Opinion: Decision signals victory in Indian Country taxation lawsuit

A view of the Agua Caliente Reservation in southern California. Photo from Facebook

The Agua Caliente Band of Cahuilla Indians has won the right to proceed with a taxation lawsuit against Riverside County in California. Attorneys Steven D. Gordon and Kenneth W. Parsons believe the decision paves the way for a victory against local and state taxation efforts in Indian Country:
Indian country may be close to another victory against state and local taxes. On Feb. 8, 2016, a California district court issued an order that signals it is likely to invalidate Riverside County's imposition of a possessory interest tax on lessees of trust lands within the reservation of the Agua Caliente Band of Cahuilla Indians (the Tribe). The case is Agua Caliente Band of Cahuilla Indians v. Riverside County, et al, Case. No. ED-CV-14-007-DMG (C.D. Calif. 2014).

Riverside County assesses a possessory interest tax on the lessees of the Tribe's trust lands. The tax is a general revenue-generation tax, which the Tribe alleges has no direct nexus with services provided by Riverside County to the Tribe or its members.

On Jan. 2, 2014, the Tribe filed a complaint against Riverside County seeking to invalidate the tax. Although Riverside County assesses the possessory interest tax against lessees, the Tribe alleges that the economic burden of the tax falls at least in part on the Tribe and its members. In particular, the Tribe alleges that the levy of the possessory interest tax lowers the lease value of its trust lands and costs the Tribe tax revenue. (The Tribe foregoes the imposition of a tribal tax on lessees of its trust lands in order to prevent double taxation.)

On July 28, 2014, Riverside County filed a motion for judgment on the pleadings. The court denied this motion on Feb. 8, 2016. Although this ruling does not finally decide the case, the court's reasoning indicates that it is likely to invalidate the tax when it does issue a final decision.

Get the Story:
Steven D. Gordon and Kenneth W. Parsons: State, Local Taxes on Tribal Leases Vulnerable After California Court Order (JD Supra 3/4)

Federal Register Notices:
Residential, Business, and Wind and Solar Resource Leases on Indian Land (December 5, 2012

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