State Taxation of Income of Native American Armed Forces Members

State Taxation of Income of Native American Armed Forces
Members
T he S o ld iers’ and S ailors’ C ivil Relief A c t prohibits S tates from taxing the m ilitary com pensation
o f N ativ e A m erican arm ed forces m em bers who are residents or dom icilianes o f tribal reservations
fro m w hich they are absent by reason o f th eir m ilitary service.
November 22, 2000
m em orandum O p in io n f o r t h e G e n e r a l C o u n s e l
D epa r tm en t o f D efen se
This memorandum responds to your letter to the Acting Associate Attorney
General requesting advice as to whether States may tax the military compensation
earned by Native American service members who are residents or domiciliaries
of federally recognized tribal reservations. As we explain more fully below, we
conclude that the Soldiers’ and Sailors’ Civil Relief Act, construed in light of
general principles of federal Indian law, prohibits States from taxing the military
compensation of Native American service members who are residents or domicil­
iaries of tribal reservations, and who are absent from those reservations by virtue
of their military service.
BACKGROUND
Pursuant to agreements between the States and the Department of Treasury
entered into under 5 U.S.C. §5517 (1994 & Supp. IV 1998),1 the Department
of Defense generally withholds state income tax from the military compensation
of service members, including Native American service members, unless the
member appropriately claims exemption. Several members of Congress recently
wrote to the Secretary of Defense, the Attorney General, and the Secretary of
the Interior, asking for their personal intervention to ensure that Native American
service members who claim a federally recognized Indian reservation as their legal
15 U S C § 5517 provides, in pertinent part:
(a) W hen a State statute—
(1) provides for the collection of a tax eith er by imposing on employers generally the duty of withholding
sums from the pay o f employees and making returns o f the sums to the Slate, or by granting to employers
generally the authority to withhold sums from the pay o f employees if any employee voluntarily elects
to have such sums withheld; and
(2) imposes the duty or grants the authonty to withhold generally with respect to the pay of employees
who are residents o f the State; the Secretary o f the Treasury, under regulations prescribed by the President,
shall enter into an agreement with the State within 120 days o f a request for agreement from the proper
State official The agreement shall provide that the head o f each agency o f the United States shall comply
with the requirements o f the State withholding statute in the case of employees of the agency who are
subject to the tax and w hose regular place o f Federal employment is within the State with which the
agreem ent is made. In the case of pay for service as a member o f the armed forces, the preceding sentence
shall be applied by substituting “ who are residents o f the State with which the agreement is m ade” for
“ w hose regular place o f Federal employment is within the State with which the agreement is made.”
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domicile are not subject to such withholding. See Letter for Hon. William S.
Cohen, Secretary of Defense, Hon. Janet Reno, Attorney General, and Hon. Bruce
Babbitt, Secretary of the Interior, from Hon. George Miller, Senior Democratic
Member, House Committee on Resources, et al. (July 18, 2000) (“ Miller letter” ).
The letter stated that under section 514 of the Soldiers’ and Sailors’ Civil Relief
Act (“ SSCRA” ), ch. 581, 56 Stat. 769, 777 (codified as amended at 50 U.S.C.
app. §574 (1994)), a military service member “ does not lose his permanent resi­
dence or domicile solely because of [his] absence [from the place of residence
or domicile] in compliance with military orders,” and it maintained that the
SSCRA “ applies to Native Americans as it does to all other Americans residing
in lands under the jurisdiction of the United States.” Miller letter at 2. Accord­
ingly, the letter asserted, “ [a] Native American’s domicile should therefore remain
unchanged by military service, and a tribal member who resides on a reservation
would enjoy the same tax status (i.e. immunity) he had enjoyed in his home state.”
Id. The letter concluded by stating that “ [t]he Department [of Defense] should
change these [Native American] service members’ [income tax] withholding forms
to reflect an exemption from state withholding as authorized in the Treasury
Financial Manual instructing federal agencies on deductions and withholding
issues,” and it urged that “ no greater burden of proof should be placed on tribal
members to establish residency than on any other member of the military.” Id.
at 3.
After receiving the Miller letter, you wrote to the Acting Associate Attorney
General requesting an opinion from the Department of Justice as to the applica­
bility of the SSCRA to Native American service members who claim a federally
recognized tribal reservation as their residence or domicile. See Letter for Dan
Marcus, Acting Associate Attorney General, from Douglas A. Dworkin, General
Counsel, Department of Defense (Aug. 9, 2000) ( “ Dworkin letter” ). Your letter
noted that while no federal court has yet addressed this question, three state tribu­
nals have concluded that they lacked the authority to impose an income tax on
the military compensation of Native Americans domiciled on tribal reservations
within their respective States. Id. at 1,2 In order to determine whether to continue
withholding state income tax from the military pay of those Native American
service members who claim a tribal reservation as their residence or domicile,
you asked the Department of Justice to provide its opinion on the matter.3
2See Fait v. Utah State Tax Comm'n, 884 P.2d 1233 (Utah 1994); Turner v. Wisconsin D ep't o f Revenue, Wl
St Tax Rep (CCH) P 202-744 (1986), Letter for Emil B. Beck, from Gregory B Radford, Assistant Director,
Personal Taxes Division, North Carolina Department o f Revenue, Re: Docket No. 99-386 (Jan. 25, 2000)
3 Your letter asked the Department to address three sets o f questions'
1 Is a tnbal reservation a residence or domicile in a “ State, Territory, possession, or political subdivision
of any of the foregoing” such that the provisions of 50 U S C app. §574 preserve it as the exclusive
residence or domicile of a person who is away from such residence or domicile pursuant to military orders?
Is the member not also a resident or domiciliary o f the state in which the reservation is located9
2. Is the military compensation earned by a Native Amencan while away from his or her domicile
on a tnbal reservation pursuant to military orders deemed to have been earned exclusively on the reserva-
Continued
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DISCUSSION
Determining whether States may, consistent with the SSCRA, tax the military
compensation of Native American service members who claim a federally recog­
nized tribal reservation as their place o f domicile or residence requires interpreting
relevant provisions of the SSCRA against the backdrop of general principles of
federal Indian law. We therefore outline some relevant aspects of those general
principles before proceeding to discuss the SSCRA and its application here.
General Principles o f Federal Indian Law
Historically, the Supreme Court has applied two related principles to States’
attempts to exercise jurisdiction over Indian tribes, their reservations, and their
members. The first is that of Indian sovereignty. This principle is generally associ­
ated with Chief Justice Marshall’s explanation that Indian nations are “ distinct
political communities, having territorial boundaries, within which their authority
is exclusive, and having a right to all the lands within those boundaries, which
is not only acknowledged, but guarantied by the United States.” Worcester v.
Georgia, 31 U.S. (6 Pet.) 515, 557 (1832). Building on Worcester, subsequent
Supreme Court decisions held that “ [i]t followed from this concept of Indian res­
ervations as separate, although dependent nations, that state law could have no
role to play within the reservation boundaries.” McClanahan v. Ariz. State Tax
C om m ’n, 411 U.S. 164, 168 (1973); see County o f Yakima v. Confederated Tribes
and Bands o f Yakima Indian Nation, 502 U.S. 251, 257 (1992) (describing the
Court’s decision in Worcester as concluding that “ within reservations state juris­
diction would generally not lie” ).
More recently, however, the Indian sovereignty doctrine has lost some of its
“ independent sway,” County o f Yakima, 502 U.S. at 257, and has given way
to a second principle: federal preemption. See McClanahan, 411 U.S. at 172(“ [T]he trend has been away from the idea of inherent Indian sovereignty as a
bar to state jurisdiction and toward reliance on federal preemption.” ). The source
of this principle is the Constitution, which assigns to the federal government the
responsibility for regulating commerce with Indian tribes and for treaty-making.
See U.S. Const, art. I, §8, cl. 3; id. art. II, §2, cl. 2; see also McClanahan, 411
U.S. at 172 n.7; Williams v. Lee, 358 U.S. 217, 219 n.4 (1959). In light of that
grant of federal authority, cases raising questions about the boundaries of permis­
tion, so as to exem pt it from income taxation by the state in which the reservation is located under the
rule set forth in M cClanahan [v. Ariz Stale Tax Com m ’n, 411 U.S 164 (1973),] and subsequent cases7
If so, does this apply to all tnbal reservations o f federally recognized tnbes?
3. If it is the opinion o f the Department o f Justice that Native Amencans who claim a tnbal reservation
as their dom icile are not subject to state incom e tax with respect to their military compensation, will that
opinion serve as the basis for us to terminate state tax withholding if a member certifies that he or she
meets the stated cnteria9
Dworkin letter at 2.
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sible state jurisdiction over Indian tribes, their members, and their lands are now
typically resolved by giving “ individualized treatment” to the “ particular treaties
and specific federal statutes, including statehood enabling legislation, as they,
taken together, affect the respective rights of States, Indians, and the Federal
Government.” M escalero Apache Tribe v. Jones , 411 U.S. 145, 148 (1973). The
Indian sovereignty doctrine remains relevant, however, as “ a backdrop against
which the applicable treaties and federal statutes must be read.” McClanahan,
411 U.S. at 172.1n the area of state taxation, the Supreme Court’s application
of the federal preemption and Indian sovereignty principles has yielded certain
specific rules, two of which are relevant to the matter before us. First, “ absent
cession of jurisdiction or other federal statutes permitting it,” States may not tax
“ Indian reservation lands or Indian income from activities carried on within the
boundaries of the reservation.” Mescalero, 411 U.S. at 148 (describing the rule
announced in McClanahan, 411 U.S. at 164); County o f Yakima, 502 U.S. at 258( “ [0]ur cases reveal a consistent practice of declining to find that Congress has
authorized state taxation [in this area] unless it has ‘made its intention to do so
unmistakably clear.’ ” ) (quoting Montana v. Blackfeet Tribe, 471 U.S. 759, 765
(1985)).4 Second, “ [ajbsent express federal law to the contrary, Indians going
beyond reservation boundaries have generally been held subject to nondiscrim-
inatory state law otherwise applicable to all citizens of the State.” M escalero,
411 U.S. at 148—49. In the state taxation context, this second rule means that
if a Native American resident of a tribal reservation earns income outside that
reservation but within the State in which the reservation is located, then, absent
federal law to the contrary, the State may tax that income. Id.5
In cases not squarely controlled by these two rules, the Court applies the federal
preemption principle against the backdrop of the Indian sovereignty principle.
Preemption analysis asks whether the state law or action at issue “ stands as an
obstacle to the accomplishment and execution of the full purposes and objectives
4 Before announcing this rule, the McClanahan Court analyzed, inter alia, the particular nineteenth century treaty
that the federal government had entered into with the Navajo Nation, and the Arizona Enabling Act, both of which
contained language indicating that the federal government’s authonty over Navajo reservations was exclusive. See
411 U.S. at 173-75. Thus, McClanahan might be read as having turned on a case-specific preemption holding —
a determination that the treaty, enabling act, and other federal legislation relevant to the case preempted the stale
taxation at issue But the Court did not, in fact, find any specific federal preemption. As then— Associate Justice
Rehnquist later explained, “ [although no legislation directly provided that Indians were to be immune from state
taxation under these circumstances, the enactments reviewed were certainly suggestive o f that interpretation
The [McClanahan] Court therefore declined to infer a congressional departure from the prior tradition of Indian
immunity absent an express provision otherwise.” Washington v Confederated Tribes, 447 U.S. 134, 179 (1980)
(Rehnquist, J , concurring in part and dissenting in part); see Felix Cohen, Handbook o f Federal Indian Law 269-
70 (1982 e d ) (noting that McClanahan held the state tax at issue to intrude on a sphere of activities subject only
to federal and tribal authonty, ‘‘despite the lack o f any specific conflict with tnbal law” ) That is, McClanahan
announced a generally applicable default rule that prohibits slate taxation of “ reservation lands and reservation
Indians” except where authonzed by Congress, County o f Yakima, 502 U S at 258, and it analyzed the relevant
treaty, enabling act, and other legislation simply to confirm that Congress had not given such authorization in that
case See Thomas C Mundell, The Tribal Sovereignty Limitation on State Taxation o f Indians: From Worcester
to Confederated Tnbes and Beyond, 15 Loy. L.A L. Rev 195, 216-17 (1982)
5 It is not clear whether this rule also extends to off-reservation income generated outside the State where the
reservation is located See infra note 11
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of Congress.” G eier v. Am. Honda M otor Co., 529 U.S. 861, 873 (2000) (quoting
Hines v. D avidow itz, 312 U.S. 52, 67 (1941)); see Freightliner Corp. v. Myrick,
514 U.S. 280, 287 (1995); Jones v. Rath Packing Co., 430 U.S. 519, 526 (1977).
To the extent the analysis involves the interpretation of a federal statute, the Court
has emphasized that statutes affecting Indians “ are to be construed liberally in
favor of the Indians, with ambiguous provisions interpreted to their benefit.” Mon­
tana v. Blackfeet Tribe, 471 U.S. at 766; see Bryan v. Itasca County, 426 U.S.
373 (1976); Choate v. Trapp, 224 U.S. 665 (1912). “ [I]n examining the pre­
emptive force of the relevant federal legislation,” courts “ are cognizant of both
the broad policies that underlie the legislation and the history of tribal independ­
ence in the field at issue.” Cotton Petroleum Corp. v. New Mexico, 490 U.S.
163, 176 (1989).
The Soldiers ’ and Sailors ’ Civil R elief Act
The SSCRA was enacted in 1940. See Act of Oct. 17, 1940, ch. 888, 54 Stat.
1178 (codified as amended at 50 U.S.C. app. §§501-593 (1994)). It was “ [i]n
many respects . . . a reenactment” of legislation that had been passed in 1918
and had expired at the end of World War I. Conroy v. Aniskoff, 507 U.S. 511,
516 (1993); see Act of Mar. 8, 1918, ch. 20, 40 Stat. 440 ( “ Act of Mar. 8,
1918” ).6 Noting the substantial similarities between the 1918 and 1940 statutes,
the Supreme Court observed that the legislative history of the former could pro­
vide useful indications of congressional intent with respect to the latter. See Boone
v. Lightner, 319 U.S. 561, 565 (1943). That earlier legislative history indicates
that Congress intended to “ protect[ ] . . . persons in military service of the United
States in order to prevent prejudice or injury to their civil rights during their term
of service and to enable them to devote their entire energy to the military needs
of the Nation.” Act of Mar. 8,1918, § 100.
Congress amended the SSCRA in 1942, in part in order to “ make available
additional and further relief and benefits to persons in the military and naval
forces.” S. Rep. No. 77-1558, at 2 (1942). The 1942 amendments added section
514, ch. 581, 56 Stat. 769, 777 (codified as amended at 50 U.S.C. app. §574
(1994)). The first two sentences o f the current version of that provision are
reproduced below:
For the purposes of taxation in respect of any person, or of his
personal property, income, o r gross income, by any State, Territory,
possession, or political subdivision of any of the foregoing, or by
the District of Columbia, such person shall not be deemed to have
lost a residence or domicile in any State, Territory, possession, or
6 Both the House and Senate Reports accompanying the SSCRA’s passage in 1940 described it as “ in substance,
identical with the [1918 A ct].” H.R. Rep No 76-3001, at 3 (1940), S Rep. No 76-2109, at 4 (1940).
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political subdivision of any of the foregoing, or in the District of
Columbia, solely by reason of being absent therefrom in compliance
with military or naval orders, or to have acquired a residence or
domicile in, or to have become resident in or a resident of, any
other State, Territory, possession, or political subdivision of any
of the foregoing, or the District of Columbia, while, and solely by
reason of being, so absent. For the purposes of taxation in respect
of the personal property, income, or gross income of any such per­
son by any State, Territory, possession, or political subdivision of
any o f the foregoing, or the District of Columbia, of which such
person is not a resident or in which he is not domiciled, compensa­
tion for military or naval service shall not be deemed income for
services performed within, or from sources within, such State,
Territory, possession, political subdivision, or District, and personal
property shall not be deemed to be located or present in or to have
a situs for taxation in such State, Territory, possession, or political
subdivision, or district.
50 U.S.C. app. §574(1).7 Section 514’s first sentence generally provides that, for
purposes of state and local income and property taxation, a military service mem­
ber’s residence in a “ State, Territory, possession, or political subdivision of any
of the foregoing, or in the District of Columbia,” shall not change solely because
the service member is absent from his place of residence in compliance with mili­
tary orders. Id. The second sentence generally provides that, for purposes of
income and property taxation imposed by any “ State, Territory, possession, or
political subdivision of any of the foregoing, or the District of Columbia,” military
compensation earned within such a jurisdiction by a service member who does
not reside there shall not be deemed income earned within the jurisdiction. Id.
Taken together, these provisions have the effect, inter alia, of “ prevent[ing] mul­
tiple State taxation of the property and income of military personnel serving within
various taxing jurisdictions through no choice of their own.” H.R. Rep. No. 77-
2198, at 6 (1942); S. Rep. No. 77-1558, at 11.
In the legislative history to the SSCRA’s 1942 amendments, Congress made
clear that “ [a]ny doubts that may arise as to the scope and application of the
act should be resolved in favor of the person in military service involved.” H.R.
Rep. No. 77-2198, at 2; S. Rep. No. 77-1558, at 2. The Supreme Court, in turn,
has emphasized that the SSCRA “ is always to be liberally construed,” Boone,
319 U.S. at 575, and should be read “ with an eye friendly to those who dropped
7 Allhough the concepts of “ residence” and “ domicile” may in some settings have slightly different legal con­
sequences, see B lack's Law Dictionary 1309 (6th ed 1990) (comparing and distinguishing the two terms), section
514 uses them together without distinguishing them. For purposes o f state taxation, therefore, section 514 preserves
military service mem bers’ pre-service domicile and residence in precisely the same manner Because the tw o concepts
are not distinguished for these purposes, the balance of this ^memorandum generally uses the term “ residence.”
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their affairs to answer their country’s call,” California v. Buzard, 382 U.S. 386,
395 (1966) (quoting Le M aistre v. Leffers , 333 U.S. 1, 6 (1948)). Of course, the
protections afforded by section 514 are not without limits. As the Supreme Court
has explained, “ [sjection 514 does not relieve servicemen stationed away from
home from all taxes of the host State.” Sullivan v. United States, 395 U.S. 169,
180 (1969) (holding that section 514’s provisions do not extend to sales and use
taxes in the host state). With respect to income and property taxes, however, the
caselaw emphasizes the need for a liberal construction. See Buzard, 382 U.S. at
395. Thus, although section 514’s “ predominant legislative purpose” is to protect
military personnel from “ multiple State taxation” of their income and property,
Sullivan, 395 U.S. at 180, the Court has not limited the scope of section 514
to this one problem:
[TJhough the evils of potential multiple taxation may have given
rise to this provision, Congress appears to have chosen the broader
technique of the statute carefully, freeing servicemen from both
income and property taxes imposed by any state by virtue of their
presence there as a result of military orders. It saved the sole right
of taxation to the state of original residence whether or not that
state exercised the right. Congress, manifestly, thought that
compulsory presence in a state should not alter the benefits and
burdens of our system of dual federalism during service with the
armed forces.
Dameron v. Brodhead, 345 U.S. 322, 326 (1953) (emphasis added).8 This broad
statutory purpose and presumption in favor of the military service member nec­
essarily informs our application of section 514 to the instant matter.
Section 514 and the M ilitary Income o f Native American Service Members
In order to determine whether section 514 of the SSCRA permits States to tax
the military income of Native American service members whose residence is on
a tribal reservation, it is useful first to distinguish among the States that might
attempt to impose such taxation. They fall into three general categories: States
where the service member works but only because of his military service; States
where the service member lives but only because of his military service; and States
containing the tribal reservation on which the service member lived until com­
mencing his military service. We address these categories in turn.
8 In Sullivan, the C ourt explained that, although it had previously described secuon 514’s purpose broadly in
Dameron, the provision’s “ predominant legislative purpose” is “ to prevent multiple State tax atio n ” 395 U S . at
180. Because “ the substantial nsk o f double taxation under multi-state ad valorem property taxes does not exist
with respect to sales and use taxes,” the Court concluded that section 514’s protections do not cover host States’
sales and use taxes Id.300
State Taxation o f Income o f Native American Armed Forces Members
Section 514 explicitly addresses both the first and second categories. As to the
first, the second sentence of section 514 provides, in pertinent part:
For the purposes of taxation in respect of the personal property,
income, or gross income of any such person by any State, Territory,
possession, or political subdivision of any of the foregoing, or the
District of Columbia, of which such person is not a resident or
in which he is not domiciled, compensation for military or naval
service shall not be deemed income for services performed within,
or from sources within, such State, Territory, possession, political
subdivision, or District.
50 U.S.C. app. §574(1). This provision prevents a State from taxing military com­
pensation earned in its jurisdiction by service members who are not otherwise
residents of the State. See Dameron, 345 U.S. at 326 (section 514 “ saved the
sole right of taxation to the state of original residence whether or not that state
exercised the right” ). As to the second category, the first sentence of section 514
provides that no person shall be deemed “ to have acquired a residence or domicile
in, or to have become resident in or a resident of, any other State, Territory,
possession, or political subdivision of any of the foregoing, or the District of
Columbia, while and solely by reason of being . . . absent’ ’ from his pre-military
service residence. 50 U.S.C. app. §574(1). This provision clearly prohibits a State
from taxing the military income of a service member who lives in that State solely
in order to comply with his service obligations. See Buzard, 382 U.S. at 393 ( “ The
very purpose of §514 in broadly freeing the nonresident serviceman from the
obligation to pay property and income taxes was to relieve him of the burden
of supporting the governments of the States where he was present solely in
compliance with military orders.” ). For Native Americans, like other military
service members, neither the State where a service member works due only to
military orders nor a state in which a service member lives due only to such
orders may tax the service members’ military income.
The third category presents a somewhat more complex case. In order to deter­
mine whether the SSCRA permits the State containing a service member’s reserva­
tion residence to tax his military income, we look initially to the first sentence
of section 514. That sentence provides that a military service member “ shall not
be deemed to have lost a residence or domicile in any State, Territory, possession,
or political subdivision of any of the foregoing, or in the District of Columbia,
solely by reason of being absent therefrom in compliance with military or naval
orders.” 50 U.S.C. app. §574(1). A threshold question is whether this provision
preserves the tribal residence of Native Americans. For three reasons, we conclude
that it does.
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First, an Indian reservation is arguably a “ residence . . . in [a] State.” That
is, since an Indian reservation is located within the geographical boundaries of
a State or States, a Native American who resides on a reservation has a residence
in a State just as, for example, one who resides in a particular city has a residence
in the State containing that city. See Cohen, supra note 4, at 649 (“ [TJribal lands
within the boundaries of state or organized territories have always been considered
to be geographically part of the respective state or territory.” ). Thus, the first
sentence of section 514 arguably provides that a Native American service member
shall not be deemed to have lost her residence on a reservation located within
a State “ solely by reason of being absent therefrom in compliance with military
or naval orders.” 50 U.S.C. app. §574(1).
Second, and alternatively, while neither the text of the SSCRA nor its legislative
history defines the terms “ State, Territory, possession, or political subdivision,”
an Indian reservation might itself be regarded as a “ Territory” for purposes of
section 514. Although territories are not generally understood to be subsumed
within State boundaries, “ when Congress uses the term ‘territory’, this may be
meant to be synonymous with ‘place’ or ‘area’, and not necessarily to indicate
that Congress has in mind the niceties of language of a political scientist.” Moreno
Rios v. United States, 256 F.2d 68, 71 (1st Cir. 1958). Accordingly, the precise
scope of the term “ Territory” depends on the purpose and nature of the particular
statute in which it is used. See D istrict o f Columbia v. Carter, 409 U.S. 418,
420 (1973) ( “ Whether the District of Columbia constitutes a ‘State or Territory’
within the meaning of any particular statutory or constitutional provision depends
upon the character and aim of the specific provision involved.” ).9 There is no
9 In U nited States ex rel M ackey v Coxe, 59 U S . (18 How ) 100 (1855), for example, the Court held that for
purposes o f a federal full faith and credit statute covering “ letters testamentary or of administration . granted,
by the proper authority in any o f the United States or the territories thereof,” a Cherokee Indian reservation “ may
be considered a territory o f the United Slates.” Id. at 103-04; see id. at 103 (explaining that the Indian reservation
was “ not a foreign, but a domestic territory— a territory which originated under our constitution and laws” ), see
also, e .g , In re Larch, 872 F 2d 66, 68 (4th Cir. 1989) (holding that “ the Cherokee tribe is a ‘state’ ” under the
Parental Kidnapping Prevention Act, which defines “ State” as “ a State o f the United States, the District o f Columbia,
the Commonw ealth o f Puerto Rico, or a territory or possession o f the United States,” 28 U S.C. § 1738A(b)(8));
Jim i’. C IT Fin. Servs C o rp , 87 N M. 362, 363 (1975) (citing Mackey and holding that “ the Navajo Nation is
a ‘territory’ within the meaning o f [28 U S.C § 1738]” ); Cohen, supra note 4, at 383, 385, 649 n.42 (noting that
“ territory” has been held to encompass tribal reservations in some contexts). Similar results have been reached
in interpreting state statutes. In Tracy v. Super. C t., 168 A n z 23 (1991) (en banc), for example, the Supreme Court
of Arizona considered w hether a Native American tnbe could be considered a “ territory” under A nzona’s Uniform
Act to Secure the Attendance o f Witnesses From Without a State in Criminal Proceedings, Ariz. Rev. Stat §§ 13-
4091 to 13-4096 (1989) The court noted that “ Indian tribes . have often been regarded as territories for purposes
of various statutory enactm ents,” Tracy, 168 Ariz. at 32 (collecting cases), and explained that “ [t]he proper approach
is to analyze each statute, in terms o f its purpose and policy, to determine whether Indian tribes may be regarded
as territories within the statute’s in te n t” Id. at 33. After undertaking that approach, the court conctuded that “ a
tribe may be considered a territory for purposes o f statutory enactments such as the one now before us ” Id. at
44
The Supreme C ourt has, however, indicated its support for the opposite conclusion m other statutory contexts.
See, e.g., N ew York ex rel. Kopel v. Bingham, 211 U S 468, 474—75 (1909) (citing with approval Ex Parte Morgan,
20 F. 298, 305 (W D Ark. 1883), in which a district court held that the Cherokee nation was not a “ territory”
under the federal extradition statute). And at least one lower federal court has concluded that a tribal reservation
does not constitute a “ Territory” under 28 U S.C . § 1738 (1994), the general full faith and credit statute. See Wilson
v. M archington, 127 F 3 d 805, 808-09 (9th C ir 1997), cert, denied, 523 U S 1074 (1998) But in Wilson, the
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indication in either the text of section 514 or its legislative history that Congress
intended to define “ Territory” narrowly so as to exclude Native American service
members from the statute’s protections. Thus, it is arguable that the term as
employed in section 514 should be read to include Indian reservations.
Third, even assuming an Indian reservation is not a “ Territory” or a “ residence
. . . in [a] State” within the meaning of section 514, we think it is clear that
the statute’s recitation of jurisdictions is not intended and should not operate as
a limitation on the protection the SSCRA affords to all service members. By its
terms, the first sentence of section 514 covers military compensation earned by
“ any person.” 50 U.S.C. app. §574(1). As the Supreme Court has explained,
in the absence of a clear expression to the contrary, “ a general statute in terms
applying to all persons includes Indians and their property interests.” Fed. Power
Com m ’n v. Tuscarora Indian Nation , 362 U.S. 99, 116 (1960). Here, there is
no indication that Congress intended to exclude Native American residents of
tribal reservations from section 514’s coverage. Any residual ambiguity on this
point is settled by Congress’s specific guidance to resolve “ [a]ny doubts that may
arise as to the scope and application of the [SSCRA] . . . in favor of the person
in military service involved,” H.R. Rep. No. 77-2198, at 2, by the Supreme
Court’s holding that the SSCRA is “ always to be liberally construed,” Boone,
319 U.S. at 575, and by the Court’s similar directive that “ statutes are to be
construed liberally in favor of the Indians, with ambiguous provisions to be inter­
preted to their benefit,” Blackfeet Tribe, 471 U.S. at 766. In light of these direc­
tives, we conclude that section 514 should be read to preserve the reservation
residence of Native American service members.10
Next, we consider what consequences flow from section 514’s preservation of
Native Americans’ reservation residence. It might be argued that, even though
section 514 preserves a service member’s pre-service residence, the State con­
Ninth Circuit based its holding not on a general finding that tribal reservations are not territones, but on the fact
that, after 28 U.S C § 1738 was enacted, Congress passed a number of other statutes expressly extending full faith
and credit to certain tnbal proceedings See 127 F 3d at 809 (citing 25 U S.C. §§2201-2211 (1983), 25 U.S.C.
§ 1725(g) (1980), and 25 U.S.C §§ 1901 et s e q ) The court observed that “ [ijf full faith and credit had already
been extended to Indian tnbes, enactment of [the later statutes] would not have been necessary ” Id Here, in contrast,
there is no post-section 514 legislation to undermine the argument lhat section 514’s use o f the word “ T em tory”
should be read to encompass tnbal reservations
l0 lt is true that the Supreme Court has “ repeatedly said that tax exemptions are not granted by implication,”
and “ fi]t has applied that rule to taxing acts affecting Indians as to all others ” Okla. Tax Comm'n v United States,
319 U.S 598, 606 (1943). Accordingly, in Oklahoma Tax Commission the Court held that “ [i]f Congress intends
to prevent the State o f OkJahoma from levying a general non-discnminatory estate tax applying alike to all its
citizens, it should say so in plain words Such a conclusion can not rest on dubious inferences.” Id at 607; see
M escalero, 411 U S at 156—57 Here, however, it is clear lhat by passing section 514 Congress did indeed intend
to grant a tax exemption to military service members. That is, the statute satisfies the requirement that Congress
state its intent to grant a tax exemption “ in plain words.” Okla Tax C om m 'n, 319 U S at 607 The question
is how that exemption applies to Native Amencans who reside on tribal reservations. In such circumstances, courts
follow the rule that “ ambiguous statutes . . . are to be construed in favor of Indians, and this canon o f statutory
construction applies to tax exemptions ” Confederated Tribes v. Kurtz, 691 F 2 d 878, 881 (9th Cir 1982), see Black­
fe e t Tribe, 471 U S at 766, see also Cotton Petroleum C orp, 490 U.S. at 176-77 ( “ [F]ederal pre-emption [of
state taxing authonty] is not limited to cases in which Congress has expressly — as compared to impliedly — pre­
empted the state activity.’’).
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taining a Native American service member’s reservation may still tax his military
compensation to the same extent as it may tax the military compensation of other
service members whose pre-service residence is in that State. That argument is
premised on the theory that Native Americans who live on their reservation are
residents o f both their reservation and the State in which it is located, and that
section 514 preserves both those residences for income tax purposes. Absent fed­
eral law to the contrary, a State m ay tax off-reservation, in-state income earned
by reservation Indians whose reservation is in that State. See M escalero, 411 U.S.
at 148-49 (“ Absent express federal law to the contrary, Indians going beyond
reservation boundaries have generally been held subject to nondiscriminatory state
law otherwise applicable to all citizens of the State.” ). Arguably, Mescalero
implicitly recognizes that Native Americans who live on a reservation are residents
of both their reservation and the State containing it, and that once they leave
the reservation to work they are subject to the generally applicable tax laws to
which all other residents of the State are subject, including tax liability for both
in-state and out-of-state income. The validity of this view is unclear.11 We need
not attempt to resolve the issue here, however, because we conclude the SSCRA,
especially when read in light of general principles of federal Indian law, preempts
any authority a State containing a Native American’s tribal residence may other­
wise have to tax that Native American’s military income.
11 This uncertainty is due in part to the fact that while Mescalero made clear that a State may tax the off-reservation
income o f a Native American resident of a reservation within that State, it did not specify the precise source of
that taxing power. As a general matter, a Slate m ay “ tax all the income o f its residents, even income earned outside
the taxing jurisdiction.” Okla. Tax Comm'n v Chickasaw Nation, 515 U S . 450, 462-63 (1995). But for nonresidents,
a State generally may tax only income earned within the jurisdiction. Id. at 463 n i l It is unclear which head
of taxing authonty supports the decision in M escalero If it is the former, then the State may also tax the out-
of-state income o f Native Americans who reside on reservations within the State; if it is the latter, the State may
not.
At bottom, the question here concerns the precise relationship between Native Amencans residing on reservations
and the States in which those reservations are located The question is not easily answered. On the one hand, there
may be some basis for States to treat reservation Indians working off the reservation as full state residents. Indeed,
it is clear that Native A mericans are deemed state residents for certain purposes. See Goodluck v Apache County,
417 F Supp 13 (D. Ariz. 1975), a j f d , 429 U.S 876 (1976). “ They have the right to vote, to use state courts,
and they receive some state services.” McClanahan, 411 U.S. at 173 (footnotes omitted). At least one court has
relied on these facts to conclude that “ [a]n enrolled member of a tn b e living on a reservation is subject to three
levels o f governmental junsdiction: the tnbe, the state, and the federal government Being a resident o f one does
not remove the person from the junsdiction of the others. An enrolled member of a tnbe living on the tn b e ’s reserva­
tion remains dom iciled in the state and is a resident of the state for limited purposes.” Esquiro v Dept o f Revenue,
14 Or. Tax 130, 134 (Or. Tax 1997), a ff’d, 328 O r 37 (Or. 1998). On the other hand, a leading treatise on federal
Indian law suggests that reservation Indians working off the reservation are, for taxation purposes at least, in the
same position as nonresidents working in the State. “ [A]n Indian residing within a reservation but earning some
income off the reservation can be taxed to the extent o f the off-reservation income, provided that the State bases
its income tax on place o f earning.” Cohen, supra note 4, at 417 (emphasis added). A federal distnct court recently
took a sim ilar approach. See Lac du Flambeau B a n d o f Lake Superior Chippewa Indians v. Zeuske, 145 F. Supp.2d
969 (W D Wis. 2000). In that case, the court held that Wisconsin lacked the authonty to lax income earned outside
Wisconsin by a Native American resident of a tn b al reservation located within Wisconsin According to the court,
“ (t]he state may tax persons resident within its borders who do not live on reservations because it has conferred
upon these persons the benefit o f domicile and its accompanying privileges and advantages. It has not conferred
the same benefit upon tnbal members residing on reservations, however. The nght of tnbal members to reside on
the reservation derives from treaties entered into by the tribe in the nineteenth century.” Id at 976
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As noted above, preemption analysis asks whether “ under the circumstances
of th[e] particular case, [the State’s] law stands as anobstacle to the accomplish­
ment and execution of the full purposes and objectives of Congress.” Geier, 529
U.S. at 873 (quoting Hines , 312 U.S. at 67); see Freightliner , 514 U.S. at 287.
Determining what constitutes a “ sufficient obstacle” in this sense is “ informed
by examining the federal statute as a whole and identifying its purpose and
intended effects.” Crosby v. N a t’l Foreign Trade Council, 530 U.S. 363, 373
(2000).
[W]hen the question is whether a Federal act overrides a state law,
the entire scheme of the statute must of course be considered and
that which needs must be implied is of no less force than that which
is expressed. If the purpose of the act cannot otherwise be accom­
plished— if its operation within its chosen field else must be frus­
trated and its provisions be refused their natural effect — the state
law must yield to the regulation of Congress within the sphere of
its delegated power.
Id. (quoting Savage v. Jones, 225 U.S. 501, 533 (1912)).
The Supreme Court has explained that “ [t]he very purpose of §514 in broadly
freeing the nonresident serviceman from the obligation to pay property and income
taxes was to relieve him of the burden of supporting the governments of the States
where he was present solely in compliance with military orders.” Buzard, 382
U.S. at 393; see also Dameron, 345 U.S. at 326. As this passage suggests, section
514 is intended to provide that if an individual works in a certain jurisdiction
because his military service requires him to be there, he should not be subject
to any different burdens by virtue of that compulsory presence.12 More specifi­
cally, compulsory presence in a particular place may not subject the service
member to taxing authorities to which he was not already subject prior to his
military service.
Before beginning military service, a Native American resident of a tribal res­
ervation who does not work outside the reservation is not subject to taxation by
the State in which the reservation is located. See McClanahan, 411 U.S. at 164.
If that State were to tax that individual’s military income on the theory that it
is income earned off-reservation, it would subject him to an income tax to which
he was not previously subject, and it would do so by virtue of his compulsory
presence in a particular jurisdiction. Section 514’s broad, generous purpose is to
prevent precisely that eventuality.
l2The legislative history to the SSCRA’s predecessor supports this reading See Act of Mar. 8, 1918, § 100 (Con­
gress intended to “ protect[] persons in military service of the United States in order to prevent prejudice
or injury to their civil rights during their term o f service and to enable them to devote their entire energy to the
military needs of the Nation ” ) (emphasis added).
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We recognize, of course, that some Native American service members could
have been subjected to state income tax prior to joining one of the armed services.
Under M escalero, a State containing a Native American’s tribal residence may,
absent federal law to the contrary, subject that tribal member to income tax for
income earned outside the reservation. See 411 U.S. at 148—49.13 Prior to enlisting
in the military, however, such an individual was not subject to state income tax
in a general sense; rather, she was subject to such tax only to the extent that
her income was earned outside a reservation. When a reservation Indian enters
military service and is directed to perform that service outside her reservation,
any income she earns for that service is earned off the reservation because of
military orders. Thus, were a State to impose a tax on that military compensation,
the tax would be incident to the service member’s compulsory presence and work
outside her tribal reservation. That is, the tax would result from the individual’s
compliance with military orders. Such a tax would run afoul of what the Dameron
Court identified as section 514’s core purpose: to protect military service members
from being subjected to taxing authorities that rely solely on the members’
compulsory presence in a particular jurisdiction as the basis for taxing them. See
345 U.S. at 326.14
We presume that section 514 was not designed to afford less protection to
Native Americans than to other members of the military. See Fed. Pow er Comm ’n,
362 U.S. at 120 (“ [GJeneral Acts of Congress apply to Indians as well as to
all others in the absence of a clear expression to the contrary.” ). Indeed, we are
obliged under both federal Indian law and the SSCRA to construe any textual
ambiguity on this point in favor of more, rather than less, protection. See Blackfeet
13As discussed above, see supra note 1), it is unclear whether a State’s authonty to tax income earned m the
State by a Native A merican resident o f a reservation who is working off the reservation is based on the Slate’s
authonty to tax all residents o f the State or the State’s authority to tax income earned within the Slate by nonresidents
working there. To the extent that a State’s authonty to tax such tribal members is based, not on the individual’s
residence in that State, bgt on the place where the income is generated, then, wholly apart from any lax exemption
conferred by the SSCRA, the only tribal residents whose military income could possibly be subject to state taxation
would be those who perform military service w ithin the Stale in which their reservation residence is located In
light o f our analysis o f the SSCRA ’s preemptive force, we need not, and do not, reach that issue here. See supra
p 11
14 W e have found one case. U nited States v. K ansas, 810 F 2 d 935 (10th Cir. 1987), that is arguably in tension
with this analysis, but ihe outcome reached in lhat case is not contrary to the conclusion we reach here. In Kansas,
the Tenth C ircuit held that Kansas dtd not violate section 514 o f the SSCRA by taking the military income of
nonresident service members into account when determining the rate o f income tax lo be levied on their nonmihiary
income earned in K ansas (typically by the service m ember’s spouse). See id. at 936-38 & n.2. Although the court
noted that “ higher tax rates and, consequently, higher taxes on nonmilitary Kansas source income can result from
including military pay in the state’s rate-setting form ula,’’ id at 936, it concluded that “ [n]either the legislative
history nor the plain language o f the SSCRA prohibits the use o f the described military income in formulas which
set rates o f taxation on other income " I d at 938. The court specifically rejected the federal government’s contention
that “ the potentially higher rates on Kansas source income consutute ‘an indirect tax on the military compensation
of nonresident military personnel,’ ” and held that “ [t]here is here a potentially higher tax on Kansas source income,
nothing m ore.’’ Id (citation om itted) Kansas d o es not bear directly on the precise question at issue here, since
in that case the service member was already subject to some host state income tax for nonmililary income. But
insofar as it may stand for the proposition that a military service member may be forced to shoulder a greater
state income tax burden as a direct consequence o f his compulsory presence in a particular jurisdiction in compliance
with military orders, we find the Tenth Circuit’s reasoning to conflict with section 514’s broad, generous purpose
as identified by the Supreme Court in Dameron, 345 U S at 326, Buzard, 382 U S at 393, and elsewhere.
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Tribe, 471 U.S. at 766 (statutes affecting Indians “ are to be construed liberally
in favor of Indians, with ambiguous provisions to be interpreted to their benefit” );
H.R. Rep. No. 77-2198, at 2 (“ Any doubts that may arise as to the scope and
application of the act should be resolved in favor of the person in military service
involved.” ); Boone, 319 U.S. at 575 (SSCRA “ is always to be liberally con­
strued” ); Le M aistre, 333 U.S. at 6 (SSCRA is to be read “ with an eye friendly
to those who dropped their affairs to answer their country’s call.” ). Accordingly,
we conclude that where a Native American service member who claims a tribal
reservation as her residence earns military compensation outside that reservation
by virtue of her compliance with military orders, section 514 prohibits the State
containing the service member’s reservation residence from taxing that military
compensation.15
Finally, you have asked whether our opinion constitutes an adequate legal basis
for the Department of Defense to terminate state income tax withholding for
Native American service members who certify that they have met the specified
criteria. Pursuant to statute, the Attorney General is responsible for providing legal
advice to the heads of departments within the Executive Branch. See 28 U.S.C.
§512 (1994) ( “ The head of an executive department may require the opinion
of the Attorney General on questions of law arising in the administration of his
department.” ). The Attorney General has delegated that responsibility to the
Office of Legal Counsel. See 28 C.F.R. § 0.25(a) (2000) (assigning to the Assistant
Attorney General, Office of Legal Counsel, the responsibility for “ [preparing
the formal opinions of the Attorney General” and for “ rendering informal opin­
ions and legal advice to the various agencies of the Government” ). In that regard,
the legal advice of the Office of Legal Counsel constitutes the legal position of
the Executive Branch, unless overruled by the President or the Attorney General.
See H. Jefferson Powell, The Constitution and the Attorneys General xv (1999)
( “ The published opinions of the Attorneys General and, since 1977, of the Office
of Legal Counsel, . . . constitute the formal legal views of that branch o f the
federal government charged with the faithful execution of the laws.” ). Accord­
ingly, to the extent that a Native American service member can demonstrate resi­
dence on a federally recognized tribal reservation in a manner that satisfies the
Defense Department’s current standards for establishing entitlement to an exemp­
tion from state income tax withholding under section 514 of the SSCRA, the
15 As discussed above, see supra note 4, the McClanahan rule bam ng slate taxation of income earned on a reserva­
tion is a “ categorical” one, County o f Yakima, 502 U.S al 258, and prohibiis state taxation o f Indian lands and
reservation Indians except where authonzed by Congress But the rule would not apply — and our conclusion
regarding the effect o f the SSCRA could well be different— in a situation where Congress had separately authonzed
a State or States to tax the reservation income of a reservation Indian. We are aware of no such authonzation.
The McClanahan Court surveyed a number of federal statutes in this area, and concluded that they manifest “ Con­
gress’ intent to maintain the tax-exempt status of reservation Indians." 411 U S . at 176. Similarly, in Bryan v
Itasca County, the Court held that although 28 U S C § 1360 grants certain States junsdiction over pnvate civil
hugation involving reservation Indians in state court, it does not grant those States general civil regulatory authonty
over reservation Indians See 426 U.S. at 385, 388-90. The Court therefore held that the statute does not empower
States to tax property on a reservation
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Defense Department may rely on the advice provided in this opinion and not with­
hold state income tax from such a service member’s military compensation. Cf.
Smith v. Jackson , 246 U.S. 388, 390-91 (1918) (concluding that the Auditor of
the Panama Canal Zone should have followed the ruling of the Attorney General
on a question of federal statutory law ).16
CONCLUSION
For the foregoing reasons, we conclude that section 514 of the SSCRA prohibits
States from taxing the military compensation of Native American service members
who are residents of tribal reservations.
RANDOLPH D. MOSS
Assistant Attorney General
Office o f Legal Counsel
16 M oreover, we are informed by the Department’s Tax Division that to the extent that Native American service
members properly claiming a tnbal reservation as their residence become involved in legal proceedings concerning
their possible liability for state income tax on their military compensation, the Tax Division will, upon request from
the Defense Department, provide legal representation to such service members where appropnate
308