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as: 2004 WL 2361991 (N.D.Okla.))
Pleadings and Filings
States District Court,
Richard BRUNER, Jr. and Betty K. Bruner, Plaintiffs,
STATES of America, Defendant.
Aug. 17, 2004.
James Rouse Hicks, Ronald Joseph Saffa, Reece Boone Morrel, Paul R. Hodgson,
Morrel West Saffa Craige & Hicks Inc., Tulsa, OK, Arthur R. Miller,
Cambridge, MA, for Plaintiffs.
Robert D. Metcalfe, Teresa Dondlinger Trissell, US Department of Justice
Tax Division, Washington, DC, for Defendant.
HOLMES, Chief J.
This matter comes before the Court for a determination of whether a statute
duly enacted by the United States Congress is enforceable under the Constitution
of the United States. That statute, Section 3 of the Act of Congress dated
May 10, 1928, 45 Stat. 495, provides in applicable part as follows:
all minerals, including oil and gas, produced on or after April 26, 1931,
from restricted allotted lands of members of the Five Civilized Tribes
in Oklahoma, or from inherited restricted lands of full-blood Indian heirs
or devisees of such lands, shall be subject to all State and Federal taxes
of every kind and character the same as those produced from lands owned
by other citizens of the state of Oklahoma.
Plaintiffs argue that this enactment constituted an uncompensated "taking"
of property and therefore violated the due process rights granted by the
Constitution. Defendant replies that the statute effects no such taking
and is fully within the constitutional power of Congress to impose taxes.
At the hearing on June 6, 2003, Plaintiffs conceded that they cannot prevail
in this lawsuit if Section 3 is constitutional. Therefore, after further
briefing, the only question before the Court at this time is the constitutionality
of this enactment. After an extensive review of the pertinent case authority,
as discussed below, the Court finds the 1928 statute is constitutional.
I. FACTUAL BACKGROUND
Solely for the purpose of resolving the instant question, the parties
have stipulated to the following facts:
A. Historical Background
1. The Creeks, at the time of the establishment of the United States Government,
inhabited a territory in the southeastern United States.
2. During the period 1826 through 1840, the Creek Indians, some voluntarily
and some forcibly, left their homes in the east and relocated in Indian
Territory (in what is now the State of Oklahoma). Pursuant to a treaty
dated February 14, 1833, the Creek Nation acquired a patent awarding the
Nation fee simple title to a part of the Indian Territory. Over time,
the white population in Indian Territory outnumbered the Indian population.
3. After the Civil War, the United States Government pursued a policy
of dissolution of the Five Civilized Tribes, including the Creek Nation,
and the creation of a state in what was then Indian Territory.
4. Representatives of the Dawes Commission met with the Five Civilized
Tribes with the dual goals of allotment of the land to the individual
Indian members and the abolishment of tribal governments. The Dawes Commission
found that a majority of the Indians were hostile to the proposed allotment
of their land and the abolishment of their tribal governments. From 1893
to 1897, the Dawes Commission made fruitless efforts to conclude allotment
agreements. Congress threatened to enact laws for compulsory allotment
if the tribes did not voluntarily ratify allotment agreements.
5. In 1897, the Dawes Commission submitted a proposed agreement to the
Creeks for ratification. Both the Chief and the National Council rejected
the Agreement of September 27, 1897.
6. It was under these conditions that Congress passed the Act of June
28, 1898, commonly called the Curtis Act.
7. In an election held on November 1, 1898, the Creek Nation rejected
an amended version of the September 27, 1897 Agreement which had been
included as Section 30 of the Curtis Act. As a result of the Tribe's failure
to ratify the Agreement of September 27, 1897, the Curtis Act of June
28, 1898, became operative in the Creek Nation on December 1, 1898.
B. The Bruners' Allotment
8. Miller Bruner was a full-blood male Creek Indian enrolled at Roll No.
4893, on February 3, 1900, and was 22 years of age.
9. Miller Bruner died intestate on May 15, 1903.
10. By an Allotment Deed and a Homestead Deed both dated September 25,
1903 and approved by the Department of Interior on October 23, 1903, Miller
Bruner was allotted the SW Quarter of Section Twenty-one (21), Township
Eight (8) North, Range Nine (9) East, Hughes County, Oklahoma ("the
11. Dick Bruner, plaintiff Richard Bruner's father and also a full-blood
Creek Indian, inherited the Property subject to a life estate held by
his mother. This life estate was later conveyed to Dick Bruner and the
conveyance approved by the County Court of Hughes County.
12. Dick Bruner died intestate on September 19, 1981. Each of his three
sons-- Rudolph Bruner, Randolph Bruner, and plaintiff Richard Bruner,
Jr.--received a one-third (1/3) share in the Property.
13. Plaintiffs Richard Bruner, Jr. and Betty K. Bruner, husband and wife,
are citizens of the United States of America and are residents of Claremore,
14. Plaintiff Betty K. Bruner is Richard Bruner, Jr.'s wife, but is not
a restricted Indian. Mrs. Bruner is also a plaintiff because she filed
federal income tax returns for the years 1984, 1985, and 1991 through
1995 jointly with Mr. Bruner.
C. The Oil and Gas Lease and Income
15. The three brothers, Rudolph, Randolph, and plaintiff, Richard, entered
into an oil and gas lease with Melzer Exploration Company on March 16,
1983, covering the Southwest Quarter of Section 21-8N-9E, Hughes County,
Oklahoma. The leasing parties entered into an addendum on June 17, 1983.
The lease and the addendum were both approved by the District Court of
Hughes County, Oklahoma on June 17, 1983, at which the United States Probate
16. Richard Bruner, Jr. was paid in open court his share of bonus money
from the oil and gas lease on the Property after approval of the lease
by the state court.
17. Plaintiff Richard Bruner, Jr. received income from the production
of oil and gas on this restricted Indian land and included this income
in Plaintiffs' taxable income on their federal income tax returns for
the years 1984, 1985, and 1991 through 1995.
D. Plaintiffs' Federal Income Tax Returns and Claims for Refund
18. Plaintiffs' tax returns were filed, their taxes paid, and their claims
for refund were filed with the IRS on the following dates:
Latest Tax Claim
19. Plaintiffs paid the
following amounts of federal income tax, as reported due on their returns:
20. Plaintiffs request a refund of $44,325 of federal income taxes paid
on net income attributable to oil and gas production from the SW Quarter
of Section 21-8N-9E as follows:
21. By letter dated November 1, 2000, the Internal Revenue Service disallowed
all of Plaintiffs' claims for federal income tax refunds and none have
E. Additional Facts
22. No state court guardian has been appointed for Richard Bruner, Jr.
23. Richard Bruner, Jr. signs his own contracts except for contracts pertaining
to restricted Indian land, which must be approved by the state district
24. Plaintiffs filed their own federal income tax returns for the years
at issue; the Bureau of Indian Affairs did not prepare or file tax returns
for Plaintiffs for those years.
25. Richard Bruner, Jr. signed his Forms 1040x, Amended U.S. Individual
Income Tax Return, for the years at issue; these forms were not prepared
by the Bureau of Indian Affairs.
II. LEGAL BACKGROUND
The Court finds that a review of the relevant legal authorities in this
area is instructive.
The federal-tribal relationship, premised upon broad but not unlimited
federal constitutional power over Indian affairs, often is described as
"plenary." This relationship also is characterized by special
trust obligations, which require the United States to adhere strictly
to fiduciary standards in its dealings with the Indians. The tension inherent
between this broad federal authority and the special trust obligations
has resulted in a unique body of law. Felix
S. Cohen's Handbook of Federal Indian Law
207 (1982) (hereinafter Cohen).
This same 1982 edition of Cohen indicates that, at least up to that time,
"[n]o case ha[d] been found holding a federal tax law unconstitutional
as applied to Indians or tribes." Cohen at 390 n.4. According to
Chickasaw Nation v.
United States, 208
F.3d 871, 880 (10th Cir.2000), aff'd,
534 U.S. 84, 122 S.Ct.
528, 151 L.Ed.2d 474 (2001), "[a]lthough Congress has often refrained
from imposing taxes on Indian tribes, the Supreme Court has never held
unconstitutional a federal tax applied to Indians."
This area of the law is not free from doubt. As one scholar noted, there
are so many federal and state laws concerning Oklahoma Indians that "practically
speaking it is no wonder that confusion exists over what the law states."
Kirke Kickingbird, "Way
Down Yonder in the Indian Nations, Rode My Pony Cross the Reservation!"
from "Oklahoma Hills" by Woody Guthrie,
29 Tulsa L.J. 303, 304 (1993). Kickingbird added that "it is quite
possible that no one is clear on what the law is." Id.
at 324. Significantly,
he noted that "statutes and court decisions which attempt to sift
through the confusion tend to reflect the federal Indian policy at the
time of the decision rather than a strict interpretation of the law, thus
causing a general inconsistency in the treatment of the subject matter."
at 324-25. As an example of such confusion on the part of Congress, he
cites the Act of May 24, 1928, 45 Stat. 733, which amended section 4 of
the instant statute just two weeks following its enactment. Id.
at 325 n. 92.
This case involves the constitutionality of a federal law that authorizes
the State of Oklahoma to tax oil and gas production on restricted Indian
land. Express authorization by the United States Government is a prerequisite
for a state to impose a tax. "Whether a state is empowered to tax
Indians and Indian-related activities depends on an analysis of conflicting
sovereign rights. Congressional authorization to tax is an overriding
factor in determining if a state tax is valid." William S. Dockins,
on State Power to Tax Natural Resource Development on Indian Reservations,
43 Mont. L.Rev. 217,
218 (1982). Congress, with its plenary power to deal with the tribes,
may be able to empower the state to do this. Id.
It is settled law that "Congress is invested with a wide discretion,
and its action, unless purely arbitrary, must be accepted and given full
effect by the courts." Cohen at 214, quoting Perrin
v. United States,
232 U.S. 478, 486, 34 S.Ct. 387, 58 L.Ed. 691 (1914). Cohen states that
the Fifth Amendment limits the taxing power in certain instances, but
that federal power to tax Indians and tribes is usually clear. Cohen at
390. He states further that "federal tax laws are assumed not to
intend to infringe on the rights of Indians under treaties and Indian
legislation, absent clear congressional intent to the contrary,"
so that the application of federal tax laws to Indians customarily involves
interpreting the purposes behind applicable treaties, Indian laws, and
tax laws. Cohen at 390.
As the Court observed previously, the Supreme Court decisions in this
area appear to reflect the prevailing Indian policy of the day. The statute
at issue here was enacted during a period in which Congress passed several
statutes enabling states to tax gross mineral production on restricted
Indian lands. Cohen at 421. Cohen suggests that their "dominant purpose
may have been to overcome the immunity of non-Indian lessees," even
though they applied to Indian royalty interests. Cohen at 422. Notably,
the Supreme Court has indicated that this was not their purpose at all:
congressional enactments permit Oklahoma to impose a gross production
tax on minerals produced from the lands of the Osages, the Kaws, the Quapaws,
and the Five Civilized Tribes, and authorize payment of taxes due on account
of the Indians' royalty interest. But Congress' purpose in enacting these
statutes was the removal of the immunities of the Indians themselves ....
The resulting removal of the immunity of private lessees of those Indian
lands was an incidental effect of this legislation.
Comm'n v. Texas Co.,
336 U.S. 342, 366-67, 69 S.Ct. 561, 93 L.Ed. 721 (1949).
B. Case Law
The United States Supreme Court, federal appellate courts, and the Supreme
Court of Oklahoma have each addressed related issues. These cases inform
the instant question.
In Choate v. Trapp,
224 U.S. 665, 32 S.Ct.
565, 56 L.Ed. 941 (1912), Choctaw and Chickasaw patents under the Atoka
Agreement were determined to be "in the form of a contract,"
and therefore conferred rights that could not be taken away without due
at 671. Restrictions on alienation
could be removed, but the tribe members had a right to the tax exemption
promised for a certain period of years (21). Id.
at 673. This case is
inapposite, however, because this attempt to curtail the exemption occurred
before the expiration of the established period of time.
In English v. Richardson,
224 U.S. 680, 32 S.Ct.
571, 56 L.Ed. 949 (1912), decided the same day as Choate,
a Creek plaintiff was
granted a tax exemption following the reasoning in Choate.
No material distinction
is made between the situation of the Choctaws and Chickasaws versus that
of the Creeks. Id.
at 681. Notably, however,
this was inside the 21-year time period.
In Woodward v. De Graffenried,
238 U.S. 284, 35 S.Ct.
764, 59 L.Ed. 1310 (1915), the Supreme Court discussed in detail
the history of the Creeks with regard to the allotment process. A Creek
freedwoman died after selecting her allotment but before the Original
Creek Agreement, so she took under Section 11 of the Curtis Act. Her allotment
was subsequently confirmed by Section 6 of that Agreement. This was an
ejectment suit, and the question was what law applied to determine her
According to the Supreme Court, Section 11 conveyed only the exclusive
right to the surface of the land during the allottee's lifetime, a "mere
temporary or provisional allotment." Id.
at 292, 307. The Curtis
Act was attempting to administer the trusts imposed on the tribes by early
treaties, and did not purport to disturb tribal title to the allotted
at 305. The Original Creek Agreement
accepted and confirmed the allotment work already accomplished by the
Dawes Commission, and with the same effect as if it had been done after
ratifying the agreement. Id.
at 313. The Court saw
no evidence of a design to put the Curtis Act allotments on any different
basis, in any respect, from allotments made after the Agreement, "if
not inconsistent with the provisions of the Agreement." Id.
at 314. The Curtis Act
allotments, which had been "tentative and provisional," became
"final and conclusive" by virtue of the Agreement. Id.
In Marlin v. Lewallen,
276 U.S. 58, 48 S.Ct.
248, 72 L.Ed. 467 (1928), the Court considered a claim to an estate by
the curtesy in lands allotted to a Creek woman, stating with respect to
the Creek Agreements: "It is apparent from the terms and scope of
the agreements that they were in the nature of a comprehensive treaty
rather than a mere supplement to the fragmentary legislation which preceded
them; and it is apparent from their repealing provisions ... that they
were to have full effect regardless of any inconsistency with that legislation."
276 U.S. at 63. They were "negotiated
and put in force as special laws for the Creeks ... and their provisions
... were such that the Indians naturally would regard them as complete
in themselves and not affected by other laws not brought into them by
distinct reference." Id.
In Carpenter v. Shaw,
280 U.S. 363, 50 S.Ct.
121, 74 L.Ed. 478 (1930), the Court addressed an action involving Choctaws
and the Atoka Agreement. The Court construed the Act of May 10, 1928 in
the context of that agreement, and refused to restrict its limited tax
exemption to land or real estate taxes. Id.
at 367. It liberally
construed the tax on royalty interests, not as one on the severed oil
and gas, but "upon the right reserved in them as lessors and owners
of the fee." Id.
at 368. It is noteworthy,
however, that the 21-year period of exemption had not expired.
In Carter Oil Co. v.
Oklahoma Tax Comm'n,
166 Okla. 1, 25 P.2d 1092 (Okla.1933), the Oklahoma Supreme Court
addressed whether a grantee of a Seminole tribe member would be exempt
from paying the gross production tax. The opinion concluded that an unambiguous
act of Congress provided the requisite evidence of the federal government's
consent to the imposition of a state tax on a federal instrumentality.
at 1094. No vested property rights were involved, as the plaintiff here
was the oil company grantee. The Supreme Court of Oklahoma concluded that
Congress was acting within its power when it passed the Act of May 10,
The case of Superintendent
of Five Civilized Tribes v. Comm'r of Internal Revenue,
295 U.S. 418, 55 S.Ct. 820, 79 L.Ed. 1517 (1935), involved income from
invested funds of a Creek Indian, which the Supreme Court said was the
type of income contemplated by the general terms of the tax act.
at 420. Looking to the Original and Supplemental Creek Agreements (as
well as 1906 and 1908 acts extending the period of restriction) for guidance,
the Court found no such exemption and was not inclined to infer one for
this type of income. Superintendent,
295 U.S. at 420-21.
Oklahoma Tax Comm'n
v. Texas Co., 336
U.S. 342, 69 S.Ct. 561, 93 L.Ed. 721 (1949), concerned non-Indian
lessees of mineral rights in allotted and restricted lands in Oklahoma
who were deemed not immunized against payment of the state gross production
and excise taxes on petroleum produced from the lands. The allotments
were under the General Allotment Act (GAA). The Supreme Court stated that
Congress does have the power to immunize the lessees from such taxes,
that in the absence of Congressional action "we think the Constitution
permits Oklahoma to impose." Id.
at 365. They proceeded
to enumerate the Congressional statutes permitting Oklahoma to impose
a gross production tax on minerals, including the instant statute.
at 366 n. 42. The Court indicated that immunity was removed from the Indians,
and declined to infer immunity "from mere congressional silence."
Squire v. Capoeman,
351 U.S. 1, 76 S.Ct.
611, 100 L.Ed. 883 (1956), addressed whether the proceeds of the sale
of timber by the federal government on lands allotted under the General
Allotment Act could be made subject to capital gains tax. The Supreme
Court focused on several "relatively contemporaneous official and
unofficial writings" in concluding that the proceeds were not taxable.
at 9-10. The rationale included the knowledge that the value of the land
was in its timber, and "[o]nce logged off, the land is of little
at 10. It would thwart
the purpose of the tax exemption in the GAA, and "[i]t is unreasonable
to infer that, in enacting the income tax law, Congress intended to limit
or undermine the Government's undertaking." Id.
[FN1] In addition, the
Court expressed the view that the language of an amendment to the GAA
clearly indicated Congress's intent that an allotment was to be "free
from all taxes, both those in being and those which might in the future
be enacted", until the final patent issued. Squire,
351 U.S. at 8. The language
at issue was that the Secretary of the Interior, when satisfied that the
Indian allottee was competent to handle his or her affairs, would issue
"a patent in fee simple, and thereafter all restrictions as to sale,
incumbrance, or taxation of said land shall be removed."
In United States v.
Daney, 370 F.2d 791
(10th Cir.1966), the Tenth Circuit construed Section 3 of the Act of May
10, 1928 in an action involving a Choctaw attempting to recover income
taxes paid on a lease bonus. In examining the Act's legislative history,
court found that the main purpose
of Section 3 was to enable Oklahoma to collect a gross production tax
on oil and gas produced on restricted Indian land. Id.
at 794. The Court declined
to extend a tax on production to a lease bonus or advance royalty:
language of the statute purports to put Indians and other citizens of
Oklahoma on equal footing only as regards minerals produced.
The Indians still enjoy
the special tax advantage as to other income from the allotted, restricted
lands. That advantage must be preserved to carry out the Congressional
purpose behind the allotment system.
at 795 (emphasis in original).
Clark v. United States,
587 F.2d 465 (10th Cir.1978),
involved a noncompetent, restricted Chickasaw's request for refund of
taxes paid from her trust account. The question was whether the oil and
gas cash bonus and delay rentals were subject to federal income tax as
advance royalty, when actual production followed such payment.
at 466. The Clark
court decided to follow
its earlier opinion in Daney,
observing that nothing
in the legislative history of the Act of May 10, 1928 mentioned federal
taxes, only the Oklahoma gross production tax. Id.
at 468. The court was
"not convinced that Congress clearly intended to remove this tax
exemption, in view of the strong public policy to favor the Indians in
matters of construction of these Acts." Clark,
587 F.2d at 468.
Chickasaw Nation v.
United States, 534
U.S. 84, 122 S.Ct. 528, 151 L.Ed.2d 474 (2001), which concerned a possible
exemption in the Indian Gaming Regulatory Act, contains an extended discussion
of conflicting canons of construction, finding that the canon that assumes
Congress intends statutes to benefit the tribes is offset by the canon
that warns against implied tax exemptions. Id.
at 95. The Supreme Court
declined to concede that the former canon is controlling, "particularly
where the interpretation of a congressional statute rather than an Indian
treaty is at issue .... This Court's earlier cases are too individualized,
involving too many different kinds of legal circumstances, to warrant
any such assessment about the two canons' relative strength."
C. Legislative History and Other Contemporaneous Documents
An early Attorney General opinion regarding income from restricted lands
of the Quapaws, which predates the statute at issue here (thus Congress
presumably was aware of it), stated that to make the restriction on alienation
effective, "it would seem that inalienability and nontaxability should
go hand in hand, at least until Congress clearly provides otherwise."
34 Op. Att'y Gen. 439, 445 (1925), overruled
by 39 Op. Atty. Gen.
107 (1937). An even earlier Attorney General opinion, concerning taxability
of income received by individual members of the Five Civilized Tribes
from tax-exempt lands, maintained that when Congress removed restrictions
against alienability, it did not follow that the exemptions from taxation
also were removed. 34 Op. Att'y Gen. 275 (1924), reprinted
as T.D. 3570, 1924
III-1 C.B. 85, 89. The Indians' patents gave them "as good a title
to the exemption as it did to the land itself." Id.
224 U.S. at 674). Such
exemptions became vested rights, and during the period of tax exemption
specified, income received from the land also was immune. Id.
Language contained in contemporaneous statutes, and related legislative
history, confirms a desire by Congress to consider specially taxes on
oil production. John Collier, Commissioner of the Bureau of Indian Affairs,
wrote in the Washington
Post on May 6, 1934,
prior to introducing a redrafted version of the Indian Reorganization
Act, ch. 576, § 2, 48 Stat. 984 (1934), extending the trust
period indefinitely, that the Act assures the Indians that they will not
owe taxes on their land. However, this did not mean that "Indians
who produce commodities on which they make a substantial income w[ould]
not have to pay taxes on that income," quoted in Patrick Putzi,
Indians and Federal Income
Taxation, 2 N.M.
L.Rev. 200, 218 n.96 (1972). The Oklahoma Indian Welfare Act, ch. 831,
49 Stat.1967 (1936) (codified at 25 U.S.C. § 501 (2000)), provides
that while the lands are held in trust by the United States, they will
be "free from any and all taxes," with the exception of the
gross production tax on oil that the state is authorized to levy.
Reports accompanying the legislation at issue here are not instructive.
The reports issued by both the U.S. House of Representatives and the U.S.
Senate are in all substantive respects virtually identical, comprising
predominantly a letter from Secretary of the Interior, Hubert Work. With
regard to Section 3 of the Act of May 10, 1928, he stated as follows:
keeping in mind the interests of the restricted Indians of the Five Civilized
Tribes, it is believed that if the period of restrictions on their lands
be extended as contemplated in the proposed bill, they should not continue
to be exempt from taxation, except as to a limited acreage of their land.
It is further believed that the taxation provisions of sections 3 and
4 of the proposed bill are not only fair and just to the State of Oklahoma,
but to the Indians as well.
H.R.Rep. No. 70-1193, at 5 (1928).
More instructive is the September 22, 1931 opinion with respect to the
Act of 1928 of E.C. Finney, Solicitor of the Department of the Interior,
found in 53 Interior Dec. 502 (1931). The Secretary of the Interior requested
his opinion on whether Oklahoma had the right to tax the royalty interests
of the Five Civilized Tribe members on oil and gas produced on their restricted
lands under section 3 of the Act of May 10, 1928. Finney asserted that
the section is free from ambiguity, "[b]earing in mind, however,
that it is beyond the power even of Congress to invade or impair vested
rights," and that it is important "in determining whether the
statute is effective to accomplish its plainly expressed purpose, to consider
the rights of these Indians with regard to the taxability of their lands
under prior legislation and treaties negotiated with them." 53 Interior
Dec. at 503.
Finney divided the lands involved into two distinct classes: those to
which tax exemption had attached by express provisions of allotment agreements,
and those to which the tax exemption attached as an incident of the restrictions
against alienation. The first class encompassed those lands covered by
the Choctaw and Chickasaw agreement, also known as the Atoka Agreement,
and discussed in Choate,
224 U.S. 665, 32 S.Ct.
565, 56 L.Ed. 941. That grant of nontaxable land conferred property rights
protected by the Fifth Amendment, and was not subject to subsequent repeal
or impairment by Congress. 53 Interior Dec. at 504. These lands, in his
opinion, remained exempt from taxation during the period provided for
in the allotment agreements, despite Section 3 of the 1928 Act.
On the other hand, the restrictions against alienation of the second group
"did not constitute a vested property right but were in the nature
of personal disabilities to be continued or dropped at the will of Congress."
at 506. Therefore, Finney concluded that "[i]n so far as the lands
to which no vested right of immunity from taxation has attached are concerned,
the legislation providing for the tax invaded no right of the Indians
and was unquestionably a proper exercise of the plenary power possessed
by Congress over the subject matter," notwithstanding that the legislation
was a departure from its usual practice of tying tax exemption to restricted
Finney reconciled sections 3
and 4 of the 1928 legislation, by concluding that even the homestead would
be subject to the gross production tax after April 26, 1931. Id.
III. EXISTENCE OF A VESTED RIGHT
Based upon a review of the above-referenced authorities, the question
becomes whether Plaintiffs have a vested right to an exemption from taxation.
According to Cohen, the Fifth Amendment protection pertains only to Indian
property rights "recognized by Congress." Cohen at 217 n.5.
Section 11 of the Curtis Act, or Act of June 28, 1898, 30 Stat. 495, 498,
provides that restricted Indian land "shall be nontaxable while so
held." Plaintiff's grandfather took his allotment under this Act
in 1900. Plaintiffs assert that it is irrelevant that the Curtis Act was
not written in the formal language of contract (Plaintiff's Memorandum
of Constitutionality at 7), but parts of it most certainly were. The Atoka
Agreement was embodied in Section 29 of the statute, and the contemplated
(but never ratified) agreement with the Creeks in Section 30. Based on
a careful review of the language, the Court finds that the provisions
of Section 11, ("when the roll of citizenship ... is fully completed
..., and the survey of the lands ... is also completed, the commission
... shall proceed to allot the exclusive use and occupancy of the surface
of all the lands ...," 30 Stat. 497), cannot be construed as a contract
granting vested rights.
Subsequently, the Act of March 1, 1901, 31 Stat. 861 (Original Creek Agreement),
was enacted by Congress, an "Act to ratify and confirm an agreement
with the Muscogee or Creek tribe of Indians, and for other purposes."
The language indicates that Chapter 676 is accepting, ratifying, and confirming
an agreement negotiated the year before between the Commission to the
Five Civilized Tribes and the Creek tribe. Id.
inter alia, covered
the allotment to each enrolled citizen of 160 acres of land, and in Section
6 it stipulated that "[a]ll allotments made to Creek citizens by
said commission prior to the ratification of this agreement ... are confirmed,
and the same shall, as to appraisement and all things else, be governed
by the provisions of this agreement." Id.
at 863. Section 7 provided
that lands were inalienable for five years, and homesteads of forty acres
carved from the allotments "shall be nontaxable and inalienable and
free from any incumbrance whatever for twenty-one years." 31 Stat.
The following year, the Act of June 30, 1902, 32 Stat. 500 (Supplemental
Creek Agreement), modified the original agreement. This act purported
to ratify and confirm a supplemental agreement with the Creek tribe, and
the language "in consideration of the mutual undertakings herein
contained it is agreed" clearly sounds in contract. Id.
Some sections of this
agreement contained language indicating that the section as contained
in the original agreement was amended and "as so amended is reenacted
to read as follows." ( See,
e.g., Sections 2
and 3.) Other provisions were repealed ( see,
e.g., Sections 6
and 15, repealing one part of earlier section 7 and all of prior section
24, respectively.) The remainder of the language supplemented the original
agreement, which remained in effect. There is nothing, however, to supplant
the language in original Section 6, quoted above. The language in original
Section 7, also quoted supra,
was paraphrased in Section
16 with some minor changes, but the entire allotment still was restricted
for five years, and the forty-acre homestead remained "nontaxable,
inalienable, and free from any incumbrance whatever" for 21 years.
Cohen maintains that the Supreme Court repeatedly has confirmed that Congress
may abrogate a treaty provision unilaterally, but goes on to say that
"special rules concerning construction of Indian treaties ... create
a strong presumption that treaty rights have not been abrogated or modified
by subsequent congressional enactments." Cohen at 222. Congress must
demonstrate a "clear and plain" intent to abrogate treaty rights,
either in the language of the statute itself or in its legislative history.
at 223. Here, we are dealing with agreements (original and supplemental)
that were fashioned after 1871 (when the practice of making treaties with
the tribes was discontinued by Congress). However, history and common
sense compel the conclusion that "[t]he principle of a 'clear and
plain statement' before Indian treaty rights can be abrogated also applied
in nontreaty contexts." Cohen at 224.
Although the federal government considers itself guardian of the Indian
ward, "there is no superior authority to whom this particular
guardian may be compelled to account, and the dealings of our government
with its Indian wards have not infrequently amounted to what in the case
of an ordinary guardian would be both legally and morally a gross breach
of trust." Robert C. Brown, The
Taxation of Indian Property,
15 Minn. L.Rev. 182, 184 (1930-31). What protects the Indians against
state or federal government action is determined by Congress, with no
explicit right of appeal to the courts, and "what Congress desires
with respect to taxation or anything else it can almost invariably secure,
any injustice to the states or to the Indians themselves to the contrary
at 187. This contemplates
a federal government with discretion over all taxation of Indians, who
can be made subject to or exempt from state or local taxation as the federal
government desires (unless there is a contract vesting them with protected
In the instant case, the language of the Agreements purports to cover
comprehensively the entire agreement between the federal government and
the Creek tribe. Indeed, the language does not mention a perpetual tax
exemption, or suggest that restriction and tax exemption are to be tied
together inexorably. Accordingly, this Court finds that no vested right
has been granted here and, accordingly, no vested right has been abrogated.
Instead, an exemption for a set period of time (a certain number of years,
or as amended during the allottee's tenure, or both) is all that was established.
Clearly, the Original Agreement neglected to carry forward the prospective
tax exemption language embodied in Section 11 of the Curtis Act. Moreover,
the Supreme Court and other courts have had ample opportunity over the
last 76 years to consider the Act of May 10, 1928 and its amending acts,
and no court has determined that the Constitution in any way prevents
Congress from exercising its lawful authority to impose taxes in this
IV. CONCLUSIONS OF LAW
Based upon a review of the above-referenced authorities and the briefs
and arguments of counsel, the Court hereby enters the following Conclusions
A. General Principles
1. The Sixteenth Amendment to the United States Constitution gives Congress
the power to tax, without apportionment, income "from whatever source
derived." U.S. Const. amend. XVI.
2. Sections 1 and 11 of the Internal Revenue Code (the "Code")
subject the income of every individual, estate, trust, and corporation
to tax. 26 U.S.C. §§ 1, 11 (2000). Section 61(a) of the
Code further provides that "[e]xcept as otherwise provided in this
subtitle, gross income means all income from whatever source derived ..."
26 U.S.C. § 61(a) (2000).
3. The Supreme Court repeatedly has inferred from the sweeping language
of Section 61(a) or its predecessor provisions that Congress intended
to exert "the full measure of its taxing power." HSCS--Laundry
v. United States,
450 U.S. 1, 5, 101 S.Ct. 836, 67 L.Ed.2d 1 (1981); Comm'r
v. Glenshaw Glass Co.,
348 U.S. 426, 429, 75 S.Ct. 473, 99 L.Ed. 483 (1955); Helvering
v. Clifford, 309
U.S. 331, 334, 60 S.Ct. 554, 84 L.Ed. 788 (1940).
4. It is well settled that "[u]nder our system of federal income
taxation, ... every element of gross income of a person, corporation,
or individual is subject to tax unless there is a statute or some rule
of law that exempts that person or element." HSCSLaundry,
450 U.S. at 5.
5. It also is settled law "that a general statute applying to all
persons includes Indians and their property interests." Federal
Power Comm'n v. Tuscarora Indian Nation,
362 U.S. 99, 116, 80 S.Ct. 543, 4 L.Ed.2d 584 (1960). Courts long have
held that "Indians are citizens and that in the ordinary affairs
of life, not governed by treaties or remedial legislation, they are subject
to the payment of income taxes as are other citizens." Squire,
351 U.S. at 6.
Accord Jourdain v. Comm'r,
617 F.2d 507, 509 (8th
Cir.1980); Lazore v.
Comm'r, 11 F.3d 1180,
1183 (3rd Cir.1993); United
States v. Willie,
941 F.2d 1384, 1400 (10th Cir.1991).
6. A court is not free to construe a treaty or a statute as impliedly
creating a tax exemption. Mescalero
Apache Tribe v. Jones,
411 U.S. 145, 156, 93 S.Ct. 1267, 36 L.Ed.2d 114. The Supreme Court "
'has repeatedly said that tax exemptions are not granted by implication....
It has applied that rule to taxing acts affecting Indians as to all others."
' Id. (quoting Oklahoma
Tax Comm'n v. United States,
319 U.S. 598, 606-07, 63 S.Ct. 1284, 87 L.Ed. 1612 (1943)). Accord
Dillon v. United States,
792 F.2d 849, 853 (9th Cir.1986); see
Superintendent of Five Civilized Tribes,
295 U.S. at 420 ("if [a tax] exemption exists it must derive plainly
from agreements with the [Indians at issue] or some Act of Congress dealing
with their affairs.")
7. If Indians are to be granted an exemption from taxation, whether by
treaty or statute, it must be clearly expressed. Squire,
351 U.S. at 6;
Mescalero Apache Tribe,
411 U.S. at 156;
see also Comm'r v. Walker,
326 F.2d 261, 263 (9th
Cir.1964) (as a general act of Congress applying to all persons, the Internal
Revenue Code subjects Indians to the payment of federal income taxes "unless
an exemption from taxation can be found in the language of a Treaty or
Act of Congress"). An Indian claiming an exemption from federal income
taxation must point to "express exemptive language in some statute
or treaty." United
States v. Anderson,
625 F.2d 910, 913, 917 (9th Cir.1980).
8. Although one canon of Indian law states that ambiguous statutes and
treaties are to be construed in favor of Indians, such statutes and treaties
are not to be construed to grant tax exemptions unless they contain language
which reasonably can be so construed. Hoptowit
v. Comm'r of Internal Revenue,
709 F.2d 564, 565 (9th Cir.1983).
9. No interpretation of statutory language in favor of Plaintiffs is appropriate
here. As discussed above, the canon of construction that warns against
interpreting federal statutes to provide tax exemptions unless clearly
expressed trumps the canon assuming that Congress intends its statutes
to benefit the tribes. Chickasaw
Nation, 534 U.S.
B. Creek Nation
10. When a Creek Indian claims an exemption from tax based on his status
as an Indian, the exemption must come from agreements between the United
States and the Muskogee (Creek) Nation, or acts of Congress. See
Superintendent of the Five Civilized Tribes,
295 U.S. at 420 (looking to the Creek agreement of 1901 and the Supplemental
Agreement of 1902); Marlin
v. Lewallen, 276
U.S. at 63 (1928).
11. The terms of the agreements between the United States and the Creek
Nation are contained in the Original Creek Agreement of March 1, 1901
(31 Stat. 861) and Supplemental Agreement of June 30, 1902 (32 Stat. 500).
Indian Land Titles
§ 21 at 23.
12. It is apparent from the terms and scope of these two agreements that
they were in the nature of a comprehensive treaty rather than a mere supplement
to the fragmentary legislation which preceded them; and it is apparent
from their repealing provisions-section 41 of one and section 20 of the
other-that they were to have full effect regardless of any inconsistency
with that legislation. See
Marlin, 276 U.S.
13. These agreements, along with the land patents under which Miller Bruner
accepted his land, "must be construed together" to determine
the offer terms under which Miller Bruner received his allotment.
224 U.S. at 673-74 ("The patent and the legislation of Congress must
be construed together ...).
14. The Original Creek Agreement of 1901 (31 Stat. 861) sets forth the
specific terms under which Miller Bruner took title to the Property at
issue in this suit. See
Exhibits 1 and 2 to the
15. Section 7 of this agreement provides that forty acres of every allotment
shall be nontaxable and inalienable for twenty-one years. See
31 Stat. 861, 863 § 7.
16. Section 16 of the Supplemental Creek Agreement of 1902 (32 Stat. 500)
similarly provides that each citizen shall select from his allotment forty
acres which shall be and remain nontaxable for twenty-one years from the
date of the deed. See
32 Stat. 500, 503 § 16.
17. As shown on Exhibit 2 to the Complaint, Miller Bruner selected a homestead
of 40 acres of land from his 160 acre allotment. The Homestead Deed land
patent specifically provides that the forty acres "shall be nontaxable
and inalienable and free from any incumbrance whatever, for twenty-one
Exhibit 2 to the Complaint.
18. No language can be found in the Agreements, the Homestead Deed or
the Allotment Deed making the land nontaxable so long as it is restricted.
19. Various acts of Congress extended the tax exemption on this Property
beyond the 21 years provided in the Original and Supplemental Creek Agreements.
Act of Congress dated April 26,
1906 (the Curtis Act of 1906), 34 Stat. 137 (extending the tax-exempt
status for 25 years, until April 26, 1931, as long as the title remained
in the original allottee); Act of Congress dated May 10, 1928, 45 Stat.
495, (extending the tax-exempt status for an additional 25 years, until
April 26, 1956).
20. The Act of Congress dated August 11, 1955, 69 Stat. 666, extended
the restrictions on alienation for the owner's life. The Creek Indians
gave no consideration in exchange for this extension.
21. None of these acts extended the tax exemption to the heir of Richard
Bruner Sr. ("Dick Bruner"). Plaintiffs have pointed to no subsequent
acts of Congress which extended to Dick's son, Richard Bruner, Jr., a
tax exemption on lands that he is restricted from alienating.
22. Congress did not subject the minerals produced on the Property at
issue to state and federal taxation until April 26, 1931, again by passage
of the Act of Congress dated May 10, 1928 (45 Stat. 495). Section 3 of
the 1928 Act provides in relevant part "That all minerals, including
oil and gas, produced on or after April 26, 1931, from restricted allotted
lands of members of the Five Civilized Tribes in Oklahoma, or from inherited
restricted lands of full-blood Indian heirs or devisees of such lands,
shall be subject to all State and Federal taxes of every kind and character
the same as those produced from lands owned by other citizens of the state
of Oklahoma...." Miller Bruner's deeds are dated October 22, 1903;
twenty-one years from 1903 is 1924. Consequently, the 21-year tax exemption
provided under the Original and Supplemental Creek Agreement language
expired before Congress enacted section 3 of the 1928 Act.
C. Restriction vs. Exemption
23. Richard Bruner, Jr. is not entitled to hold the Property exempt from
federal income taxes simply because he is restricted from alienating the
Property. Under federal law, land restrictions and tax exemptions are
discrete entities. They do not go hand in hand. See
Superintendent of the Five Civilized Tribes,
295 U.S. at 420; Oklahoma
Tax Comm'n, 319 U.S.
at 598. See also Jones
v.. Taunah, 186 F.2d
445, 446 (10th Cir.1951) ("[I]t is settled law that restrictions
upon alienation and non-taxability under federal law are not necessarily
synonymous. They are separate and distinct things."). Holding restricted
land does not grant the holder an exemption from taxation. See
Superintendent of the Five Civilized Tribes,
295 U.S. at 421 ("Non-taxability and restriction upon alienation
are distinct things."); Oklahoma
Tax Comm'n, 319 U.S.
at 602 ("We find ... that the restriction [upon alienation], without
more, is not the equivalent of a congressional grant of estate tax immunity....")
and 607 ("Nontaxability and restriction upon alienation are distinct
things, and when Congress wants to require both non-alienability and nontaxability
it can, as it has so often done, say so explicitly.") (citations
omitted). See also
Semple, § 487
at 354 ("The theory upon which restricted lands are held nontaxable
does not apply after [May 10, 1928].)"
D. Curtis Act
24. Plaintiffs maintain that Miller Bruner accepted a patent for the Property
under the Curtis Act of 1898 (30 Stat. 495). They argue that the pertinent
language of section 11 ("That the lands allotted shall be nontransferable
until after full title is acquired and shall be liable for no obligations
contracted prior thereto by the allottee, and shall be nontaxable while
so held") conveyed a right to Plaintiff Richard Bruner, Jr. to hold
his land free from taxation as long as it is nontransferable. But accepting
Plaintiffs' position that the
allotment was taken under the Curtis Act of 1898 does not give Richard
Bruner, Jr. a right to hold the Property at issue exempt from taxation.
The U.S. Supreme Court has held that the only interest conveyed to Creek
Indians by section 11 of the Curtis Act of 1898 is a life estate.
238 U.S. at 292. Therefore, tax exemption for Miller Bruner did not pass
to his heirs.
E. Due Process
25. The Fifth Amendment provides in part: "nor shall private property
be taken for public use, without just compensation." U.S. Const.
26. The purpose of the compensation guarantee is to prevent the Government
from requiring a few to bear burdens that, in fairness, should be borne
by the public as a whole. Armstrong
v. United States,
364 U.S. 40, 49, 80 S.Ct. 1563, 4 L.Ed.2d 1554 (1960).
27. To be unconstitutional under the due process clause, a taxing statute
must be so arbitrary as to amount to a confiscation or a clear and gross
inequity or injustice. 1 Mertens, Law
of Federal Income Taxation
§ 4:12, at 4-22.
28. Section 3 of the 1928 Act was enacted to address concerns raised by
members of Congress from Oklahoma over the amount of tax-exempt lands
in the State of Oklahoma. See
Semple, § 486
29. Due to the economic position of the Oklahoma Indians from their mineral
resources, Congress determined that the Indians of the Five Civilized
Tribes could help pay for the Government services paid for out of tax
H.R. Rep. 1193, 70th Cong., 1st
Sess. 5 (1928); S. Rep. 982, 70th Cong., 1st Sess. 5 (1928).
30. In order to state a claim for a taking, a claimant must establish
that he or she was the owner of property and that some portion of the
property was taken for a public purpose. Pub.
Water Supply Dist. No. 3 v. United States,
133 Ct.Cl. 348, 135 F.Supp. 887, 890 (Ct.Cl.1955).
31. Only one possessing an ownership interest in the property at the time
of the taking is entitled to receive the required compensation.
United States v. Dow,
357 U.S. 17, 20-21, 78 S.Ct.
1039, 2 L.Ed.2d 1109 (1958).
32. The complaint alleges that the "property" taken was "a
vested property right exemption from federal and state taxation."
See Complaint, ¶ 26. This claim fails for two reasons. First,
as discussed above, Richard Bruner, Jr. has never held this land as tax-exempt.
No treaty or federal law vests Plaintiffs with the right to a tax-exemption
on this land. Second, even if the limited 21- year tax-exemption provided
under the Creck treaties and extended by subsequent Acts of Congress could
be interpreted to apply to the heirs of heirs of allottees, Plaintiffs
cannot show that Richard owned this property at the time of the taking.
The taking Plaintiffs allege occurred in 1928 with the passage of section
3 of the Act of May 10, 1928. See
Complaint, ¶ 14.
But Richard did not have an ownership interest in the Property until September
19, 1981, some 53 years later. See
Complaint, ¶ 11.
Since Richard did not own the Property at the time of the alleged taking,
he is not entitled to compensation under the Fifth Amendment.
33. Even if this Court were to accept Plaintiffs' argument that the exemption
from taxation goes hand-in-hand with the restrictions on alienation, (contrary
to the holdings in Superintendent
of the Five Civilized Tribes,
295 U.S. at 421, and Oklahoma
Tax Comm'n, 319 U.S.
at 602, 607), Plaintiffs' argument must fail. While Richard Bruner, Jr.
is restricted from alienating his land (at least until he obtains a certificate
of competency), the tax at issue here is an income tax. Richard Bruner,
Jr. is not restricted in any way from disposing of his income. His status
does not dictate that this income must be exempt from taxation.
See Choteau v. Burnet,
283 U.S. 691, 695-96,
51 S.Ct. 598, 75 L.Ed. 1353 (1931) (the claim that petitioner, a restricted
Indian, was restricted with respect to the income from royalties of oil
and gas leases must fail).
34. Congress's elimination of a tax exemption does not require compensation
under the Fifth Amendment. Acts of Congress are amendable and repealable
at the will of Congress. See
Choate, 224 U.S.
at 671; see also Rosebud
Sioux Tribe v. Kneip,
430 U.S. 584, 594, 97 S.Ct. 1361, 51 L.Ed.2d 660 (1977) (confirming that
Congress can abrogate a statutory or even a treaty provision unilaterally
without the consent of the tribe); Lone
Wolf v. Hitchcock,
187 U.S. 553, 566, 23 S.Ct. 216, 47 L.Ed. 299 (1903); Cohen at 222. No
property right in having tax-exempt property was created by the extension
of the tax exemption beyond 21 years. Furthermore, "[t]he tax law
is not a promise, and no taxpayer has a vested right to the treatment
provided at any particular time by the Code." 1 Mertens,
Law of Federal Income Taxation
§ 4:14, at
4-28, citing United
States v. Carlton,
512 U.S. 26, 114 S.Ct. 2018, 129 L.Ed.2d 22 (1994).
35. As noted above, nothing in the Original Creek Agreement, Supplemental
Creek Agreement, Miller Bruner's Homestead Deed, or Miller Bruner's Allotment
Deed precluded the Government from taxing the minerals produced on the
Property at issue after April 26, 1931.
36. Section 3 of the 1928 Act is a valid exercise of the taxing powers
that Congress has under the Constitution and the Internal Revenue Code.
The enactment of section 3 is not a taking and does not offend Constitutional
principles of due process.
F. Equal Protection
37. The due process clause of the Fifth Amendment provides that no person
shall be "deprived of life, liberty, or property without due process
of law." U.S. Const. amend. V. This clause embodies the principles
of equal protection. Regan
v. Taxation With Representation of Washington,
461 U.S. 540, 547, 103 S.Ct. 1997, 76 L.Ed.2d 129 (1983).
38. As to the principle of equal protection, classifications adopted by
Congress may not be disturbed so long as they bear a rational relation
to a legitimate governmental purpose. Regan,
461 U.S. at 547. The
rational basis standard is particularly deferential in the context of
classifications made by tax laws. Nordlinger
v. Hahn, 505 U.S.
1, 11, 112 S.Ct. 2326, 120 L.Ed.2d 1 (1992).
39. Tax legislation carries a "presumption of constitutionality"
and legislatures have considerable latitude in creating classifications
and distinctions in the tax statutes. Regan,
461 U.S. at 547. The
broad discretion that legislatures possess as to classification in the
taxation arena has been recognized for a long time. Madden
v. Kentucky, 309
U.S. 83, 87-88, 60 S.Ct. 406, 84 L.Ed. 590 (1940).
40. A taxpayer may overcome the presumption of constitutionality "only
by the most explicit demonstration that a classification is a hostile
and oppressive discrimination against particular persons and classes."
41. Federal legislation with respect to Indian tribes, although relating
to Indians as such, is not based upon impermissible racial classifications.
United States v. Antelope,
430 U.S. 641, 645, 97
S.Ct. 1395, 51 L.Ed.2d 701 (1977). The unique legal status of Indian tribes
under federal law permits the Federal Government to enact legislation
singling out tribal Indians, and this legislation is not subject to strict
scrutiny simply because it includes an Indian classification.
Washington v. Confederated
Bands & Tribes of Yakima Indian Nation,
439 U.S. 463, 500-01, 99 S.Ct. 740, 58 L.Ed.2d 740 (1979).
42. There is no violation of the equal protection principles of the Constitution
in Congress's decision to exempt from taxation certain kinds of income
derived from restricted lands, while not exempting income received from
the production of oil and gas from restricted lands. Congress has the
authority under the Constitution to provide a benefit to a particular
class of taxpayers without providing similar benefits to all other classes
of taxpayer. Regan,
461 U.S. at 546-47.
Based on the above, the Court finds the Act of 1928 is constitutional.
As previously noted, Plaintiffs conceded at the hearing on June 6, 2003
that if the 1928 Act is constitutional, Defendant must prevail in this
lawsuit. Accordingly, the parties are hereby ordered to prepare an agreed
form of judgment in Defendant's favor and submit that judgment to the
Court not later than two weeks from the file date of this Order.
IT IS SO ORDERED.
FN1. Two scholars have advanced the view that a different outcome might
have resulted if the income was recurring in nature, and not derived from
a wasting enterprise such as timber harvesting, as the income would not
represent "the loss, destruction or even diminution of the value
of the land." Terry Noble Fiske & Robert F. Wilson, Federal
Taxation of Indian Income from Restricted Indian Lands,
X Land & Water L.Rev. 63, 80-81 (1975).
• 4:02CV00504 (Docket)