An orca at Quil Ceda Village, a community on the Tulalip Reservation in Washington. Photo: Cloganese

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Tulalip Tribes lose decision in closely-watched dual taxation case

Friday, October 5, 2018

A federal judge has ruled against the Tulalip Tribes and the federal government in a closely-watched dual taxation case.

Businesses on tribal land are taxed by Washington state and by the Snohomish County. In 2015, the state collected nearly $32 million in taxes on the reservation while the county collected more than $10.2 million.

The tribe, in comparison, received $5.2 million in land lease payments from businesses that same year. Despite the disparity, Judge Barbara Jacobs Rothstein said the system is fair because it does not infringe on tribal sovereignty.

"First,, Tulalip’s sovereignty interests here are at a minimum, where the taxes in question are keyed solely on goods manufactured off the reservation, and on transactions between non-Indians," Rothstein wrote in the 23-page decision on Thursday, a copy of which was posted by Turtle Talk.

"Second, as outlined above, the only sovereignty interest being impeded in this case is the tribes’ ability to collect the full measure of its own taxes—an interest that is essentially little more than financial," Rothstein continued. "While this interest is valid, there is no evidence in the record that the state and county collection of taxes here has impeded the tribes’ ability to thrive financially."

During the Obama administration, the federal government joined the case on behalf of the tribe. But Rothstein said there was no "strong" federal interest in pre-empting, or preventing, the state and local taxes.

"Furthermore, even if the federal government’s interest in tribal economic development were, without more, a factor that tipped the scales in favor of preemption, the taxes at issue in this case demonstrably have not impeded this interest," Rothstein wrote.

In response to the ruling, Chairwoman Marie Zackuse told The Everett Herald that the tribe will be considering its options. One possible step would be to ask the 9th Circuit Court of Appeals to overturn the decision.

“We are still reviewing the decision, but we are extremely disappointed in the result,” Zackuse told the paper.

Indian Country is paying close attention to the case because tribes elsewhere face similar situations. In North Dakota, for example, the state has imposed more than $1 billion in taxes on energy production on the homelands of the Mandan, Hidatsa and Arikara Nation.

Beyond litigation, tribes were hoping to address dual taxation with an update to the so-called Indian Trader Regulations. The effort began late in the Obama era.

But many tribes and advocates believe the Trump administration has basically killed the initiative. Ever since Deputy Secretary David Bernhardt, the second-in-command at the Department of the Interior, arrived in Washington, D.C., in the summer of 2017, there's been no movement to finalize the rule.

Turtle Talk has posted some documents from the Tulalip Tribes case, Tulalip Tribes v. State of Washington .