Opposition Brief — New Mexico Taxation & Revenue Department v. Ramah Navajo School Board, Inc.

No. 99-59 ; Uber

IN THE

Supreme Court of the United States

NEW MEXICO TAXATION AND REVENUE DEPARTMENT,

Petitioner,

Ve

RAMAH NAVAJO SCHOOL BOARD, INC., PATTERSON

OIL CO., INC., and GUNDERSON OIL CO., INC.,

Respondents.

On PETITION FOR A WRIT OF CERTIORARI

TO THE New Mexico Court or APPEALS

RESPONDENTS’ BRIEF IN OPPOSITION

MICHAEL P. Gross

Counsel of Record

Law Offices OF MICHAEL P. Gross

Attorneys for Respondents

460 St. Michael’s Drive

Suite 300

Santa Fe, New Mexico 87505

Eric TREISMAN (505) 983-6686

On the Brief

154260 @) Counsel Press LLC

FORMERLY LUTZ APPELLATE SERVICES

(800) 274-3321 + (800) 359-6859

i

QUESTIONS PRESENTED

1. Is a State gasoline excise tax nominally imposed

on a non-Indian distributor on “receipt” of gasoline from

an off-reservation refinery pre-empted when: (1) the

distributor responds to a bid solicitation emanating from

the reservation and delivers the gasoline to a tribal school

board operating under The Indian Self-Determination And

Education Assistance Act, 25 U.S.C. §§ 450 to 450n;

(2) the tribal entity necessarily absorbs the cost of the tax,

thus reducing the amount of federal monies available to

operate school, health, and other government programs; and

(3) the tax scheme provides deductions for comparable

sales to federal agencies and instrumentalities but not to

tribal governments?

2. Is the State gasoline tax properly labeled an off-

reservation tax between non-Indians when it is imposed at

an arbitrary stage in a unified purchase-sale transaction with

the tribe which begins and ends on the Indian reservation?

3. Does Ramah Navajo School Board, Inc. v. Bureau

of Revenue, 458 U.S. 832 (1982) control this case because

the tax impermissibly burdens and impedes the attainment

of the Federal Indian Self-Determination policy?

ii

STATEMENT PURSUANT TO RULE 29.6

The Ramah Navajo School Board, Inc., (RNSB) is a

tribally-sanctioned school board and governmental entity

of the Navajo Nation, a federally recognized Indian tribe.

RNSB is also incorporated as a private, non-profit

corporation under the laws of the State of New Mexico.

Neither Gunderson Oil Company, Inc. nor Patterson Oil

Company, Inc., the non-Indian distributors, have any parent

corporations and no publicly held company owns 10% or

more of each corporation’s stock. Neither corporation has

any interest in this case.

TABLE OF CONTENTS

Questions Bresemted ..cccccccessersereerer ee.

Statement Pursuant to Rule 29.6 .----eeerr ttt’

Statement of REED cc ccccccesoceveeseeres*'

Summary of the Argument ..-----ss77 777" "

Reasons for Denying the Writ ..--eccererrrre’®

lL.

Il.

Ill.

IV.

The Tax Was Effectively Imposed On An On-

Reservation Transaction Of An Indian Tribal

Governmental Entity. ..----..7770

The New Mexico Tax Discriminated Against

Sales To Indian Tribes And Thus Served As

A Disincentive And Impediment To Self-

Determination Contracting. .-----."°""""

This Court Has Not Erected A Bright-Line

Test As Posited By Petitioner. .-.----+***°

The Petitioner Employs Arguments Not

Raised Below And Facts Not Of Record.

TABLE OF CITED AUTHORITIES

Page

Cases:

Appeals of Alamo Navajo School Board, Inc. and

Miccosukee Corporation, U.S. Dept. of the

Interior, IBCA 3463-3466 and IBCA 3560-3562,

98-2 BCA, 29, 831 and 29, 832 (pending appeal

in the Federal Circuit Court of Appeals, Docket

No. 98-1457 consolidated with Docket No.

PRET T E Pree Oey ee eT eT ETE 10

Appeal of Cherokee Nation of Oklahoma, IBCA

Docket No. 3877-3879/98 .........ceceeeees 10

Arizona Department of Revenue v. Blaze

Construction Co., _ U.S. __, 119 S. Ct. 957

CE bceedndoknarsbaatksedecedecekeeusia 7

Cotton Petroleum Co. v. New Mexico, 490 U.S. 163

EE vvcoksantaueasanunaces ceeiwss onaary 5, 6,8

Hines v. Davidowitz, 312 U.S. 52, 61 S. Ct 399, 85

i GP Pn +c cbeedasdbete tse ekue ennis 5

Hisquierdo v. Hisquierdo, 439 U.S. 572, 99 S. Ct.

GRUPO 6d ck acecnkndscdeuevocerersnient 5

Kiowa Tribes of Oklahoma v. Hoover, 150 F.3d 1163

tot 5 PP rrerrerrrrr ry errr 7,8

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

SR SEGUE eck cnckessutbceuceucseriilacw 7

DP RA Ra aR

Cited Authorities

Page

Mescalero Apache Tribe v. Jones, 411 U.S. 145

CUPeE cubs cnuebeieccsearkwesasrereerTTens 8

Nash v. Florida Industrial Comm'n, 389 U.S. 235,

fF eR 8. fy RR eee 5

Oklahoma Tax Commission v. Chickasaw, 515 U.S.

et i Ee ey err eer ere 4,6, 7

Ramah Navajo Chapter v. Lujan, 112 F.3d 1455 (10%

Oy re er re se er er pepe 10

Ramah Navajo School Board, Inc. v. Babbitt, 87 F.3d

Cee Gees Gs BOOD 0 00n decévecndweneuvaes 10

Ramah Navajo School Board, Inc. v. Bureau of

Revenue, 458 U.S. 832 (1982) ....... hy dy See Du Fee

Seminole Tribe of Florida v. Florida State

Department of Revenue, 720 So.2d 270, No. 97-

ee ee re ree 9

Shoshone-Bannock Tribe v. Shalala, 988 F. Supp

1306 (D. OR. 1997), mod. oth. grnds., 999

FP, SO. US5S GD. GER. ESTED oc ccncccsscseus: 10

United States v. New Mexico, 455 U.S. 720 (1982)

cua wes RO oUNE TC Raenae eer Reena bweinesee 7

White Mountain Apache Tribe v. Bracker, 448 U.S.

PEE od dees 6s bee eee ceed eeckeees cee 6, 7,8

Xerox Corp. v. County of Harris, 459 U.S. 145

Peer oe pe pete oe ream 3, 5

vi

Cited Authorities

Page

Statutes:

Indian Self-Determination and Education Assistance Act

of 1975:

25 U.S.C. §§ 450 to 450(n) 2.0.0.0... eee ee. i, |

SUBS, 6 GUUS oo coceceviscsioece 9

USS OWT oe icicccrccesectietee 10

SUG O ADD occ icncciccesen 10

Federal Property and Administrative Services Act of

1949:

SOUBE SABI os os ce rsccoiweeceeieeen 9

New Mexico Gasoline Tax Act:

§ 7-13-4, NMSA 1978 (1998 Repl. Pam.) ..... 2

§ 7-13-4(c), NMSA 1978 (1998 Repl. Pam.) ... 3

Faas EME GOS, Gk ae OS covsevensdeeveoveel 3

NM. SG BSG le Kak BO ve xeckavedebeuseesee 3

The Civil Rights Act, 42 U.S.C. § 1983 ......... l

vil

Cited Authorities

Page

United States Constitution:

Supremacy Clause, Art. VI,Cl.2 .............. l

Rule:

United States Supreme Court Rule 17 ........... 4

Other Authority:

Laurence H. Tribe, American Constitutional Law,

Te’ fe ft & ePePrrrrre rr ereereee 3

vill

TABLE OF APPENDICES

Page

Appendix A — Affidavit of Donald D. Creamer .. la

Appendix B — Affidavit of Jim Hooper Jr. ...... 3a

Appendix C — N.M. Laws of 1997, Ch. 192 ..... 6a

Appendix D — N.M. Laws of 1993, Ch. 2 and N.M.

Ff gg... 4° > eer ee re 7a

aa

l

STATEMENT OF THE CASE

Respondent Ramah Navajo School Board, Inc., (RNSB),

in its own name and as assignee of the rights of two gasoline

distributors, Gunderson Oil Company, Inc. and Patterson Oil

Company, Inc., filed suit in the First Judicial District Court

for Santa Fe County, New Mexico, on July 8, 1996, claiming

damages for the illegal imposition of state gasoline excise

taxes adversely affecting Federally-financed governmental

programs under the Indian Self-Determination And

Education Assistance Act of 1975 (ISDA), 25 U.S.C. §§ 450-

450n. After dismissing claims based on 42 U.S.C. § 1983,

the District Court rendered summary judgment for Petitioner

Taxation & Revenue Department on September 24, 1997.

Thereafter, Respondent RNSB filed notice of appeal to the

New Mexico Court of Appeals. On March 4, 1999, that Court

affirmed the dismissal of the 42 U.S.C. § 1983 claim but

reversed the decision as to the Supremacy Clause

(U.S. Const., Art. VI, Cl. 2) claim and remanded for

determination of damages. The parties each filed petitions

for writ of certiorari to the New Mexico Supreme Court,

which denied the Department’s petition on April 8, 1999

and RNSB’s petition on April 12, 1999.

Respondent is a tribal school board and sanctioned

organization of the Navajo Nation for purposes of ISDA.

Since 1970 (before the Act was passed) RNSB has been

operating a school and other governmental programs for the

2500 members of the Ramah Navajo community in western

New Mexico. The Act was passed in 1975. Since then RNSB

has been funded through ISDA contracts with monies

appropriated by Congress for operation of Indian and related

programs. In 1982 it successfull» challenged New Mexico’s

gross receipts tax which was wmpesed on a construction

2

project financed by Congress for new school facilities

housing RNSB’s programs. Ramah Navajo School Board,

Inc. v. Bureau of Revenue, 458 U.S. 832 (1982). (Ramah /).

In the late 1980s RNSB began purchasing gasoline from

non-Indian, off-reservation-based distributors at wholesale.

Typically, RNSB faxed or phoned bid solicitations to known

distributors specifying the quantity and type of product

desired and a delivery time. Upon award, the distributor

would dispatch a tanker to the refinery, load the product,

deliver it to Pine Hill on the Ramah Navajo Reservation

where RNSB is headquartered, and off-load it. These steps

— from bid solicitation to delivery — were often

accomplished the same day and almost always within 24

hours.

Gunderson Oil Co. and Patterson Oil Co. are two of the

distributors RNSB used regularly for its purchases of

gasoline. Petitioner audited each of the distributors and

assessed the tax as to deductions taken by each of them on

sales to Respondent RNSB. As in Ramah / involving the

construction project, RNSB paid the assessment or

reimbursed the distributor for the tax and received an

assignment of any refunds in return. ;

At the time material to this action, New Mexico’s former

gasoline tax statute allowed for deductions on sales from

distributors to federal agencies or instrumentalities but not

to tribes or tribal entities. 7-13-4, NMSA 1978. As a result,

a disincentive was placed on tribes’ or tribal organizations’

use of ISDA to gain control over the operations of federal

Indian programs of the Interior Department and the Health

and Human Services Department. The tax burden was

measurable and significant, some $128,000. In 1997, the

‘ii

3

Legislature extended the deduction to Indian nations, tribes

or pueblos and their agencies and political subdivision.

7-13-4(c), NMSA 1978 (1998 Repl. Pam.), Laws 1997, Ch.

192. (App. C).

For part of the assessment periods, the New Mexico

. gasoline statutes also required sellers of petroleum products

| to include the tax in the selling price of gasoline, thus placing

legal incidence on consumers. This requirement was removed

from the statutes in 1993 by Act of the Legislature. Laws

1993, Ch. 2, § 2 (App. D) No other material changes to the

statutes were made.

4

|

Based on general preemption principles of long standing,

) the Decision below held that the disparate treatment of

federal agencies compared with tribes before the 1997 change

violated the Supremacy Clause. Citing Laurence H. Tribe,

American Constitutional Law, § 6-26, at 489 (2d ed. 1988)

the Court held that a federal statute preempts state law even

if it does not do so expressly, if the state law in question

“specifically frustrates fairly narrow and concrete objectives

that underlie federal enactments”. Relying on Xerox Corp.

v. County of Harris, 459 U.S. 145 (1982), the Court went on

to hold that preemption-by-frustration applies to state taxes

as well as other laws and found that the New Mexico tax

structure in force during the assessment periods was in

“irreconcilable conflict” with the “core objectives of the Self-

Determination Act”, objectives which had been recognized

in Ramah IJ in 1982.

SUMMARY OF THE ARGUMENT

| The decision below was correctly decided on the basis

; of well-established principles of preemption and of Indian

4

law. The bright line test advocated by Petitioners is not

appropriate. The balancing test of Ramah J has never been

overruled or substantially altered. None of the considerations

listed in Rule 17 of this Court obtain. The tax provision found

to be impermissible is no longer in effect.

REASONS FOR DENYING THE WRIT

I. THE TAX WAS EFFECTIVELY IMPOSED ON AN

ON-RESERVATION TRANSACTION OF AN

INDIAN TRIBAL GOVERNMENTAL ENTITY.

At all material times, the former New Mexico gasoline

tax seriously impacted the operations of RNSB’s federally-

contracted school, health, and other governmental programs.

Though nominally imposed on non-Indian distributors, the

tax directly, predictably, and adversely affected reservation

governmental activities of the Respondent authorized and

mandated by Congress through ISDA as part of Congress’

twenty-five year old policy to promote better education and

living conditions for Indians through maximum self-

determination. The transaction itself originated and ended

on the reservation, characterized by an unbroken series of

connected steps from bid solicitation to delivery. The 1993

change switched the legal incidence from the consumer to

the distributor, but the tax was still passed along to the

consumer. The economic effects on the Respondent tribal

entity remained the same. The tax is therefore properly

viewed as an on-reservation impost burdening a tribal

governing entity operating governmental programs under

contracts sanctioned by The Indian Self-Determination Act.

The case is thus factually on all fours with Ramah J which,

therefore, controls. Nothing in Oklahoma Tax Commission

v. Chickasaw, 515 U.S. 450 (1995), or elsewhere invites

ow 2 a >

ae a a

5

states to manipulate the legal incidence of their taxes to avoid

the preemptive effect of the ISDA as found in Ramah J.

Il. THE NEW MEXICO TAX DISCRIMINATED

AGAINST SALES TO INDIAN TRIBES AND THUS

SERVED AS A_ DISINCENTIVE AND

IMPEDIMENT TO SELF-DETERMINATION

CONTRACTING.

At the same time, the favored treatment of federal

agencies and instrumentalities under New Mexico’s then tax

statute as compared with Indian tribes and entities served to

discourage the latter from exercising their ISDA rights by

making self-determination contracting more expensive. Ina

variety of contexts including taxation, this Court has

repeatedly held that direct, tangible, and measurable

disincentives or impediments erected by states which

discourage exercise of federal rights by individuals transgress

the Supremacy Clause. Hines v. Davidowitz, 312 U.S. 52,

61S. Ct 399, 85 L. Ed 581 (1941); Hisquierdo v. Hisquierdo,

439 U.S. 572, 99 S. Ct. 802 (1979); Nash v. Florida Industrial

Comm'n, 389 U.S. 235, 88 S. Ct. 362 (1967); Xerox, supra.

Even if the case were not controlled by Ramah /, this aspect

of the former state tax structure would be an independent

and sufficient basis on which to rest the decision, as the New

Mexico Court of Appeals held.

Ill. THIS COURT HAS NOT ERECTED A BRIGHT-

LINE TEST AS POSITED BY PETITIONER.

Contrary to the argument of Petitioner, this Court has

not replaced the Ramah J balancing test for indirect tax

situations with a bright-line test. In fact, this Court has

reaffirmed the balancing test. Cotton Petroleum Co. v. New

Mexico, 490 U.S. 163, 176 (1989):

6

Although determining whether federal legislation

has pre-empted state taxation of lessees of Indian

land is primarily an exercise in examining

congressional intent, the history of tribal

sovereignty serves as a necessary “backdrop” to

that process. (Citations omitted) As a result,

questions of pre-emption in this area are not

resolved by reference to standards of pre-emption

that have developed in other areas of the law, and

are not controlled by “mechanical or absolute

conceptions of state or tribal sovereignty.” White

Mountain Apache Tribe v. Bracker, 448 U.S. 136,

145, 100 S. Ct. 2578, 2584, 65 L. Ed. 2d 665

(1980). Instead, we have applied a flexible pre-

emption analysis sensitive to the particular facts

and legislation involved. Each case “requires a

particularized examination of the relevant state,

federal, and tribal interests.” Ramah Navajo

School Board, Inc. v. Bureau of Revenue, 458 U.S.

832, 838, 102 S. Ct. 3394, 3398, 73 L. Ed. 2d

1174 (1982).

References to ISDA in Cotton are pure dicta. ISDA was not

involved in that case.

The other citations relied on by Petitioner are equally

unsupportive of Petitioner’s position. Chickasaw, supra, 515

U.S. at 464, expressly reserved the question “whether the

Tribe’s right to self-governance [not pled in that case but

central to the claims here] could operate independently to

pre-empt the State’s ability to tax income earned from work

performed for the tribe when the employee does not reside

in Indian country.” Moreover, Chickasaw’s comments about

bright lines applied to an aspect of the case which involved

Perel

7

a direct tax imposed on a tribal gas station, a tax clearly

prohibited by the rule in McClanahan vy. Arizona State Tax

Comm'n, 411 U.S. 164 (1973) which held that states may

not impose direct taxes on Indians living and working on

their own reservation. The state had argued that since the

tribal outlet passed on the tax to non-Indian consumers the

tribe was not being taxed. This is the reverse of what

happened here: a non-Indian taxpayer passing on the tax

burden to a protected Indian consumer. The Court’s comment

was not aimed at indirect taxation of tribal governments of

the sort involved here, but the converse. Chickasaw did noi

reverse or even mention Ramah J.

Arizona Department of Revenue v. Blaze Construction

Co., U.S. _, 119 S. Ct. 957 (1999), involved a foreign

Indian-owned company doing road construction under

contract to the Bureau of Indian Affairs, a federal agency.

No tribe or tribal entity was a party. No measurable impact

on tribal government or on an Indian self-determination

program was involved. No ISDA contract was involved. As

a result, that case was controlled by United States v. New

Mexico, 455 U.S. 720 (1982) decided just months before the

decision in Ramah J. United States v. New Mexico involved

the same tax as Ramah I, the New Mexico gross receipts or

sales tax, a tax comparable in structure to the gasoline taxes

at issue here. The only difference between the two cases was

that a federal government agency bore the burden of tax in

United States v. New Mexico, while the burdened entity in

Ramah I, as here, was a tribal government. That single

element, however, produced radically different results, a

reflection of the three-way comity interests of states, the

Federal government, and tribes which must be taken into

consideration whenever tribes are involved. Ramah J;

Bracker, supra; Cf. Kiowa Tribes of Oklahoma v. Hoover,

8

150 F.3d 1163 (10" Cir. 1998) (upholding tribal sovereign

immunity for off-reservation transactions). Finally,

Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1973)

predates White Mountain Apache Tribe v. Bracker, 448 U.S.

136 (1980) and Ramah IJ and, in any case, deals with a

proprietary activity, a ski resort, unlike the purely

governmental activities involved here.

In none of the cases relied on by Petitioner, moreover,

was there a comprehensive federal scheme comparable to

the Indian Self-Determination scheme central to this case.

The State’s reliance on geography and legal incidence

therefore disregards the Court’s functional test. The State’s

approach would require an Indian tribe to cut itself off from

virtually all off-reservation economic relationships in order

to qualify for tax-free status. Such economic isolation is not

and cannot reasonably be required. Indian tribes are not

islands and cannot be segregated from the social and

economic life of this country. Congressional policy aims at

restoring and furthering tribal self-government within the

mainstream life of this country, not outside it. In turn, the

policy requires provision of adequate resources, under tribal

control, for vital governmental programs. To achieve

Congress’ ends, such resources cannot be subject to

measurable and debilitating (albeit indirect) state taxes which

burden protected reservation tribal activities.

Bright line tests may be practical in other contexts, but

the singular three-way relationship of tribes, states, and

federal government does not lend itself to such black and

white rules. Instead, this Court has wisely fashioned a

flexible, uniquely suitable balancing test, established by

Bracker and Ramah I, and refined in Cotton, for situations

9

such as this one where states act in significant yet indirect

ways to stifle tribal advance and federal policy. Any other

rule has been seen as an invitation to States to manipulate

tax laws, just as happened here. The decision below does

not depart from that line of authority and represents no

significant issue of federal law requiring this Court’s

intervention.

IV. THE PETITIONER EMPLOYS ARGUMENTS

NOT RAISED BELOW AND FACTS NOT OF

RECORD.

The new argument based on the interplay of 25 U.S.C.

§ 450j(k) and the Federal Property and Administrative

Services Act of 1949, 40 U.S.C. § 481(a), was not preserved

below. There was no showing whatever regarding fuel yards,

and the state’s assertion it was practicable for RNSB to

procure gasoline from GSA fuel yards is sheer, belated

speculation.

Moreover, the mandate that a tribal agency is deemed

an executive agency of the federal government for purposes

of procurement of personal property would seem to be an

independent ground for the determination below barring a

state tax scheme that treats the tribal agency less favorably

than the federal government. In an analogous situation,

. Seminole Tribe of Florida v. Florida State Department of

Revenue, 720 So. 2d 270, No. 97-3758 (Oct 28, 1998) holds

that Indian tribes performing ISDA services function as

federal instrumentalities, hence are exempt from Florida sales

and use taxes that on their face exempt only state and federal

governments.

10

The Petitioner also misunderstands the complexities of

the funding provisions of ISDA. The direct cost provisions

it cites do not apply to the school operations of RNSB which

are funded by formula under 25 U.S.C. §§ 2007 and 2008, a

formula which does not include provisions for paying state

taxes. (Appendix A). Moreover, the indirect costs and

contract support provisions are in controversy nationwide at

the present time because of Congress’ failure to appropriate

sufficient funds. See, e.g., Ramah Navajo Chapter v. Lujan,

112 F.3d 1455 (10" Cir. 1997); Shoshone-Bannock Tribe v.

Shalala, 988 F. Supp 1306 (D. OR. 1997), mod. oth. grnds.,

999 F. Supp. 1395 (D. OR. 1998); and Appeals of Alamo

Navajo School Board, Inc. and Miccosukee Corporation,

U.S. Dept. of the Interior, IBCA 3463-3466 and IBCA 3560-

3562, 98-2 BCA, 29, 831 and 29, 832 (pending appeal in the

Federal Circuit Court of Appeals, Docket No. 98-1457

consolidated with Docket No. 99-1033); Appeal of Cherokee

Nation of Oklahoma, IBCA Docket No. 3877-3879/98.

Further, Ramah Navajo School Board, Inc. v. Babbitt, 87

F.3d 1338 (D.C. Cir. 1996) is not relevant since that was an

administrative law decision dealing with an arbitrary rule

imposed by the Secretary reducing contract support for two

ISDA contractors who missed an application deadline. That

case has absolutely nothing whatsoever to do with

administrative costs generally or their general availability

under annual appropriations. The suggestion that RNSB

should sue the BIA is, therefore, not useful.

Another new argument, not raised below, based on

supposed tax benefits to RNSB, pp. 12-13, is unsupported

by any evidence in the record. This case was decided on

cross motions for summary judgment. Petitioner did not

submit any proofs to counter the affidavit of Jim Hooper, Jr.

(Appendix B).

11

Finally, the New Mexico tax provision that formerly

treated Indian governmental agencies less favorably than

federal agencies has been rectified by the New Mexico

legislation. The differential treatment which was properly

found to be impermissible no longer exists. (Appendix C).

CONCLUSION

FOR THESE REASONS, the Petition for Certiorari

should be denied.

Respectfully submitted,

MICHAEL P. Gross

Counsel of Record

Law OFFICES OF MICHAEL P. Gross

Attorneys for Respondents

460 St. Michael’s Drive

Suite 300

Santa Fe, New Mexico 87505

(505) 983-6686

Eric TREISMAN

On the Brief