Petitioners' Supreme Court Brief in Chickasaw Nation v. United States

The nations contend that Title 25, section 2719(d)(1) of the United States Code, the Indian Gaming Regulatory Act, 102 Sta. 2486 (1998) (IGRA), should be construed to exempt the nations from excise taxes on pull-tab games they conduct on trust lands. The U.S. District Court for the Eastern District of Oklahoma ruled in favor of the IRS in separate refund actions filed by the nations to recover wagering and occupational taxes the Service assessed on their pull- tab operations. Upholding the lower court's decisions regarding the two tribes, the circuit court reasoned that although the language of the statute was "cryptic," the language did not indicate a congressional intent to exempt the nations from federal wagering excise taxes.

Pointing to the rationale in Little Six Inc. v. United States, 210 F.3d 1361 (Fed. Cir. 2000)(construing section 2719(d)(1) as extending a similar exemption from excise taxes to tribes that Chapter 35 of the Internal Revenue Code extends to state gaming), the nations argue the statute is ambiguous and must be construed in favor of tribal interests. The nations further assert that a liberal construction of the statute does not circumvent a contrary conclusion reached in the legislative history of IGRA, addressing the exemption issues raised by section 2719(d)(1), but supports and advances federal policies found in IGRA.

[1] Whether, under the applicable Indian-law canons of statutory construction, the Indian Gaining Regulatory Act, by 25 U.S.C. section 2719(d)(1)'s express incorporation of Chapter 35 of the Internal Revenue Code, confers on Indian tribes conducting gaming operations the same exemption from wagering taxes afforded to states by Chapter 35 of the Internal Revenue Code?

TABLE OF CONTENTS

Question Presented

CITATION TO STATUTES INVOLVED IN THE CASE

[3] The Chickasaw Nation and the Choctaw Nation of Oklahoma [the "Nations"], sovereign, federally-recognized Indian Tribes, separately conduct pull-tab games pursuant to the Indian Gaming Regulatory Act, Pub. L. No. 100-497, 102 Stat. 2485 (1988) (codified at 25 U.S.C. section 2701, et seq.) ["IGRA"], and their own respective tribal ordinances. Those games are conducted exclusively on trust lands at facilities operated by the respective Nations. As required by 25 U.S.C. section 2710(b)(2)(B), the tribal revenues from those operations are used exclusively for the respective Nations' governmental functions, consisting of legislative branch expenses, judicial branch expenses and executive branch expenses, including tribal nutritional, medical, educational and senior citizen programs. No tribal member of either Nation owns an interest in the particular Nation's gaming operations or is entitled to receive direct payment from the net revenues of those operations.

[4] The Internal Revenue Service assessed federal wagering and related occupational taxes pursuant to Internal Revenue Code ["IRC") Chapter 35, 26 U.S.C. sections 4401 and 4411 (1994), against the Nations in connection with their pull-tab operations.

[5] After satisfying the administrative prerequisites for a refund action, each Nation filed its separate action against the United States [the "Government"] for a refund pursuant to 28 U.S.C. section 1346(a)(1) (1994) in the United States District Court for the Eastern District of Oklahoma, seeking recovery of the wagering taxes paid for the month of July 1993, plus interest; occupational taxes for the year 1993, plus interest; and reasonable litigation costs authorized by 26 U.S.C. section 7430(a) (1994). Each Nation alleged that the taxes were erroneously and illegally assessed and collected. The Government denied in each case that the taxes in question were erroneously and illegally assessed and collected. In each case, the Government also counterclaimed for unpaid wagering and occupational tax assessments, plus interest for periods additional to those addressed in the complaints. The Nations denied liability and alleged that the taxes assessed were illegal as applied to them.

[6] The merits in each case were addressed by cross motions for summary judgment. In each action, the district court then entered judgment against the particular Nation and in favor of the Government.

[7] The Nations separately appealed to the United States Court of Appeals for the Tenth Circuit.

[8] The Tenth Circuit affirmed the district court's judgments. The court of appeals addressed the question of whether the reference to IRC Chapter 35 in 25 U.S.C. section 2719(d) provides to tribes the same federal gaming tax exemption afforded by IRC Chapter 35 to state governmental gaming. ¹ The Tenth Circuit characterized the relevant provision of section 2719(d)(1) as "cryptic;" did not apply any test for determining the existence of an ambiguity; implicitly (if not expressly) recognized an ambiguity; neither invoked nor applied the relevant Indian-law canon of construction (requiring statutory ambiguity to be liberally interpreted to the Indians' benefit) to section 2719(d)(1); construed the provision against the tribal interests; and stated in its Opinion in the Chickasaw appeal: ²

Although it is true that section 2719(d)'s reference to Chapter

We agree with Little Six that, although wagers placed on Indian

The government argues that Little Six is not exempt from

In view of the inconsistency between the statute's reference to

We note that the Tenth Circuit has recently held that 25 U.S.C.

In the present case, having determined that the language of

[14] The Petitioner Nations sought a Writ of Certiorari to the Court of Appeals for the Tenth Circuit to resolve the conflict between two United States Courts of Appeals on the important matter of whether 25 U.S.C. section 2719(d)(1)'s express incorporation of Chapter 35 of the IRC confers on Indian tribes the same exemption from wagering taxes afforded to states by that chapter. The Respondent acquiesced in the Petition for Certiorari and urged this Court to grant the Petition. Brief for Respondent United States of America, Dec. 26, 2000, at p. 6. On January 22, 2001, this Court granted the Petition.

SUMMARY OF THE ARGUMENT

[15] This Court uses a long-held principle deeply rooted in jurisprudence to resolve textual ambiguities in Indian-law statutes. Between two possible constructions, this Court chooses the liberal construction that benefits the interests of the Indians. Since the trust relationship between the United States and the Indian tribes on which the Indian-law canons are grounded has not changed, the Indian- law canons remain eminently sound and vital. In particular, this Court has applied the Indian-law canons to resolve statutory ambiguities concerning claimed exemptions from both direct federal taxation and the federal authorization of state taxes without distinction. That application has occurred in the face of the general maxim that tax exemptions are to be strictly construed.

[16] In no case involving the construction of an actual statutory ambiguity, on the basis of which Indians have asserted a tax exemption, has this Court held that the general tax-exemption maxim supersedes the Indian-law canons of construction and results in a narrow construction against the Indians. The Indian tax-exemption cases in which this Court has, in dicta, referenced the general tax- exemption maxim neither included textual ambiguity, actually resulted in construction, nor even mentioned the Indian canons. Rather, those cases stand as support for the general proposition that tax exemptions are not to be implied from pure policy untethered to statutory text.

[17] 25 U.S.C. section 2719(d)(1) contains an ambiguity as to whether tribal governmental gaming enjoys the same exemption from federal wagering taxes as is provided to state governmental gaming operators by IRC Chapter 35. Section 2719(d)(1), as finally enacted, includes an express reference to IRC Chapter 35, albeit in a phrase of section 2719(d)(1) concerning the reporting and withholding of third-party winnings. Chapter 35, however, has nothing to do with the reporting or withholding of taxes with respect to winnings by third parties. All appellate judges who have addressed section 2719(d)(1), regardless of their ultimate view on the availability of the tax exemption to Indian tribes engaged in governmental gaming, have either expressly or implicitly acknowledged the facial ambiguity of the statute.

[18] The legislative history does not clearly indicate that Congress intended for tribal governmental gaming to be treated differently than state governmental gaming. S. 555, section 20(d), 100th Cong. (Feb. 19, 1987), which ultimately became IGRA, did initially make clear that the IRC provisions concerning taxation (and implicitly, tax exemptions) applicable to state governmental gaming would apply to tribal government gaming. Although the phrase including "taxation" was deleted from S. 555, it was not replaced with silence. Rather, the general "taxation" phrase was contemporaneously replaced by language that included the specific reference to the exemption-granting IRC Chapter 35. The Senate Committee Report and the congressional floor debate are silent as to the reason for that specific substitution. This is not a case of simple deletion, in which congressional intent might be rather strongly inferred from subsequent silence.

[19] Application of the Indian-law canons of construction should result in a liberal construction of the facial statutory ambiguity in section 2719(d)(1) in favor of the tax exemption. Failure to so construe the PATENT ambiguity in that provision would: (a) violate congressional intent that the Indian-law canon on statutory ambiguity apply to IGRA; (b) constitute the practical demise of that eminently sound and vital canon by destroying its long-held primacy and relegating it to the back of the line of tools of construction; and (c) constitute fundamental federal Indian policy adverse to Indian tribes without clear, supporting congressional direction.

[20] Application of the Indian-law canons and the resulting construction in favor of the equality of federal tax treatment of tribal gaming with state gaming will further the federal Indian policy embodied in IGRA of advancing tribal governmental gaming to provide governmental revenue for tribal members' services. Such a construction is inconsistent neither with any clear language in section 2719(d)(1) (or for that matter, any other IGRA provision), nor with any clear legislative history concerning that statute. That construction advances the federal Indian policy of using governmental gaming to raise tribal revenue for member services, thereby helping to break the debilitating cycle of tribal dependency on congressional appropriations.

[21] Application of the Indian-law canons also results in a construction consistent with the legislative indication (from the Senate Committee Report) that tribal governmental gaming to raise revenue for governmental purposes is the same type of activity as governmental gaming conducted by state competitors of tribes. Construction in favor of the exemption places tribal governmental gaming on the same tax footing as state governmental gaming.

[22] A construction of the textual ambiguity in favor of the availability to tribes of the state wagering tax exemption is also consistent with the views of IGRA's primary author, Senator Daniel Inouye, whose views (at a minimum) demonstrate that the pro-tribal construction is clearly a "possible construction" of the ambiguity. Petitioner Nations therefore urge this Court to adopt their proffered construction of section 2719(d)(1) as the necessary resolution of the statutory ambiguity under the Indian-law canons of construction.

ARGUMENT

PROPOSITION ONE

EVEN IN CASES IN WHICH A FEDERAL TAX EXEMPTION IS IN ISSUE, THE INDIAN-LAW CANONS OF CONSTRUCTION MANDATE CONSTRUCTION OF TEXTUALLY- AMBIGUOUS INDIAN-LAW-RELATED FEDERAL STATUTES BROADLY IN THE MANNER MOST FAVORABLE TO TRIBAL INTERESTS, ABSENT CLEAR LEGISLATIVE HISTORY SUPPORTING A CONTRARY CONCLUSION.

A. AN AMBIGUITY IN AN INDIAN-LAW-RELATED FEDERAL STATUTE IS TO BE

When we are faced with these TWO POSSIBLE CONSTRUCTIONS, our

[24] The Indian-law canons reflect a specific, historically- based judicial perspective:

This rule is not simply a method of breaking ties; it reflects

[25] Fundamental policy based on the relation of the United States to Indian tribes undergirds the Indian-law canons of statutory construction:

The canons of construction applicable in Indian law are rooted

[26] That unique trust relationship between the United States and the Petitioner Nations here has not been abrogated. The Indian- law canons based upon that trust relationship therefore remain "eminently sound and vital," Bryan v. Itasca County, 426 U.S. 373, 392 (1976).

B. THE LEGISLATIVE HISTORY OF IGRA COUNSELS THAT THE INDIAN-LAW

The Committee recognizes that this may include issues of a very

C. IN CONSTRUING IN FAVOR OF INDIAN INTERESTS AMBIGUOUS FEDERAL

This rule of construction has been recognized, without exception

[29] This Court has recognized Choate's teaching -- that the specific Indian-law statutory-ambiguity canon supersedes the general tax-exemption maxim -- in a number of cases involving federal legislation. Most recently, in Montana v. Blackfeet Tribe of Indians, 471 U.S. 759 (1985), this Court resolved in favor of the Indian tribe the question of whether a state may tax the tribe's royalty interests for leases issued to non-Indian lessees pursuant to the Indian Mineral Leasing Act of 1938, ch. 198, 52 Stat. 347, 25 U.S.C. section 396(a) et seq. [the 1938 Act]. The Act of May 29, 1924, ch. 210, 43 Stat. 242, 25 U.S.C. section 398 et seq. [the 1924 Act] authorized mineral leasing of unallotted lands, and state taxation of the oil and gas production. The 1938 Act, which permitted the mineral leasing of unallotted lands and detailed uniform leasing procedures designed to protect the Indians, did not contain a provision authorizing state taxation, nor did it specifically repeal the tax authorization of the 1924 Act. Rather, the 1938 Act contained a general repealer provision stating that "[a]ll Act [sic] or parts of Acts inconsistent herewith are hereby repealed." 471 U.S. at 764.

[30] In determining the question by statutory construction in favor of the tribe, this Court observed that the state failed to appreciate that the standard principles of statutory construction do not have their usual force in cases involving Indian law. See id. at 766. After explaining the reason for the Indian canons, identifying an Indian-law canon specifically applicable to federal-authorization- of-state-taxation issues (not applicable in this case), and setting forth the canon that "statutes should be construed liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit," id., this Court then noted:

Indeed, the Court has held that although tax exemptions

[31] Although this Court used an Indian-law canon specifically applicable to the federal-authorization-of-state-taxation issue to justify in part its decision in Blackfeet Tribe, ⁶ it also made clear that the Indian canon requiring that statutory ambiguity be construed in favor of tribal interests provided grounds to reject the state's claim that no tax exemption existed:

The clause surely does not satisfy the requirement that Congress

[32] This Court's decision in Squire v. Capoeman, 351 U.S. 1 (1956), is particularly germane to the application of the Indian-law canons herein, since that case also dealt with an asserted federal- statute-based immunity from FEDERAL taxation. In Squire, this Court found statutory ambiguity, resolved it in favor of Indians and consequently recognized an exemption from direct federal taxation. At the outset, this Court rejected the very approach proffered to date by the Government in this litigation. Cf. at 5-6 ("[T]he Government urged us to view this case as an ordinary tax case without regard to the . . . relevant statutes, congressional policy concerning Indians, or the guardian-ward relationship between the United States and these particular Indians."). This Court then acknowledged the general maxim that tax exemptions should be clearly expressed. Id. ("We also agree that, to be valid, exemptions to tax laws should be clearly expressed."). Next, this Court also noted that the statutory provision on which the Indians based their exemption did not unequivocally provide for non-taxability. Id. ("[Although this statutory provision is not expressly couched in terms of non- taxability . . ."). Most importantly, after stating the general tax- exemption maxim and acknowledging that the statutory provision did not unambiguously establish a tax exemption, this Court invoked the Indian-law canons of construction:

[D]oubtful expressions are to be resolved in favor of the weak

. . . In other words, it is not likely to be assumed that

[33] McClanahan v. Arizona State Tax Commission, 411 U.S. 164 (1973), demonstrates the continuing vitality of Squire. In addressing the statute under which the exemption at issue was claimed, this Court acknowledged the general tax-exemption maxim, invoked Squire, and illustrated how asserted Indian tax exemptions should be evaluated in the presence of federal statutory ambiguity:

Nor is the Arizona Enabling Act [of June 20, 1910, ch. 310, 36

[34] McClanahan has additional relevance to this case for several reasons. Initially, the McClanahan Court clearly recognized that the Indian-law canons of construction supersede the general tax- exemption maxim where both might otherwise theoretically apply. Second, it reasserted the general nature of the tax-exemption maxim, and, by so doing, indicated that general maxim's subservience to the specific Indian-law canon on statutory ambiguity. Third, by comparing the ambiguity of the Arizona Enabling Act of June 20, 1910, ch. 310, 36 Stat. 557, at 570, to the statute at issue in Squire (and labeling the Squire statute "far more ambiguous"), McClanahan, 411 U.S. at 175-76, this Court demonstrated that the application of the Indian- law statutory-ambiguity canon is not dependent upon a specific degree of statutory ambiguity. Finally, McClanahan's use of the federal tax exemption Squire opinion in a case of asserted exemption from state taxation confirms that the primacy of the Indian-law canons over the general tax-exemption maxim inheres regardless of whether the claimed exemption is from federal taxation or from state taxation. ⁸

[35] Lastly, Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1973), provides yet another example of this Court construing an ambiguous federal statutory provision broadly in favor of Indian interests to recognize a tax exemption, the general tax-exemption maxim notwithstanding. There, this Court construed 25 U.S.C. section 465's exception from ad valorem property taxation on "lands, interests in lands, water rights and surface rights" to encompass an exemption from a use tax on personal property that was later attached to the land. ⁹ Even though an exemption for use taxes was not unambiguously provided for in the statute, this Court unequivocally indicated that its finding of an exemption was based on statutory construction that resulted in an outcome favorable to Indian interests:

. . . [U]se of permanent improvements upon land is so intimately

[36] From those opinions of this Court, a constant theme emerges spanning almost a century. When actual textual ambiguity exists concerning a possible tax exemption benefitting Indians, broad construction in favor of the Indians' interests occurs, the general tax-exemption maxim notwithstanding.

D. NO DECISION OF THIS COURT HAS CONSTRUED A GENUINE TEXTUAL

[38] In this Court's Indian-law decisions involving tax exemptions, treatment and result differ significantly between those cases in which this Court has recognized the existence of an actual textual ambiguity and those cases in which no such ambiguity was found. When this Court has found an actual ambiguity, and thus had to engage in construction, this Court has applied the Indian-law statutory-ambiguity canon to construe the ambiguity in favor of the particular tax exemption for Indian interests. ¹¹ On the other hand, when no actual ambiguity was found, and hence nothing existed to construe by application of the Indian-law canons, this Court has routinely announced that exemptions cannot be "implied" [from pure policy untethered to statutory text].

[39] The earliest in this sequence of cases, The Cherokee Tobacco, 78 U.S. (11 Wall.) 616 (1870), cited to this Court by the Government in its response in this case, see Br. for the United States at 12, involved no actual textual ambiguity, hence no holding arose as to the role of the general tax-exemption maxim in light of the Indian-law statutory-ambiguity canon when actual textual Indian- law tax-exemption ambiguity exits. In that case, Congress applied certain taxes to "articles produced anywhere within the exterior boundaries of the United States, whether . . . within a collection district or not." Act of July 20, 1868, ch. 186, section 107, 15 Stat. 167. The tobacco of the Cherokee Respondents was seized for failure to bear federal tax stamps. The Indians noted that the Indian Territory was not within any revenue collection district of the United States, and argued that Congress had not intended to apply the 1868 statute in the Indian Territory. This Court held that the tax applied. In finding the statute unambiguous (and therefore presenting nothing for construction), the mention of the general tax-exemption maxim revealed itself simply as general dictum that a tax exemption cannot be implied from pure policy:

THE LANGUAGE OF THE SECTION IS AS CLEAR AND EXPLICIT AS COULD BE

[40] In Choteau v. Burnet, 283 U.S. 691 (1931), also invoked previously by the Government, see Dr. for the United States at 10, 11, 12, again this Court found no actual textual Indian-law statutory ambiguity on which to base a holding as to the relative weight of the general tax-exemption maxim vis-a-vis that of the Indian-law canons of construction. There, Choteau, an emancipated Osage Indian, claimed that his "headright" income was exempt from federal income taxation for two reasons. Neither assertion was based on an actual statutory ambiguity. Choteau's first basis, that he was "exempt because of his status as an Indian," id. at 694, was based only on policy, as this Court expressly noted, id. ("The assertion requires a reference to the policy of the government with respect to Indians."). Additionally, Choteau asserted that his income came from an "exempt source" -- royalties that prior to distribution were held by the Government in trust for the tribe. Id. at 696.

[41] In rejecting the "exempt source" assertion, this Court pointed to absolutely no statute, much less any statutory ambiguity that required construction. Instead, this Court focused entirely on the now-obsolete "instrumentality" doctrine. See id. at 696-97. Thus, while the Choteau Court did quote the general tax-exemption maxim in the "exempt source" portion of its opinion, other than insofar as that maxim precludes the implication of tax exemptions from pure policy untethered to statutory text, that maxim had nothing to do with the actual resolution of the "exempt source" issue -- or for that matter, with the resolution of anything else in the case. ¹² As in The Cherokee Tobacco, the dictum concerning the general tax- exemption maxim arose in Choteau from no ambiguity, much less from the construction of an Indian-law statutory ambiguity.

[42] Superintendent of the Five Civilized Tribes v. Commissioner of Internal Revenue, 295 U.S. 418 (1935), also cited by the Government at the Petition stage, see Br. of the United States at 10, 12, does not hold that in the case of an actual, textual Indian- law statutory ambiguity, on which Indians claim a tax exemption, the general tax-exemption maxim requires that the ambiguity be construed in favor of the Government and against Indian interests. There, funds derived from the restricted allotment of a Creek Indian were invested, with the proceeds held in trust for the Indian by the Superintendent under the direction of the Secretary of the Interior. This Court held those proceeds subject to federal income tax. There was no finding that any statutory provision on which the claimed tax exemption was based was ambiguous. In fact, this Court first found that the Revenue Act of 1928 was UNAMBIGUOUS, id. at 420 ("The terms of the 1928 Revenue Act are very broad, and nothing there indicates Indians are to be excepted."), then emphasized the absence of ambiguity in such a way as to make its quotation of the Choteau dictum, see Superintendent, 295 U.S. at 420 (quoting Choteau, 283 U.S. at 693), only dictum yet again.

[43] The Superintendent Court then addressed two statutes ¹³ cited to it as potential sources of the Indian's INCOME tax exemption. This Court unequivocally found that the 1906 statutory exemption "related to LAND and not to income derived from investment of surplus INCOME FROM LAND." Id. at 421 (emphasis added). Likewise, the 1908 statute was functionally identical. See id. Simply put, there was no actual textual statutory ambiguity to construe, hence no construction, and therefore no holding that such an actual ambiguity would be construed narrowly against the Indians' claim of a tax exemption and in favor of the government. Consistent with prior decisions of this Court in which no Indian-law statutory ambiguity was found, the Indian-law canon was not mentioned.

[44] Finally, Mescelaro Apache Tribe v. Jones, 411 U.S. 145 (1973), ¹⁴ likewise does not hold that in the construction of an actual federal statutory ambiguity concerning a tax exemption for Indians the general tax-exemption maxim supersedes the Indian-law canons. In Mescalero Apache, the tribe sought to exempt income from its off-reservation ski resort from a state gross receipts tax. Once again without construction of any federal statutory ambiguity, the Mescalero Apache Court rejected the assertion that an exemption from that tax should be implied from pure policy -- which was exactly what the tribe's first argument (based on the long-defunct federal instrumentality doctrine, see id. at 154-55) essentially sought.

[45] This Court then went on to address the tribe's second basis for the claimed exemption from the gross receipts tax, Section 5 of the Indian Reorganization Act of 1934, 48 Stat. 985 (codified at 25 U.S.C. section 465 (1970)). Although the Mescalero Apache Court mentioned the general tax-exemption maxim in that context, see 411 U.S. at 156, it made clear that no textual ambiguity existed:

On the face of section 465, therefore, there is no reason to

[46] As the above-discussed decisions demonstrate, this Court has not used the general tax-exemption maxim to supersede the Indian- law statutory-ambiguity canon in the construction of an actual textual ambiguity. Rather, that general maxim has been mentioned in Indian-law-related cases only as dicta when this Court acknowledged the impropriety of inferring a tax exemption from pure policy untethered to statutory ambiguity.

PROPOSITION TWO

APPLICATION OF THE APPOSITE PRINCIPLES OF CONSTRUCTION RESULTS IN THE CONCLUSION THAT 25 U.S.C. section 2719(d)(1) CREATES AN EXEMPTION FOR INDIAN TRIBES FROM THE FEDERAL WAGERING (AND RELATED OCCUPATIONAL) TAXES THAT IS IDENTICAL TO THE EXEMPTION ENJOYED BY STATES UNDER CHAPTER 35 OF THE INTERNAL REVENUE CODE.

A. 25 U.S.C. SECTION 2719(d)(1) IS FACIALLY AMBIGUOUS.

[47] The ambiguity of 25 U.S.C. section 2719(d)(1) is patent. On the one hand, Congress may have focused its application of the Internal Revenue Code on provisions "concerning the reporting and withholding of taxes with respect to the winnings from gaming or wagering operations." But on the other hand, Congress expressly included in its identification IRC provisions section 6050I and Chapter 35 of the IRC, neither of which have anything to do with the reporting and withholding of taxes with respect to winnings. Chickasaw, 208 F.3d at 883; Little Six, 210 F.3d at 1365. Instead, Chapter 35 establishes the wagering (and related occupational) taxes -- and the exemptions for states from those taxes -- to which the Petitioners claim entitlement here.

[48] The ambiguity created by that conflicting statutory language has been recognized directly by two opposing sets of appellate judges within one circuit, and at least implicitly by another circuit. ¹⁵ No appellate court addressing the statutory language has pronounced it clear and unambiguous. That facial ambiguity inheres in section 2719(d)(1) is beyond legitimate doubt.

B. THE LEGISLATIVE HISTORY OF IGRA THAT IS SPECIFICALLY RELEVANT TO

Provisions of the Internal Revenue Code of 1954, as amended,

[50] In commentary on that section, the House Committee Report for H.R. 1920 expressly identified two portions of the IRC, 26 U.S.C. section 3402(q) (1994) (which involves only reporting and withholding of taxes related to the operation of gaming activities), and Chapter 35 (which both authorizes the taxes and creates the state gaming exemption from them at issue here). That Report, stated:

Section 4 provides that related provisions of the Internal

[51] The floor debate on H.R. 1920 contained nothing on the matter of federal taxes or exemption from them.

[52] In the 100th Congress, the Senate considered S. 555, 100th Cong. (1987), which ultimately became IGRA. Section 20(d) of S. 555, 100th Cong. (Feb. 19, 1987), initially contained the same general language about taxation that had been included in Section 4 of H.R. 1920.

[53] During the Senate's consideration of S. 555, the more specific language at issue here, including the reference to IRC Chapter 35 contained in H.R. Rep. No. 99-488, at 13, was substituted for the phrase that included the general reference to "taxation." Section 20(d) of S. 555, 100th Cong. (1987) (which ultimately was enacted as what is now 25 U.S.C. section 2719(d)) was modified to provide:

(d) APPLICATION OF THE INTERNAL REVENUE CODE OF 1986.

[55] The only committee report that accompanied what ultimately became IGRA is silent on section 2719(d)(1)'s reference to IRC section 6050I and Chapter 35. In its "section by section analysis," the Senate Report merely states that Section 20(a)-(d):

Sets forth policies with respect to lands acquired in trust

[56] Nothing in that Committee Report clearly indicates that the tax exemption enjoyed by states was to be unavailable to the Indian tribes conducting the same activity as states to provide revenue for governmental purposes, nor is there an indication to the contrary. Likewise, the debate on IGRA on the floors of the Senate and the House of Representatives contain no mention of the question of federal taxation.

[57] The unexplained changes in S. 555 as it moved through the legislative process are also inconclusive. While S. 555 initially contained a general reference to "taxation," the specific reference to the exemption-containing IRC Chapter 35 was substituted for that general provision. That substitution of the specific for the general renders inapplicable the sometimes-employed rule that a deletion of express language in an earlier draft (when replaced with nothing) is some evidence that Congress did not intend a result consistent with that deleted language. ²⁰ Here, however, the SUBSTITUTION of the specific exemption-containing IRC Chapter 35 for the general term "taxation" is not simply a deletion, but can be viewed as merely a different way of indicating the same result. ²¹

[58] At the end of the review of the legislative history one fact remains. That history does not clearly demonstrate Congress' intent -- one way or another -- as to whether Indian tribes engaged in gaming pursuant to IGRA shall be precluded from the Chapter 35 tax exemption provided to states engaged in similar activity. Without such a clear indication of Congressional intent from the face of the statute and its legislative history, the ambiguity remains and requires construction for resolution. ²²

C. 25 U.S.C. SECTION 2719(d)(1) SHOULD THEREFORE BE CONSTRUED AS

[60] Failure to apply the Indian-law canons of construction in this case would cause multiple deleterious consequences. First, such a failure would violate the Congressional intent suggested by IGRA's specific legislative history -- that the Indian-law canons be used to resolve ambiguities in that Act.

[61] Second, such a failure could herald the practical death of that "eminently sound and vital canon." This Court has applied the canons to statutes far less ambiguous than section 2719(d)(1). See McClanahan, 411 U.S. at 175-76. If statutes that did not contain the patent ambiguity present here triggered application of the Indian-law canons, and were this Court now to determine that the more ambiguous section 2719(d)(1) did not trigger their force even absent dispositive legislative history, then the real conclusion would inevitably be that the Indian-law canons were no longer "eminently sound and vital." Either the statutory-ambiguity canon, which contains no qualification as to its application, retains pride of place as a tool of construction of Indian-related statutes whose ambiguity is unresolved by clear legislative history, or it does not. If no longer preeminent, this canon would become completely ineffectual because a clever reason to avoid its application by elevation of another rule (or reference to increasingly creative interpretations of increasingly remote legislative history) could always be advanced.

[62] Third, a failure to apply the Indian-law statutory- ambiguity canon to the admittedly ambiguous section 2719(d)(1) would constitute a judicially-driven change in fundamental federal Indian policy without clear, supporting Congressional direction. The statutory-ambiguity canon is "rooted in the unique trust relationship between the U.S. and the Indians." See County of Oneida, 470 U.S. at 247-48. The Petitioners respectfully suggest that no Congressional action authorizes a judicial articulation of such a radical change in federal Indian policy.

[63] At the end of the day the choice is clear: either the Indian-law statutory-ambiguity canon still remains vital as the dispositive tool to resolve an obvious textual ambiguity in an Indian-law-related statute when such ambiguity is not clearly resolved against tribal interests by legislative history, or it does not. No legitimate reason exists to deprive the Indian-law statutory- ambiguity canon of that vitality.

PROPOSITION THREE

THE CONSTRUCTION OF SECTION 2719(d)(1) IN FAVOR OF THE TAX EXEMPTION FOR THE PETITIONER NATIONS IS CONSISTENT WITH AND MATERIALLY ADVANCES IMPORTANT FEDERAL INDIAN POLICIES EMBODIED IN IGRA.

[64] Application of the Indian-law statutory-ambiguity canon results in a construction of section 2719(d)(1) that is consistent with the federal Indian policy embodied in IGRA. The background of Indian governmental gaming explained by this Court in California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987), ²³ the Senate Committee Report accompanying IGRA, and the express language of IGRA all resonate the same federal Indian policy. Tribal gaming is "governmental gaming, the purpose of which is to raise tribal revenues for member services." S. Rep. No. 100-446, 100th Cong., at 12 (1988), reprinted in 1988 U.S.C.C.A.N. 3071, 3082. Specifically, Congress' central purpose in enacting IGRA was to "provide a statutory basis for the operation of gaming by Indian tribes as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments. . . ." 25 U.S.C. section 2702(1) (1994). Gaming pursuant to IGRA advances that purpose by providing tribal governments with a method of funding those governmental needs, while breaking the cycle of dependency on federal appropriations. In discussing tribal gaming operations, the Senate Committee concluded that "for those tribes that have entered into the business of business, the income often means the difference between an adequate governmental program and a skeletal program that is totally dependent on Federal funding." S. Rep. No. 100-466 at 2-3, 100th Cong. (1988), reprinted in 1988 U.S.C.C.A.N. 3071, 3072. The tribal tax exemption resulting from the application of the Indian-law canons to section 2719(d)(1)'s ambiguity would make more money available to assist the tribal governments in meeting their citizens' needs, and would thereby assist in breaking that cycle of dependency on Congressional appropriations. ²⁴

[65] Application of the Indian-law statutory-ambiguity canon also results in a construction of section 2719(d)(1) consistent with the legislative indication that tribal governmental gaming under IGRA to raise revenue for governmental purposes is the same as governmental gaming conducted by state competitors of tribes for identical purposes. No serious doubt can exist that at the time of IGRA's enactment, various states were engaged in gaming operations to provide governmental services to their citizens. The Senate Committee expressly noted that tribal governments, like state governments, were using gaming to provide governmental services to their citizens:

Indian tribal elected officials demonstrated to the Committee

[66] That Senate Committee Report's observation is clearly consistent with an intent that Indian tribes using gaming to meet governmental responsibilities be viewed as engaging in the same type of governmentally-sponsored activity, to generate the same type of revenue and to provide the same type of governmental service as their state government competitors. Tribes, therefore, should not be treated less favorably by the federal government than those state competitors. The construction resulting from the Indian-law statutory-ambiguity canon places tribal governmental gaming on the same tax footing as state governmental gaming.

[67] Application of the Indian-law statutory-ambiguity canon also further results in a construction of section 2719(d)(1) consistent with the interpretation of it by the primary author of IGRA, Senator Daniel Inouye, the Chair of the Senate Select Committee on Indian Affairs. In response to proposals by the IRS to attempt collection of Chapter 35 taxes from Indian tribes, Chairman Inouye wrote to the IRS Commissioner:

As primary author of the Indian Gaming Regulatory Act, I

[68] Senator Inouye's remarks should be given weight for several reasons. First, whether the remarks of the legislative sponsor were made before passage of a bill or after passage is not outcome determinative of their value to this Court. Rather, it is the status of the Senator, as the legislator chiefly responsible for guiding the act in question into enactment, that gives weight. In Menominne Tribe v. United States, 391 U.S. 404 (1968), this Court expressly relied on a post-passage statement of the legislative sponsor to bolster its conclusion as to the effect of an Indian- related federal statute. See id. at 413 ("Our conclusion is buttressed by the remark of the legislator chiefly responsible for guiding the termination Act to enactment, Senator Watkins, who stated upon the occasion of the signing of the bill that it . . ."). Senator Inouye fulfilled that role here as the legislator chiefly responsible for guiding IGRA to enactment. His post-passage remarks deserve weight here, just as did Senator Watkins' post-passage remarks in Menominne Tribe.

[69] Further, the Chairman's explanation was timely. The Petitioner Nations do not expect the Government to dispute that Senator Inouye promptly wrote to the IRS Commissioner when the IRS first disclosed its intention (after at least a decade of Indian gaming) to attempt to collect Chapter 35 taxes on Indian gaming. The Chairman's letter was not a recounting of ancient history by a back- bench legislator who had merely cast a vote decades earlier on a bill in which he had no meaningful involvement.

[70] Finally, a more clear, authoritative and timely statement of the Congressional purpose for the substitution of the reference to IRC Chapter 35 for the phrase including "taxation" in 25 U.S.C. section 2917(d)(1) than Chairman Inouye's letter does not exist. The Senate Committee Report on IGRA and the floor debate in Congress are both silent on this subject. ²⁵ At the very minimum, Senator Inouye's explanation, consistent with the Little Six Opinion, reinforces the possible construction of section 2719(d)(1) as providing the same tax exemptions for tribal governmental gaming as are afforded to state governmental gaming by IRC Chapter 35. That "possible construction" of the ambiguity in favor of tribal interests requires the Petitioner Nations to prevail. See County of Yakima, 411 U.S. at 174.

CONCLUSION

[71] The Petitioner Nations request this Court to determine that 25 U.S.C. section 2719(d)(1) is ambiguous, to apply the Indian- law statutory-ambiguity canon of construction to that ambiguity, to construe that ambiguity liberally in favor of the availability of the tax exemption contained in IRC Chapter 35 to Indian tribes, to reverse the judgments of the Tenth Circuit against the Petitioners, and to remand this matter to that Court for the entry of judgments against the Government on its claims for wagering taxes, against the Petitioner Nations and in favor of their claims for refunds and ancillary relief sought in the District Court.

Respectfully submitted,

(d) APPLICATION OF INTERNAL REVENUE CODE OF 1986

SECTION 4402. EXEMPTIONS.

³ After denial of the petition for rehearing by the Tenth Circuit, the rehearing en banc sought by the Government in Little Six was denied, with three judges dissenting from that denial. Little Six, Inc. v. United States, 229 F.3d 13 83 (Fed. Cir. 2000). That dissent suggested relegating the Indian-law canon to the back of the line of tools of construction:

However, in my view, the panel should not have invoked the

I do not find persuasive the government's argument (adopted by

⁴ See generally McNary v. Haitian Refugee Center, Inc.,498 U.S. 479, 496 (1991) ("It is presumable that Congress legislates with knowledge of our basic rules of statutory construction. . . .").

⁵ Only a few years before Choate, this Court explained the relatively weak office of the general tax-exemption maxim and indicated that its true effectiveness is as a last, rather than a first, resort:

WE RECOGNIZE THE FORCE AND SALUTORY CHARACTER OF THE RULE, BUT

⁶ Two such canons are directly applicable in this case:

First, the States may tax Indians only when Congress has

⁷ 34 Op. Atty. Gen. 439, 45 (1925). This Court also articulated that principle without attribution in Superintendent of the Five Civilized Tribes v. Commissioner of Internal Revenue, 295 U.S. 418, 420 (1935).

⁸ See also the exemption-from-state-taxation case Mescalero Apache Tribe v. Jones, 411 U.S. 145, 155-56 (1973), where this Court invoked Squire as if it were fully interchangeable with this Court's federal-authorization-of-state-taxation case law.

⁹ In so doing, this Court expressly acknowledged that a property tax and a use tax on personalty later attached to real property were two different things. E.g., id. at 158 ("This is not to say that use taxes are for all purposes deemed simple ad valorem property taxes.").

¹⁰ This Court has recently indicated in a treaty case that the Indian-law canon requiring ambiguities to be construed in favor of Indian interests also supersedes a general presumption about the legality of executive action. Minnesota v. Mille Lacs Band of Chippewa Indians, 526 U.S. 172, 194 n.5 (1999). That same reasoning is consistent with affording to the Indian-law canons pride of place in the tax-exemption context.

¹¹ E.g., Montana Blackfeet Tribe of Indians, 471 U.S. 759 (1985); Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1973); McClanahan v. Arizona State Tax Comm'n, 411 U.S. 164 (1973); Squire v. Capoeman, 351 U.S. 1 (1956); Choate v. Trapp, 224 U.S. 665 (1912).

¹² Nor do any of the cases cited in the relevant section of Choteau involve an actual Indian-law statutory textual ambiguity, much less hold that in such an instance the actual ambiguity must be construed against the Indians to the benefit of the federal government because the general tax-exemption maxim somehow supersedes the Indian-law canons. In Heiner v. Colonial Trust Co., 275 U.S. 232 (1927), this Court considered whether a non-Indian oil and gas lessee of Osage mineral interests was exempt from federal income tax. The non-Indian raised the then-operative, constitutionally-based "federal instrumentality" doctrine. This Court rejected that argument by noting that the "federal-instrumentality" doctrine could not even then bind Congress with respect to the imposition of a federal tax, and then found that the text of the Revenue Act of 1916 provided compelling evidence that Congress meant what it said (and hence no ambiguity existed). Id. at 234-35. This Court went on to reject an assertion, based on the policy that Indians are impliedly exempt from income tax, that non-Indian lessees of Indians are also exempt. Id. at 235. No ambiguity was found. No construction occurred. The Indian- law canons were not mentioned. The mention of the general tax- exemption maxim therefore was simply dictum.

Shaw v. Gibson-Zahniser Oil Corp., 276 U.S. 575 (1928), is for present purposes no different than Heiner. In Shaw, an oil company asserted a "federal instrumentality" exemption from state gross- production taxes on land that was purchased for a restricted Indian with proceeds from royalties of a lease of his restricted allotment lands. This Court rejected the exemption. In so doing, this Court found no Indian-related statute ambiguous, engaged in no statutory construction, and did not mention the Indian-law canons of construction. Consistent with the absence of an ambiguity, Us Court found the statutory authority for taxation clear:

The Act of May 27, 1908, contains no express exemption from

¹³ Act of April 26, 1906, section 19, 34 Stat. 137; Act of May 27, 1909, section 4, 35 Stat. 312.

¹⁴ Mescalero Apache was decided the same day as McClanahan v. Arizona State Tax Comm'n, 411 U.S. 164 (1973), a case with which Mescalero Apache should be read in pari materia. The implications of McClanahan are discussed in substantial detail above. Supra at 19-20.

¹⁵ Little Six, Inc. v. United States, 210 F.3d 1361, 1365 (Fed. Cir. 2000) ("In view of the inconsistency between the statute's reference to winnings and its reference to section 6060I and Chapter 35 of the Internal Revenue Code, we conclude that the language in section 2719(d)(1) is AMBIGUOUS" (emphasis added)); Little Six, Inc. v. United States, 229 F.3d 1383, 1384 (Dyk, J., dissenting from denial of rehearing) ("Despite the government's efforts, THERE IS NO WAY TO RECONCILE section 2719(d)(1)'s literal limitation to provisions of the Internal Revenue Code 'concerning the reporting and withholding of taxes with respect to the winnings from gaming or wagering operations' with its parenthetical reference to Chapter 35" (emphasis added)); Chickasaw, 208 F.3d at 871 (10th Cir. 2000) ("Although it is true that section 2719(d)(1)'s reference to Chapter 35 is somewhat CRYPTIC . . ." (emphasis added)).

¹⁶ In Rice v. Rehner, 463 U.S. 713, 733 (1983), this Court indicated that the Indian-law canons of construction are not to be employed when Congressional intent against the Indians' interest is clear from the face of the statute and its legislative history. Here, the face of the statute and the legislative history do not clearly demonstrate that the construction of section 2719(d)(1) proffered by the Petitioner Nations is incorrect.

¹⁷ Chickasaw, 208 F.3d at 883; Little Six, 210 F.3d at 1365.

¹⁸ 26 U.S.C. sections 4401, 4411 (1994) (App. 91a, 94a).

¹⁹ 26 U.S.C. section 4402 (1994) (App. 92a).

²⁰ As a general principle, deletion of express language from an earlier draft, by itself, provides some evidence that Congress did not intend as a result the deleted provision. However, it is the application of that principle that is important. For example, in INS v. Cardoza-Fonseca, 480 U.S. 421 (1987), cited by the Government to this Court in material respect at the Petition stage, see Br. for the United States at 8, the critical passage (making a refugee ineligible for asylum unless his deportation or return would be prohibited by a particular section of the Immigration and Nationality Act) was replaced with nothing, thus giving rise to this Court's statement that "Congress does not intend sub silentio to enact . . ." 480 U.S. at 442-43. That same replacement with nothing occurred in Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 199-200 (1974), and Mescalero Apache Tribe v. Jones, 411 U.S. 145, 152-53 n.9 (1973), also earlier relied upon by the Government, see Br. for the United States at 8. The "deletion" principle should have no application here, since the phrase containing the general reference to "taxation" in the earlier version of S. 555 was replaced with the specific reference to the exemption-containing Chapter 35, thus precluding any conclusion premised on mere deletion.

²¹ In at least one Indian-law case, Oklahoma Tax Comm'n v. Barnsdall Refineries, Inc., 296 U.S. 521 (1936), even the DELETION of language from the final draft of a statute was not dispositive. There, this Court disregarded the deletion of the critical word "now" (which had been stricken from the final version of the bill as enacted), and adopted a construction giving application to that stricken word for the benefit of the lessee of Indian lands. Id. at 523-25.

²² This Court has not indicated that application of the Indian-law canons can be avoided by seriatim resort to legislative history at ever-increasing levels of remoteness to resolve virtually any textual ambiguity. If such were the case, then (since the Indian- law canons operate solely in the presence of ambiguity) "continued vitality" would be merely semantic since not only could they not control the outcome of any litigation, but also they could never even theoretically APPLY. Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163 (1989), to which the Government referred this Court at the Petition stage, see Br. for the United States at 13, certainly does not support such a canon-destroying view. In Cotton Petroleum, this Court took great pains to re-emphasize the canons' continued vitality. See 490 U.S. at 177 ("[A]mbiguities in federal law are, as a rule, resolved in favor of tribal independence."); id. ("[E]ven when [the relevant Congressional reports are] considered (IN THEIR BROADEST POSSIBLE TERMS . . . (emphasis added)); id. at 179 (same); id. at 186 (same). Moreover, the tribe in Cotton Petroleum sought to ground an exemption on a statute that was utterly silent about the matter, unlike here, where the statute is textually ambiguous. While the Petitioners in no measure deny the potential force of dispositive legislative history in appropriate cases, Cotton Petroleum does not support an Indian-law-canon-evading "keep reviewing the legislative history until something moves the issue off equipoise" approach to resolving federal statutory ambiguities affecting Indian Tribes. Hagen v. Utah, 510 U.S. 399 (1994), and Oregon Dept of Fish & Wildlife v. Klamath Indian Tribe, 473 U.S. 753 (1985), also invoked by the Government at the Petition stage, see Br. for the United States at 13, are also subject to similar observations. In short, for the Indian-law canons to have actual vitality, they must at some point meaningfully be controlling. Cotton Petroleum, Hagen and Klamath in no way impeach that conclusion.

²³ In Cabazon Band, this Court expressly recognized the "congressional goal of Indian self-government, including its 'overriding goal' of encouraging tribal self-sufficiency and economic development" in the specific tribal-gaming context. 480 U.S. at 216.

²⁴ See also Cabazon Band, 480 U.S. at 217 n.20 (quoting President Reagan's 1983 Statement on Indian Policy, which provided in pertinent part that "[i]t is important to the concept of self- government that tribes reduce their dependence on Federal funds by providing a greater percentage of the cost of their self-government." (citation omitted)).

²⁵ Petitioners are aware that in circumstances substantially different from those here, this Court has declined to give weight to post-passage statements of legislators. In Weinberger v. Rossi, 456 U.S. 25 (1982), this Court found insufficient to establish the kind of affirmative Congressional expression of an intent to abrogate provisions in thirteen international agreements "one isolated remark by a single Senator, ambiguous in meaning when examined in context . . .", id. at 35. Here, the Chairman's letter to the IRS Commissioner is far from ambiguous in meaning when examined in context. In Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102 (1980), this Court rejected the comments of a Congressman who did not sponsor the bill in question, but authored another bill, with different critical provisions that were not adopted. See id. at 118. Here, Senator Inouye was IGRA's primary author and sponsor. In. Chrysler Corp. v. Brown, 441 U.S. 281 (1979), a case in which the reports of both Houses and statements of other members of Congress refuted a statutory interpretation consistent with the remarks of the sponsor, id. at 311, this Court explained that such remarks of a sponsor are not controlling in analyzing legislative history. But here, in contrast, nothing in the Senate Report or the statement of any other member of Congress refutes the Chairman's explanation. Finally, in TVA v. Hill, 437 U.S. 153 (1978), this Court recognized that such a statement could not serve to change the legislative intent of Congress expressed before the Act's passage. See id. at 193. Here, no such clear statement of pre-passage legislative intent of Congress's inclusion of Chapter 35 in section 2719(d)(1) exists, much less is sought to be changed by the Chairman's explanation.