A California resident is taxable on their worldwide income for California personal income tax purposes. Due to California’s very high individual income tax rates (up to 13.3% in 2015), one of the more common questions posed to me (and one in which we handle often on audit) is whether an individual is deemed a “resident” of California when they spent time both within and without California during the tax year. Continue reading
On September 18, 2015, in Notice 2015-67 (the “Notice”), the Internal Revenue Service (“IRS”) issued final guidance on the federal income tax treatment of per capita distributions made to Tribal Members from funds held in Tribal Trust Accounts. See entire Notice here.
By way of background, it has been long standing law that Tribal Members are U.S. citizens and, similar to other U.S. citizens, are subject to federal income taxes on their receipt of income. See Squire v. Capoeman, 351 U.S. 1 (1956) (per capita distributions of net gaming revenues taxable). Continue reading
Over a year ago, in January 2014, we reported on the possible tax benefits that could arise to both Indian Tribes and private parties that lease Tribal land for business purposes as a result of the issuance in 2013 of the final federal regulations by the US Government under 25 CFR 162.017 (the “Lease Regulations”). See the article, including more detail on the Lease Regulations.
By way of background, although many state and local governments believe that they still have the right to tax the leasehold interests that non-Indians may hold in Tribal lands, federal regulations that went into effect in 2013 (the Lease Regulations) clarify that such taxation, as well as many other charges by state and local governments, is prohibited under federal law. More specifically, the Lease Regulations provide that state and local governments may not impose their taxes on property (e.g., no property taxes), activities (e.g., no sales and use tax), or interests associated with leased Indian trust or restricted land, without regard to whether the party leasing the Tribal land is Native or non-Native.
One tribal government using the Lease Regulations to challenge such taxes imposed on the tribe’s land is the Tulalip Tribes’ government in Washington State.
On June 12, 2015, the Tulalip Tribes filed a Complaint for Declaratory and Injunctive Relief (the “Complaint”) against, among others, the Washington Department of Revenue (who collects sales and use taxes and Business & Occupation taxes) and the Snohomish County Assessor (who collects property taxes) (the “Taxing Authorities”). In the Complaint, the Tulalip Tribes allege that the Taxing Authorities are unlawfully imposing taxes against the Quil Ceda Village which is a partially private commercial enterprise located on the Tulalip Tribes’ land, in violation, of among other things, the Lease Regulations.
Although a few other unrelated tribal governments are currently using the Lease Regulations to challenge municipalities that have historically sought to tax lease activities on their tribal lands, the Tulalip Tribes received a seemingly very favorable boost when on August 4, 2015, the US Department of Justice (“DOJ”) filed a 14 – page Motion to Intervene (the “DOJ Motion”) and 26 – page Complaint in Intervention intervening on behalf of the Tulalip Tribes in the lawsuit against the Taxing Authorities.
In the DOJ Motion, the DOJ alleges that the Taxing Authorities “taxation of economic activities occurring in Quil Ceda Village conflicts with the principles of tribal sovereignty and the exclusive role of the United States, as well as the federal goals of tribal self-determination and self-sufficiency.” The DOJ Motion goes on to say that the disposition of this case involving the Tulalip Tribes involves a wide range of federal statues, treaties, and regulations, including the Lease Regulations.
If the DOJ is successful and the United States District Court, Western District of Washington at Seattle grants the DOJ Motion, the Tulalip Tribes and their attorneys will effectively be fighting this tax battle against the Taxing Authorities with the added firepower of the DOJ attorneys and the full backing of the US Government. This support exponentially strengthens the Tulalip Tribes’ position against the Taxing Authorities, and will benefit other tribal governments currently dealing with state and county taxing authorities who discounted the intent of federal statutes, treaties, and the Lease Regulations. In short, if the DOJ Motion is granted, allowing the DOJ attorneys involvement, it will be a gigantic boost for the Indian Country.
This message is being sent clearly to states and counties. Just this week, the Department of Interior followed this action with the approval of HEARTH Act regulations for the Seminole Tribe of Florida which will preempt state and local taxation, explaining that:
“The strong Federal and tribal interests against State and local taxation of improvements, leaseholds, and activities on land leased under the Department’s leasing regulations apply equally to improvements, leaseholds, and activities on land leased pursuant to tribal leasing regulations approved under the HEARTH Act. Congress’s overarching intent was to ‘‘allow tribes to exercise greater control over their own land, support self-determination, and eliminate bureaucratic delays that stand in the way of homeownership and economic development in tribal communities.’’ 158 Cong. Rec. H. 2682 (May 15, 2012).’’ See entire Notice here.
Eric is a Senior Counsel in the tax team at Procopio as well as an active member of Procopio’s Native American Practice Group. His practice encompasses both tax controversy and tax planning. Eric has represented corporations, individual, and nonprofits before the various tax authorities, including the Internal Revenue Service, Franchise Tax Board and California Board of Equalization
Ted is head of the Native American Law practice group and primary editor for the Blogging Circle. Connect with Ted at firstname.lastname@example.org and 619.515.3277.