# Amicus Curiae Brief — Wagnon v. Prairie Band Potawatomi Nation > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0052%3A03 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 2005 - **Citation:** 546 U.S. 95 ## Text j Supreme Court. U. . (2) | pare i ! "24 2004 No. 04-631 - | a In The Supreme Court of the United States STEPHEN RICHARDS, in his official capacity as Secretary, Kansas Department of Revenue, Petitioner, Vv. PRAIRIE BAND POTAWATOMI NATION, Respondent, On Petition for Writ of Certiorari to the United States Court of Appeals For the Tenth Circuit BRIEF AMICUS CURIAE OF MULTISTATE TAX COMMISSION IN SUPPORT OF PETITIONER FRANK D. KATZ, General Counsel (Counsel of Record) MULTISTATE TAX COMMISSION 444 No. Capitol Street, N.W. #425 Washington, D.C. 20001 (202) 624-8699 I. II. Ill. CONCLUSION TABLE OF CONTENTS APPLYING THE WHITE MOUNTAIN APACHE TRIBE BALANCING-OF- INTERESTS TEST TO OFF-RESERVA- TION TRANSACTIONS IS CONTRARY TO THIS COURT'S FIRM PRECEDENT... THE UNCERTAINTY FROM APPLYING THE BALANCING TEST OFF RESERVATION THREATENS STATE TAX ADMINISTRATION, STATE TAX REVENUES AND _— STATE-TRIBAL PUEAEE DIET cvcvcccevcccccccocccossccsosecsoescesece THE PRESENT CASE, ALONG WITH THE CASE OF HAMMOND V. COEUR D'ALENE TRIBE, PRESENT THE COURT WITH AN OPPORTUNITY TO BRING CLARITY AND CERTAINTY WITH REGARD TO INDIAN TAXATION CC eee eee eee eee eee! SPEER eee eee eee 1000 @ ii TABLE OF AUTHORITIES Page Cases: Cotton Petroleum Co. v. New Mexico, GBD UE. BD CRG cocecccccdsccscocesoncssessemeens 6,9 Hammond v. Coeur d'Alene Tribe, U.S. Sup. Ct. Pe. BEGG. cccccccocccncccctecesedsucessieunaaan 10, 11 McClanahan v. Arizona Tax Comm'n, 411 U.S. BBS CH Ue cocecoccccodsoseisindsensacsseameianaaaan 2, 5, 6, 7 Mescalero Apache Tribe v. Jones, 411 U.S. 145 TEDW Gil ccccccccsccosccsccssosesonsennseusesuanademanias 3, 5, 7 Oklahoma Tax Comm'n v. Chickasaw Nation, SRS US, GE Ce ceccecccevecesacisssecnnmnenian 4,5,9 Oklahoma Tax Comm'n v. United States, SAD CB. GD COs cccccccccsdscdanisensnendadieaneenmnn 5 Oregon Dep't of Fish & Wildlife v. Klamath Indian Tribe, 473 U.S. 753 (1GGB5) ...ccccccccccccccccccccccsecs 9 Rodey, Dickason, Sloan, Akin & Robb, P.A. v. Revenue Division, 107 N.M. 399, 759 P.2d 186 TG ccoccocccsccoccsseccuconsedestebsasneennsenaaniaianananal 5 Sac and Fox Nation v. Pierce, 213 F.3d 566 (2G™ Cle Be cccoccccccccnnsecdsatatedietsaniaina 9 The Kansas Indians, 72 U.S. (5 Wall.) TEE CRETE cocecececcesscossesncssonieaseamennsaauaiaaaindl 5 Trotter v. Tennessee, 290 U.S. 354 (1933) ......... 5 United States Steel Corp. v. Multistate Tax Comm'n, 434 U.S. 452 (1978).......ccccceceeeeeeeees 1 iii Warren Trading Post Co. v. Arizona Tax Comm'n, SBO U.S. GES (1LGSB) ...ccccccvceccccccccscscccscscccccecees 6 Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134 (1980)......... 9 White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980) ............008 3, 4, 6, 7, 8, 10 Worcester v. Georgia, 31 U.S..(6 Pet.) 515 SIE acccunsdnescesdenceseccecseccecccesesencveceosoeccoccccoeces 2 Statutes and Legislative Material: MULTISTATE TAX COMPACT, RIA ALL STATES TAX GUIDE 4 701 et seq., p. 657 (2001) .............. 1,2 TITLE II of Pus. L. No. 86-272, 73 Stat. 555, 556 EEE STE EE ee neee eee e ee eee 2 RS COOGEE AGI cccccecccccccccccccccceccccccesess 10 l BRIEF AMICUS CURIAE OF MULTISTATE TAX COMMISSION IN SUPPORT OF PETITIONER! INTEREST OF AMICUS CURIAE The Multistate Tax Commission is the adminis- trative agency of the MULTISTATE Tax Compact. See RIA ALL STATES TAX GUIDE @ 701 et seq., p. 657 (2001). Twenty-one States have legislatively estab- lished full membership in the Compact. In addition, five States are sovereignty members, eighteen States are associate members and three states are project members.? This Court upheld the validity of the Compact in United States Steel Corp. v. Multistate Tax Comm'n, 434 U.S. 452 (1978). Historically, the Compact evolved out of concern of the States and multistate taxpayers about pro- posed federal legislation to regulate state tax sys- ‘No counsel for any party authored this brief in whole or in part. Only Amicus Multistate Tax Commission and its member States through the payment of their membership fees made any monetary contribution to the preparation or submission of this brief. This brief is filed by the Commis- sion, not on behalf of any particular member State. Finally, this brief is filed pursuant to the consent of the parties. 2 The COMPACT parties are Alabama, Alaska, Arkansas, California, Colorado, District of Columbia, Hawaii, Idaho, Kansas, Maine, Michigan, Minnesota, Missouri, Montana, New Mexico, North Dakota, Oregon, South Dakota, Texas, Utah and Washington. The Sovereignty members are Flor- ida, Kentucky, Louisiana, New Jersey and Wyoming. The Associate members are Arizona, Connecticut, Georgia, IIli- nois, Maryland, Massachusetts, Mississippi, New Hamp- shire, New York, North Carolina, Ohio, Oklahoma, Pennsyl- vania, South Carolina, Tennessee, Vermont, West Virginia and Wisconsin. Project members are lowa, Nebraska and Rhode Island. 2 tems that followed recommendations of the Willis Committee. The States’ initial interest in forming the ComPACT was to safeguard state taxing author- ity—an essential governmental power for States to fulfill their constitutional role—from federal en- croachment. Preserving state taxing sovereignty under our vi- brant federalism remains a key purpose of the Commission. When States seek to tax transactions on Indian lands, tribes are a third concentric sover- cign whose interests must properly be considered. Sorting out which sovereign has authority to impose tax on what transactions inevitably requires line drawing. The brighter the lines, the more adminis- trable the tax, the fewer the conflicts and the lower compliance burdens on taxpayers and tax agencies. The territorial component of sovereignty has been a key factor in forging bright-line rules. For over 170 years, the Court has imposed a bright-line standard that States have no jurisdiction over Indi- ans on their sovereign lands unless Congress ex- pressly authorizes it.4 With regard to off-reservation transactions, the Court has likewise relied on a clear demarcation—that tribal sovereignty ends at the reservation boundary. “Absent express federal law to the contrary, Indians going beyond reserva- 5 The Willis Committee, a congressional study of State taxation of interstate commerce sanctioned by TiTLe II of PuB. L. 86-272, 73 Stat. 555, 556 (1959), made extensive recommendations as to how Congress could regulate State taxation of interstate and foreign commerce. * E.g. McClanahan v. Arizona Tax Commission, 411 U.S. 164, 168-69 (1973); Worcester v. Georgia, 31 U.S. (6 Pet.) 515, 557 (1832). tt —— I 3 tion boundaries have generally been held subject to nondiscriminatory state law otherwise applicable to all citizens of the State.” Mescalero Apache Tribe v. Jones, 411 U.S. 145, 148-149 (1973). State authority to tax non-Indians for transac- tions with Indians on tribal reservations raises more difficult issues. The non-Indian taxpayer is within the State and under state authority. Yet the trans- actions are with Indians on tribal lands, and there- fore implicate tribal sovereignty. With sensitivity to both sovereigns, the Court has developed a complex and nuanced balancing test to determine whether States may impose tax in these cases. The analysis calls for a “particularized inquiry into the nature of the state, federal, and tribal interests at stake... ." White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 145 (1980). In the instant case, Kansas sought to impose fuel tax on non-Indian distributors for receiving gasoline off the reservation. The bright-line rule from Mesca- lero Apache Tribe should have controlled. The Tenth Circuit's erroneous use of the uncertain balancing test of White Mountain clouds this bright line and impacts the Commission's interest in protecting state sovereignty in two ways. First, the Tenth Circuit's holding jeopardizes the unambiguous rules that define state authority with regard to reservations. Bright-line rules allow good relations to flourish between States and tribes and pretermit disputes and litigation between them. This strong preference for bright-line rules has been pursued by the States in this Court even against the immediate interests of other States. In Oklahoma 4 Tax Comm'n v. Chickasaw Nation, 515 U.S. 450, 460 (1995), this Court noted that eleven States urged the retention of the “legal incidence’ test” with regard to taxation that impacts Indians and Indian tribes in In- dian country, even though another State had urged adoption of more uncertain “economic reality” rule which might have furthered its cause in that litigation. The Court noted that the eleven States had favored the test because it “provide[s}] a reasonably bright-line standard which, from a tax administration perspective, responds to the need for substantial certainty as to the permissible scope of state taxation authority.” Id. Second, the holding jeopardizes state authority to tax off-reservation transactions. States depend upon tax revenues to run their governments. Sub- jecting off-reservation transactions that may subse- quently impact Indian tribes to the inexact balanc- ing test will substantially impair States’ ability to impose taxes. The decision below deprived Kansas of tax revenue it rightfully expected from a tax imposed on a non-Indian distributor receiving fuel off the reservation merely because the gasoline was later sold to a tribal retailer. ARGUMENT I APPLYING THE WHITE MOUNTAIN APACHE TRIBE BALANCING-OF- INTERESTS TEST TO OFF-RESERVA- TION TRANSACTIONS IS CONTRARY TO THIS COURT'S FIRM PRECEDENT. This Court's jurisprudence governing state au- thority to tax Indians and activities on Indian lands may fairly be divided into three areas, two of which 5 are pillars of certainty controlled by bright-line rules modifiable only by explicit congressional action. The third area is governed by the flexible and indefinite balancing-of-interests test. States have long been barred from taxing Indians for on-reservation activity absent explicit permission from Congress. Chickasaw Nation; McClanahan; The Kansas Indians, 72 U.S. (5 Wall.) 737, 757 (1866). States have long been permitted to tax off- reservation activity, whether conducted by Indians or others, absent express preemption by Congress. Long-standing precedent holds that tax exemptions are not granted by implication in recognition of the crucial importance of taxation to the very existence of each governmental entity. Oklahoma Tax Comm'n v. United States, 319 U.S. 598, 606 (1938); Trotter v. Tennessee, 290 U.S. 354, 356 (1933). States may tax activities off-reservation, even if they involve or affect Indians, “[aJbsent express federal law to the contrary.” Mescalero Apache Tribe, 411 U.S. at 145. See also Rodey, Dickason, Sloan, Akin & Robb, P.A. v. Revenue Division, 107 N.M. 399, 759 P.2d 186 (1988), appeal dismissed, 490 U.S 1043 (1989) (pre- emption by implication doctrine inapplicable to tax on legal services performed off reservation for tribe). — These two per-se rules, one barring state taxa- tion and the other permitting it in the absence of express congressional action, provide a certainty that furthers state tax administrability. When States seek to tax non-Indians on reserva- tion transactions with Indians, however, competing interests of three concentric sovereigns are in- 6 volved.5 The State is asserting jurisdiction over its citizens for activity in its territory. The tribe is as- serting jurisdiction over its territory and has legiti- mate concerns about the economic affect on its members. And all are subject to the supreme sover- eignty of the federal government and Congress's ex- pansive authority under the Indian Commerce Clause. Recognizing that three competing sover- eignty interests must be weighed in allocating gov- ernmental authority in these cases, the Court aban- doned an absolutist approach in favor of a more flexible implied-preemption standard in Warren Trading Post Co. v. Arizona Tax Comm'n, 380 U.S. 685 (1965) and McClanahan, 411 U.S. at 172. The Court further transformed this implied-preemption analysis into a malleable balancing-of-interests test in White Mountain. Under this approach the Court examine|s] the language of the relevant fed- eral treaties and statutes in terms of both the broad policies that underlie them and the notions of sovereignty that have devel- oped from historical traditions of tribal in- dependence. This inquiry is not dependent on mechanical or absolute conceptions of state or tribal sovereignty, but has called for a particularized inquiry into the nature of the state, federal, and tribal interests at stake, an inquiry designed to determine whether, in the specific context, the exercise of state authority would violate federal law. 5 See Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 188 (1989) (“There are, therefore, three different gov- ernmental entities, each of which has taxing jurisdiction over all of the non-Indian [on-reservation] wells.”) 7 White Mountain, 448 U.S. at 144-45. The implied-preemption balancing test has been confined exclusively to reservation activities consis- tent with the territorial limits of tribal sovereignty. In McClanahan, the Court referenced “Indian sover- eignty” as “a backdrop against which the applicable treaties and federal statutes must be read.” 411 U.S. at 172. In White Mountain, the Court noted the “unique historical origins of tribal sovereignty” as the reason for using an adaptable, implied-pre- emption standard in these cases, 448 U.S. at 143, and affirmed that geography matters. The Court has repeatedly emphasized that there is a significant geographical compo- nent to tribal sovereignty, a component which remains highly relevant to the pre- emption inquiry. Id. at 151. Significantly, the Court in White Moun- tain reaffirmed the Mescalero Apache Tribe bright line that off the reservation and outside the bounda- ries of tribal sovereignty an express congressional statement of tax exemption is required. 448 U.S. at 144, n. 11. In each case, tribal sovereignty, which exists only over tribal territory, has been the con- ceptual basis for the implied preemption analysis. Applying the balancing test to off-reservation transactions also makes no practical sense. The State's interest should virtually always predominate with regard to any off-reservation transaction. The erroneous application of the balancing test below highlights this fact. The Tenth Circuit improperly focused on an activity the State did not tax—the re- tail sale on the reservation—rather than on the ac- 8 tivity it did tax—the receipt of gasoline by the dis- tributor in Troy, Kansas. State roads radiating out from Troy include the very state roads that carried the distributor's gasoline, along with many of the tribal casino’s customers, to the reservation. The State’s interest in obtaining road fund revenues for its 60 mile portion of this trip formidably predomi- nates over tribal interest in funding the 1% mile reservation portion. The Tenth Circuit's decision below flouts this Court's firm precedent by applying the implied- preemption balancing test to off-reservation activity. THE UNCERTAINTY FROM APPLYING THE BALANCING TEST OFF RESERVATION THREATENS STATE TAX # £=ADMINI- STRATION, STATE TAX REVENUES AND STATE-TRIBAL RELATIONS. The Tenth Circuit decision, if left unchecked, threatens dire consequences for state tax admini- stration. By applying the vagaries of the balancing test where it should not have—to a transaction that occurred off the reservation where the gasoline dis- tributor received the gasoline—the decision greatly expands uncertainty about state taxing authority. Any tax imposed on a transaction that may ulti- mately have an economic consequence on a reserva- tion will be subject to challenge. How can taxpayers know whether items on which they have paid tax will subsequently be resold or used on a reserva- tion? Under the Tenth Circuit’s ruling, does the creation of a tribal casino insulate from taxation any off-reservation purchase for the casino, or for any ——_ 9 related enterprise, or for any enterprise which can claim a benefit from the casino? Will state tax im- posed on all off-reservation purchases by tribal enti- ties be subject to defeasance? The unpredictability of the balancing test is well reflected by comparing the Tenth Circuit’s decision below, balancing state and tribal interests in the tribe’s favor, with its earlier decision in Sac and Fox Nation v. Pierce, 213 F.3d 566 (10% Cir 2000), cert. denied, 531 U.S. 1144 (2001), balancing seemingly indistinguishable interests in the State’s favor. Moreover, the manner in which the Tenth Circuit applied the balancing test will acerbate uncertainty. It balanced interests without reference to a single federal law that might—even by implication— preempt state authority to tax. This would leave every decision to the unfettered judgment of each trial court, unhinged from federal law. This Court has explicitly rejected such generalized use of con- gressional acts that advance tribal sovereignty and promote economic development as an all-purpose justification for preempting any state action that might have an adverse economic affect on tribes. Cotton Petroleum, 490 U.S. at 183, n. 14; Washing- ton v. Confederated Tribes of Colville Indian Reserva- tion, 447 U.S. 134, 155 (1980). Additionally, this extension of the balancing test will impact state regulatory authority. The “particu- larized inquiry” of White Mountain applies to state regulatory, as well as state tax, authority. Chicka- saw Nation, 515 U.S. at 458 (“We have balanced federal, state and tribal interests in diverse contexts, notably in assessing state regulation that does not involve taxation.”) See also Oregon Dep't of Fish & 10 Wildlife v. Klamath Indian Tribe, 473 U.S. 753, 765 (1985). States impose many regulations on the off- reservation manufacture of goods and provision of services. A tribe, employing the Tenth Circuit's rea- soning, can presumably challenge a regulation un- der White Mountain balancing standards to the ex- tent that it has what the tribe perceives as an unto- ward impact on tribal interests. Judging tax authority based on balancing inter- ests can provide needed flexibility when demands of three conflicting sovereigns must be satisfied. The unprecedented and unwarranted extension of that test to State tax authority over off-reservation activi- ties subject only to federal and state sovereignty, however, will cause great uncertainty and turmoil. THE PRESENT CASE, ALONG WITH THE CASE OF HAMMOND V. COEUR D'ALENE TRIBE, PRESENT THE COURT WITH AN OPPORTUNITY TO BRING CLARITY AND CERTAINTY WITH REGARD TO INDIAN TAXATION MATTERS. Your amicus respectfully suggests that Idaho's pending petition for certiorari in Hammond v. Coeur d'Alene Tribe, No. 04-624, provides the court with an opportunity to reinforce the two pillars of cer- tainty in Indian taxation matters. The instant case is properly controlled by the requirement of express congressional preemption, clearly lacking here. The Hammond case is properly controlled by express congressional permission, there provided by the Hayden-Cartwright Act which authorizes state taxa- tion of “licensed traders” on "United States military ll or other reservations,” a combined terminology that uniquely refers to Indian reservations. Hammond also implicates the off-reservation bright-line stan- dard in the first issue presented: whether a federal court may, despite an express allocation by the state legislature of the legal incidence of the motor fuels tax to a distributor, nonetheless deem the incidence of the tax to be borne by the retailers. Hammond serves as a suitable companion to the present case, and consideration and resolution of the cases together would be of benefit to the States, to the tribes, and to the public. CONCLUSION The decision below radically departs from this Court's jurisprudence governing state authority to tax off-reservation activity. It threatens the ability of States to raise revenues. It reduces certainty in state tax administration and stability in state-tribal relations. Let stand, the decision will permit contra- dictory lower court decisions, which will serve to en- courage litigation. Your amicus respectfully requests that the Court grant the Petition and issue a writ of certiorari to the Court of Appeals for the Tenth Cir- cuit. Respectfully submitted, Frank D. Katz, General Counsel Counsel of Record MULTISTATE TAX COMMISSION 444 No. Capitol Street, N.W., #425 Washington, D.C. 20001 (202) 624-8699 November 24, 2004 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0052%3A03. Public record. Not legal advice.