Brian Pierson: Big decision in Seminole Tribe's taxation case

Seminole Tribe Chairman Jim Billie and Interior Secretary Sally Jewell signed a HEARTH Act agreement in January 2015. Photo from Department of the Interior / Facebook

Attorney Brian Pierson discusses the significance of the 11th Circuit Court of Appeals decision in a taxation dispute between the Seminole Tribe and the state of Florida:
On August 26, 2015, the Eleventh Circuit handed down Seminole Tribe of Florida v. Stranburg, 2015 WL 5023891 (11th Cir. 2015), an important decision that, on balance, will be helpful to tribes seeking to prevent taxation of activities on leased land. An appeal to the U.S. Supreme Court would not be surprising.

In Stranburg, the Seminole Tribe of Florida had entered into 25-year leases in 2005, approved by the BIA, with two non-Indian corporations—Ark Hollywood, LLC, and Ark Tampa, LLC (Ark Entities)—to provide food-court operations at each of its casinos. The leases required the Ark Entities to pay “applicable” taxes. The state of Florida sought to impose (1) a commercial rent tax on the “privilege of engaging in the business of renting, leasing, letting, or granting a license for the use of any real property” in the state, assessed against the lessee and collected by the lessor, based on the total amount of rent paid and (2) a tax “on gross receipts from utility services that are delivered to a retail consumer” in Florida (Utility Tax), “imposed upon every person for the privilege of conducting a utility or communications services business, and each provider of the taxable services remains fully and completely liable for the tax, even if the tax is separately stated as a line item or component of the total bill.” Administrative regulations specified that even when stated on the consumer’s bill, the “tax is imposed on the privilege of doing business, and it is an item of cost to the distribution company,” who “remains fully and completely liable for the payment of the tax, even when the tax is wholly or partially separately itemized on the customer’s bill.”

The Tribe and the Ark Entities successfully challenged both taxes in the district court. On appeal, the Eleventh Circuit, citing the Supreme Court’s 1973 decision in Mescalero Apache v. Jones, held that the rental tax was barred by 25 U.S.C. § 465, which provides that land taken into trust under the Indian Reorganization Act “shall be exempt from State and local taxation”: “In our view, Mescalero stands for the proposition that § 465 precludes state taxation of that ‘bundle of privileges that make up property or ownership of property.’ … The ability to lease property is a fundamental privilege of property ownership. … By taxing the ‘privilege’ of ‘engaging in the business of renting, leasing, letting, or granting a license for the use of any real property,’ the State of Florida is taxing a privilege of ownership.” Importantly, the Court questioned Ninth Circuit decisions prohibiting taxation of Indian land or permanent improvements on Indian land but upholding a state’s right to impose a tax on non-Indians’ “possessory interests” in Indian land.

Get the Story:
Brian L. Pierson: Eleventh Circuit Decides Important Tax Case: Seminole Tribe of Florida v. Stranburg (The National Law Review 9/1)

11th Circuit Decision:
Seminole Tribe v. Stranburg (August 26, 2015)

Federal Register Notices:
HEARTH Act Approval of Seminole Tribe of Florida Regulations (August 12, 2015)
Residential, Business, and Wind and Solar Resource Leases on Indian Land (December 5, 2012)

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