WINNEBAGO, Neb. ? Tax warfare is escalating between Kansas and the Winnebago tribe of Nebraska.
Kansas state officials are threatening to seek extradition of Winnebago tribal chairman John Blackhawk and Lance Morgan, executive director of Ho-Chunk Inc., the tribe's business arm. Winnebago leaders in return are threatening a federal lawsuit. The hostilities began April 10 when the Kansas Department of Revenue confiscated motor fuel tankers delivering untaxed oil to Kansas tribal businesses and issued warrants for the arrest of the two tribal officials.
Kansas Assistant Attorney General Steve Maxwell threatened to seek extradition of Blackhawk and Morgan during a conversation with the tribal officials.
The warrants on Blackhawk and Morgan are meant to force the payment of $1.25 million in taxes to Kansas, which the state claims amounts to six months worth of unpaid motor fuel taxes. Civil warrants for nonpayment have already been issued against the personal property of the two officials, Morgan's wife Erin, and HCI Distribution employee Earlene Hradec.
Extradition on the six criminal counts, which are misdemeanors, is not likely, Morgan said.
The state of Kansas claims that Ho-Chunk Inc, the parent company of HCI Distribution, failed to pay six months worth of motor fuel taxes to the state of Kansas for fuel distributed to three Kansas tribes.
Mark Ohlmeier, spokesman for the Kansas Attorney General, would confirm only that criminal charges were filed on the six counts against the HCI and two employees. He would not confirm whether or not the extradition orders were issued and in fact would not reveal the names of the individuals on the warrants.
Nebraska state extradition officials also said that no extradition papers had been received at their office.
The controversy between Kansas and its four tribes and the Winnebago tribe of Nebraska stems from the sale of motor fuel from one tribal operation to another. Another company, Davies Oil, was charged with non-payment of nearly $700,000 in fuel taxes for oil products sold to the Prairie Band Potawatomi.
"The Winnebago Tribe has a legal right under the United States Constitution to conduct commerce with other tribal governments and for the state of Kansas to interfere by force is itself against the law," said Blackhawk in a prepared statement.
HCI Distributing transported fuel to the Sac and Fox, Kickapoo and Iowa nations in Kansas for sale on their reservations.
Kansas state police confiscated two HCI Distributing fuel tankers on April 9 and charged the drivers with misdemeanors. Shortly after, the state issued warrants for the two tribal officials. Several fuel tankers belonging to Davies Oil were also confiscated.
The state does not look at this controversy as a jurisdictional issue between a state and a tribal sovereign nation, Gayle Martin of the state Revenue Department said. Not at any time has the Attorney General's office or the Department of Revenue referred to the Winnebago Tribe as a tribal nation in press releases or court documents. Martin said the warrants were issued against a corporation.
Morgan joked that the tribe should file a lawsuit in tribal court in order to get the HCI property back. "It won't go far but may get a couple of hearings," he said.
The Winnebago Tribe sent a letter to the state asking for the return of the tankers and a meeting to negotiate the issue. The state continues to demand the $1.25 million before any negotiations take place.
"It's the peccadillo of the dispute," Morgan said. "The tribe took control of its future and we want to negotiate from a position of strength."
The Prairie Band Potawatomi also sent a letter to the governor asking credible negotiations for a tax compact. Past attempts have failed because the state wants the lion's share of the fuel tax, the tribe stated.
Ho-Chunk Inc. has an agreement with the state of Nebraska to mix additives, sell the fuel on the Winnebago reservation and collect a tax, of which the state receives 25 percent.
The state of Iowa passed legislation that authorizes tax negotiation with the tribes. Kansas, however, is in its second litigation over an attempt to tax tribes. The Kansas tribes, including the Prairie Band Potawatomi, won the first lawsuit over tax collection more than a year ago.
In that suit, the state argued in a February 2001 motion that "First and foremost the tribe's assertion of inherent Indian sovereignty must be dispelled.
"The romantic notions of inherent tribal sovereignty vanished when the United States conquered and subdued the tribes in the 18th and 19th centuries," argued John Michael Haney, attorney for the Kansas Revenue Department.
Morgan, an attorney himself, asserts that federal courts, Congress and the executive branch of the federal government have all confirmed the constitutional right of tribal government to engage in intra-tribal commerce and other business dealings with other tribes and companies.
The four tribes involved with purchase of the motor all expressed support for the Winnebago Tribe, Ho-Chunk Inc., HCI Distribution, and Davies Oil.
"Davies Oil did not charge state fuel taxes to the Prairie Band Potawatomi Nation out of respect for the historic tribal self-government, granted by treaty," said Badger Wahwasuck, chairman of the Prairie Band Potawatomi.
"In addition to placing an unfair burden on Davies Oil, these recent actions damage efforts to negotiate a fair agreement regarding motor fuel and other taxes between the governments of the Prairie Band Potawatomi Nation and the state of Kansas," Wahwasuck said.
The Potawatomi Nation does not receive any funding from the state of Kansas to maintain roads and bridges on the reservation, whether or not the tribe collects the taxes on the fuel sales. The tribe is solely responsible for road and bridge construction and repair, Wahwasuck said.
The tribe collects 16 cents per gallon of gas, the same as the state, but keeps the tax revenue to improve the highway infrastructure on the reservation.
"Prairie Band Potawatomi Nation officials seek to meet with the Governor or other high-ranking officials in an atmosphere of mutual respect and honest forthright dealings," Wahwasuck said. "Meaningful tax compacts between the states and the Indian Nations have been accomplished by our neighbors in other states. We seek to improve the government-to-government relations with the state of Kansas, and the Prairie Band Potawatomi is disappointed over these recent, unfortunate events."