SEATTLE, Wash. - An appellate court decision has limited a tribe's ability to impose taxation on non-tribal companies on certain lands within the reservation and could have serious ramifications for many tribes who used legal precedent to impose the tax.
The 9th Circuit Court of Appeals said the Crow Tribe of Montana overstepped its sovereign jurisdiction by requiring Big Horn County Electric company to pay taxes on property on the Crow Reservation on which it has an easement.
The tribe moved a lower court decision to the appellate court when U.S. District Court Judge Jack Shanstrom ruled against the tribe, saying rights-of-way across the reservation constituted non-Indian fee land.
The U.S. Supreme Court ruled in 1997 that certain rights-of-way did constitute fee land. The argument is that the tribes have little or no jurisdiction on fee lands located within the reservation boundaries.
Tribes across the country view the appellate court decision as a blow to sovereignty over land use and taxation. It can mean that other utility companies, railroads, pipeline companies and other entities that require rights-of-way will now challenge any taxation from tribal governments.
Bill Eggars, acting general counsel to the Crow Tribe said the tribe will ask for a full judge panel review.
"Other tribes have contacted us with regard to filing an amicus curiae brief in support of the Crow position. We are hoping that a review en banc will be more productive and more constructive to preserving the right of Indian country's right to self-determination," he said.
The three-judge panel, while it agreed with the lower court over jurisdiction, reversed that court's decision to order the Crow Tribe to pay back nearly $200,000 in utility taxes already paid. The court stated held that to refund the tax would constitute a violation of tribal sovereign immunity as allowed by precedent in the U.S. Supreme Court.
"The court got the sovereign immunity right, but the decision on the tax was very strange. It was an outrageous decision," said John Fredericks III, attorney of record for the Crow Tribe.
"There is a good chance the court will hear the case because the court overlooked some of the evidence and the court got some of the facts wrongs. If the decision stands it will be devastating to some tribes."
Fredericks added that tribes, when granting rights of way, have no intention of giving up the land held in trust. He said much of the land on which the Big Horn Electric power poles and lines are located is actually allotment land.
What may be more significant than the Crow decision is one by which utilities and industry have lived for a few years. The 1991 Burlington Northern Railroad vs. the Blackfeet Tribe provided a legal basis for tribes to collect taxes on property owned by the non-Indian companies on tribal lands.
But in 1997, the U.S. Supreme Court upheld a decision in a North Dakota case, State vs. A-I Contractors. That opinion stated that congressionally granted right-of-ways were the equivalent of fee land and therefore not under the jurisdiction of the tribe.
Based on an agreement the Crow Tribe and Big Horn Electric signed, the land on which the utility's property was located constituted fee land and was not within the tribe's jurisdiction, the court said.
The appellate court opinion stated the Blackfeet case was decided on the erroneous premise that a congressionally granted right-of-way is an easement the tribe maintains jurisdiction over. "The Blackfeet Tribe is no longer good law," the written opinion said.
It was the BNN-Blackfeet case that prompted some tribes to impose taxes on property owned by non-tribal companies located within the boundaries of the reservations. Attorneys said more lawsuits could be forthcoming with the intent putting an injunction against the payment of taxes to the tribes.
Jim Torske, attorney for Big Horn Electric, said he was hopeful the Crow would look at a positive side of the decision.
"If they would, the tribes could perceive it as an event that could increase development of Indian country throughout the U.S. It removes the stigma of making substantial capital investment without predictable costs. It could work to the extreme benefit of the tribes if it is perceived that way."
He added, he wasn't surprised by the ruling. Other attorneys said they were not surprised by the outcome. But Federicks was.
"In Strate, it involved two non-Indians killed in a car accident on reservation land in North Dakota. Here we are talking about the tribe's power to tax. These judges just can't grasp that. Strate casts a lot of confusion in this area. The Supreme Court opinion was broadly written."
He said the Strate opinion indicates that when a tribe consents to rights-of-way the tribe gives up ownership of the land. "No non-Indian would do that."
The Crow Tribe assessed Big Horn Electric 3 percent on the full, fair market value of the property owned and located within the exterior boundaries of the reservation.
In 1993 the Crow Tribe sent Big Horn the first tax bill of $36,699. In April of 1994 the utility company began adding the tax onto customer's bill. This add-on was in violation of the tribal Railroad and Utility Tax Code conditions.
The tribe filed action in tribal court to stop Big Horn from passing the tax to the customers. The tribal court ruled in favor of the tribe and the tribal appeals court upheld the ruling. Big Horn then filed in federal court. Each time the tribal court ruled the tribe did not exceed its authority.
At the time of the appeal, State vs. A-I Contractors was decided by the U.S. Supreme Court. Big Horn then argued in court that right-of-way land was not tribal land, but was considered fee land and not subject to tribal jurisdiction, according to the opinion of the high court.
Approximately one-half the 1,700 customers of the Big Horn cooperative are Crow Tribal members who live on the reservation. Tribal attorneys were unsuccessful in arguing that because of the large ownership of Crow members, the utility did not constitute a non-tribal entity.
The impact could be felt by a few tribes, Fredericks said. First, the Blackfeet tribe is now impacted, Fort Peck, Fort Berthold the Umatilla and several in Arizona may have to deal with the decision.
Could the case get to the Supreme Court? Fredericks said this or another case will have a good chance.
The 10th Circuit Court of Appeals upheld the Navajo right to tax hotels on the reservation. With this 9th Circuit court decision the two courts are at odds with similar cases.
The 9th Circuit court held "that the tribe's ad valorem tax on the value of Big Horn's utility property exceeds the tribe's regulatory jurisdiction."