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Michigan tribe wins another ruling in state taxation battle
Friday, June 30, 2006

A Michigan tribe scored another court victory this week in its long-running tax battle with the state.

Affirming a federal judge who sided with the tribe, the 6th Circuit Court of Appeals said members of the Keweenaw Bay Indian Community can't be forced to pay property taxes to the state. By a 2-1 vote, the court said tribal land remains protected by an 1854 treaty signed with the United States.

"As made amply clear by Supreme Court precedent, this court must read this ambiguity in favor of [KBIC] and its members, and against the backdrop of the Indian sovereignty doctrine and the notion that American Indian tribes enjoy quasi-sovereignty," wrote Judge Eric L. Clay for the majority.

"This backdrop reinforces [KBIC's] interpretation that the treaty disallowed involuntary state tax sales, and thus state taxation, of real property held by plaintiff or its members," the decision, dated June 26, continued.

Clay, a Clinton nominee, was joined in the decision by Judge Martha Craig Daughtrey, another Clinton pick. But Senior Judge Ralph B. Guy, a Reagan nominee, filed a dissent that said the tribe is subject to state taxes.

Although Guy's opinion was short, it focused on a key question: Can states can tax Indian land based on language in a treaty or based on language in an act of Congress?

In Cass County v. Leech Lake Band of Ojibwe, the Supreme Court focused on the second part of the question. In the unanimous decision, the justices said an act of Congress that opened up a Minnesota reservation to allotment was an "unmistakably clear" sign that state and local taxation is allowed.

In the KBIC case, there is no such law in place. But language in the 1854 treaty mentions allotment of Chippewa lands.

Due to the split on a key issue, it's possible the case could be reheard by the full 6th Circuit. And it could end up before the Supreme Court, whose recent decisions have signaled that tribes will have a hard time fighting off state encroachments on their land.

In the eyes of the tribe, state taxation is an "an insult to tribal sovereignty." As far back as 1982, the tribe and the state have been battling over property taxes on the 59,840-acre L'Anse Reservation.

The tribe has won nearly every step of the way, at least in the courtroom. It's the Michigan Tax Commission that has been putting up roadblocks, sometimes in direct contravention to court rulings in the tribe's favor.

The current case involves property taxes but the state and the tribe are also at odds over tobacco taxes, sales taxes and car use taxes. In April 2005, the Michigan Tax Tribunal ordered the state to refund money to a tribal member for an illegal tax.

6th Circuit Decision:
Keweenaw Bay Indian Community v. Michigan (June 26, 2005)

Lower Court Decision:
Keweenaw Bay Indian Community v. Michigan (June 1, 2005)

Supreme Court Decision:
Cass County v. Leech Lake (June 8, 1998)

Relevant Links:
Keweenaw Bay Indian Community - http://www.ojibwa.com