Erik M. Jensen


Economic development on the lands of the American Indian nations has been spotty at best. Almost everyone knows the great success stories with Indian gaming, which has been furthered by federal legislation, but those economic benefits have not been felt uniformly. Some tribes have prospered because of this peculiarly favored form of enterprise; others have not and, in many cases, probably cannot. Substantial economic development in Indian country will not occur without significant infusions of outside capital, but investment by non-Indian and nongovernmental sources is risky, or is perceived to be so, which leads to the same practical result. This situation has many causes, none of which is easily remedied, but one important reason is uncertainty about the powers of federal, state, and tribal governments to impose their taxes on transactions within, and those doing business in, Indian country. If a prudent investor cannot predict the tax liability he will incur on his investment with reasonable certainty, he is likely to look for investment opportunities elsewhere. No investor should expect absolute certainty in taxation, of course: tax laws change, and American courts have not been sympathetic to the argument that a taxpayer has a due-process right to a continuation of existing laws. If a taxpayer invests on the assumption that his income will be taxed at a 35-percent rate for federal purposes and Congress raises the rate to 50 percent, the taxpayer is out of luck. He can argue until he is blue in the face that he relied on the 35-percent figure in making his investment decisions, and he may find friendly listeners at the country club. But no court is going to come to his aid: one cannot reasonably rely on an assumption that national or state legislation will remain unchanged. Those looking for absolutely clear answers in American Indian law are nevertheless likely to be frustrated by this Article; the structure of taxation in Indian country can be made only so transparent. Although general principles can be stated, the analysis of a specific issue is likely to be particularistic, depending on such factors as treaty language (if a treaty is involved); relevant statutory, executive order, or regulatory language; the specific facts at issue; and the scope given to interpretational principles intended to resolve disputes such as the Indian “canons of construction,” discussed below. Moreover, most commentators agree that, because of particularistic analyses and the ebb-and-flow of judicial sympathy for tribal concerns, Supreme Court decisions do not come close to establishing a coherent body of law. One can sometimes find unifying themes in the cases, but the process of rationalization can go only so far. Generally applicable principles suggest one operational standard for a potential investor in Indian country: because the investor is likely to be subject to federal and state taxation anyway (except in special circumstances), he should be negotiating with tribal officials to lessen any otherwise applicable tribal taxation. The investor should be trying to convince tribal officials that the benefits of economic development outweigh the short-term revenue loss attributable to any tax break the investor receives.

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