Amicus Curiae Brief — Wagnon v. Prairie Band Potawatomi Nation

Supreme Court brief2005

Ask Donna

What actually matters in this document.

Text

No. 04-631

IN THE oe os

Supreme Court of the United brates 4 aS

OF THE CLERK

JOAN WAGNON, IN HER OFFICIAL CAPACITY AS SECRETARY,

KANSAS DEPARTMENT OF REVENUE,

Petitioner,

PRAIRIE BAND POTAWATOMI NATION,

Respondent.

On Writ of Certiorari

to the United States Court of Appeals

for the Tenth Circuit

BRIEF OF AMICI CURIAE NCAI, CONFEDERATED

TRIBES OF THE WARM SPRINGS INDIAN

RESERVATION, PUEBLOS OF ISLETA, SANDIA AND

ZIA, SISSETON WAHPETON SIOUX TRIBE, SKULL

VALLEY BAND OF GOSHUTE INDIANS, TULALIP

TRIBES, AND WINNEBAGO TRIBE OF NEBRASKA

RIYAZ A. KANJI CARTER G. PHILLIPS

KANJI & KATZEN, PLLC VIRGINIA A. SEITZ*

101 N. Main Street SIDLEY AUSTIN BROWN &

Suite 555 WOOD LLP

Ann Arbor, MI 48104 1501 K Street, N.W.

(734) 769-5400 Washington, D.C. 20005

(202) 736-8000

JOHN DOSSETT

NATIONAL CONGRESS OF REID PEYTON CHAMBERS

AMERICAN INDIANS SONOSKY, CHAMBERS,

851 SW Sixth Avenue SACHSE, ENDRESON &

Suite 1650 PERRY LLP

Portland, OR 97204 1425 K Street, N.W., Suite 660

(503) 248-0783 Washington, D.C. 20005

(202) 682 0240

Counsel for Amici

July 14, 2005 * Counsel of Record

WILSON-EPES PRINTING Co., INC. — (202) 789-0096 -— WASHINGTON, D. C. 20001

TABLE OF CONTENTS

TAREE GP AAT TEI CUED cencecevscrsasssrsnecsecscnsmnessesvestete

STATEMENT OF INTEREST OF AMICI CURIAE ......

INTRODUCTION AND SUMMARY OF ARGU-

THE ORIGINS AND EVOLUTION OF INDIAN

PREEMPTION DEMONSTRATE THAT KANSAS

MAY NOT IMPOSE ITS TAX ON FUEL SOLD

A. The Principles Underlying Federal Preclusion

Of State Taxes Infringing Tribal Sovereignty

And Burdening On-Reservation Commerce.......

I ie et I cincsttennditiicstiinsniiiiintitneniie

1. Kansas’s Claim That State Taxes Infringing

Tribal Sovereignty Are Valid Unless

Expressly Preempted Ignores History And

The Actual Interests At Stake Here ...............

2. Kansas’s Claim That Its Tax Is Valid Be-

cause It Is Formally Imposed On An Off-

Reservation Act Is Wrong..........sssccseeeeeeeesees

3. Kansas’s Balancing Derogates The Federal

And Tribal Interests At Stake ..............:00000

TABLE OF AUTHORITIES

CASES Page

Cabazon Band of Mission Indians v. Wilson, 37

F.3d 430 (9th Cir. 1994) ........ccccsssssssssreserrseeeeees 25, 26

California vy. Cabazon Band of Mission Indians,

4BD U.S. 202 (1987). .cccccccoccscoccccersceverccveecccccsscesces 11

Carpenter v. Shaw, 280 U.S. 363 (1930)... 19

Central Mach. Co. v. Arizona State Tax Comm'n,

GAB U.S. 16D (19BD)....ccccsccccecccccrcrcscecccccesscsscsssesees 20, 21

Cherokee Nation v. Georgia, 30 U.S. (5 Pet.) |

CETTE e Prcccosernszusnesenosessounssssessnescecovecesneeessossonnaenensenss 8

Cotton Petroleum Corp. v. New Mexico, 490 U.S.

DGD CISD PP nccsvcccccesesccevccceccoccccccsccovapsossosccsoesens 17, 18, 24

Complete Auto Transit, Inc. v. Brady, 430 U.S.

Lf | Eee 16, 20, 22

Department of Taxation & Fin. v. Milhelm Attea

& Bros., 512 U.S. 61 (1994) ..ccccceereeeeeeeenenes 14, 20, 25

Hilton v. South Carolina Pub. Rys. Comm'n, 502

SED BF COG Pecseccecscvcccsocccacecszcceveseovccnsevssssennsssee 15

Hoopa Valley Tribe v. Nevins, 881 F.2d 657 (9th

ele FIP ccecesssccsesoncesensesescscsccsevsscveesesccconscnsnesnneese 26

Japan Line, Ltd. v. County of L.A., 441 U.S. 434

FP vi ncecscnscvessenccensessonsssvenevscsssssccevssnsesococesnnnannenes 16, 17

The Kansas Indians, 72 U.S. (5 Wall.) 737

SETI cnssoponpencsesbenmecnesenennscoseseecncsovnessnersorsqnsncnsten 9

Maricopa & Phoenix R.R. v. Territory of Ariz.,

156 U.S. 347 (1GDS).ncccccccccccccceccccecceccovcccocsessnsssees 25

McClanahan v. State Tax Comm'n, 411 U.S. 164

(ne eduaedeunennenenssenenesesesnconssqsssqvocssnaasenease 11

Merrion v. Jicarilla Apache Tribe, 455 U.S. 130

EPI ccrcescscncsceneessnenssssscsenesscenssssesssccososooesansensestent 17, 23

Moe v. Confederated Salish & Kootenai Tribes,

42S U.S. 463 (1DTE) .cccccccccoceccccesceccecccccccossssccssssees 25

New Mexico v. Mescalero Apache Tribe, 462 U.S.

| __ E ON N NTT 12, 15, 23, 24, 27

iii

TABLE OF AUTHORITIES -— continued

Oklahoma Tax Comm'n v. Chickasaw Nation, af

Pe eee ee ee rccnensnnsnerssmnnemecsmmmnnmceneveness 11, 20

Oklahoma Tax Comm'n v. Sac & Fox Nation, 508

els esa snsemnensnssveninnentecentensnnensinnmeenses 28

Ramah Navajo Sch. Bd. v. Bureau of Revenue,

ee 12, 14, 20, 24, 28

Rice v. Olsen, 324 U.S. 786 (1945) .......ccccccccceeeeeeees 9

Seminole Tribe of Fla. v. Florida, 517 U.S. 44

SEU ctcntasneneenensnnsnsnnnmncmmnnnnamegnmennpemnessemmmncsnstes 17

Thomas v. Gay, 169 U.S. 264 (1898) ........ccccccceseeees 9, 25

Trinova Corp. v. Michigan Dep't of Treasury,

Sa es ee Ce rccestencseenmcassenemannemsemesngenns 22

United States v. 43 Gallons of Whiskey, 93 U.S.

Ba Ge ncnencanscnnsssmnensenemnansengmenaneenemmensesemecenes 7

United States v. Kagama, 118 U.S. 375 (1886)......

United States v. McBratney, 104 U.S. 621

[UETEE i ennsusnscinnencempnssenenapnstepasnesnneensnesneseummesnnenenses 9

United States v. Wheeler, 435 U.S. 313 (1978) ...... 6

Utah & N. Ry. v. Fisher, 116 U.S. 28 (1885).......... 9

Wagoner v. Evans, 170 U.S. 588 (1898).............00. 25

Washington v. Confederated Tribes of the

Colville Indian Res, 447 US. 134

ne 12, 14, 24, 25

White Mountain Apache Tribe v. Bracker, 448

Se Ce I iercnenseonecnnnsennnscnnnnnsemscssenns 3, 12, 20, 24

Williams v. Lee, 358 U.S. 217 (1959) .....ccccccccceseeees 9

Worcester v. Georgia, 31 U.S. (6 Pet.) 515

Gia ccensnncsonnsensunensnsenensnnntessenenensneenseenamenmeamenente 7,8

CONSTITUTION, STATUTES AND REGULATION

a 4

a ae OF I eneresrennsncnneemnenensenmenssenenmensemenens 27

ee ee He crnensccesnrpnmnenemneenememenneens 26

EET cnecrnnecscsnnensnnnenseennmmeneninens 26

TABLE OF AUTHORITIES — continued

Page

ON ) Oe 28

I OU 28, 29

Po KR ee 27

LEGISLATIVE HISTORY

33 J. Cont. Cong. 453-63 (Aug. 3, 1787) ........cc00000 7

SCHOLARLY AUTHORITIES

Note, /ntergovernmental Compacts in Native

American Law: Models for Expanded Usage,

112 Harv. L. Rev. 922 (1999)................ccccereeseeees 18

F. Cohen, Handbook of Federal Indian Law

(0 | 4,7, 10

R. Clinton, The Dormant Indian Commerce

Clause, 27 Conn. L. Rev. 1055 (1995)................ 7,8

OTHER AUTHORITIES

The Federalist, No. 42 (Madison) (C. Rossiter

ge 7

J. Madison, Journal of the Federal Convention

RT —————— 7

STATEMENT OF INTEREST OF AMICI CURIAE'

Established in 1944, the National Congress of American

Indians (“NCAI”) is the oldest and largest American Indian

organization, representing more than 250 Indian Tribes and

Alaskan Native villages, including amici Confederated Tribes

of the Warm Springs Reservation, Pueblos of Isleta, Sandia,

and Zia, Sisseton Wahepeton Sioux Tribe, Skull Valley Band

of Goshute Indians, Tulalip Tribes, and Winnebago Tribe of

Nebraska. NCAI is dedicated to protecting the rights and

improving the welfare of American Indians. This case calls

for the straightforward application of longstanding principles

regarding federal preemption of state taxes that substantially

infringe tribal sovereignty. Kansas, however, urges this Court

to embark on a wholesale revision of these principles and

advocates a rule of law that would thwart federal and tribal

interests in tribal sovereignty and economic self-sufficiency.

Amici have a strong interest in opposing the abandonment of

time-honored principles of Indian law and in preventing the

infringement of tribal sovereignty Kansas seeks to work in

this case.

INTRODUCTION AND SUMMARY OF ARGUMENT

Prior to 1995, Kansas imposed an excise tax on motor fuel

sold or delivered in the State. Pursuant to an agreement with

the Prairie Band Potawatomi Nation (“Tribe”), Kansas did not

tax the motor fuel sold or delivered to the Tribe for the station

on its reservation. In 1995, however, Kansas amended its

Motor Fuel Tax Act to place the legal incidence of the tax on

distributors, and now seeks to enforce that tax on motor fuel

sold or delivered to the Tribe’s on-reservation gas station.

'No persons or entities other than Amici have made a monetary

contribution to the preparation or submission of this brief. Counsel of

record for both parties have consented to the filing of this brief, and the

letters of consent have been filed with the Clerk.

Imposition of the tax on fuel sold to the Tribe would

deprive the tribal government of all fuel tax revenues

currently used by the tribal government to fund and maintain

reservation roads. Although reservation roads are essential to

reservation economies, educational systems, health care and

virtually all aspects of reservation life, these roads are

generally in miserable condition, resulting in a far greater

number of automobile accidents and fatalities than occur in

comparable areas outside of Indian country. The federal

government has a comprehensive regulatory structure

addressing reservation roads, but federal funding is woefully

inadequate. The states, moreover, who receive federal

funding for their own roads that fall within reservations,

frequently shirk their obligation to improve or maintain these

roads and instead siphon off the funds for use elsewhere. The

Tribe's fuel tax, whose revenues are exclusively dedicated to

reservation roads, seeks to address the glaring need to

improve the Tribe’s transportation infrastructure — an

important governmental function that federal reservation-

roads regulations specifically envision the tribes will

discharge.

The tribal government’s ability to act as a responsible

sovereign vis-a-vis reservation roads would be wholly

abrogated by enforcement of the Kansas tax on fuel delivered

to the Tribe. If both state and tribal taxes were imposed, the

high tax burden would price the Tribe’s fuel out of the

market. Pet. App. 12. Moreover, the Tribe is not marketing a

tax exemption (its tax is roughly equivalent to the state tax),

see JA 134. Its station sells motor fuel primarily to the

customers and employees of the Tribe’s casino, and thus is an

“integral and essential part of the Nation’s on-reservation

gaming enterprise.” Pet. App. 8, 3. Equally to the point,

pursuant to tribal law, all tribal motor fuel tax revenues are

expended to improve roads in Kansas. The sole consequence

of the tribal taxing authority, accordingly, is a more equitable

distribution of revenues for road maintenance in Kansas.

In sum, the Kansas tax on fuel sold to the Tribe would

annul the Tribe’s taxing authority and its ability to fulfill its

sovereign responsibility to fund and maintain reservation

roads. It is, accordingly, preempted.

Kansas contends that none of this matters. Kansas first

claims that no matter what its effect on the Tribe, the tax is

lawful unless Congress expressly preempts it. In addition,

Kansas asserts — again no matter what its effect on the Tribe —

that the tax is lawful because its formal incidence falls off-

reservation. Finally, Kansas argues that even if this Court’s

established balancing test is applied, see White Mountain

Apache Tribe v. Bracker, 448 U.S. 136 (1980), the State

always wins the balancing game if its tax serves a valid state

purpose and is imposed off-reservation. But, Commerce

Clause jurisprudence generally, including Indian Commerce

Clause jurisprudence specifically, has always focused on the

real interests at stake for al// sovereigns involved.

Indeed, every error in Kansas’s analysis can be traced to its

failure to understand or appreciate the constitutional and

historic origins of this Court’s Indian Commerce Clause

jurisprudence, and hence the origins of the balancing test. If

this Court were to adopt either of the two bright-line tests that

Kansas endorses (express preemption and formal incidence)

or Kansas’s application of Bracker balancing, Indian

preemption law would become wholly divorced from its

historic and constitutional roots, interests and purposes. Our

constitutional structure and history recognize the overlapping

interests of three different sovereigns in Indian preemption

cases. In such cases, any legal test applied to determine the

validity of state regulation must respect those interests; and

that respect, not an ahistoric simplicity, is the hallmark of

proper legal analysis in this setting.

Part L.A. sets forth the origins and the evolution of this

Court’s test balancing the interest of all three sovereigns in

determining whether a state tax is preempted. By adopting

the Constitution, Kansas, like other States, delegated to

Congress the power to “regulate Commerce with foreign

Nations, and among the several States, and with the Indian

Tribes.” U.S. Const. art. 1, § 8, cl. 3. From the earliest days

of the Republic, the Indian Commerce Clause, in conjunction

with the United States’ trust responsibility to the tribes, has

been interpreted to give the federal government broad power

over tribal Indians, tribal land, and tribes. F. Cohen,

Handbook of Federal Indian Law 212-16 (1982 ed.). But the

Indian Commerce Clause and the United States’ trust

responsibility do not merely authorize the United States to

exercise authority over the Indian Tribes. They incorporate

into our constitutional structure a recognition of both the

tribes’ sovereignty and the United States’ unique obligation to

the tribes.

As a result of these constitutional and historic roots, federal

preemption of state regulations or taxes infringing tribal

sovereignty and burdening tribal commerce has two aspects:

First, federal law may preempt the state regulation at issue,

either expressly or because federal and tribal interests

outweigh the relevant state interests. Second, state law that

unduly infringes tribal sovereignty is prohibited. These tests

recognize that an Indian tribe, like a state or foreign state,

possesses sovereign authority — an authority that inherently

limits other sovereigns’ ability to impose burdens on or

infringe a tribe’s authority. The limits are not identical to

those arising from the sovereignty of a state or foreign state,

but are the distinctive consequences of the tribes’ status as

domestic dependent nations subject to the United States’

authority and under the United States’ protection.

Part 1.B. relies on the fundamental principles underlying

Indian preemption to demonstrate that the legal rules

proposed by Kansas are utterly inconsistent with the

constitutional and historic foundations of Indian Commerce

Clause preemption law. Kansas’s first request — that the

Court jettison the balancing test for express preemption —

wholly ignores that a tribe is not merely a market participant,

but a sovereign whose inherent authority to tax in order to

fulfill its sovereign responsibilities with respect to reservation

roads is entitled to respect and protection. Forcing a tribe to

run to Congress for protection from every state regulation that

infringes upon its sovereignty — no matter how severe the

infringement — is entirely inconsistent with the tribes’ status

in our constitutional system, in addition to being wholly

unworkable. The test for federal preclusion of state

regulation affecting the tribes must take legitimate tribal

interests into account, which an express preemption test fails

to do.

Second, Kansas’s claim that the balancing test should not

apply because the legal incidence of its tax falls on off-

reservation conduct both mischaracterizes the Kansas tax,

which in truth attaches to the on-reservation delivery of fuel,

and misunderstands the relevant constitutional inquiry. The

pertinent question is not the formal incidence or geography of

the transaction taxed, but the effect of the regulation on the

interests of federal, tribal and state sovereigns. The state

regulation cannot stand if it substantially infringes tribal

sovereignty (here, the sovereign power to tax value generated

on the reservation to fund and maintain reservation roads).

The State’s manipulation of legal incidence — without

changing the tax’s forbidden impact — treats state taxation of

tribes in Indian country as a game in which the label is

dispositive and the effect of the tax on tribal self-government

is irrelevant. That has never been the law under any of the

Commerce Clauses; instead, this Court’s legal tests protect

the sovereign interests implicated by overlapping jurisdiction.

Finally, Kansas’s version of the Court’s balancing test

would make balancing a meaningless exercise because

federally-protected tribal sovereignty, and concomitant

federal and tribal interests, would be accorded no weight.

The State erroneously contrasts its interests as arising from its

status as sovereign with the Tribe's interests as supposedly

arising only from a desire to increase profits. But, the state

tax would nullify tribal taxing authority and significantly

obstruct the federal interest in tribal self-determination with

respect to taxes, governmental functions (here the funding

and maintenance of a safe and viable transportation

infrastructure), and other economic activities. It should be

dispositive here — under both the balancing test and the

infringement test — that enforcement of the state tax would

wholly preclude the Tribe from exercising its sovereign

authority to tax sales of motor fuel at its on-reservation

station, and thereby to fund the very reservation roads that

only the Tribe has demonstrated a commitment to maintain.

This is not a case, finally, where the impact of the state tax

is speculative or remote: The state tax is passed through to

the Tribe in its entirety; and the impact of the lost revenues is

substantial for the Tribe (but would be trivial to the State if its

tax were invalidated). The federal and tribal interests at stake

overwhelm the State’s interest in collecting the tax on

distributions to the Tribe.

ARGUMENT

THE ORIGINS AND EVOLUTION OF INDIAN

PREEMPTION DEMONSTRATE THAT KANSAS MAY

NOT IMPOSE ITS TAX ON FUEL SOLD TO A TRIBE,

A. The Principles Underlying Federal Preclusion Of

State Taxes Infringing Tribal Sovereignty And

Burdening On-Reservation Commerce.

This Court has recognized the Indian Commerce Clause, in

conjunction with the federal treaty power, as the source of

plenary federal power over Indian affairs. See, e.g., United

States v. Wheeler, 435 U.S. 313, 319 (1978). The Indian

Commerce Clause, however, is not simply a constitutional

supplier of federal power over the tribes. The Framers

intended it to serve as a barrier to state authority that infringes

upon tribal sovereignty on the reservation.

During the colonial period, the tribes were recognized as

sovereigns, governing their own territories. See Worcester v.

Georgia, 31 U.S. (6 Pet.) 515 (1832). Under international

law, however, the British Crown’s “discovery” of the tribes

and tribal land gave the Crown power over the tribes’ external

relations. /d. at 543-44. When the United States declared

independence, the Crown’s rights were passed to the colonies.

The Articles of Confederation, however, were wholly unclear

about whether, and the extent to which, the states or the

United States had succeeded to the Crown’s discovery rights.

See R. Clinton, The Dormant Indian Commerce Clause, 27

Conn. L. Rev. 1055, 1097-98 (1995) (legal history of federal-

state conflict during this period). Several colonies took the

position that they had inherited the powers of the British

Crown with respect to tribes within their boundaries.

Experience under the Articles demonstrated to the

Constitutional Convention of 1787 that exclusive federal

control over Indian policy was necessary. Separate states’

actions routinely created serious conflicts and threats of war

with powerful tribes. See 33 J. Cont. Cong. 453-63 (Aug. 3,

1787). With little debate, accordingly, the Constitution gave

the federal government exclusive power over Indian affairs.

See J. Madison, Journal of the Federal Convention 654-56

(E. Scott ed. 1898); The Federalist No. 42, at 268 (Madison)

(C. Rossiter ed., 1961) (“[t]he regulation of commerce with

the Indian tribes is very properly unfettered from two

limitations in the Articles of Confederation, which render the

provision obscure and contradictory”). Once the Constitution

was enacted, states ceased to have jurisdiction vis-a-vis tribes

and tribal lands except as provided by Congress. See Cohen,

supra, at 388; United States v. 43 Gallons of Whiskey, 93 U.S.

188, 194 (1876).

Federal exclusivity (and the corollary of state exclusion

from Indian policy) was reflected in the early decisions of this

Court. In Worcester, for example, Chief Justice Marshall

addressed the constitutionality of a Georgia law requiring

non-Indians to obtain a state license to visit or work in the

Cherokee Nation. The Court invalidated the law on several

grounds, including its inconsistency with the Indian

Commerce Clause, which this Court held excluded states

from the regulation of Indian affairs. The opinion described

the “discontents and confusion” resulting from the divided

federal-state authority over Indian affairs under the Articles of

Confederation, and explained that the Constitution threw off

“{t}he shackles imposed on [federal] power, in the

confederation.” 31 U.S. (6 Pet.) at 559. The Georgia law was

thus invalidated because it “interfere[d] forcibly with the

relations established between the United States and the

Cherokee nation, the regulation of which, according to the

settled principles of our constitution, are committed

exclusively to the government of the union.” Id. at 561

(emphasis supplied). See also id. at 580-81 (“the regulation

of commerce among the Indian tribes . . . . must be considered

as exclusively vested in congress, as the power to regulate

commerce with foreign nations”) (M’Lean, J., concurring).

“A clearer and more forceful assertion of the dormant

Indian Commerce Clause is hard to imagine.” R. Clinton,

supra, at 1173. See also Cherokee Nation v. Georgia, 30

U.S. (5 Pet.) 1, 18-19 (1831) (describing the Indian

Commerce Clause as the source of the exclusivity of federal

power over Indian affairs). As the Court’s early cases reflect,

the Constitution’s exclusive grant of Indian commerce power

to Congress prevented states from exercising authority over

Indian affairs, including over non-Indians who dealt with

tribes. Federal statutory enactments, accordingly, were not

necessary to preclude state regulation.

In the years that followed, the Court regularly rejected state

claims of inherent authority over Indian affairs. For example,

when Kansas sought to tax the tribal lands of the Shawnee,

this Court held that the United States’ continuing recognition

of the Shawnee as a tribe necessarily excluded Kansas’s

exercise of taxing authority over the tribal lands so “long as

the United States recognizes [the tribe’s] national character.”

The Kansas Indians, 72 U.S. (5 Wall.) 737, 756-57 (1866).

See also United States v. Kagama, 118 U.S. 375 (1886)

(sustaining Congress’s authority under the federal trust

obligation to enact the Major Crimes Act punishing Indians

who committed serious offenses in Indian country, and

explaining why states lacked any concomitant authority).

It is critical to note, however, that the Indian Commerce

Clause completely excluded state regulatory authority without

assessment of countervailing state interests only where tribes

were involved in or directly and concretely affected by the

transactions that the state sought to regulate. Thus, in United

States v. McBratney, 104 U.S. 621 (1881), the Court

sustained Colorado’s authority to prosecute a non-Indian for

the murder of another non-Indian even though the murder

occurred on the Ute reservation. And, in Utah & Northern

Railway v. Fisher, 116 U.S. 28 (1885), the Court upheld a

territorial tax on a railway’s right-of-way through an Indian

reservation, explaining that “[t}he authority of the Territory

may rightfully extend to all matters not interfering with

[federal provisions for the tribe’s] protection.” Jd. at 31. See

also Thomas v. Gay, 169 U.S. 264 (1898) (upholding

Oklahoma tax on cattle owned by non-Indians but grazed in

part on Indian land, because the tax was not imposed on the

tribe’s rental income or contract, but only on the cattle; thus

its effect was too remote to interfere with Indian commerce).

As matters stood by the mid-20" century, then, states were

empowered to exercise general regulatory authority, including

taxing authority, over transactions not involving, or only

remotely affecting, tribes, even if those transactions took

place in, or had some connection with, Indian country. But,

federal authority was exclusive with respect to transactions

directly or concretely affecting tribes in Indian country. See

Rice v. Olsen, 324 U.S. 786, 789 (1945) (“[t]he policy of

leaving Indians free from state jurisdiction and control is

deeply rooted in the Nation’s history”).

In Williams v. Lee, 358 U.S. 217 (1959), the Court gave

voice to one of the modern tests for assessing assertions of

state jurisdiction in light of these principles. There, the Court

announced that the Arizona courts lacked jurisdiction over a

non-Indian’s claim against a Navajo seeking to collect for

goods sold on the reservation. The Court relied on the United

States’ treaty with the Navajo, but also relied on Worcester,

and thus on the Indian Commerce Clause and the federal trust

obligation, for the proposition that “absent governing Acts of

Congress, the question has always been whether the state

action infringed on the right of reservation Indians to make

their own laws and be ruled by them.” /d. at 219-20. In

essence, ‘his Court read the Constitution and its precedent to

protect the exclusivity of federal authority over Indian affairs

and tribal sovereignty from state infringement.

From the inception of our Republic, Congress has regularly

exercised its broad authority over Indian affairs, altering the

content of federal Indian policy in ways that have

dramatically affected the scope of tribal sovereignty.

Throughout that journey from isolation, to allotment, to

assimilation, to self-determination and economic self-

sufficiency, however, the tribes have retained their status as

sovereigns, exercising those inherent powers of sovereignty

consistent with the Congress’s Indian policy of the time.

See, e.g., Cohen, supra, at 239-40.

Critically here, in the past three decades, federal Indian

policy has led to increasing interaction among tribes and non-

Indians, with the result that federal, tribal and state interests

are implicated in more and more areas subject to regulation.

The increasing overlap in sovereign interests has required the

Court to consider and accommodate all three sovereigns’

interests in an increasing number of cases. In order to do so,

the Court has synthesized the various strands in its analysis of

the validity of state regulation that affected tribal Indians in

Indian country — the enforcement of preemptive federal

power, the protection of tribal sovereignty from infringement,

and the recognition that states have certain valid interests

affected by activities in Indian country.

The Court has continued, of course, to enforce federal law

with express preemptive effect. See, e.g., McClanahan v.

State Tax Comm'n, 411 U.S. 164, 165 (1973); California v.

Cabazon Band of Mission Indians, 480 U.S. 202, 216-18

(1987). And, the Court has continued, in the vein of

Williams, to flatly forbid state regulation that frustrates tribal

self-government. McClanahan, 411 U.S. at 170. See id. at

173 (Indian tribes are “‘regarded as having a semi-

independent position when they preserved their tribal

relations; net as States, not as nations, not as possessed of the

full attributes of sovereignty, but as a separate people, with

the power of regulating their internal and social relations, and

thus far not brought under the laws of the Union or of the

State within whose limits they resided’”). But, in addition to

assessing whether state regulations that are not expressly

preempted frustrate tribal self-government, the Court’s

increasing need to accommodate tribal sovereignty, its federal

protection, and state interests has given rise to the current

balancing approach for assessing the validity of state

regulation, including taxation, affecting Indian country.

Under this approach, direct state taxation of tribal Indians

and tribes for on-reservation activities is flatly forbidden

absent express congressional authorization, because in that

setting, federal and tribal interests always outweigh the

contravening state interest. See Oklahoma Tax Comm'n v.

Chickasaw Nation, 515 U.S. 450, 458 (1995). Importantly,

however, in analyzing the validity of state taxes on non-

Indians, the Court, separate and apart from the Williams

infringement test, balances the legitimate interests of the

affected sovereigns (the United States, the tribe and the state)

to determine whether the tax has an unlawful effect in Indian

country. Through this test, the Court gives continuing effect

to the Indian Commerce Clause and its historic purpose to

protect the legitimate sovereign interests of the tribes and

their federal protector.

Bracker states the modern test for determining whether

state regulation of non-Indians should be invalidated and the

principles supporting that test:

[C]Jongressional authority [under the Indian Commerce

Clause] and the “semi-independent position” of Indian

tribes have given rise to two independent but related

barriers to the assertion of state regulatory authority over

tribal reservations and members. First, the exercise of

such authority may be pre-empted by federal law.

Second, it may unlawfully infringe “on the right of

reservation Indians to make their own laws and be ruled

by them.” The two barriers are independent because

either, standing alone, can be a sufficient basis for

holding state law inapplicable to activity undertaken on

the reservation or by tribal members. [448 U.S. at 142-

43 (citations omitted).]

The Court has thus “rejected the proposition that in order to

find a particular state law to have been pre-empted by

operation of federal law, an express congressional statement

to that effect is required.” /d. at 143. See also Ramah Navajo

Sch. Bd. v. Bureau of Revenue, 458 U.S. 832, 838 (1982)

(“federal pre-emption is not limited to those situations where

Congress has explicitly announced an intention to pre-empt

state activity”).

The Court has also determined that a state law's validity is

not controlled by “mechanical or absolute conceptions of state

or tribal sovereignty, but [...] call{s] 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.” Bracker, 448 U.S. at 145. See also Washington

v. Confederated Tribes of the Colville Indian Res., 447 U.S.

134, 154-157 (1980); New Mexico v. Mescalere Apache

Tribe, 462 U.S. 324 (1983) (preempting state wildlife

regulation and licensing fees on non-Indians on reservation).

This inquiry is required to ensure that competing sovereign

interests are all given due respect.

In sum, in addition to being the constitutional source of the

broad federal power over Indian tribes, the Indian Commerce

Clause is a reservation of areas of exclusive federal authority

from which state regulation is excluded to serve the federal

interests in protecting tribal sovereignty and fulfilling the

federal trust obligation. The Court has limited the area of

exclusivity, allowing state regulation (including taxation) that

does not substantially infringe federal interests and tribal

sovereignty. But, in light of the constitutional origins of this

Court's jurisprudence, it would be a revolutionary change in

the law, not warranted by any showing of need, to eliminate

either the Williams infringement or the Bracker balancing

test — tests which take federally-protected tribal interests into

account to give content to the Indian Commerce Clause and

the trust obligation embodied in our constitutional plan.

B. Kansas’s Tax Is Invalid.

1. Kansas’s Claim That State Taxes Infringing

Tribal Sovereignty Are Valid Unless

Expressly Preempted Ignores History And

The Actual Interests At Stake Here.

Kansas contends that Bracker balancing is administratively

unworkable and must be replaced with a bright-line test of

express preemption. This Court has already rejected the

argument. In any event, an express preemption test would

sever all ties between the constitutional origins and principles

of Indian preemption and modern jurisprudence in this area.

First, Kansas’s quest to subject Indian commerce to plenary

state control absent express preemption is not new. Twenty-

five years ago, an effort to achieve Kansas’s goal was

emphatically rejected by this Court. In Colville, several

Indian tribes challenged the legality of Washington's taxes on

cigarette sales by Indian retailers and on motor vehicle use in

Indian country, asserting that these taxes violated the Indian

Commerce Clause and the Supremacy Clause. 447 U.S. at

139-41. The United States argued that the tribes’ Commerce

Claims were “insubstantial,” because the Court had

previously ¢ccided that the Indian Commerce Clause was

“*without ‘ore 2 in situations like the present.’ /d. at 148.

Colville rejected the United States’ position. This Court

held that “[{t}he principle of tribal self-government, grounded

in notions of inherent sovereignty and congressional policies,

seeks an accommodation between the interests of the Tribes

and the Federal Government, on the one hand, and those of

the State, on the other.” /d. at 156. In balancing those

legitimate concerns, the Court explained that although “the

Indian Commerce Clause, of its own force, [does not}

automatically bar{] all state taxation of matters significantly

touching the political and economic interests of the Tribes,”

the Clause nonetheless has a continuing “role to play in

preventing undue discrimination against, or burdens on,

Indian commerce.” Id. at 157 (emphasis supplied).

Colville, thus, explicitly refused to adopt the express-

preemption test advocated by Kansas and instead reaffirmed

that balancing of federal, tribal and state interests is required

to determine whether state regulation infringing tribal

sovereignty is valid under the Indian Commerce Clause. See

also Ramah, 458 U.S. at 843 (the state’s argument that

“imposition of the state tax is not pre-empted because the

federal statutes and regulations do not specifically express the

intention to pre-empt this exercise of state authority... is

clearly foreclosed by our precedents”) (citing cases). The

Court recently utilized the balancing test to address the

validity of a state tax on a non-Indian, see, e.g., Department

of Taxation & Fin. v. Milhelm Attea & Bros., 512 U.S. 61,

73-75 (1994). Kansas has not come close % producing a

“compelling justification” for departing from stare decisis in

this area, where the Court’s decisions are subject to

congressional revision. See Hilton v. South Carolina Pub.

Rys. Comm’ n, 502 U.S. 197, 202 (1991).

Second, Kansas’s proposed rule is divorced from the

historic underpinnings of the Indian Commerce Clause. The

Clause did not simply grant authority to the federal

government. As Part A makes clear, the Indian Commerce

Clause addressed the problems created by the dual authority

over Indian affairs under the Articles of Confederation by

reserving an area of exclusive federal authority and excluding

state regulation from that area. Federal exclusivity was

deemed necessary to serve the federal interests in protecting

tribal sovereignty and fulfilling the federal trust obligation.

From this inception until today, the Court has always

recognized the constitutional basis for the protection of tribal

sovereignty and the necessary accommodation of federal,

state and tribal interests. Indian law preemption respects

“‘(t}he unique historical origins of tribal sovereignty, and the

federal commitment to tribal self-sufficiency and self-

determination.” Mescalero, 462 U.S. at 334.

Acceptance of Kansas’s crabbed express-preemption test

would entirely exclude tribal-sovereignty interests from the

Indian Commerce Clause analysis, and thus turn a blind eye

to the Court’s precedent and the Framers’ intent. States could

enact taxes that would devastate tribal governments and

enterprises, and the tribes would be forced to lobby Congress

for an express exemption each time such a tax was enacted in

any state. That — and not the Bracker balancing test — is

wholly unworkable. At a bare minimum, the Indian

Commerce Clause and the federal trust obligation require that

tribal interests be recognized and respected; an express

preemption test fulfills neither requirement.

There is a third textual and historical reason that the Court

should not adopt an express preemption rule. The Indian

Commerce Clause is one of three Commerce Clauses,

granting the federal government broad authority to regulate

commerce among the states and with foreign states and Indian

tribes. The interstate and foreign Commerce Clauses both

have “dormant” aspects that forbid states from burdening

commerce despite the absence of any express congressional

prohibition. With regard to state taxes, those that burden

interstate commerce are analyzed under a four-part test set out

in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977),

which requires a substantial nexus between the state and the

item taxed, a fair relationship between the state and the

services provided by the state, fair apportionment of the tax,

and the absence of discrimination against foreign goods. /d.

at 279. State taxes that burden international commerce are

judged under a rigorous test set forth in Japan Line, Ltd. v.

County of L.A., 441 U.S. 434 (1979), which includes the four-

part Complete Auto test, with additional consideration of the

risk of multiple taxation and the interest in federal uniformity.

Significantly here, this Court does nof require an express

congressional statement of preemption to invalidate a state tax

that burdens interstate or foreign commerce. Indeed, the

development of the test for determining when a state tax

violates the interstate Commerce Clause is analogous to the

Court's movement from the exclusivity of federal regulation

to the Bracker balancing inquiry. In Complete Auto, this

Court rejected the longstanding Spector rule that a state tax on

the “privilege of doing business” is per se unconstitutional

when applied to interstate commerce as _ excessively

formalistic and divorced from the true interests served by the

interstate Commerce Clause. See 430 U.S. at 278 (citing

Spector Motor Serv. v. O’ Connor, 340 U.S. 602 (1951)). But,

in doing so, the Court has emphasized that express

preemption is not required and that a state’s interest in raising

revenue must always be balanced against the federal interest

in preventing undue burdens and discrimination in interstate

commerce:

it long has been “accepted constitutional doctrine that

the commerce clause, without the aid of Congressional

legislation... affords some protection from state

legislation inimical to the national commerce, and that in

such cases, where Congress has not acted, this Court,

and not the state legislature, is under the commerce

clause the final arbiter of the competing demands of

state and national interests.” [Japan Line, 441 U.S. at

454 (emphasis supplied).]

In the text of the Constitution, the Indian Commerce Clause

parallels the interstate and foreign Commerce Clauses in a

grammatical sense. This parallel phrasing reveals that the

Framers contemplated that the national government would

have bilateral relations with the Indian tribes as distinct

sovereign entities, just as it would with foreign nations and

the several States. See Merrion v. Jicarilla Apache Tribe,

455 U.S. 130, 153 & n.19 (1982). There are historic reasons

to give the Indian Commerce Clause stronger preclusive

effect than the interstate or foreign Commerce Clauses. See

Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 62 (1996)

(“[i]f anything, the Indian Commerce Clause accomplishes a

greater transfer of power from the States to the Federal

Government than does the Interstate Commerce Clause”).

But, at the very least, the structure of the Commerce Clause

as a whole and the history and purpose of the Indian

Commerce Clause militate strongly against Kansas’s

argument that an express preemption test — which excludes

any consideration of the interests of the tribal sovereign —

should be adopted in place of a balancing test that respects all

relevant sovereigns’ interests.

This point — that the individual Commerce Clauses are

parallel and that there is no basis in the text or history of the

provisions to require express preemption under the Indian

Commerce Clause — is not undermined by Cotton Petroleum

Corp. v. New Mexico's discussion of the differences between

the interstate and Indian Commerce Clauses. 490 U.S. 163,

192 (1989). The Court made these observations in explaining

that Indian tribes are not states for purposes of determining

whether New Mexico's taxation of the mineral production

had to be apportioned in light of the tribal tax. Nothing in

that explanation undermines the point that a balancing test is

appropriate to determine whether a state tax is invalid under

the Commerce Clause generally and the Indian Commerce

Clause specifically. Indeed, Cotton Petroleum cites and

applies the Bracker test. See id. at 183-86. In Kansas’s view,

the tribes are no better off than private citizens, protected

from state regulation only by express preemption; but, this

Court has often made clear that tribes are sovereigns and, for

that reason, entitled to have their unique status and interests

taken into account where state and tribal interests are both

implicated.

At the end of the day, the sole basis Kansas offers for its

ahistorical argument that state regulations that infringe Indian

sovereignty and burden on-reservation commerce are lawful

unless expressly preempted is that interest-balancing is

messy. This argument applies to the majority of legal

standards because most issues do not lend themselves to

inflexible absolutes. Complexity is certainly endemic to

cases arising under the interstate and foreign Commerce

Clauses. In this area, the Constitution recognizes that the

competing interests of sovereigns are at issue; those interests

cannot be ignored because the accommodation process is

sometimes difficult. (Indeed, it is precisely for this reason

that states and tribes often address these potential issues of

multiple taxation by negotiated agreement. See Note,

Intergovernmental Compacts in Native American Law:

Models for Expanded Usage, 112 Harv. L. Rev. 922 (1999).)

The Court’s precedents “provide sufficient guidance,”

Ramah, 458 U.S. at 846. Kansas’s express-preemption test

should be rejected.

2. Kansas’s Claim That Its Tax Is Valid

Because It Is Formally Imposed On An Off-

Reservation Act Is Wrong.

In the alternative, Kansas claims that its fuel tax falls on

off-reservation conduct and thus is per se valid, even if it

infringes tribal sovereignty and unduly burdens on-

reservation commerce. Preliminarily, as the Tribe’s brief

shows, Kansas’s characterization of its fuel tax as a tax on

off-reservation conduct ignores the structure of the statutory

scheme at issue: The activity taxed is the use, sale or delivery

of motor fuel in Kansas, here the on-reservation sale and

delivery of fuel to the Tribe. In any event, as Amici show, the

State’s attempted recharacterization of its tax cannot insulate

that tax from a proper Indian Commerce Clause analysis.”

The issue is not where the tax falls, but whether the tax has a

forbidden effect. If a state tax imposed on an off-reservation

act significantly burdens on-reservation interests, the

balancing inquiry must be conducted.

Like its express preemption test, Kansas’s per se legal

incidence test reflects the State’s indifference to the actual

interests at stake here, and its desire to replace an interest-

based analysis with a label. The dispositive question here is

not the geographic location of the activity taxed, but whether

the state tax has an unlawful effect on tribal sovereignty. Put

differently, it is the location and nature of the effect, not the

location of the tax, that determines whether that tax may be

imposed under the Indian Commerce Clause. To determine

whether the tax has an unlawful effect, the interests of all

relevant sovereigns must be carefully weighed.

As set forth in Part A, supra, the primary purpose and

function of the Indian Commerce Clause is the protection of

Indian sovereignty and commerce in Indian country from

undue state infringement. Thus, where, as here, the Court is

analyzing whether a state tax on a non-Indian unduly

infringes tribal sovereignty and commerce on the reservation,

the Court is fulfilling the Indian Commerce Clause’s core

protective purpose. And, the question whether the activity

? Legal incidence is, of course, a question of federal law, as its deter-

mination is necessary to protect a federal right. See Carpenter v. Shaw,

280 U.S. 363, 367-68 (1930).

taxed is on or off the reservation is relevant only insofar as

the location exacerbates or ameliorates the burden that the tax

imposes on tribal sovereignty on the reservation.

Thus, the question whether a particular tax on a non-Indian

has an unlawful effect on the reservation cannot be answered

by invocation of a presumption based on the location of the

activity taxed. Such a “formalism merely obscures the

question whether the tax produces a forbidden effect.”

Complete Auto, 430 U.S. at 288. The Indian Commerce

Clause test cannot protect the interests that it is intended to

serve if those interests are not even considered. That is why

this Court has always conducted a particularized balancing

inquiry to determine whether a state tax on non-Indians has an

unlawful effect on the reservation, without regard to whether

the tax has off-reservation components. See Bracker, 448

U.S. at 143-44, 150-51; Ramah, 458 U.S. at 843-44 (moving

the incidence of a tax upstream or off-reservation to avoid

taxing a tribe directly does not save a state tax “whose

ultimate burden falls on the tribal organization”); Milhelm

Attea, 512 U.S. at 73 (applying balancing test to validity of

state regulation of off-reservation wholesalers). Cf.

Chickasaw Nation, 515 U.S. at 459 (where “the legal

incidence of the tax rests on non-Indians, no categorical bar

prevents enforcement of the tax”; the “Indian preemption”

test requires the Court to analyze “the balance of federal,

state, and tribal interests”).

In Central Machinery Co. vy. Arizona State Tax

Commission, 448 U.S. 160 (1980), this Court invalidated a

state gross receipts tax on a non-Indian who did not have a

place of business on the reservation, but who sold tractors to

tribal Indians on the reservation. The state defended its tax,

pointing out that the incidence of the tax fell on the non-

Indian whose business was not on the reservation. Rejecting

that argument, this Court explained: |

Nor may [the state] distinguish the present case from

Warren Trading Post [where a state tax on a non-

Indian’s sales of goods to a tribal Indian was

invalidated] by contending that the tax at issue in this

case falls upon the [non-Indian] seller of goods and not

the [Indian] buyer because it is a tax on the privilege of

doing business in Arizona rather than a sales tax.....

[R]egardless of the label placed upon this tax, its

imposition as to on-reservation sales to Indians could

“disturb and disarrange the statutory plan Congress set

up in order to protect Indians against prices deemed

unfair or unreasonable by the Indian Commission.” [Id.

at 163 n.3 (citations omitted) (emphasis supplied)].

This Court’s concern with state taxation that affects tribal

Indians is not merely symbolic — it is substantive. It arises

from the Indian Commerce Clause and the historic principles

of tribal sovereignty embedded in our constitutional structure,

which Kansas embraced when it joined the United States.

The Court’s jurisprudence is designed to protect those

substantive interests, not to enforce a formal rule about the

incidence of taxation that would simply facilitate

circumvention of the constitutional and historic protections

afforded the tribes.

For example, with substantial federal promotion and

support, the tribes are now engaged in a multitude of

commercial activities from professional services to product

development and manufacturing, to natural resource

exploitation. See infra at 25-26. If states are empowered to

capture the full market value generated on Indian reservations

simply by shifting the incidence of the tax off the reservation,

these important federal and tribal interests will be severely

undermined. No bright line test based on the incidence of

taxation can fairly accommodate the federal, tribe and state

interests that are implicated by state taxation regimes.

It is noteworthy that the Court has rejected analogous

requests to adopt formal incidence tests under the parallel

provisions of the interstate Commerce Clause. In Complete

Auto, for example, the Court explained that, in analyzing state

taxes that affect interstate commerce, the Court “has moved

toward a standard of permissibility of state taxation based

upon its actual effect rather than its legal terminology.” 430

U.S. at 281 (emphasis supplied). Like the Bracker test,

Complete Auto’s functional analysis “seek[s] to avoid

formalism and to rel[y] upon a ‘consistent and rational

method of inquiry [focusing on] the practical effect of a

challenged tax.’” Trinova Corp. v. Michigan Dep't of

Treasury, 498 U.S. 358 (1991) (third alteration in original)

(quoting Mobil Oil Corp. v. Commissioner of Taxes, 445 U.S.

425, 443 (1980)).

It is undisputed that enforcement of the Kansas tax

precludes imposition of the tribal tax. And, the statutory

pass-through mechanism makes clear that this is not a case

where a tax on a non-Indian simply increases the non-Indian’s

costs and has the indirect and speculative effect of making

tribal economic activity more expensive or less profitable

(e.g., Thomas, Cotton Petroleum). There is nothing

speculative about the burden of Kansas’s tax — by statute, it is

directly and in its entirety passed through to the Tribe, and

imposes an impenetrable barrier to tribal taxation. With this

effect, the state tax cannot stand.

3. Kansas’s Balancing Derogates The Federal

And Tribal Interests At Stake.

Kansas’s final argument is that its tax is valid even if the

Bracker balancing of federal, tribal and state interests is

conducted. Kansas’s version of this Court’s balancing test,

however, illustrates what happens when no weight is given to

the tribal sovereignty interests protected by our constitutional

structure and Indian preemption law, and dispositive weight is

given to the most minimal state interest. The State contends

that its interest in collecting $300,000 in fuel tax revenue to

fund Kansas roads outweighs the Tribe’s sovereign interest in

exercising any power to tax fuel sold at its on-reservation

station as part of its casino complex in order to fund

reservation roads, also in Kansas, and recognized by the

oT in mall

federal government as critical to tribal welfare and self-

sufficiency. The Tribe is not marketing a tax exemption,

assisting tax evaders or engaged in any other illegitimate

activity; instead, the Tribe is taxing an on-reservation service

to generate revenue to fulfill a governmenial function.

Moreover, transactions with the Tribe alone among

sovereigns are fully taxed. Kansas’s version of balancing

makes a mockery of tribal sovereignty.

A tribe’s “power to tax is an essential attribute of [its]

sovereignty because it is a necessary instrument of self-

government and territorial management,” allowing the tribe

“to raise revenues for its essential services.” Jicarilla Apache

Tribe, 455 U.S. at 137. Indeed, a “necessary implication of

th{[e] broad federal commitment” to tribal self-sufficiency in

all its forms is that the tribes have “the power... to defray

the cost of governmental services by levying taxes.”

Mescalero, 462 U.S. at 335-36. In addition, like any

government, a tribe has an important sovereign interest in the

construction and maintenance of an infrastructure of roads

and bridges on its reservation. Here, under applicable law —

and as a result of inadequate federal and state funding for

numerous years — the Tribe has assumed financial

responsibility “for the majority of the roads and bridges on

and near its reservation.” Pet. App. 11. The Tribe receives

no funding from the State for this purpose. See JA 79. The

Tribe’s principal economic asset and revenue source is its

casino, with associated services such as the tribal gas station.

Thus, the Tribe exercised its taxing power to fund its roads

programs by imposing a fuel tax on sales at its on-reservation

station whose proceeds are used exclusively for this purpose.

Id. at 48-50 (PBP Code §§ 10-6-1 to -2).

Nothing less than the Tribe’s practical ability to exercise

one of the most fundamental attributes of sovereignty in order

to fulfill a traditional, critical government function is at stake

here. Although the State has not passed a law forbidding the

Tribe to tax retail sales of motor fuel at its reservation station,

it has constructively done so. “[T]he Tribal and State taxes

are mutually exclusive and only one can be collected without

reducing the [Tribe’s] fuel business to virtually zero.” Pet

App. 12.

If “[t]he power to tax transactions occurring on trust lands

and significantly involving a tribe or its members is a

fundamental attribute of sovereignty which the tribes retain

unless divested of it by federal law or necessary implication

of their dependent status,” Colville, 447 U.S. at 152, the State

cannot impose such a tax. Tribes do not have a theoretical

interest in taxing economic activity on the reservation; the

tribal interest in taxation (like that of the United States and

the states) is a practical interest in the ability to raise essential

funds for public purposes, here the building and maintenance

of roads. Where state regulation constructively eliminates a

tribe's ability to exercise its sovereign power, the tribal

interest in precluding such regulation should be dispositive.

Tribal sovereignty would be “hollow,” indeed, if “[t]he Tribe

could thus exercise its authority over the reservation only at

the sufferance of the State.” Mescalero, 462 U.S. at 338.°

Moreover, under the circumstances, the Tribe bears the full

economic burden of the Kansas motor fuel tax. Although the

Court will not strike down a tax on a non-Indian simply

because the tribe bears the economic burden of the tax, that

fact is important in assessing the relative importance of the

Indian interest. Compare Bracker, 448 U.S. at 151-52;

Ramah, 458 U.S. at 844 n.8 (finding “it significant that the

economic burden of the asserted taxes would ultimately fall

on the Tribe, even though the legal incidence of the tax was

on the non-Indian logging company”) with Cotton Petroleum,

“Compare Cotton Petroleum, 490 U.S. at 185 (permitting state

severance tax on non-Indian’s leased oil and gas production where the

State tax imposed “‘no economic burden... on the tribe’” because “the

Tribe could, in fact, increase its taxes without adversely affecting on-

reservation oil and gas development’’) (alteration omitted).

490 U.S. at 185 (“‘no economic burden [fell] on the tribe by

virtue of the state taxes’”) (alteration omitted). And, it is

particularly important where, as here, the fact and extent of

the economic harm to the Tribe is certain; the tax is passed on

to the Tribe in its entirety.“

In addition, this is not a case like Moe v. Confederated

Salish & Kootenai Tribes, 425 U.S. 463, 482 (1976), or

Colville, 447 U.S. at 155, where the tribes had no legitimate

interest in exercising their sovereign power to assist state tax

evaders or in marketing an exemption from state tax law,

respectively. Here, the Tribe “sells fuel at fair market prices,”

JA 133-134, 40, 86, 69-70; and “*“the value marketed” by

{the Tribe’s] Station results from the business generated by

the casino and from employees of the casino and [Tribal]

government and residents.”” Pet. App. 3. A tribe has a

substantial, legitimate interest in an on-reservation market

when it generates sales that “would occur on the reservation

because of its location and because of the efforts of the Tribes

in importing and marketing the [product],” even “if credit [for

the tribal tax] were given.” Colville, 447 U.S. at 158

(emphasis supplied).

In fact, a tribe’s interest in raising revenue is “strongest

when the revenues are derived from value generated on the

reservation by activities involving the Tribes.” Colville, 447

U.S. at 156-57; Milhelm Attea, 512 U.S. at 73 (same). See

also Cabazon Band, 480 U.S. at 219. As noted above, with

strong federal backing and pursuant to federal statutes and

‘The Court has upheld state property taxes on railroad rights-of-way

and non-Indian livestock grazed on reservation lands. See Maricopa &

Phoenix R.R. v. Territory of Ariz., 156 U.S. 347 (1895); Wagoner v.

Evans, 170 U.S. 588 (1898); Thomas v. Gay, 169 U.S. 264 (1898). In

these cases, the only Indian interest asserted was the Indians’ potential

ability to obtain marginally more money from the rights-of-way or leases

if the taxes were preempted — interests the Court considered too remote

and speculative to invalidate state regulation. See Thomas, 169 U.S. at

273-74.

regulatory programs,” Indian tribes today are engaged in a

broad array of economic activities on reservations, including

commercial exploitation of natural resources, basic

manufacturing, professional services, product development

and cultural and entertainment activities. See, e.g., Cabazon

Band of Mission Indians v. Wilson, 37 F.3d 430 (9th Cir.

1994) (tribal investment in off-track wagering facility);

Hoopa Valley Tribe v. Nevins, 881 F.2d 657 (9th Cir. 1989)

(tribal investment in timber operation). A state tax that

entirely precludes tribal taxation by capturing all tax

revenues available on such activities and products — as the

Kansas tax does — both infringes tribal sovereignty and

undermines the federal interest in promoting tribal enterprises

that generate economic value on reservations.

The substantial infringement of tribal sovereignty worked

by the Kansas tax alone should result in its invalidation. It

does not stand alone, however. The Tribe's brief fully details

Congress’s comprehensive scheme regulating the funding,

construction and maintenance of roads on reservations — a

scheme responsive to the dismal and dangerous condition of

reservation roads and the urgent need for improvement of this

vital infrastructure to further the paramount federal goals of

_ tribal sovereignty and economic self-sufficiency. Amici

endorse and adopt the Tribe’s delineation of the substantial

federal interests obstructed by Kansas’s tax. Specifically,

federal laws governing the Indian Reservation Road (“IRR”)

system recognize the tribes’ interest qua sovereigns in road

* Congress has routinely acknowledged and sought generally to

encourage tribal sovereignty and economic self-sufficiency. That purpose

and policy is embodied in federal statutes such as the Indian

Reorganization Act, 25 U.S.C. §§ 461-479, the Indian Self-Determination

and Education Act, 25 U.S.C. § 450f et seq., and IGRA. See also, e.g.,

Cabazon Band, 480 U.S. at 216 (“|t}he inquiry is to proceed in light of

traditional notions of Indian sovereignty and the congressional goal of

Indian self-government, including its ‘overriding goal’ of encouraging

tribal self-sufficiency and economic development”).

planning, regulation, and construction, and identify a “[t)ribal

fuel tax” as a vital source of funds for IRR projects. 25

C.F.R. § 170.932(d). See 23 U.S.C. § 135(d)(2), (e(2(C),

(f)(1)(B)(iii) (mandating state consultation with the tribes on

roads issues related to Indian country). Viewed through the

proper lens, the Kansas tax obstructs full implementation of

the specific federal purposes of improving tribal roads and

supporting tribal efforts to act as responsible sovereigns and

to raise revenue to do so. Where, as here, a state tax

precludes tribal taxation of an on-reservation activity, it

undermines these important federal interests.

State interests such as those at stake here are not “sufficient

to justify the assertion of State authority.” Mescalero, 462

U.S. at 334. Like tribes, states always have a significant

sovereign interest in enforcing a tax to obtain funds for roads

and other government projects, but the state tax here

effectively eliminates any tribal taxing power and thus

significantly impinges on the Tribe’s on-reservation

sovereignty, while the loss of the tax revenues from

transactions with the Tribe has a very small impact on the

State’s fuel tax revenues. Of the roughly $429 million

Kansas annually collects from its motor fuel tax,

approximately $300,000 would be laid upon fuel distributed

to the Tribe. See id. at 343 (limiting state interest in tax

because “[t}he loss of revenue to the State is likely to be

insubstantial”). However substantial state interests in their

taxing authority are, tribes have an analogous interest. Thus

where, as here, the tribal power to tax is obliterated by a state

tax, the tribe’s interest necessarily outweighs the state

interest.

In addition, the State’s interest in revenues related to a

particular transaction should be reduced when the tribal tax

produces revenues devoted to a legitimate governmental

purpose. For example, like all Kansas citizens, tribal

members benefit from Kansas’s network of roads; but tribal

members and non-members also benefit from reservation

roads. Kansas law requires the State to remit a significant

percentage of its fuel tax funds to cities and counties, but not

to Indian tribes, for road projects. Kan. Stat. Ann. § 79-34,

142. And, the Tribe is using its fuel tax proceeds exclusively

for roads projects within the reservation. Put differently, the

Tribe's tax does not deprive the State road system of revenue;

it simply results in the use of less than one-tenth of one

percent of the motor fuel tax proceeds for on-reservation road

projects in the State. Cf. Ramah, 458 U.S. at 844 n.9 (“the

State tax revenues derived from [the non-Indian contractor’s]

off-reservation business activities are adequate to reimburse

the State for the services it provides to [that contractor]’”).

Kansas fails to recognize either its omission or the Tribe’s

beneficial use of the funds in its “balancing” of the relevant

interests.

In this connection, it is difficult to discern the legitimacy in

Kansas’s determination that it may nullify the Tribe’s taxing

authority by collecting all motor fuel tax revenues resulting in

the Tribe’s inability to collect any. A state is not required

strictly to adhere to proportional taxation when its taxes

overlap with those of a tribe with concurrent jurisdiction. But

a State should not be permitted to act in complete derogation

of the tribes’ sovereign taxing power and responsibilities, and

this is precisely what Kansas’s version of balancing would

allow. See Oklahoma Tax Comm'n v. Sac & Fox Nation, 508

U.S. at 114, 124-25 (1993).

Finally, a state’s interest in enforcing a tax must be

diminished if its tax scheme is discriminatory. Kansas does

not tax distributors’ transactions with the United States or its

contractors. When the State taxes distributors’ transactions

with Kansas, it simply moves the money from one “pocket”

to another. Even local governments receive a mandated

rebate of almost half of a// fuel taxes for their roads projects,

counterbalancing any taxes they pay on distributors’

transactions with them. See Kan. Stat. Ann. §§ 79-3402,

-34,142 (formula). The Tribe is the only sovereign neither

exempted from the tax nor entitled to share in its revenues.

Kansas cannot see any derogation of the Tribe’s interest

here because it does not view the Tribe as retaining inherent

sovereign powers or responsibilities on the reservation. And,

indeed, Indian tribes have not generally prospered under the

balancing test of Bracker and its progeny. In its application,

federal courts have tended to favor familiar state interests

over tribal interests which are less well known. As a result,

State taxation often drains reservation economies, while states

make little or no contribution to reservation infrastructure.

Kansas’s application of Bracker balancing, however, would

go even further in this direction, placing a thumb permanently

on the states’ side of the scale in the balancing process. This

is a case where any reasonable analysis demonstrates that the

tax substantially infringes federally-protected interests and the

Tribe’s right to self-government, nullifying any tribal ability

to levy a fuel tax and fulfill its sovereign responsibilities vis-

a-vis reservation roads, and the State interest is transferring

$300,000 in fuel tax revenues from one set of Kansas roads to

reservation roads also in Kansas. Yet Kansas urges the Court

to scrap any balancing or infringement test, or to apply a

balancing test in ways entirely divorced from its

constitutional origins. The Tribe is a responsible government

that is not marketing a tax exemption but instead exercising

its taxing authority to build reservation roads and fulfill

important governmental functions. Its authority should be

upheld. Kansas’s fuel tax is unconstitutional.

CONCLUSION

The decision of the Tenth Circuit should be affirmed.

Respectfully submitted,