DENVER - Attorneys for the Chickasaw and Choctaw nations will be heading to Washington to argue a case involving taxation of pull-tab games before the nation's highest court.
At issue is whether the games are lottery-, actual wagering- or betting-type games. The case is on appeal from a ruling in the 10th District Court of Appeals.
The tribes protest payment of taxes on their pull-tab games, similar to lottery tickets - a customer buys a ticket and pulls a tab - to see if it is a prize-winner. Since customers of the pull-tabs aren't playing against others, the tribes contend these games are similar to lottery tickets. The government, however, disagrees.
The Internal Revenue Service considers the games wagering and therefore taxable.
The tribes believe they should enjoy the same taxation regulations as states which aren't required to pay taxes on lottery games.
Although the suits were filed separately, wording is identical in Chickasaw Nation vs. United States of America (99-7042) and Choctaw Nation vs. United States of America (99-7072). In each case attorneys strongly defend the lottery definition in pull-tab games.
The federal Indian Gaming Regulatory Act is not precise on the point, and the tribes claim that under established legal precedent, governments must interpret any ambiguity in tax laws in the light most favorable to the tribes.
The Justice Department countered that the principle applies to states in their tax disputes with Indian tribes, but not to the federal government.
The issue began with both tribes in dispute with the IRS on taxation. Both nations were audited by the IRS and it was determined in each case that the tribe was subject to federal wagering excise taxes.
Ultimately both nations sued the federal government and in both cases, a lower court and the 10th Circuit Court of Appeals ruled against the tribes and they were ordered to pay the taxes due.
The 10th Circuit decision stated that the Indian Gaming Regulatory Act does not preclude the gaming activities at issue from being subject to federal wagering excise taxes and that the self-government guarantee of the 1855 treaty between the United States and the Choctaw Nation could not be reasonably interpreted to provide the Choctaw Nation with an exception from the federal wagering excise issue.
Chief Greg Pyle of the Choctaw Nation strongly disagrees with the court of appeals decision.
"The Choctaw Nation is gratified that the Supreme Court will review this case," Pyle said. "We feel it is inconsistent for the federal government to have a policy of encouraging self-governance of tribes and turn around and impose a tax on tribes."
Pyle said he could see more useful purposes for the revenue that the IRS wants to collect in taxation of the pull-tab games.
"Rather than pay taxes, the total business revenues can be put to good use to better the lives of many people," Pyle said. "Revenues from gaming enterprises are used for education assistance such as college scholarships, day care centers and Head Start programs; for health care, including a new hospital built in 1999 and medicines that are greatly needed; for a myriad of social programs such as emergency assistance and burial assistance; and to help with other needs such as employment and housing."
"We are pleased that the Supreme Court has agreed to take the case because this gives us some reason to be optimistic that the justices will affirm the rights of tribal self-governance and self-direction at issue," Chickasaw Gov. Bill Anoatubby said.
New Mexico tribes can also expect some impact from the decision, say Indian gaming advocates in Albuquerque and Santa Fe.
Santa Fe-based attorney Richard Hughes, who represented tribal interests in New Mexico gambling issues, said, "This decision as it stands would apply to tribes in New Mexico that offer pull-tabs," he said. "Lots of them do."
Frank Chaves, chairman of the New Mexico Indian Gaming Association said he had no specific figures, but, "I think most tribes in New Mexico who have gaming activities also would have pull-tabs."
Eleven New Mexico tribes offer casino gambling.
Chaves said any question about the applicability of this tax law should be resolved in favor of the tribes.
"Tribes are governments as well," he said, "and they depend on revenue such as gaming for governmental purposes, much like states do."