The longtime chairman of the Citizen Potawatomi Nation of Oklahoma must pay federal income taxes on his tribal salary, the 10th Circuit Court of Appeals ruled on Monday.

In 2001, John "Rocky" Barrett drew his salary from earnings on the tribe's trust fund. He was paid $48,057.64 that year but did not pay federal taxes on it.

After an Internal Revenue Service audit, Barrett paid $19,355 in taxes and $3,871 in penalties. But he asked for a refund, citing federal approval of the tribe's trust fund distribution plan.

The plan states that "none" of the money distributed under the plan "shall be subject to federal or state income taxes." That language was taken from Section 1407 of the Indian Tribal Judgment Funds Use or Distribution Act.

But the exemption does not cover Barrett's salary because his compensation does not further "development" of the tribe, the 10th Circuit said. Additionally, Congress did not expressly provide for such an exemption, the court noted.

"If the annual compensation paid to a tribal chairman was to be exempt from taxation, it could have been easily and plainly expressed," the court said.

"Although Barrett cites sources which emphasize the government’s strong desire for American Indians to progress toward tribal self-sufficiency, this goal does not trump the long-standing requirement that an exemption from the payment of taxes must be explicitly stated," the court added.

Barrett has served as chairman of the tribe since 1985.

10th Circuit Decision:
Barrett v. US (April 6, 2009)

Briefs and More:
Barrett v. United States — Tribal Trust Funds Paid to Subject to Federal Income Tax (Turtle Talk 4/7)