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SEPTEMBER 14, 2000

In a case decided in federal court last Friday, the Lac du Flambeau Band of Lake Superior Chippewa successfully challenged the state of Wisconsin over the taxation of its tribal members.

The case originally began as a dispute in 1998 between one tribal member and the Wisconsin Department of Revenue. But the tribe eventually took over the case in order to protect its own sovereign interests.

"When it became clear there would be no settlement, I asked the tribe to be a party so that I could move it out of the state system into federal court," said Brian L. Pierson, a lawyer for the Lac du Flambeau.

Under federal law, individuals are prohibited from bringing taxation lawsuits in federal court. So the tribe's involvement played an important role in getting the case heard.

Tribes in previous taxation cases have used a similar strategy. The Sac and Fox Nation of Oklahoma and the Confederated Salish and Kootenai Tribes of Montana both sued their respective states in order to prevent taxation of tribal members who earn income within tribal or reservation boundaries.

But the Flambeau case had a twist. The state of Wisconsin wanted a tribal member to pay taxes for income earned not within the reservation, but in another state.

In this instance, Harold Jackson was employed as a truck driver for a company based in Minnesota. Although he had filed tax returns in Wisconsin and declared that he earned no income in the state, a subsequent audit of his returns led to an attempt to collect money he had already been refunded.

The state reasoned that it had a right to collect the taxes because the reservation is within its boundaries and once Jackson and other tribal members leave the reservation, they become subject to other state laws and regulation.

But the court disagreed. Since the reservation was created by treaty and not by the state, the court said there was no connection between Wisconsin and tribal members who live on the reservation but earn no income in the state.

Additionally, the court said the government has never allowed states to tax tribal members who reside on the reservation.

The case is Lac du Flambeau Band of Lake Superior Chippewa Indians v. Zeuske. It was decided in US District Court for the Western District of Wisconsin.

Related Tax Decision:
Oklahoma Tax Comm'n v. Sac & Fox Nation, 508 U.S. 114
Syllabus | Opinion
A state cannot tax tribal members who live and work on tribal land.

Related Stories:
Tribe wins round in tax case (Money Matters 9/12)
Tax bill killed (Money Matters 07/20)

Relevant Links:
Lac du Flambeau Band of Lake Superior Chippewa - www.glitc.org/ldf.htm
US District Court for the Western District of Wisconsin - www.wiw.uscourts.gov
Wisconsin State Department of Revenue -www.dor.state.wi.us