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Federal Appeals Court Sends Oneida Tax Foreclosure Case to State Court

A federal appeals court has sent a tax foreclosure dispute between the Oneida Indian Nation and two counties back to state court, but has affirmed in its ruling that the Nation’s “ancient reservation” has not been disestablished.

The 2nd Circuit Court of Appeals’ October 20 ruling vacated a six-year-old injunction by a district court that stopped Madison and Oneida counties from foreclosing on properties that the Oneida Indian Nation acquired during the 1990s. The counties claimed they were entitled to collect taxes on the properties, but the Nation said the lands were part of Indian country and could not be taxed. When Oneida refused to pay the taxes, the counties tried to foreclose the properties, resulting in what the appeals court called “this protracted and procedurally convoluted litigation.” The case, which consolidated a number of appeals, has been returned to the appeals court for the second time on remand from the U.S. Supreme Court.

While the appeals court reversed three of the four grounds the federal district court used to uphold Oneida’s claim against the counties’ foreclosure, the affirmation that the Nation’s reservation was never disestablished was good news to the Oneida Nation. “We are pleased that the federal court dismissed the counties’ claims and ruled, once and for all, that the Oneida Indian Nation reservation has not been disestablished, putting that issue to rest,” Mark Emery, director of the Nation’s media relations, said in a statement.

The appeals court concluded that the Nation’s sovereign immunity from lawsuits and federal restrictions on the alienation of lands under the 1790 Nonintercourse Act “could no longer be sustained” because the Nation had voluntarily waived its sovereign immunity in the case before the U.S. Supreme Court. It ruled that the lower court “erred” in ruling that the counties had violated the Nation’s due process in their notification procedure. With respect to the federal court’s fourth ground – that Indian reservations are exempt from property taxation under New York State law – the appeals court concluded “that concerns of comity, fairness, and judicial economy warrant that we and the district court decline to exercise supplemental jurisdiction over them.” The appeals court said that this claim should be decided in state court.

In addition, the appeals court affirmed a number of “ancillary matters.” It agreed that the Nation is not liable for penalties or interest for unpaid taxes that accrued prior to March 29, 2005 – the date of the Supreme Court’s notorious ruling in City of Sherrill v. Oneida Indian Nation. It confirmed the district court’s decision “to decline to abstain from this litigation” and it agreed that the Stockbridge-Munsee Community should not be allowed to intervene. As for the Nation’s reservation, the appeals court affirmed “the district court’s dismissal of the Counties’ counterclaims seeking a declaration that the Oneida Nation’s ancient reservation was disestablished.”

“The court . . . rejected the counties’ attempts to impose unlawful penalties and interest. The only remaining issue is whether property taxes may be assessed on the Oneida reservation lands.” The Nation will pursue that issue in state court, Emery said. “Regarding that issue, New York State law specifically provides that ‘[n]o taxes shall be assessed, for any purpose whatever, upon any Indian reservation in this state, so long as the land of such reservation shall remain the property of the nation.’ We will continue to follow the law, as well as the federal court’s direction, and promptly present this remaining issue to a state court for a final resolution.”

John Becker, Madison County Board of Supervisors chairman, told the Madison County Courier that he’s “pleased” the court lifted the injunction preventing the county from collecting property taxes on the Nation’s lands. “The Second Circuit’s decision today goes a long way to making that a reality. We look forward to resolving the sole remaining state law tax issue in state court, where it belongs,” Becker said.

The appeals court ruling came on the heels of a U.S. Supreme Court decision not to review a 2nd Circuit ruling denying the Nation’s right to reclaim land that was illegally taken by the State of New York or be compensated an estimated $500 million for it. The Oneidas originally possessed around 6 million acres in central New York and managed to hold onto a reservation of about 300,000 acres. The 1794 Treaty of Canandaigua recognizes the Oneidas’ right to possess the reservation lands and guarantees the tribe’s continued possession of it even though most of the land was illegally acquired and sold by the state over the past 200 years.