Opportunity to Comment.

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1 Public Notice and Request for Comments on Proposed Enactment of the Possessory Interest Tax of the Three Affiliated Tribes of the Fort Berthold Indian Reservation Copies may also be obtained from the Three Affiliated Tribes Tribal Tax Office, at the Tribal Administration Building 404 Frontage Road, New Town, ND Opportunity to Comment. The purpose of this notice is to invite comments on the proposed Possessory Interest Tax. The Tribe will then consider all comments, and will determine the extent to which changes may be needed before making a final decision on the amendments. Any amendments to the law would then be submitted to the Secretary of the Interior for approval and publication in the Federal Register. Anyone wishing to comment on the Tribe s proposed Possessory Interest Tax may do so by submitting comments in writing to the following: Mary Mashunkashey, Tribal Tax Director Three Affiliated Tribes Tribal Administration Building 404 Frontage Road New Town, ND marymtax@mhanation.com Comments must be received by 4:30 PM CST on May 31, 2016 CHAPTER 7: THE POSSESSORY INTEREST TAX OF THE THREE AFFILIATED TRIBES OF THE FORT BERTHOLD RESERVATION SECTION 701. Statement of Purpose. Pursuant to the provisions of Chapter 1 of this Code, it is the policy of the Three Affiliated Tribes of the Fort Berthold Reservation to provide their members and non-members residing, doing business, or working within the jurisdiction of the Tribe with essential governmental services. To finance this governmental policy, the Tribe adopts in this Chapter a possessory interest tax, which will provide the Tribe with a portion of the revenues necessary to address the increased demands on the Tribal government, fund essential governmental services to benefit all individuals and businesses on the Reservation. SECTION 702. Short Title. The tax levied by this Chapter shall be called the Possessory Interest Tax and shall be levied on the ownership and use of a non-exempt possessory interest on Trust land, which includes any right or interest obtained in a tract of Trust land within the boundaries of the Fort Berthold Reservation whether by lease, permit, contract, easement, rightof-way, deed, or any other agreement which authorizes a Person (as defined in Section of this Code) to use that property for commercial business, profit, or use. SECTION 703. Definitions. In addition to the definitions set out in Section 102 of this Code, the following definitions apply to the terms as used in this Chapter: 1

2 1. Company. Company includes any individual, copartnership, business trust, corporation, limited liability company, joint-stock company or association. 2. Commercial business. Commercial Business shall mean any business for profit which is not a Utility and shall include agriculture (which includes farming, ranching, grazing, livestock, animal husbandry, and horticulture) and similar land related activities and mining of surface and subsurface rights. 3. Owner. "Owner" means any person who owns any interest in utility property as grantee, lessee, permittee, assignee, sublessee, or transferee. In the case of parties to a joint venture or operating agreement, the Tribe shall determine whether a joint venture partner or an operator is an owner in light of the terms of the agreement on the basis of the parties respective participation in and entitlement to income or profits, assets and management of the venture or operation. 4. Utility. Utility as used in this Chapter shall mean privately or publicly held entity primarily engaged in supplying, transmitting, transporting or distributing electricity, oil and oil products, gas, natural gas, natural gas products, water, carbon dioxide, liquid hydrocarbons, telephone, telegraph or other communication services, or transportation services including freight services. 5. Property used for utility purposes. Property or an interest in property is "used for utility purposes" if it was granted, or is used, in connection with operation of a utility, as that term is defined herein. 6. Utility property. "Utility property" means all property used for utility purposes and located on or using trust lands on the Reservation. Utility property shall include all improvements placed on trust land on the Reservation. 7. Trust land. Trust land includes all land title to which is held by the United States in trust for the Tribe or for any individual Indian, as well as all land held by the Tribe or any individual Indian, title to which is subject to restriction against alienation imposed by the United States. For purposes of this Chapter, trust land includes the entire acreage of any tract where the United States holds an undivided interest in such tract in trust for the Tribe or for any Indian, or where the Tribe or individual Indian holds an undivided interest in such tract subject to restriction against alienation imposed by the United States. SECTION 704. The Tax Cycle. The tax rate and the approaches to determining the appraised value, (i.e., the Tax Base) of the Possessory Interest shall be done on an annual basis. SECTION 705. Imposition and Rate of Tax. The possessory Interest tax set forth herein shall be imposed on the ownership and use of any possessory interest in real and personal property that is located on Trust land within the Reservation and used for business purposes, as of January 1 st of each year and shall be assessed at the rate of three percent (3%) of the assessed value of the possessory interest in the property as determined in accordance with method set out in section 706. Any amendment to the tax rate shall be made by resolution of the Tribal Business Council, with notice given to all taxpayers, published in newspapers of general circulation and posted or published at such places as the Tax Commission designates. SECTION Oil and Gas Gathering Lines, Electricity and Telecommunications. Notwithstanding anything to the contrary in this chapter, Utilities engaged in; (1) the operation 2

3 of pipelines that are used to transport crude oil or natural gas from the production site (wellhead), or (2) the sale or distribution of electricity or telecommunication services, shall pay the possessory interest tax based on the same rate and amount that they would otherwise pay under North Dakota law as it pertains to the payment of property taxes, including any payments in lieu of property taxes. SECTION 706. Computation of Value of Possessory Interest. The value of a possessory interest shall be assessed as provided herein. The method reflects the reasonable value of the use of the possessory interest which is subject to taxation. 1. Possessory interests subject to tax. Any possessory interest in trust land and property used on trust land on the Reservation is subject to the tax, unless exempted under this Code. 2. Date of assessment. The assessment date for each calendar year shall be January 1 of that year. Possessory interests in property shall be assessed annually as of the assessment date. The Tribe may assess unassessed possessory interests as of the date upon which the property should have been assessed, and may redetermine incorrect or erroneous assessments. 3. Valuation for assessment of possessory interests. The Tax base of all taxable possessory interests shall be fifty percent (50%) of the actual value thereof as determined by the Tax Commission in the manner described by this Subsection, and such percentage shall be uniformly applied without exception. 4. Basis of Valuation. The value of a possessory interest shall include the ad valorem value of the possessory interest in real and personal property on trust land and shall be determined in accordance with the provisions of this Section for purposes of possessory interest taxation as follows: a. For pipelines used to transport crude oil or natural gas from the production site (wellhead) including the related and associated personal property and improvements; i The value shall be equal to the value determined by North Dakota for property tax purposes. The value of a possessory interest in utility property is presumed to be equal the full value per linear mile of the utility property as assessed by the State of North Dakota pursuant to North Dakota Century Code Chapter 57-06, multiplied by the number of miles of the utility located on trust land within the Reservation. The value of utility property on trust land not measured by linear mile shall be presumed to be equal to the full value as assessed by the State of North Dakota pursuant Chapter of the North Dakota Century Code. For purpose of these presumptions the most recent North Dakota assessment made prior to the assessment date shall be used. b. For possessory interests of other utilities. The basis of valuation of the possessory interest of utilities not covered by subsection 4.a shall include the dollar value of the Trust land covered by the possessory interest and the capitalized value of net income attributable to the use of the land, as determined pursuant to this subsection 3

4 4.b of Section 706, and in accordance with forms and worksheets provided by the Tax Commission, as follows i. Statement of Utility and Taxpayer/Tax Commission. Every taxpayer of any utility on trust lands within the Reservation whose possessory interest is in operational mode or is capable of being in operational mode on the assessment date of any year, shall, no later than March 31 st of each year, prepare, sign and file with the Tax Commission, a return on a form as provided by the Tax Commission that shows: (a) The name, and address, of the Taxpayer and the nature of the Taxpayer's business. (b) A description of the possessory interest of the Taxpayer over Trust land within the Reservation, including length, width and acreage. (c) The gross operating revenue, the gross operating expenses, and the net income, and other financial information necessary to compute the tax in accordance with this Subsection, including, but not limited to audited financial statements. Where the foregoing information is submitted by the taxpayer to federal or North Dakota regulatory authorities, the taxpayer shall provide the information as set out in the taxpayer s reports to such authorities along with copies of the federal or state reports relied upon. (d) A statement of the amount of the tax due calculated in accordance with the capitalization net income method set out herein. ii. On the basis of information provided by the taxpayer as set out in Subsection i, the value of a possessory interest shall be determined in accordance with the capitalization income method. The value of a possessory interest shall be determined, thus, by computing the capitalized value of the net income exclusive of any non-utility income and deductions, and in proportion to the value of the Trust land upon which the possessory interest is located. The capitalization rate shall be set at thirteen percent (13%) except when and if the taxpayer demonstrates a different and higher number. The reasonable expenses to be incurred in producing the proportional annual net income shall be allowed, and the proper adjustment that any applicable federal or state regulatory authorities do not allow to be included in their forms shall also be allowed. Such capitalization shall be done for the remaining life of the possessory interest. If the possessory interest life is indefinite, the life of the possessory interest shall be presumed to be twenty-five (25) years for the purpose of this method. iii. The value of land for the purposes of this Subsection shall be set at $6,000 per acre; and the said value may not be escalated by more than the annual rate of inflation as measured by the annual average rate of the GNP Price Deflator of the preceding year for the succeeding tax years. 5. Alternative valuation methodologies. If the valuation of the possessory interest as determined under section 706 subsection 4.b is challenged pursuant to Section 708, the value of the possessory interest shall be determined by the Tax Commission, after a hearing, based on one or more of the following methods: 4

5 a. Fair market value method. On the basis of the selling prices of comparable property (whether within or outside the Reservation) which are sold by willing sellers to willing buyers, neither of whom are under a compulsion to act. b. For utility possessory interests, the value as determined by North Dakota. The value of a possessory interest in utility may be presumed to be equal the full value per linear mile of the utility property as assessed by the State of North Dakota pursuant to North Dakota Century Code Chapter 57-06, multiplied by the number of miles of the utility located on trust land within the Reservation. The value of utility property on trust land not measured by linear mile shall be presumed to be equal to the full value as assessed by the State of North Dakota pursuant Chapter of the North Dakota Century Code. For purpose of these presumptions the most recent North Dakota assessment made prior to the assessment date shall be used. c. Any other method which reasonably and accurately reflects the value of the possessory interest. SECTION 707. Assessment of Tax. 1. The Tax imposed by this Chapter is based upon the return filed by the taxpayer, provided however that when it appears that the return filed by the taxpayer does not reflect the tax due under this Chapter, the Tax Commission shall assess the taxpayer for the deficiency, interest, penalties, and costs. 2. If no return is filed, the Tax Commission is authorized to make an estimate of the tax due, and to assess the taxpayer for that tax, interest, penalties, and costs. The assessment is binding on the taxpayer. 3. If the taxpayer fails to provide information within its possession or control which is relevant to an assessment of taxes due, and which it is required to provide under this Chapter, the Tax Commission is authorized to make an estimate of the tax due and to assess the taxpayer for that tax, interest, penalties, and costs. This assessment is binding on the taxpayer unless it is shown that the estimate, on the basis of the best information available to the Tax Commission, was clearly erroneous. SECTION 708. Challenges to valuation. 1. Any owner of a possessory interest in property may, at the time of filing the return required by this Chapter, or at any time prior to the deadline for filing such return, file a challenge to the value established as provided in Section 706. The challenge shall state in detail why the value is not accurate, what the correct value is, and why that value is correct. It shall have attached to it as an exhibit any appraisals or other information upon which the owner intends to rely. The challenge shall be filed with the Tax Commission and heard in accord with the procedures set out in Chapter 5, Sections 501 through 507 of this Code. 2. During the pendency of a challenge proceeding, the tax shall be paid and collected based on the value established as provided by Section 706. If the value 5

6 assessed by the Tax Commission is greater than such value, any further tax due shall be paid within thirty (30) days of the date of the decision, or, if the decision is appealed, within thirty (30) days of the decision of the appeal. If the value assessed by the Tax Commission is less than such value the Commission shall order a refund of any overpayment or permit the owner to deduct it from future payments. SECTION 709. Reporting Requirements. Each taxpayer shall comply with the following reporting requirements and such other requirements as are by rules or regulations adopted by the Tax Commission: 1. Forms. The Tax Commission shall provide taxpayers with forms for the reporting of the value of all possessory interests to the Tribe. Information reported by the taxpayer on these forms shall be the basis for assessment of tax due. 2. Reporting Date. Each taxpayer shall report the value of its possessory interests by May 31 st of the year following the tax year. If the date of submittal of the report to the related regulatory authority, as required in Subsection 706 is after May 31 st, the report for the previous year may be accepted. 3. Extension of Time. Upon timely written requests to the Tax Commission, a taxpayer may request an extension of time within which to report the value of its possessory interest; and for good cause shown, the Tax Commission may extend, for a period not to exceed thirty (30) days, the reporting date, but no further extension shall be allowed. Such a request for extension, to be timely, must be received by the Tax Commission prior to the reporting date. Requests for extension received by the Tax Commission after the reporting date shall not be considered. If the Tax Commission extends the date for filing valuation reports for a taxpayer, the date for mailing the notice of tax assessment to that taxpayer provided for in Section 710 of this Chapter shall automatically be extended by the amount of additional time granted the taxpayer for filing the valuation reports. 4. Failure to Report, Administrative Valuation. If a taxpayer fails to file substantially complete possessory interest tax reporting information, or to otherwise provide requested information or documents within its possession or control which are relevant to an assessment of the extent or value of its possessory interests, the Tax Commission may proceed to assess the value of the taxpayer s possessory interests and to assess taxes accordingly. This assessment will be binding on the taxpayer unless it shows that the valuation, on the basis of the best information available to the Tax Commission, was clearly erroneous or unless the Tax Commission for other good cause shown relieves the taxpayer from the operation of this Subsection. 5. Reporting Value of Exempt Interests. No taxpayer or entity shall be required to file property valuation forms for any possessory interest which is exempt under Sections 108 and 406 and other relevant Sections of this Code, provided that the Tax Commission may require any taxpayer or entity to file the information necessary to establish the claimed tax exemption. 6. Authority of the Tax Commission. The Tax Commission may by form or regulation require any taxpayer to file the information or documents deemed necessary for the proper and efficient administration of the tax. 7. Administrative Reports. The Tax Commission shall report all possessory interest tax activities and collections to the Tribal Business Council at least annually. 6

7 8. Amended Returns. Amended returns for assessment may be filed, and will be considered for a period of one year from the date of the original report. After one year, all reports will be considered final. Any refunds of overpayments as a result of corrected assessment will be paid to the taxpayer. SECTION 710. Notice of Assessment and Payment of Taxes Due. 1. Notice of tax assessment and of the amount of tax due shall be mailed by the Tax Commission by July 30 th of the year following the tax year, unless that date has been extended. The notice shall be based on the value established as provided in Section 706 unless a different value has been finally established by the Tax Commission. The notice shall be mailed to the address specified in the most recent return filed pursuant to Section709, or, if no return has been filed, to the owners' last known address. Failure to send or receive notice, shall not relieve the owner of the obligation to timely pay the tax due. 2. The assessed tax shall be paid within thirty (30) days of the date of mailing said notice, unless another date is specified by the Tax Commission in the notice of assessment or the due date has been extended pursuant to this Code. Any taxes assessed shall be paid by check or money order made payable to the Three Affiliated Tribes Tax Commission as provided by Section 304 of this Code. SECTION 711. Extension of Time for Paying Tax. Upon the filing with the Tax Commission of a timely request for an extension of time within which to pay assessed taxes, and upon a showing of good cause, the Tax Commission may extend, for a period not to exceed forty-five (45) days, the due date for payment of taxes assessed, but no further extension shall be allowed. Such a request for extension, to be timely, must be filed on or before the date the assessed taxes are due. The penalty for late payment as provided for in Section 712 of this Chapter shall not apply to any payment for which an extension has been granted. SECTION 712. Penalty for Late Payment. Any taxpayer failing to pay the amount of tax assessed by the due date, except in cases where extensions have been granted, shall pay a penalty on the outstanding balance in accordance with the provisions of Chapter 3 of the Code. SECTION 713. Lien for Taxes. Lien against Possessory Interest. The procedures for placing a Lien against the possessory interest shall be according to the provisions of Section 408 of the Code. SECTION 714. Exemptions. 1. The exemptions contained herein are in addition to the exemptions contained in Sections 108 and 406 of the Tax Code. The possessory interest tax is not considered a tax on federal trust land for purposes of section of the Tax Code. 2. Possessory interests for the exploration and production of oil and gas are exempt from the possessory interest tax. SECTION 715. Method of Claiming Exemption. Any taxpayer owning both taxable and exempt possessory interests shall file with the Tax Commission a claim for any exemption. The claims for exemption shall be filed on the form provided by the Tax Commission and at the time of filing the return required by Section 709, and shall be accompanied by a map clearly 7

8 indicating the specific property for which exemption is claimed. Any taxpayer owning only exempt possessory interests shall be required to claim such exemptions only at the written request of the Tax Commission. SECTION 716. Appeal Procedures for Protested Taxes. Any appeals from assessments, or denial of refunds or other determinations made by the Tax Commission under this Chapter, shall be governed by Chapter 5, Sections of the Code. SECTION 717. Enforcement. The Tax Commission, in the name of the Tribe, shall have full power to collect taxes and penalties assessed, including the power to file suit in Fort Berthold District Court or in any other court of competent jurisdiction, and to execute on any judgment by all appropriate legal remedies including attachment and seizure of the assets of any delinquent taxpayer, as set forth in Chapter 4, Sections of this Code. SECTION 718. No Waiver of sovereign Immunity. Section 104 of this Code shall govern any challenge made in connection with the application of this Chapter. SECTION 719. Severability. If any part or application of this Chapter is held invalid, the remainder of the Chapter or its application to other situations or taxpayers shall not be affected. SECTION 720. Use of Tax Proceeds. The use of proceeds shall be approved by the Tribal Business Council to defray the costs of providing essential governmental services on the Reservation and for other purposes as approved by the Tribal Business Council. SECTION 721. Amendment. This Chapter may be amended by resolution passed by the Tribal Business Council in accordance with the Constitution of the Tribe. The Tax Commission shall notify taxpayers of any amendment in the manner considered appropriate by the Tax Commission under Tribal Laws. SECTION 722. Conflict with other applicable laws. In the event of a conflict between the provisions of this Code and any other provision of applicable law that by its terms is applicable to taxation, this Code shall supersede and be controlling. The provisions of this Chapter, which were adopted and have been in effect since December 13, 1990 (Resolution #90-05-JJR) shall be implemented in a manner consistent with any agreements that the Tribe may have with any other sovereign regarding tax issues. 8