Attorney-at-Law

INDIANS DIVIDED AND NOT TAXED

In Uncategorized on 03/06/2019 at 16:33

The last time I looked at the corporate division of a Federally-chartered Indian tribe, I punted. That Obliging Jurist, Judge David Gustafson, unloaded 68 pages in Uniband, Inc., 140 T. C. 13, filed 5/22/13, which I mentioned as a one-off in my blogpost “Indians Not Taxed,” 5/22/13.

Today Judge Joseph Robert (“Take No Prisoners”) Goeke counts coup on IRS in Blue Lake Rancheria Economic Development Corporation, 152 T. C. 5, filed 3/6/19, in only 52 pages. Blue Lake Rancheria is a Federally-recognized Indian tribe; I’ll refer to their Economic Development Corporation as Blue Lake.

Blue Lake was an IRA Sec. 17, that is, a corporation chartered by the Federal government under Section 17 of the Indian Reorganization Act of 1934.

Judge Goeke provides a quick overview. “To establish an IRA sec. 17 corporation, an Indian Tribe must submit to the Secretary of DOI a resolution adopted by its tribal council requesting the issuance of a charter.  The Secretary has delegated his power to issue corporate charters to the Bureau of Indian Affairs (BIA) regional offices.  As part of the approval process, each IRA sec. 17 charter must be reviewed by BIA for consistency with Federal law and subsequently approved by the BIA Regional Director and by the Assistant Secretary–Indian Affairs.  Following approval by DOI, the tribal council must pass another resolution ratifying the charter.  Upon passage of the ratifying resolution, the corporation is officially created.  Once issued, an IRA sec. 17 charter cannot be revoked or surrendered except by an act of Congress.” 152 T. C. 5, at pp. 17-18.

Blue Lake adopted a resolution incorporating Mainstay, a corporate division, which handled employee leasing and staffing, and ran up a carload of unpaid FICA/FUTA, which IRS attempts to collect from Blue Lake, claiming Mainstay is a subsidiary and Blue Lakes owes the taxes.

Remember the Courts cut the Indians much slack. IRA Sec. 17 is extremely broad, and Judge Goeke will make it as broad as can be. State law must give way to Congress’ Constitutional mandate to deal with the Indians.

The tribal division is different from any other subsidiary. It is truly a legal stand-alone. When Mainstay needed to take title to an office building wherein to operate, the lending bank wanted title placed in Blue Lake d/b/a Mainstay, because their counsel had no desire to tread in the area of Indian law. I don’t blame counsel; here be dragons. And Judge Goeke gives that the go-by when IRS claims this shows Mainstay was alter ego of Blue Lake.

Mainstay had its own EIN, its own bank accounts, ran the building, paid operating costs and debt service itself, and had benefits and burdens. “[Mainstay] had its own customers, including certain departments of the State of California, and used written contracts and client service agreements with those customers.  [Mainstay] was paid by its customers; {Blue Lake] did not receive payments from [Mainstay] customers.  [Mainstay] leased equipment and automobiles in its own name and made lease payments on the same.  [Mainstay] had commercial general liability insurance, workers compensation insurance, and property and casual [sic; I think you meant “casualty”, Judge] insurance all in its own name.  The premiums for these policies were all paid out of [Mainstay’s] operating account.” 152 T. C. 5, at pp. 12-13.

And when Mainstay factored its receivables, everything was done in Mainstay’s name; although Blue Lake waived sovereign immunity to keep the deal going, the waiver extended to Mainstay only, and anyway, Blue Lake had authority to waive sovereign immunity in its charter.

There’s the usual dictionary-chaw over the word “incidental,” relating to corporate powers under State law, and the distinction between State law powers and Indian powers. But it all comes down to the broad Federal enactment and the Constitutional supremacy thereof.

Blue Lake created a separate division, whose liabilities don’t flow back to Blue Lake.

So when divided, Indians are not taxed.

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