taxation

What happened

Tax power in Indian country turns on three questions: who is being taxed, where the money was earned, and what treaties and statutes say. Three Supreme Court decisions show the pattern.

In McClanahan v. State Tax Commission of Arizona (decided March 27, 1973), Arizona withheld $16.20 in state income tax from a Navajo woman whose income came entirely from the Navajo Reservation. The Court held the state had no jurisdiction to tax the income of Navajo Indians residing on the reservation whose income is wholly derived from reservation sources, as the relevant treaty and federal statutes make clear.

In Merrion v. Jicarilla Apache Tribe (decided Jan. 25, 1982), the Tribe had adopted a severance tax on oil and gas production on reservation land. Oil and gas companies that leased tribal land challenged it. The Court held the Tribe has inherent power to impose the tax. It called the power to tax an essential attribute of Indian sovereignty, a necessary instrument of self-government and territorial management.

Cotton Petroleum v. New Mexico (decided April 25, 1989) involved the same Tribe's reservation. A non-Indian company already paid a 6 percent tribal severance tax and also faced New Mexico's 8 percent severance taxes. The Court held the State may validly impose its severance taxes on the same on-reservation production by non-Indian lessees, because such production is subject to nondiscriminatory state taxation unless Congress has acted to pre-empt it.

Summarized with AI assistance from 4 sources and checked against their words; not yet reviewed by historians or by the nations. Report an error