Leahy v. State Treasurer

The parties will be referred to herein as they appeared in the trial court.

The plaintiff commenced this action in the district court to recover a sum of money paid to the state of Oklahoma as income tax for the year 1931, alleging that the amount so paid was illegally assessed against him and collected by the defendants. From a judgment in favor of the defendants, plaintiff has appealed.

The plaintiff is a member of the Osage Tribe of Indians and duly enrolled as such under the Act of Congress of June 28, 1906, and under the authority of said act (34 Stat. 539, 542, sec. 2, par. 7) a certificate of competency was issued to him on the 24th day of May, 1924. The tax sought to be imposed by the state under chapter 66, article 7, Session Laws 1931, is an income tax upon the plaintiff's pro rata share of the income derived from the sale of the common mineral resources belonging to said tribe.

It is the contention of the plaintiff that, since the mineral resources of the Osages remain restricted and nontaxable by the state under the provisions of the Act of June 28, 1906, and successive acts of Congress, the income derived therefrom by the individual members of the tribe is also nontaxable by the state; and further, since under the authority of said act the United States holds said resources in trust for said tribe, the act of the state in attempting to collect such tax amounts to an attempt on the part of the state to levy a tax on a federal instrumentality.

In support of his contention the plaintiff cites numerous authorities, some of which are highly persuasive. We are of the opinion, however, that the case of Choteau v. Burnet,283 U.S. 691, 75 L. Ed. 1353, is controlling upon this court on the question presented herein, and we feel constrained to adopt the rule laid down and to follow the reasoning expressed by the Supreme Court of the United States in that case.

The facts in Choteau v. Burnet, supra, were in all respects the same as the facts in the case at bar, except the question there presented was whether the United States had authority to levy and collect a tax against a like income of an Osage Indian under the General Revenue Act of 1918 (40 Stat. 1057). The question was decided in the affirmative, and the court, in fixing the status of the Indian with reference to the particular property in question, considering the same in the light of the applicable acts of Congress, reasons and holds as follows (after referring to the certificate of competency issued to the plaintiff and the act authorizing same):

"The petitioner, then, was competent to hold and make any use (except to grant mining leases) of all his lands. All except his homestead were taxable, and were freely alienable without control or supervision of the government. His share of the royalties from oil and gas leases was payable to him, without restriction upon his use of the funds so paid. It is evident that as respects his property other than his homestead his status is not different from that of any citizen of the United States. In the process of gradually changing the relation between the Indian and the government he has been, with respect to the income in question, fully emancipated. Compare United States v. Waller, supra [243 U.S. 452, 37 S. Ct. 430, 61 L. Ed. 843.] It is true, as petitioner asserts, that as to his homestead he still remains a restricted Indian. But this fact is only significant as evidencing the contrast between his qualified power of disposition of that property and his untrammeled ownership of the income in controversy. The latter was clearly beyond the control of the United States. The duty to pay it into petitioner's hands, and his power to use it after it was so paid, were absolute. Work v. Mosier,261 U.S. 352; Work v. Lynn, 266 U.S. 161. The claim that with respect to this income the petitioner was restricted, and therefore exempt from the tax laid by sections 210 and 211(a) must fail."

Although in the instant case the state of Oklahoma and not the federal government is attempting to levy and collect the tax, the reasoning of the court in Choteau v. Burnett, supra, is fully applicable to the case at bar, and the holding therein is controlling upon this court. In that case the Supreme Court of the United States has definitely fixed the status of an Osage Indian with relation to the income in question; the plaintiff here occupies the same position as the taxpayer in that case with reference to federal restrictions, and the court there has established the existence of all requisites to taxing jurisdiction in the state of Oklahoma. His share of the royalty from oil and gas leases was payable to him without restrictions upon his use of the funds so paid; his status is no different from that of any citizen of the United States. In the process of gradually changing the relation between the Indian and the government, he has been, with respect to the income in question, fully emancipated; his ownership in the property is untrammeled; the duty on the part of the government to pay the income into his hands and his power to use it after it was so paid, were absolute. The government had fully released its control.

It is plain that the income here in question was free from government restrictions, and was not subject to control by any federal agency. Therefore a tax levied by the state could not be a direct burden upon a governmental instrumentality, and could not be termed an interference by the state with the operations of the federal government. Indian Motorcycle Co. v. United States, 283 U.S. 570, 75 L. Ed. 1277.

If follows that the plaintiff's income is not restricted property, and is not under the control of any governmental agency within the meaning of the acts of Congress, and is therefore taxable by the state of Oklahoma.

The judgment of the trial court is affirmed.

OSBORN, V. C. J., and BAYLESS, BUSBY, PHELPS, and CORN, JJ., concur. McNEILL, C. J., and RILEY, J., dissent. WELCH, J., absent.

On Rehearing.