Litigation

Judge rules against Miccosukee citizen in gaming per capita dispute

Tuesday, August 23, 2016

The Miccosukee Tribe owns and operates the Miccosukee Resort & Gaming in Miami, Florida. Photo from Facebook

A member of the Miccosukee Tribe of Florida owes federal taxes on her gaming per capita payments, a federal judge ruled last week.

In 2001, Sally Jim received $272,000 from her tribe but claimed she did not owe taxes because it was a considered a "general welfare" payment. Judge Cecilia Altonaga disagreed and said the money came from the tribe's gaming enterprise and is therefore subject to taxes under the Internal Revenue Code.

"Jim is subject to federal income tax on all her income from whatever source derived," Altonaga wrote in the 13-page decision. "While Indian tribes are not subject to federal income taxation, individual American Indians are subject to the same requirement to pay income taxes as non-Indians, unless specifically exempted by a treaty or agreement with the tribe or an act of Congress."

Under H.R.3043, the Tribal General Welfare Exclusion Act, Congress has exempted "general welfare" payments from federal income tax. The bill was signed into law in September 2014 and Jim cited it in hopes of avoiding liability.

However, the law does not exempt gaming per capita payments from, Altonaga determined in a prior ruling in the case. The Indian Gaming Regulatory Act< she noted, requires such payments to be taxed.

In a June 3 order, Altonaga said "the Tribal GWE Act was not meant to supplant the IGRA; that is, per capita distributions of gaming revenue remain taxable income, even if these distributions arguably promote the general welfare of a tribe."

The decision only applies to Jim but it could be used against other tribal members who allegedly failed to pay taxes on their per caps, attorney and tax specialist David Garvin told The Miami Herald, which first reported on the case. Millions of dollars are at stake.

"The tribe cannot take any solace from this order. The outcome is inevitable," Garvin told the paper.

The tribe operates Miccosukee Resort and Gaming, a Class II facility. Figures provided to the court indicate the operation is doing well -- distributions from a Miccosukee trust fund totaled nearly $33.3 million in the fiscal year that ended September 2001, a figure that jumped to $36.3 million in the next year.

According to Altonaga, the "vast majority, if not all" of those distributions are derived from gaming proceeds. The trust fund is based on a percentage of gaming revenues so the actual amount the tribe makes at the facility is likely to be higher.

The tribe has about 600 members and per capita payments are distributed equally to all members. As the head of a household in a matriarchal society, Jim testified that she was received payments in cash on behalf of herself and three other adults in her home. The $272,000 she accepted in 2001 would come to $68,000 per person.

Read More on the Story:
Miccosukee court loss could clear way for IRS to claim $1 billion in back taxes (The Miami Herald 8/23)

11th Circuit Court of Appeals Decision:
US v. Billie (June 1, 2015)