Confederated Tribes of the Chehalis Reservation v. Thurston County Board of Equalization ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CONFEDERATED TRIBES OF THE No. 10-35642
CHEHALIS RESERVATION, a federally
recognized Indian tribe on its own D.C. No.
behalf and as parens patriae for its 3:08-cv-05562-
members; CTGW, LLC, a limited BHS
liability company organized under
Delaware law,
Plaintiffs-Appellants, OPINION
v.
THURSTON COUNTY BOARD OF
EQUALIZATION, a political
subdivision of the State of
Washington; JOHN MORRISON,
Thurston County Board of
Equalization member, in his official
capacity; BRUCE REEVES, Thurston
County Board of Equalization
member, in his official capacity;
THURSTON COUNTY, a political
subdivision of the State of
Washington; STEVEN DREW,
Thurston County Assessor, in his
official capacity; SHAWN MYERS,
Thurston County Treasurer;
ELIZABETH LYMAN, Thurston
County Board of Equalization
member,
Defendants-Appellees.
2 CHEHALIS TRIBES V. THURSTON CNTY.
Appeal from the United States District Court
for the Western District of Washington
Benjamin H. Settle, District Judge, Presiding
Argued and Submitted
June 5, 2013—Seattle, Washington
Filed July 30, 2013
Before: Arthur L. Alarcón, M. Margaret McKeown,
and Sandra S. Ikuta, Circuit Judges.
Opinion by Judge Ikuta
SUMMARY*
Indian Tribes / Taxation
Reversing the district court’s summary judgment, the
panel held that state and local governments lack the power to
tax permanent improvements built on non-reservation land
owned by the United States and held in trust for an Indian
tribe pursuant to 25 U.S.C. § 465.
The panel held that pursuant to Mescalero Apache Tribe
v. Jones, 411 U.S. 145 (1973), the exemption of trust lands
from state and local taxation under § 465 extends to
permanent improvements on such lands. The panel
concluded that the fact that the improvements were owned by
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
CHEHALIS TRIBES V. THURSTON CNTY. 3
a limited liability company, rather than by the tribe itself, was
irrelevant, as was the question whether the improvements
constituted personal property under state law.
COUNSEL
Gabriel S. Galanda and Anthony S. Broadman, Galanda
Broadman, PLLC, Seattle, Washington; Kevin M. Fong
(argued) and Blaine I. Green, Pillsbury Winthrop Shaw
Pittman, LLP, San Francisco, California, for Plaintiffs-
Appellants.
Jon Tunheim, Prosecuting Attorney, Jane Futterman and
Scott C. Cushing (argued), Deputy Prosecuting Attorneys,
Olympia Washington, for Defendants-Appellees.
Rob Roy Smith, Ater Wynne LLP, Seattle, Washington, for
Amicus Curiae Marine View Ventures, Inc., Island
Enterprises, Inc., and Port Madison Enterprises.
OPINION
IKUTA, Circuit Judge:
At issue in this case is whether state and local
governments have the power to tax permanent improvements
built on non-reservation land owned by the United States and
held in trust for an Indian tribe. Pursuant to 25 U.S.C. § 465,
and Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1973),
we hold that they do not.
4 CHEHALIS TRIBES V. THURSTON CNTY.
I
The Confederated Tribes of the Chehalis Reservation is
a federally recognized Indian tribe in Southwest Washington.1
In 2002, the Tribe purchased approximately forty-three acres
of land known as the “Grand Mound Property,” which was
located off the Tribe’s reservation in Thurston County,
Washington. Two years later, the Tribe asked the
Department of the Interior to buy the Grand Mound Property
and hold it in trust for the use and benefit of the Tribe
pursuant to the Department’s authority under 25 U.S.C.
§ 465.2 Section 465 authorizes the Secretary of the Interior
to acquire “any interest in lands, water rights, or surface
rights to lands, within or without existing reservations,” and
to hold title to such lands and rights “in the name of the
United States in trust for the Indian tribe or individual Indian
for which the land is acquired.” The statute also provides that
“such lands or rights shall be exempt from State and local
taxation.” Id.3
1
The documents filed with this court inconsistently refer to the
Confederated Tribes of the Chehalis Reservation as both the “Tribe” and
the “Tribes.” We will use the singular form, as does the Tribe in its brief.
2
The parties indicated in passing that the Grand Mound Property was
converted to reservation land at some time after the facts at issue in this
appeal. Because the parties did not address the effect of this change, we
do not reach it here.
3
25 U.S.C. § 465 states, in pertinent part:
The Secretary of the Interior is authorized, in his
discretion, to acquire, through purchase,
relinquishment, gift, exchange, or assignment, any
interest in lands, water rights, or surface rights to lands,
within or without existing reservations, including trust
CHEHALIS TRIBES V. THURSTON CNTY. 5
In 2005, while the Tribe’s request was still pending before
the Department, the Tribe and Great Wolf Resorts, Inc.
entered into an agreement to form CTGW, LLC, a Delaware
limited liability company, for the purpose of building a resort,
conference center, and water park (collectively, the Great
Wolf Lodge) on the Grand Mound Property. Under the
agreement, the Tribe owned an undivided 51 percent interest
in CTGW. In 2006, the Department agreed to purchase the
Grand Mound Property pursuant to § 465 and to hold the land
in trust for the Tribe.
The Tribe and CTGW subsequently entered into a lease
agreement that gave CTGW the right to use the Grand Mound
Property “for a hotel, indoor water park and convention
center and related economic development or for any other
lawful purpose” for twenty-five years. Article 11 of that
lease provides:
All buildings and improvements on the
Premises shall be owned in fee by [CTGW]
during the term of this Lease provided that
such buildings and improvements (excluding
or otherwise restricted allotments, whether the allottee
be living or deceased, for the purpose of providing land
for Indians.
....
Title to any lands or rights acquired pursuant to this Act
or the Act of July 28, 1955 (69 Stat. 392), as amended
(25 U.S.C. 608 et seq.) shall be taken in the name of the
United States in trust for the Indian tribe or individual
Indian for which the land is acquired, and such lands or
rights shall be exempt from State and local taxation.
6 CHEHALIS TRIBES V. THURSTON CNTY.
removable personal property and trade
fixtures) shall remain on the Premises after
the termination of this Lease and shall
thereupon become the property of the [Tribe].
In short, under Article 11, CTGW would own the Great Wolf
Lodge’s physical structures for twenty-five years, at which
time the Tribe would become the owner. The Bureau of
Indian Affairs approved the lease on July 9, 2007, and it
remained in effect at all times relevant to this suit. The
Lodge opened the following year.
In 2007, Thurston County began assessing property taxes
on the Great Wolf Lodge. The County recognized that § 465
exempted the Grand Mound Property from state and local
taxation. It concluded, however, that the structures on the
land were not tax exempt, because under the terms of the
lease they were owned by CTGW and not the Tribe.
The Tribe and CTGW believed that federal law barred the
County from imposing these property taxes, and brought suit
against the County and related defendants on September 18,
2008, seeking declaratory and injunctive relief.4 The district
court awarded summary judgment to the County, holding that
state and local governments are not necessarily prohibited
from taxing permanent improvements, like the Great Wolf
Lodge, that are owned by non-Indians. The Tribe and CTGW
4
For convenience, we refer to the defendants collectively as “the
County.”
CHEHALIS TRIBES V. THURSTON CNTY. 7
timely appealed,5 and we have jurisdiction pursuant to
28 U.S.C. § 1291.
II
On appeal, we review the summary judgment order de
novo, asking “whether, viewing the evidence in the light most
favorable to” the Tribe and CTGW, “there are any genuine
issues of material fact and whether the district court correctly
applied the relevant substantive law.” Ellins v. City of Sierra
Madre, 710 F.3d 1049, 1056 (9th Cir. 2013) (quoting Delia
v. City of Rialto, 621 F.3d 1069, 1074 (9th Cir. 2010)).
“[S]ummary judgment is appropriate where there ‘is no
genuine issue as to any material fact’ and the moving party is
‘entitled to a judgment as a matter of law.’” Alabama v.
North Carolina, 130 S. Ct. 2295, 2308 (2010) (quoting Fed.
R. Civ. P. 56(c)).
A
This appeal raises the purely legal question whether the
exemption of trust lands from state and local taxation under
§ 465 extends to permanent improvements on such lands.
The law relevant to this appeal traces back to United
States v. Rickert, 188 U.S. 432 (1903), a case that precedes
the enactment of § 465 by over thirty years. In Rickert, the
5
The County’s argument that the appeal was not timely is meritless.
The final judgment in this case issued on April 2, 2010. The Tribe and
CTGW filed a Rule 59(e) motion seeking reconsideration, which was
denied June 23, 2010. They appealed within thirty days of that denial,
making the appeal timely under Federal Rule of Appellate Procedure
4(a)(4)(A)(iv).
8 CHEHALIS TRIBES V. THURSTON CNTY.
federal government challenged the taxes imposed by Roberts
County, South Dakota on “certain permanent improvements”
on lands within the former Sisseton Indian Reservation. Id.
at 432–33. The United States had allotted the lands to
individual members of the Sisseton band of Sioux Indians,
but held the lands in trust for a period of twenty-five years or
longer. Id. at 435–36 (discussing Act of Feb. 8, 1887, ch.
119, § 5, 24 Stat. 388, 389 (1887) (codified as amended at
25 U.S.C. § 348 (2006))). Rickert first held that state and
local governments had no power to tax the land itself because
it was owned by the federal government. Id. at 437–39 (“If,
as is undoubtedly the case, these lands were held by the
United States . . . it would follow that there was no power in
the state of South Dakota, for state or municipal purposes, to
assess and tax the lands in question until at least the fee was
conveyed to the Indians.”). In reaching this conclusion, the
Court relied on the proposition that “property of the United
States was exempt by the Constitution of the United States
from taxation under the authority of any state.” Id. at 438
(citing Van Brocklin v. Tennessee, 117 U.S. 151, 155 (1886)).
The Court then turned to the related question whether “the
permanent improvements, such as houses and other structures
upon the lands held by allotment,” were subject to state and
local taxes as personal property. Id. at 441–42. The Court
held that the state and local governments had no power to tax
these improvements, concluding that “[e]very reason that can
be urged to show that the land was not subject to local
taxation applies to the assessment and taxation of the
permanent improvements.” Id. at 442.
Decades after Rickert, the Court again addressed the
question whether state and local governments had the power
to tax permanent improvements on non-reservation land
owned by the United States and held in trust for Indians. See
CHEHALIS TRIBES V. THURSTON CNTY. 9
Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1973). In
that case, the Mescalero Apache Tribe operated a ski resort
on land located adjacent to reservation lands, but outside “the
existing boundaries of the reservation.” Id. at 146. Although
the record did not establish the precise form of the business
entity that was operating the ski resort, the Court quickly
dispensed with this issue, reasoning that “the question of tax
immunity cannot be made to turn on the particular form in
which the Tribe chooses to conduct its business” Id. at 157
n.13. The Mescalero Apache Tribe challenged two taxes
imposed on the ski resort by New Mexico: a tax on the ski
resort’s gross receipts, and a use tax “based on the purchase
price of materials used to construct two ski lifts at the resort.”
Id. at 147. The Tribe argued that federal law barred the state
from assessing either tax, because the Tribe’s interest in the
lands was “within the immunity afforded by § 465.” Id. at
155 n.11; see also id. at 146.
The Court rejected the Tribe’s argument with respect to
the gross receipts tax, holding that § 465 exempted “lands and
rights in land” from taxation, and “not income derived from
[the land’s] use.” Id. at 155. But the Court struck down the
use tax, reasoning that this form of tax was equivalent to a tax
on land, and therefore barred by § 465. In reaching this
conclusion, the Court first noted that the construction material
at issue had already been “installed in the construction of the
ski lifts,” and was therefore “permanently attached to the
realty.” Id. at 158. Relying on Rickert and § 465, the Court
reasoned that “these permanent improvements on the Tribe’s
tax-exempt land would certainly be immune from the State’s
ad valorem property tax.” Id. The Court then held that the
tax exemption in § 465 barred the tax New Mexico
characterized as a “use tax.” As the Court explained, “‘use’
is among the ‘bundle of privileges that make up property or
10 CHEHALIS TRIBES V. THURSTON CNTY.
ownership’ of property,” and therefore “a tax upon ‘use’ is a
tax upon the property itself.” Id. at 158 (quoting Henneford
v. Silas Mason Co., 300 U.S. 577, 582 (1937)). It followed
that the “use of permanent improvements upon land is so
intimately connected with use of the land itself that an
explicit provision relieving the latter of state tax burdens must
be construed to encompass an exemption for the former.” Id.at 158 (citing Rickert, 188 U.S. at 441–43). On this basis, the
Court struck down the tax.
Accordingly, Mescalero makes it clear that where the
United States owns land covered by § 465, and holds it in
trust for the use of a tribe (regardless of “the particular form
in which the [t]ribe chooses to conduct its business”), § 465
exempts permanent improvements on that land from state and
local taxation.6
6
In connection with our analysis of Mescalero, the Tribe asks us to
consider the following regulation recently promulgated by the Bureau of
Indian Affairs to further interpret § 465:
Subject only to applicable Federal law, permanent
improvements on the leased land, without regard to
ownership of those improvements, are not subject to
any fee, tax, assessment, levy, or other charge imposed
by any State or political subdivision of a State.
Improvements may be subject to taxation by the Indian
tribe with jurisdiction.
25 C.F.R. § 162.017(a). Because this regulation “merely clarifies and
confirms” what § 465 “already conveys,” we need not reach the
applicability of this regulation or the level of deference owed to the
Bureau of Indian Affairs in this context. See Watters v. Wachovia Bank,
N.A., 550 U.S. 1, 20–21 (2007).
CHEHALIS TRIBES V. THURSTON CNTY. 11
B
Mescalero’s ruling is dispositive in this case. The Grand
Mound Property at issue here is owned by the United States
and held in trust pursuant to § 465. Under Mescalero, § 465’s
exemption from state and local taxation applies to the
permanent improvements on that land. Thus, neither
Thurston County nor any other state or local entity can tax the
Great Wolf Lodge or other permanent improvements on that
land. Thurston County’s property taxes on the Grand Mound
Property are therefore invalid under § 465 and Mescalero.
The County raises several arguments to counter this
conclusion. First, the County attempts to distinguish
Mescalero on the ground that the improvements at issue in
this case are owned by CTGW, not the Tribe itself.
Mescalero instructs us, however, that this distinction is
irrelevant. In that case, as noted above, the form of the
business through which the Mescalero Apache Tribe owned
and operated the ski resort was unclear. Mescalero
acknowledged this, but concluded it was unimportant because
“the question of tax immunity cannot be made to turn on the
particular form in which the Tribe chooses to conduct its
business.” Mescalero, 411 U.S. at 157 n.13. In light of this
ruling, the question of immunity from the County’s property
tax assessments on the Great Wolf Lodge “cannot be made to
turn on” the Tribe’s decision to give ownership of the Lodge
to its limited liability company for the duration of the lease.
See id.Second, the County argues that because the Great Wolf
Lodge constitutes “personal property” under Washington law,
it cannot constitute “lands or rights” as that phrase is used in
§ 465. See R.C.W. 84.04.080 (defining “personal property”
12 CHEHALIS TRIBES V. THURSTON CNTY.
to include “all improvements upon lands the fee of which is
still vested in the United States”). This argument also fails.
Mescalero interpreted the scope of § 465 without reference to
state law. As such, it ruled that permanent improvements on
land owned by the United States and held in trust for Indians
may not be taxed as a matter of federal law. See Mescalero,
411 U.S. at 155, 158 (holding, without consideration of New
Mexico state law, that permanent improvements are within
“the scope of the immunity specifically afforded by” § 465).
Therefore, it is irrelevant whether permanent improvements
constitute personal property under Washington law. See U.S.
Const., art. VI, cl. 2; cf. Drye v. United States, 528 U.S. 49,
52–53 (1999) (holding that federal law defines “property and
rights to property” for purposes of a federal tax statute,
irrespective of whether the right is defined as a “property”
right under state law).
Accordingly, we are bound by Mescalero’s interpretation
of § 465 to conclude that Thurston County was barred from
taxing the Great Wolf Lodge during the time in which the
Grand Mound Property was owned by the United States and
held in trust pursuant to § 465. The district court therefore
erred in granting summary judgment for the County.
C
The Tribe and CTGW argue in the alternative that the tax
here at issue is preempted under White Mountain Apache
Tribe v. Bracker, 448 U.S. 136 (1980). In Bracker, relying on
Congress’s broad authority to regulate Indians and the “semi-
independent position of Indian tribes,” id. at 142 (internal
quotation marks omitted), the Court held that the validity of
state laws taxing transactions between Indians and non-
Indians, on reservation land, is to be assessed based on “a
CHEHALIS TRIBES V. THURSTON CNTY. 13
particularized inquiry into the nature of the state, federal, and
tribal interests at stake.” Id. at 145; see also Wagnon v.
Prairie Band of Potawatomi Nation, 546 U.S. 95, 110–11
(2005) (specifying that Bracker applies “only where the legal
incidence of the tax [falls] on a nontribal entity engaged in a
transaction with tribes or tribal members . . . on the
reservation.” (internal quotation marks omitted)). Bracker
thus creates a balancing test, Wagnon, 546 at U.S. 110,
“designed to determine whether, in the specific context, the
exercise of state authority would violate federal law,”
Bracker, 448 U.S. at 145.
We have applied the Bracker balancing test in a variety of
circumstances involving the imposition of state or local taxes
on non-Indians. See, e.g., Yavapai-Prescott Indian Tribe v.
Scott, 117 F.3d 1107, 1112 (9th Cir. 1997) (balancing state,
federal, and tribal interests, and ruling against preemption of
state taxes on food and room sales); Salt River Pima-
Maricopa Indian Cmty. v. Arizona, 50 F.3d 734, 738 (9th Cir.
1995) (under a Bracker analysis, taxes on sales to non-Indians
on Indian land were not preempted). Even prior to Bracker,
we applied a similar mode of analysis in holding that
possessory interest taxes on “non-Indian lessees of property
held in trust by the United States Government for reservation
Indians” are not per se preempted. See Fort Mojave Tribe v.
Cnty. of San Bernadino, 543 F.2d 1253, 1255 (9th Cir. 1976);
see also Agua Caliente Band of Mission Indians v. Cnty. of
Riverside, 442 F.2d 1184, 1186-87 (9th Cir. 1971). None of
these cases involved property taxes, however, so they do not
implicate § 465.7
7
While the distinction between taxes imposed on non-Indian lessees’
rights of possession (as in Agua Caliente and Fort Mojave) and property
taxes imposed on improvements owned by non-Indians (as in Mescalero)
14 CHEHALIS TRIBES V. THURSTON CNTY.
Unlike the cases requiring us to undertake a Bracker
analysis, the case before us involves only property taxes on
permanent improvements on non-reservation land owned by
the United States and held in trust for Indians.8 In this
context, we are bound by Mescalero’s holding that such taxes
are preempted under § 465, and need not consider Bracker or
any other theory of preemption.
III
Mescalero sets forth the simple rule that § 465 preempts
state and local taxes on permanent improvements built on
non-reservation land owned by the United States and held in
trust for an Indian tribe. This is true without regard to the
ownership of the improvements. Because the Supreme Court
has not revisited this holding, we are required to apply it. We
may appear formalistic, it is critical here. Where a state or local
government assesses a tax on land or improvements covered by § 465, we
are bound by § 465 and Mescalero to invalidate such taxes. Cf. Rodriguez
de Quijas v. Shearson/American Exp., Inc., 490 U.S. 477, 484 (1989) (“If
a precedent of [the Supreme] Court has direct application in a case, yet
appears to rest on reasons rejected in some other line of decisions, the
Court of Appeals should follow the case which directly controls.”). This
is not so, however, when state or local governments impose taxes on
interests other than the “lands or rights” covered by § 465. In Agua
Caliente, for example, we stressed that “[t]he California tax on possessory
interests does not purport to tax the land as such,” which would be barred
by § 465, “but rather taxes the ‘full cash value’ of the lessee’s interest in
it,” which is not covered by § 465. 442 F.2d at 1186.
8
Although neither the record nor the parties’ briefs reference the tax
statute or ordinance under which the County levied its taxes, the parties
agree that the tax at issue in this case is a property tax on the Great Wolf
Lodge, and not a possessory interest or other type of tax. The tax bills and
other evidence in the record support this conclusion.
CHEHALIS TRIBES V. THURSTON CNTY. 15
therefore reverse the district court’s summary judgment order
and remand for proceedings consistent with this opinion.
REVERSED AND REMANDED.