Case 5:14-cv DMG-DTB Document 155 Filed 03/01/17 Page 1 of 21 Page ID #:2435

Transcription

1 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 0 Jennifer A. MacLean (admitted Pro Hac Vice) JMacLean@perkinscoie.com Benjamin S. Sharp (admitted Pro Hac Vice) BSharp@perkinscoie.com PERKINS COIE LLP 00 Thirteenth Street, N.W., Suite 00 Washington D.C Telephone: (0) - Facsimile: (0) -0 GREGORY P. PRIAMOS, County Counsel (Bar No. ) RONAK N. PATEL, Deputy County Counsel (Bar No. ) rpatel@co.riverside.ca.us COUNTY OF RIVERSIDE 0 Orange Street, Suite 00 Riverside, California 0 Telephone: () -00 Facsimile: () - Attorneys for Defendants COUNTY OF RIVERSIDE, LARRY W. WARD, PAUL ANGULO and DON KENT AGUA CALIENTE BAND OF CAHUILLA INDIANS, v. Plaintiff, RIVERSIDE COUNTY, LARRY W. WARD, in his official capacity as Riverside County Assessor, PAUL ANGULO, in his official capacity as Riverside County Auditor-Controller, and DON KENT, in his official capacity as Treasurer Tax Collector, UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Defendants; and DESERT WATER AGENCY, Defendant-Intervenor. EASTERN DIVISION Case No. :-cv-0000-dmg-dtb Judge: Hon. Dolly M. Gee DEFENDANTS REPLY IN SUPPORT OF THEIR CROSS-MOTION FOR SUMMARY JUDGMENT Hearing Date: March, 0 Time: :00 p.m. Courtroom: C Trial Date: June, 0 Action Filed: January, 0 Case No. :-cv-0000-dmg-dtb

2 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: TABLE OF CONTENTS Page A. U.S.C. Does Not Preempt the PIT... B. The PIT is Not Preempted Under Bracker... C. The PIT Does Not Infringe on and is Not Preempted by Tribal Sovereignty i - Case No. :-cv-0000-dmg-dtb

3 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 0 CASES TABLE OF AUTHORITIES - ii - Page(s) Agua Caliente Band of Mission Indians v. County of Riverside, F.d (th Cir. )..., Barona Band of Mission Indians v. Yee, F.d (th Cir. 00)...,, Bryan v. Itasca County, Minnesota, U.S. ()...0 Chase v. McMasters, F.d 0 (th Cir. )..., Confederated Tribes of the Chehalis Reservation v. Thurston Cty. Bd. of Equalization, F.d (th Cir. 0)... Contrast Crow Tribe of Indians v. State of Montana, F.d (th Cir. ), sum. aff d, U.S. ()..., Cotton Petroleum Corp. v. New Mexico, 0 U.S. ()...passim Fisher v. District Court of Sixteenth Judicial Dist. of Montana, U.S. ()... Fort Mojave Tribe v. County of San Bernardino, F.d (th Cir. )..., Gila River Indian Community v Waddell, F.d (th Cir. )...0,, Mescalero Apache Tribe v. Jones, U.S. ()...passim Moe v. Confederated Salish and Kootenai Tribes, U.S. ()..., 0 Montana v. Crow Tribe of Indians, U.S. ()... Case No. :-cv-0000-dmg-dtb

4 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 0 Oklahoma Tax Comm n v. Citizen Band Potawatomi Indian Tribe, U.S. 0 ()... Ramah Navajo Sch. Bd., Inc. v. Bureau of Revenue of New Mexico., U.S. ()... Santa Rosa Band of Indians v. King Cnty., F.d (th Cir. )..., Seminole Tribe of Florida v. Stranburg, F.d (th Cir. 0)..., United States v. County of Fresno, U.S. ()...,, United States v. Cty. of Fresno, 0 Cal.App.d, Cal.Rptr. ()..., Wagnon v. Prairie Band Potawatomi Nation, U.S. (00)...,, Warren Trading Post Co. v. Arizona State Tax Comm n, 0 U.S. ()...0 Washington v. Confederated Tribes of the Colville Indian Reservation, U.S. (0)..., 0, White Mountain Apache Tribe v. Bracker, U.S. (0)...passim Williams v. Lee, U.S. ()... Yavapai-Prescott Indian Tribe v. Scott, F.d 0 (th Cir. )...0 STATUTES U.S.C. (a)... U.S.C....passim U.S.C...., U.S.C iii- Case No. :-cv-0000-dmg-dtb

5 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: U.S.C....,, Fla. Stat Stat., Pub. L. (Jul., 0)... 0 Stat., Pub. L. - (Feb., 0)... 0 Stat., Pub. L. - (Dec., 0)... REGULATIONS C.F.R....0, 0 0 -iv- Case No. :-cv-0000-dmg-dtb

6 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #:0 0 0 Defendants County of Riverside, Larry Ward, Paul Angulo, and Don Kent (in their official capacity, collectively the County ) cross-motion for summary judgment should be granted because the County has demonstrated that no genuine dispute of material fact exists, and that as a matter of law, federal law does not preempt California s possessory interest tax ( PIT ). This Court should first hold that Section of the Indian Reorganization Act of ( IRA ), U.S.C., does not preempt the PIT because the reservation lands leased by non-indians in this case were not acquired or allotted pursuant to that or any other provision of the IRA. Moreover, Section does not exempt possessory interests owned by non- Indian lessees from taxation. Second, the federal leasing regulations do not preempt the PIT under White Mountain Apache Tribe v. Bracker, U.S. (0). The leasing regulations are not comprehensive or pervasive. In fact, in 0, the Secretary of the Interior eliminated various requirements to make the regulations less rigorous. Nor do the regulations require oversight of non-indian activities on leased lands. The PIT does not conflict with, nor undermine, the federal interests reflected in the leasing regulations. Third, the PIT also survives any Bracker balancing of federal, tribal and State interests. This Court should reject the Tribe s assertion that the PIT interferes with tribal sovereignty. The Supreme Court has, for decades, rejected the argument that a tax falling exclusively on non-indians and having at best a de minimus and indirect impact on a tribe, constitutes an interference with tribal sovereignty. By contrast, the State s strong interest in having non-exempt persons pay their share for the governmental services they receive has been established, as a matter of law, for over a century. As the State law reflects, California has chosen to provide U.S.C. has recently been recodified at U.S.C. 0, but as did the Tribe in its briefing, the County will continue to reference it as Section to avoid confusion. - - Case No. :-cv-0000-dmg-dtb

7 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 0 governmental services to all its citizens by taxing property and possessory interests in tax-exempt property at the local level. The State s interest is well-established and fully justifies application of the PIT to the non-indian lessees in this case. The County respectfully requests that this Court grant the County s crossmotion for summary judgment, deny the Tribe s cross-motion for summary adjudication, and dismiss the Tribe s complaint, on grounds further explained below. A. U.S.C. Does Not Preempt the PIT The Tribe s reliance on U.S.C. fails for three simple reasons. First, the Tribe s reservation was not acquired pursuant to the IRA. Second, U.S.C. does not require Congress to treat all tribes alike and it is Congress, not the Secretary, that treats them differently. And third, the United States Supreme Court and California courts have held the PIT is not a tax on the beneficial ownership of land and is therefore not barred by U.S.C... There is no reason for the Court to consider the Tribe s U.S.C. argument because the lands involved here are not U.S.C. lands. The statute, and the tax exemption it contains, is expressly limited to lands or rights acquired pursuant to this Act. U.S.C. (emphasis added). It is undisputed that the Reservation was established by Executive Order in - (Defendants Statement of Undisputed Facts in Support of its Cross-Motion for Summary Judgment (Dkt. 0-) ( SF ), ) decades before Congress passed the IRA, and were largely allotted to individual members pursuant to U.S.C., decades after. The leased lands were not lands or rights acquired pursuant to the IRA, so the tax exemption in simply does not apply. The inquiry should end there. For the same reasons, the Tribe s cross- motion should be denied. The Tribe s arguments fail as a matter of law, and the Tribe presented no facts to prove its Bracker and tribal sovereignty arguments. -- Case No. :-cv-0000-dmg-dtb

8 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 0 The Tribe, however, urges the Court to ignore the express limitation in and apply it to all trust lands, regardless of when or how the land was set aside. Nothing the Tribe cites supports that reading. For instance, the Tribe cites Mescalero a case where the incidence of taxation was on the tribe, not non- Indians to argue that should be applied more broadly than its plain language requires. See Agua Caliente Band of Cahuilla Indians Reply in Support of its Motion for Summary Judgment ad Consolidated Response to Defendants Motions for Summary Judgment, Doc. ( Opp. ) at (citing Mescalero Apache Tribe v. Jones, U.S. ()). But Mescalero did not hold that lands set aside by treaty or Executive Order should be treated as lands acquired under. Rather, that case involved tax-exempt U.S. Forest Service lands that the Tribe leased, and because of the land status, it would have been meaningless for the United States... to convey title to itself for the use of the Tribe. Mescalero, U.S. at n. (citation omitted). Mescalero treated already tax-exempt lands owned by the federal government as lands to avoid an absurd result in that case; Mescalero provides no basis to treat Executive Order lands as lands acquired under an entirely different legal authority. Certainly the Chase and Santa Rosa Band cases cited by the Tribe [Opp. at ] do not support the Tribe s position. The lands in both of those cases were in fact acquired pursuant to the IRA, so clearly was applicable. See Chase v. McMasters, F.d 0, 0 (th Cir. ) (acquisition made pursuant to Section ); Santa Rosa Band of Indians v. King Cnty., F.d, n. (th Cir. ) ( [w]e need not decide the validity of the regulation as applied to lands not acquired pursuant to [as] the lands involved here were so acquired. ). Moreover, all of these cases Mescalero, Chase and Santa Rosa Band are readily distinguishable because the challenged taxes were imposed directly on the Tribe or the members of a Tribe for whom the federal government held -- Case No. :-cv-0000-dmg-dtb

9 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 0 property in trust. See Chase, F.d at 0; Santa Rosa, F.d at ; Mescalero, U.S. at.. In arguing for an impermissibly broad application of, the Tribe also asserts that U.S.C. bars non-uniform treatment of federally recognized tribes. Opp. at, n.. But this argument also fails. Although Congress in may have barred federal agencies from engaging in discriminatory or non-uniform treatment of tribes when implementing statutes of general applicability, does not limit the plenary power of Congress to pass laws that treat different tribes differently, nor does it override the express terms of hundreds of treaties, executive orders, and federal statutes that are tribe- and/or reservationspecific. Congress has often enacted statutes that benefit or affect a specific tribe. Even the federal leasing statute involved here expressly treats tribes non-uniformly by setting different lease durations for different tribes. See U.S.C. (a) (all restricted Indian lands can only be leased for a term of years with Secretarial approval, but the restricted lands held in trust or reserved for the approximately tribes specifically listed in the statute can instead be leased for -year terms); id. (b) (only Tulalip Tribe leases need no secretarial approval for a lease less than years, or less than 0 years if the lease is executed pursuant to certain tribal regulations). In fact, Congress non-uniform treatment of tribes under the IRA, including, has been upheld by the Supreme Court. See Carcieri, (holding that authorizes the Secretary to acquire land in trust for tribes under federal jurisdiction in, but not for those not under federal jurisdiction in ). See e.g., Act to provide for the conveyance of certain land inholdings owned by the United States to the Pascua Yaqui Tribe of Arizona, Stat., Pub. L. (Jul., 0); Act to provide for the addition of certain real property to the Reservation of the Siletz Tribe in the State of Oregon, 0 Stat., Pub. L. - (Dec., 0); Act to allow the Miami Tribe of Oklahoma to lease or transfer certain lands, 0 Stat., Pub. L. - (Feb., 0). -- Case No. :-cv-0000-dmg-dtb

10 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page 0 of Page ID #: 0 0 Simply, U.S.C. does not transform lands set by Executive Order in - into lands acquired pursuant to this Act, to which Section is expressly limited, nor alter the terms of the Act, pursuant to which they were allotted. See U.S.C... Apart from the fact that the lands involved here were not acquired under the IRA, the tax exemption in plainly does not apply to the possessory interests involved here. While Congress expressly exempted from taxation the title to any lands or rights the United States acquires pursuant to, it says nothing about the taxability of the possessory interests non-indians acquire pursuant to the leases those non-indians negotiate with tribes or individual Indians. Section is specific in authorizing the United States to acquire title to lands or rights (e.g., surface rights, water rights) and holding such lands or rights in trust (and exempt from taxation). The possessory rights a non-indian might independently acquire under a lease are not rights the United States holds in trust under the IRA. The Court in Mescalero acknowledged the limited scope of the exemption when it observed that preempts state and local taxes as applied to lands and rights in land of Indian tribes, but not income derived from its use. Mescalero, U.S. at. The PIT is not a tax on either; it is a tax on the possessory rights in taxexempt land that non-indians acquire by lease. Indeed, the construction of the Tribe advocates would insulate all non- Indian activity a view that the case law clearly refutes. For example, under the Tribe s construction, the Supreme Court in Cotton Petroleum Corp. v. New Mexico, 0 U.S. (), would have to have held that preempted New Mexico s tax assessed on non-indians extracting oil and gas from leased reservation lands beneficially owned by Indians, but the Court did not. To the contrary, the Cotton Petroleum Court upheld New Mexico s tax because is not a blanket tax exemption for non-indian use of trust property and the incidence of the tax fell on non-indian taxpayers who leased trust land and engaged in oil and gas exploration -- Case No. :-cv-0000-dmg-dtb

11 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 0 on that land. The same analysis should apply to the PIT. See e.g., Barona Band of Mission Indians v. Yee, F.d, (th Cir. 00) ( [t]he dispositive question [in Indian tax cases] is who the state is taxing and where ); Wagnon v. Prairie Band Potawatomi Nation, U.S., 0 (00) ( [U]nder our Indian tax immunity cases, the who and the where of the challenged tax have significant consequences. We have determined that [t]he initial and frequently dispositive question in Indian tax cases is who bears the legal incidence of [the] tax. ). As in Cotton Petroleum, there is no dispute here that the legal incidence of the PIT falls only on non-indian lessees and relates only to the interests they have acquired by lease. In fact, the Tribe cannot cite a single case where a court found that preempted a state tax where the incidence of taxation fell on non-indians. Instead, the Tribe points [Opp. at -] to Mescalero, U.S., and Seminole Tribe of Florida v. Stranburg, F.d (th Cir. 0). But in both of those cases, the legal incidence fell on an Indian tribe as taxpayer, and thus are distinguishable. In Mescalero, New Mexico assessed gross receipts and use taxes on the Mescalero Apache Tribe in connection with its operation of a ski resort located on federal land under a long term lease. The tribe was the objecting taxpayer, in contrast to the facts here, and the Mescalero Court noted that [l]essees of otherwise exempt Indian lands are also subject to state taxation. U.S. at. The factual context This interpretation of also would be inconsistent with a host of cases uniformly upholding state sales taxation for sales made by Indian vendors to non- Indians on reservation. See, e.g., Moe v. Confederated Salish and Kootenai Tribes, U.S. (); Washington v. Confederated Tribes of the Colville Indian Reservation, U.S. (0); Oklahoma Tax Comm n v. Citizen Band Potawatomi Indian Tribe, U.S. 0 (). In its Bracker argument [at, ], the Tribe cites Barona to argue that no Bracker balancing is required when the legal incidence of a tax falls on an Indian stating correctly that in such an instance, there is a bright line rule that the tax is preempted. [Id. at ]. But applying the very same bright line rule here means that only preempts a tax where the legal incidence of the tax falls on an Indian, which is not the case with the PIT. -- Case No. :-cv-0000-dmg-dtb

12 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 0 of Mescalero where the state attempted to tax Indians in what was deemed to be Indian country is critical to its holding. And that holding has little bearing in this case, where the PIT is only assessed on non-indians leasing Indian land, and the Tribe is neither taxed nor legally responsible for that tax. For the same reason, Stranburg is inapposite. The Florida Rental Tax at issue in that case was a tax on the privilege [of engaging] in the business of renting, leasing, letting, or granting a license for the use of any real property. F.d at (quoting Fla. Stat..0). The rental business in that case was operated by the Seminole Tribe, and the incidence of taxation thus fell on the Tribe when it rented reservation land to non-indians to operate a food-court at the Tribe s casinos. Because the tax fell on a tribal business, the tax should have been preempted, rendering the Stranburg court s analysis irrelevant. Regardless, it is undisputed here that the Tribe is not taxed and does not directly or indirectly pay the PIT, making Stranburg s analysis inapplicable.. Because the question of a tax s legal incidence is critical to the application of, the Court should reject the Tribe s urging [Opp. at 0-] that Wagnon and Fresno be ignored, two cases that speak directly to this Court s determination of the legal incidence issue. First, Wagnon, U.S. at 0-0, stands for the simple but important proposition that the scope of a state tax like the PIT is an issue of state law. In other words, in order to analyze whether the PIT is preempted requires one to determine who and what is taxed as a matter of California law. Second, United States v. County of Fresno, U.S. (), Although a lease provision passed on to the lessees the obligation to pay the tax, the legal incidence remained on the Tribe. See Barona Band, F.d at (construction of the state statute determines the legal incidence of the tax, not a contract provision that shifts the economic burden to the tribe). For the same reason, Stranburg s analysis of Bracker is dicta and should not be followed. See Wagnon, U.S. at 0 ( We have applied the balancing test articulated in Bracker only where the legal incidence of the tax fell on a nontribal entity ). -- Case No. :-cv-0000-dmg-dtb

13 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 0 confirms the definitive construction by California courts that a tax on possessory interests is not a tax on land or the owner of tax exempt land, as the Tribe argues. As the California Court of Appeal stated, the PIT is not a tax on the Federal Government, on Government property, or on a federal function. Rather, it is a tax imposed on the private citizen, and it is the private citizen s usufructuary interest in the government land and improvements alone that is being taxed. U.S. at - (quoting United States v. Cty. of Fresno, 0 Cal.App.d, 0, Cal.Rptr., ()) (citations omitted). Fresno is relevant here for its construction of the PIT, and its conclusion that the PIT is not a tax on land or the owner of land. It is a tax on a private citizen s possessory interest, not a tax on an Indian s beneficial ownership, which is what exempts from taxation.. The Court also should disregard the Tribe s criticism of the Ninth Circuit in Chehalis, where the court explained why prior precedent did not control its analysis of s application to permanent improvements owned by a tribe on trust land. Opp. at -, citing Confederated Tribes of the Chehalis Reservation v. Thurston Cty. Bd. of Equalization, F.d (th Cir. 0). The Tribe asserts that the Ninth Circuit s conclusion that does not apply to possessory interests was made casually and without analysis... in passing without due consideration. To the contrary, that conclusion was made after reasoned analysis. The Chehalis case involved trust land acquired under the IRA and permanent improvements on the land that were owned in fee by a joint venture in which the tribe owned an undivided percent interest. Id. at -. Thurston County conceded that it could not tax the land under, but instead sought to tax the permanent improvements owned by the tribe on trust land. Id. Thurston County argued that the earlier Agua Caliente and Fort Mojave Ninth Circuit cases involving the PIT were controlling, but the Ninth Circuit held that exempted taxes both on the land and the permanent improvements owned by the tribe. The court in a full analysis, albeit in a footnote explained that the earlier cases were not controlling, primarily -- Case No. :-cv-0000-dmg-dtb

14 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 0 because the PIT taxes non-indian lessees rights of possession, as opposed to interests other than lands or rights covered by that were being unlawfully taxed by Thurston County. Id. at, n.. On that basis, the Ninth Circuit also correctly concluded that Agua Caliente Band of Mission Indians v. County of Riverside, F.d (th Cir. ) and Fort Mojave Tribe v. County of San Bernardino, F.d (th Cir. ) did not involve [] property taxes... so they do not implicate. Id. at. The discussion was reasoned and persuasive, and cannot be dismissed by the Tribe as casual and without analysis. B. The PIT is Not Preempted Under Bracker. Contrary to the Tribe s assertion [Opp. at -], the federal government does not comprehensively regulate the activity taxed by the PIT, and therefore the Bracker balancing weighs in the County s favor. The Tribe s error appears to be based on its incorrect premise that the regulated activity in question is the formation of a lease, rather than the activities carried out by non-indians pursuant to their leases (i.e., a residential dwelling or operation of a commercial business). It is the latter activity that is the subject of PIT, and thus must be the focus of the Bracker analysis. See Cotton Petroleum, 0 U.S. (where non- Indian taxpayers drilled for oil and gas pursuant to leases of Indian land and the lessees were subject to a mineral extraction tax, the court weighed in the Bracker balancing analysis only those regulations pertinent to the economic activity carried out under the lease oil and gas exploration not the formation of a lease, which was regulated by BIA); Bracker, U.S. (in assessing fuel consumption and motor carrier taxes, weighing only the government s regulation of timber harvest, the economic activity conducted by the taxpayer on tribal land). So while the The Tribe attacks the County s citation to Agua Caliente and Fort Mojave, arguing that Bracker repudiated and resoundingly rejected the preemption analysis performed by the Ninth Circuit in those cases, and that the law involving -- Case No. :-cv-0000-dmg-dtb

15 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 federal government here may regulate how and when the Tribe can form a lease on trust land, the federal government and the Tribe have little to no involvement in regulating the economic activities non-indian lessees conduct on Agua Caliente tribal and allotted lands. See SF, -. The Indian leasing regulations at C.F.R. do not control non-indian lessee activity, oversee the businesses lessees operate, whom they hire, or the houses they may build or occupy. Apart from collecting the rents, there simply is no federal or tribal interest in the possession of the leasehold that is taxed by the PIT.. The Court should reject the Tribe s attempt [at ] to avoid controlling Ninth Circuit case law on the question of whether the Indian leasing regulations are pervasive. See Yavapai-Prescott Indian Tribe v. Scott, F.d 0 (th Cir. ) and Gila River Indian Community v Waddell, F.d (th Cir. ). Whether regulations occupy the field requires an assessment of the regulations, not the particular facts in a case, and the regulations here plainly do not occupy the field, as noted above. The Tribe s efforts to distinguish controlling precedent by arguing that the transactions taxed in Yavapai and Gila River were essentially non- Indian in character and the value at issue was not generated on or derived from leasing of Indian land are unpersuasive. Opp. at, 0. For instance, those cases 0 preemption of state taxation has changed substantially since those cases were decided. [Opp. at ]. The Tribe asserts that those cases upheld the PIT only because they predated Bracker, which, the Tribe claims, first articulated the doctrine of implied preemption But prior to Bracker, the Supreme Court had impliedly preempted state taxes in a number of cases. See Confederated Tribes of the Colville Indian Reservation, U.S.at -;Bryan v. Itasca County, Minnesota, U.S. (); Confederated Salish and Kootenai Tribes, U.S. ; Mescalero, U.S. ; Warren Trading Post Co. v. Arizona State Tax Comm n, 0 U.S. (). To the extent that the Tribe is arguing that C.F.R. Part provides comprehensive federal regulation of any value generated on or derived from the leasing of reservation land, Opp. at, the argument fails. If accepted, that argument would mean all taxes assessed on non-indians engaged in activity under leases in Indian country (i.e., taxes on non-indians generating or deriving value from economic activity conducted on leased trust land) would be unlawful, and Bracker balancing would be superfluous. -0- Case No. :-cv-0000-dmg-dtb

16 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #:0 0 0 involved sales taxes on non-indians purchasing from a non-indian commercial vendor operating under a lease on reservation. This case involves a tax on non- Indians commercial businesses or residents of homes under leases on reservation. Moreover, the effect of invalidating the state tax in both instances would be to enable a tribe to market a tax exemption without adding any value to the non-indian activity that is taxed. The subject of the taxes may be different, but they are factually parallel in other respects. As a result, the Court should apply Yavapai and Gila River to hold that C.F.R. does not pervasively or comprehensively regulate non-indian economic use of leased tribal or allotted land.. The Tribe claims that Bracker balancing requires the County to prove a direct connection between the tax revenues and the services that the County and related government entities provide. Opp. at. This argument is wrong on the law, and in any event, the facts show such a connection. First, as a legal matter, the law of this Circuit does not require a nexus between the taxed activity and the government function provided. Barona Band of Mission Indians, F.d at ; Gila River Indian Community, F.d at ( The Tribe s insistence that there be a direct connection between the state sales tax revenues and the services provided to the Tribe is similarly meritless. ). These Ninth Circuit cases follow Cotton Petroleum, where the Supreme Court found that the relevant services provided by the State include those that are available to lessees and members of the Tribe off the reservation as well as on it. 0 U.S. at. 0 The Court did not consider the source of funding for the services to be critical and saw no impediment to the tax even where off-reservation services and Indian per capita payments (that 0 The restrictive language in the Court s earlier opinion in Ramah Navajo Sch. Bd., Inc. v. Bureau of Revenue of New Mexico., U.S., - () ( activities off the reservation are not a legitimate justification ) appears to be superseded by the unequivocal analysis of government services in Cotton Petroleum. -- Case No. :-cv-0000-dmg-dtb

17 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 0 the Court did weigh in its analysis), were not funded with revenues from the challenged tax. Even if case law required a direct connection between the PIT and the services provided, such a connection exists here. Taxes imposed on possessory interests in lands and improvements are directly connected to the roads that access those properties (paid for in part by the PIT); the flood control that protects those properties (again, paid for in part by the PIT); and the emergency, police, education, and other services provided to protect, educate, and benefit the residents of those properties (also paid for in part by the PIT). See SF, -, -. In sum, the PIT funds services directly related to non-indian leaseholders use and enjoyment of their possessory interests in tribal or allotted lands.. The Tribe asserts that Bracker balancing requires it to show that the economic effects of the tax adversely impact [the] Agua Caliente and undermine... economic self-sufficiency. Opp. at 0. But there simply are no facts demonstrating such an economic impact. Indeed, the Tribe cites only one piece of evidence in support of its argument that it voluntarily passed an ordinance that withholds implementation of a tribal PIT while California s PIT is being assessed, even though such concurrent taxation is perfectly legal. The Tribe proffers no evidence suggesting that the Tribe tried and failed to implement its tax in the first As with the Tribe s argument regarding federal regulation, the Tribe mistakenly insists that the direct connection it claims the County must prove is between federally-regulated leasing on Indian trust lands and the services that the County and related governmental entities provide. But as noted above, the PIT does not tax leasing of Indian trust lands. Instead, it taxes the non-indian possessory use of the leased land. If, contrary to case law, the County had to show a direct connection between activities and services, it would be a connection between the activities conducted by lessees and the services the County and related government entities provide to them as residents. Courts routinely hold that concurrent taxation by two jurisdictions is lawful, and taxation by one does not undermine the other as a matter of law. See cases at County MSJ (Dkt. 0) at -; Gila River, F.d at (unlike land use regulations where conflicting state and tribal law may result in preemption, this conflict does not apply to the field of taxation where the laws of both State and Tribe may be enforced simultaneously. ) -- Case No. :-cv-0000-dmg-dtb

18 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 0 instance; that it could not do so as a concurrent tax; that the PIT has had any chilling effect on tribal economic development ; that the Tribe even has the means and ability to impose and collect a tribal PIT from non-indian lessees of tribal land under existing long-term leases; or that the Tribe has any authority over the allotted land of its members in order to levy and collect tax from lessees of allotted land (which comprise the overwhelming majority of leaseholds at issue here). All that the Tribe has said is that more than $ million in annual revenues would go to the Tribe under its tax if the California PIT were eliminated. Opp. at. But this statement, even if true, certainly does not prove that California s PIT is undermining tribal economic self-sufficiency. In sum, the Tribe has not met its burden of proof to demonstrate that it has suffered any adverse economic impact, or that the California PIT (as opposed to the Tribe s voluntary forbearance in collecting a concurrent tax) has caused an adverse impact. C. The PIT Does Not Infringe on and is Not Preempted by Tribal Sovereignty. This Court should reject the Tribe s claim that the PIT interferes with tribal sovereignty and thus is preempted. The Tribe relies on the Ninth Circuit s decision in Crow Tribe of Indians v. Montana, F.d (th Cir. ), sum. aff d, U.S. (), where the Court held that a state must prove its tax is narrowly tailored to meet its legitimate needs where the state is taxing resources (minerals owned by the tribe) that are a component of the reservation land itself. Id. at. Crow Tribe is inapposite, however, because the California PIT plainly taxes a non-indian lessee, not any component of the reservation land. See Fresno, U.S. at - (the PIT is a tax on the private citizen, and it is the private Contrast Crow Tribe of Indians v. State of Montana, F.d (th Cir. ), sum. aff d, U.S. (), where the Tribe presented expert evidence that the extraordinarily high state taxes (.%) on extraction of coal from reservation land actually had a negative effect on the coal s marketability, therefore interfering with federal and tribal interests. Id. at Case No. :-cv-0000-dmg-dtb

19 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page of Page ID #: 0 0 citizen s usufructuary interest in the government land and improvements alone that is being taxed. ) (citations omitted). Because the PIT is not analogous to the severance tax on Indian minerals at issue in Crow Tribe, the County need not show the narrow tailoring required by Crow Tribe.. The Tribe s argument for preemption based on interference with tribal sovereignty also fails because the Supreme Court has made clear that state taxes on non-indians simply do not interfere with tribal sovereignty. Washington v. Confederated Tribes of the Colville Indian Reservation, U.S., (0) ( Nor would the imposition of Washington s tax on these purchasers [Indians not enrolled in the reservation tribe] contravene the principle of tribal self-government, for the simple reason that nonmembers are not constituents of the governing Tribe ). For the same reason that a state tax is not preempted because it conflicts with a concurrent tribal tax, the state tax also cannot interfere with tribal selfgovernance. Wagnon, U.S. at n. (after deciding that the Kansas motor fuel tax was not preempted even though the tribe assessed its own motor fuel tax, holding that the same authorities also foreclose the Nation s contention that the... tax is invalid... because it interferes with the Nation s right to self-government. ).. Finally, courts simply do not rely on interference with sovereignty or self-governance to invalidate state taxation, apart from the one extraordinary circumstance present in Crow Tribe. Instead, preemption based on tribal sovereignty is generally applicable only to those internal functions that are inherent Another reason why Crow Tribe does not apply here is that the.% tax on coal at issue in that case (which was a substantial burden on the tribe, see Cotton Petroleum, 0 U.S., - and n.) is a far cry from the % tax at issue here, no portion of which is borne by the Tribe. Indeed, the Supreme Court explained in a subsequent case related to Crow Tribe that the coal tax was invalidated not because the State lacked the power to tax coal at all, but because the taxes at issue were extraordinarily high. Montana v. Crow Tribe of Indians, U.S., 0-0 () (reviewing how Cotton Petroleum held that both a state and a tribe can impose severance taxes on a non-indian lessee, and that the state severance tax was not preempted, in contrast to Crow Tribe s.% tax). -- Case No. :-cv-0000-dmg-dtb

20 Case :-cv-0000-dmg-dtb Document Filed 0/0/ Page 0 of Page ID #: 0 in tribal government, such as adoption of an Indian child, Fisher v. District Court of Sixteenth Judicial Dist. of Montana, U.S. (), or tribal court resolution of legal disputes on reservation, Williams v. Lee, U.S. (). This is reasonable, because unlike cases that turn on internal functions that are inherent in tribal government there is legal authority for concurrent taxation by state and tribal jurisdictions, and the state s legitimate tax simply does not interfere with the Tribe s exercise of sovereignty in imposing its own concurrent tax. For the foregoing reasons, the Court should grant the County s cross-motion for summary judgment, deny the Tribe s cross-motion for summary judgment, and dismiss this case. 0 DATED: March, 0 Respectfully submitted, PERKINS COIE LLP By: /s/ Jennifer A. MacLean Jennifer A. MacLean(D.C. Bar No. 0) Benjamin S. Sharp (D.C. Bar No. ) Gregory P. Priamos (Bar No. ) Ronak Patel (Bar No. ) Attorneys for Defendants County of Riverside, Larry W. Ward, Paul Angulo and Don Kent -- Case No. :-cv-0000-dmg-dtb