Bradford: Kagan fought Potawatomi chairman's taxation case

Opinion

Tuesday, July 6, 2010

"As Solicitor General, Elena Kagan rejected a petition for a Writ of Certiorari filed by a tribal chairman after the U.S. Court of Appeals ordered him to pay federal taxes on income he drew from a tribal trust fund.

A petition for Writ of Certiorari allows a losing party in litigation to request that the Supreme Court reevaluate the case in question. In 2009, President Barack Obama's Supreme Court nominee, who was the subject of Congressional hearings last week, argued that further review of the lower court's judgment was unwarranted on grounds that “the Tax Court and several court of appeals have held that money received by Native-Americans for serving as Tribal Council Members, including money paid from tribal trust funds, is not exempt from tax.”

Kagan's decision may have broader implications for leaders of federally recognized tribes who have attempted to avoid paying taxes on income and lucrative “incentive bonuses” drawn from tribal trust funds. Since a sovereign cannot tax another sovereign, the U.S. Federal Government cannot tax the revenue of tribal nations. However, this exemption does not apply to the personal income of individual tribal members since Indians are citizens of the United States.

In this case, the Indian Tribal Judgment Funds Use and Distribution Act, which was signed into law in 1983, determined that 70 percent of the compensation that the Citizen Potawatomi of Oklahoma received from the Indian Claims Commission should be distributed to the tribe's members; the remaining 30 percent was to remain in trust so that the tribe could acquire additional land, develop assets, and maintain property. The legislation also stipulated that the trust fund was not “subject to federal or state income tax.”

At the time, the Department remained a protective steward of the remaining tribal money, which was held in trust for development purposes."

Get the Story:
Susan Bradford: Kagan Affirms that Tribal Leaders Must Pay Federal Income Tax (The Conservative Camp 7/5)