Leaders of the Tulalip Tribes celebrate the opening of a new business at the Quil Ceda Village in Washington. The tribe has attracted a slew of big name retailers to the site but is losing out on millions of dollars in taxes to local and state governments. Photo by The Greater Marysville Tulalip Chamber of Commerce

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Bureau of Indian Affairs opens door to big shift in tribal economies

Thursday, December 8, 2016

The Obama administration might be winding down but the Bureau of Indian Affairs is offering tribes a huge opportunity to address one of their most pressing economic development concerns.

Tribes have long complained of unfair systems of taxation imposed on businesses that set up shop on their homelands. States and local governments are quick to assert authority on reservations, demanding a cut of the sale of goods to non-Indians.

That leaves tribes reluctant or unable to impose their own taxes, thus depriving them of a key source of revenue. But that could be changing now that the BIA plans to update the Indian Trader Regulations for the first time in more than 30 years.

“Modernizing the Indian Trader Regulations will help to promote self-determination and economic development for Tribes across the country,” Deputy Secretary Michael Connor, the second-in-command at the Interior Department, said in a press release. “The regulations governing Indian Traders are long outdated and do not reflect or respect current business practices occurring in Indian Country.”

A notice that will be published in the Federal Register on Friday explains the problem with dual taxation. Under existing systems, revenues end up going to state and local governments, bypassing the tribal communities that typically need the money the most.

"Dual taxation of traders and activities conducted by traders and purchasers can impede a tribe’s ability to attract investment to Indian lands where such investment and participation are critical to the vitality of tribal economies," the forthcoming notice states. "Tribal communities continue to struggle with unmet needs, such as in their schools and housing, as well as economic development, to name a few. Moreover, beyond the operation of their governments, tribes continually pursue funding for infrastructure, roads, dams, irrigation systems and water delivery."

The revenues bypassing Indian Country can be staggering. In Washington, the Tulalip Tribes are losing out on about $40 million a year under a taxation system that's being challenged in federal court.

In North Dakota, the numbers are even more outrageous. In the last three years, Mandan, Hidatsa and Arikara Nation has been deprived of more than $1 billion due to the way the state imposes taxes on energy development on the reservation.

"We wish the numbers were only $40 million," Chairman Mark Fox said at a tribal conference last year when dual taxation was discussed. "A billion dollars. Not $40 million. A billion dollars."

To build the case for changing the system, the BIA has scheduled a series of consultations with tribes to find out more about taxation and other issues. Although the meetings will begin after Republican president-elect Donald Trump is sworn into office, it would be difficult -- though not impossible -- for the new administration to stop the effort.

“Our nation-to-nation relationship, our treaty and trust responsibilities and our North star of tribal self-determination and self-governance guide our obligation to consult early and often with tribes as we consider policies that have tribal implications,” Larry Roberts, the de facto leader of the BIA, said on Thursday. “We encourage tribes to participate in this rulemaking process to ensure that the path forward is the result of tribal input.”

But since a solid rule hasn't been proposed at this time, it would be up to the incoming administration to develop one. Trump has yet to name someone to lead the Interior Department, much less someone to run the BIA, so tribes are still in the dark about the direction of the president-elect.

The leader of Trump's Native American Coalition, however, is encouraging Trump to open the door to more economic development in Indian Country. Rep. Markwayne Mullin (R-Oklahoma), a citizen of the Cherokee Nation, says tribes should be in control of what happens on their homelands

"In working with the incoming administration, I am confident that we can improve the land trusts and allow the tribes to be independent in determining their own use of resources and land," Mullin said in a statement. "It is time to end the overreaching paternalism that has held American Indians back from being the drivers of their own destiny."

The tribal consultations on the Indian Trader Regulations will take place on the following dates:

Thursday, February 23, 2017
Seattle area
Tuesday, February 28, 2017
Southeastern U.S.
Thursday, March 2, 2017
Southern California
Tuesday, March 7, 2017
Billings, Montana
Thursday, March 9, 2017
Rapid City, South Dakota
Tuesday, March 14, 2017
Prior Lake, Minnesota

Forthcoming Federal Register Notice:
Traders with Indians (To Be Published December 9, 2016)