Case :0-cv-0-BHS Document 0 Filed // Page of HONORABLE BENJAMIN H. SETTLE 0 0 IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA CONFEDERATED TRIBES OF THE CHEHALIS RESERVATION, et al., THURSTON COUNTY BOARD OF EQUALIZATION, et al., v. Plaintiffs, Defendants. No. C0 BHS I. INTRODUCTION DEFENDANTS MOTION FOR DECLARATORY JUDGMENT Note on Motion Docket: December, 0 Defendants Thurston County, Thurston County Assessor, and Thurston County Treasurer move this Court pursuant to Fed. R. Civ. P. for declaratory judgment that the property tax assessment of the removable business personal property located at the Great Wolf Lodge is not preempted as a matter of law, in accordance with this Court s Order Granting Defendants Motion for Summary Judgment and Denying Plaintiffs Motion for Summary Judgment RE: Bracker Preemption ( Order. See Dkt.. On appeal of the Order, the Ninth Circuit held that the permanent improvements owned by CTGW are not subject to state and local property taxation under the holdings of Mescalero Apache Tribe v. Jones, U.S., S. Ct. ( and United States v. Rickert, U.S., S. White Mountain Apache Tribe v. Bracker, U.S., -, 00 S. Ct. (0. DEFENDANTS MOTION FOR DECLARATORY JUDGMENT - Cause No: C0 BHS 000 Lakeridge Dr. SW, Bldg. Olympia, WA 0 0/- FAX 0/0-00
Case :0-cv-0-BHS Document 0 Filed // Page of 0 0 Ct. (0, and rejected a Bracker analysis. Confederated Tribes of the Chehalis Reservation v. Thurston County Bd. of Equalization, F.d (th Cir. 0. Because the Ninth Circuit limited its decision to permanent improvements, this motion seeks declaratory judgment regarding CTGW s removable personal property that is not considered permanent improvements. II. FACTS This case concerns property taxes at the Great Wolf Lodge in Thurston County. The Great Wolf Lodge consists of permanent improvements including, but not limited to, a hotel, restaurants, conference center, and indoor water park. Dkt. at :-. The property at the Great Wolf Lodge also includes removable business personal property that is the subject of this motion. In 00, the Assessor originally assessed property taxes on the partially-constructed structures that would become the Great Wolf Lodge. Dkt. at :-. In 00, the Assessor assessed the completed structures the permanent improvements as parcel number 000 at $,,00. Dkt. 0- at. Also, in 00, the Assessor issued a Personal Property Value Change Notice that included a New Value of $,0,00 assessed as parcel number 000. Dkt. 0- at. The New Value consists of the removable business personal property involved in operating the Great Wolf Lodge. On December, 00, the Plaintiffs and Defendants filed cross motions for summary judgment. Dkt. 00 and Dkt. 0. The Plaintiffs explained the property at issue as follows: In 00, the County Assessor again assessed the Property at full completion, and at 00%, for tax year 00. Galanda Decl., Ex. Q. The initial 00 property value totaled $,,00.00. Id. In November 00, the Assessor also issued a Personal Property Value Change Notice, which included a "New Value" totaling $,0.00. Id, Ex. R. These 00 through 00 tax assessments are collectively "the Tax(es" referred to throughout this Motion. DEFENDANTS MOTION FOR DECLARATORY JUDGMENT - Cause No: C0 BHS 000 Lakeridge Dr. SW, Bldg. Olympia, WA 0 0/- FAX 0/0-00
Case :0-cv-0-BHS Document 0 Filed // Page of 0 0 Dkt - at,. Additionally, the Joint Proposed Pretrial Order included the parties agreed Admitted Facts that referenced the same change of value notice as follows: In November 00, the Assessor issued a Personal Property Value Change Notice, which included an assessed value for furniture and fixtures of $,0,00. Dkt. at,. As such, it is apparent that the removable business personal property at issue in this motion was encompassed in the claims brought before this Court and included in this Court s Order. On April, 00, this Court s Order granted Defendants motion for summary judgment and denied Plaintiffs motion for summary judgment on the issue of Bracker preemption, concluding that the taxes are not preempted as a matter of law. Dkt. ; Dkt. at :-. On June, 00, this Court, in an abundance of caution clarified its order dismissing Plaintiffs claims. Dkt. at :-. On July 0, 0, the Ninth Circuit reversed this Court s Order and remanded the case for further proceedings consistent with its opinion. Confederated Tribes, F.d at. The Ninth Circuit held that the permanent improvements at the Great Wolf Lodge are not taxable. Id. However, the Ninth Circuit did not address the removable, non-permanent improvements. Id. at ( At issue in this case is whether state and local governments have the power to tax permanent improvements on nonreservation land owned by the United States and held in trust for an Indian tribe.. Because the Ninth Circuit s opinion appeared to address only the permanent improvements and omitted the removable personal property, on August, 0, Defendants filed a motion for clarification in the Ninth Circuit on the discrete issue of the taxability of the separate parcel of personal property that is not permanently attached to the land. This personal property includes the furniture and other removable personal property at the Great Wolf Lodge. See Exhibit A, DktEntry 0- at, attached hereto. The Ninth Circuit denied this motion on August, 0. See Exhibit B, DktEntry 0, attached hereto. Defendants also filed a petition for rehearing en banc, or, alternatively, rehearing on August, DEFENDANTS MOTION FOR DECLARATORY JUDGMENT - Cause No: C0 BHS 000 Lakeridge Dr. SW, Bldg. Olympia, WA 0 0/- FAX 0/0-00
Case :0-cv-0-BHS Document 0 Filed // Page of 0 0 0, on the basis that the Ninth Circuit limited its analysis to permanent improvements, [and] the panel did not address whether CTGW s non-permanent, unattached business personal property is subject to property taxation. As the panel noted, the lease to CTGW provides that buildings and improvements shall be owned by CTGW during the term of the lease and, except for removable personal property, shall remain on the premises upon lease termination. DktEntry: - at - (quoting Article of the lease. By restricting its opinion to permanent improvements, the panel rendered no determination on the non-permanent improvements. See Exhibit C, DktEntry 0 at -, attached hereto. The Ninth Circuit denied the petition for rehearing on September, 0. See Exhibit D, DktEntry 0, attached hereto. III. ANALYSIS This Court s Order applied to all of CTGW s property at the Great Wolf Lodge, including the removable business personal property. The Bracker analysis involved a particularized inquiry into the nature of the state, federal, and tribal interests at stake... to determine whether in the specific context, the exercise of state authority would violate federal law. U.S. at -. Under Bracker there is no distinction between the types of property for which taxes are, or are not, preempted because the balancing test focuses on the tribal, federal and state interests at stake in determining whether taxation of non-indians is preempted as a matter of law. Id. at -. On appeal, the Ninth Circuit determined that the issues before it raised the purely legal question whether the exemption of trust lands from state and local taxation under [ U.S.C.] extends to permanent improvements on such lands. Confederated Tribes, F.d at. The Ninth Circuit s opinion held only that the permanent improvements are not subject to state property tax. Id. at. Thus, Defendants seek declaratory judgment that this Court s decision on summary judgment is the law of the case regarding the removable, non-permanent property, because the Ninth Circuit did not address it. DEFENDANTS MOTION FOR DECLARATORY JUDGMENT - Cause No: C0 BHS 000 Lakeridge Dr. SW, Bldg. Olympia, WA 0 0/- FAX 0/0-00
Case :0-cv-0-BHS Document 0 Filed // Page of 0 0 In its analysis focused only on permanent improvements, the Ninth Circuit considered both Rickert and Mescalero in rendering its opinion. Id. at. In Rickert, the Supreme Court held that permanent improvements (specifically houses and other structures on the lands held by Indian allottees were not subject to state and local taxes. U.S. at. The Supreme Court reasoned that if the land was not subject to local taxation, then the permanent improvements should not be subject to local taxation either because the improvements are essentially a part of the lands. Id. The Ninth Circuit explained that, in Mescalero, the Supreme Court held that permanent improvements (ski lifts owned by a tribe that were located on federal land leased to the tribe, were not taxable because the tax was equivalent to a tax on land, and therefore barred by. In reaching this conclusion, the Court first noted that the construction material at issue had already been installed in the construction of the ski lifts, and was therefore permanently attached to the realty. Relying on Rickert and, the Court reasoned that these permanent improvements on the Tribe s tax-exempt land would certainly be immune from the State s ad valorem property tax. The Court then held that the tax exemption in barred the tax New Mexico characterized as a use tax. As the Court explained, use is among the bundle of privileges that make up property or ownership of property, and therefore a tax upon use is a tax upon the property itself..... Accordingly, Mescalero makes it clear that where the United States owns land covered by, and holds it in trust for the use of a tribe (regardless of the particular form in which the [t]ribe chooses to conduct its business, exempts permanent improvements on that land from state and local taxation. Confederated Tribes, F.d at - (quoting Mescalero, U.S. at (internal citations omitted. The Ninth Circuit held that Mescalero s ruling was dispositive with regard to the permanent improvements at the Great Wolf Lodge. Id. at. The Ninth Circuit explained: [t]he Grand Mound Property at issue here is owned by the United States and held in trust pursuant to. Under Mescalero, s exemption from state and local taxation applies to the permanent improvements on that land. Thus, neither Thurston County nor any other state or local entity can tax the Great Wolf Lodge or other permanent improvements on that land. Thurston County s property taxes on the Grand Mound Property are therefore invalid under and Mescalero. The Court held that the Tribe s interest as lessee of the lands was within the immunity afforded by. U.S. at n.. DEFENDANTS MOTION FOR DECLARATORY JUDGMENT - Cause No: C0 BHS 000 Lakeridge Dr. SW, Bldg. Olympia, WA 0 0/- FAX 0/0-00
Case :0-cv-0-BHS Document 0 Filed // Page of 0 0 Id. Therefore, the Ninth Circuit stated, we are bound by Mescalero s interpretation of to conclude that Thurston County was barred from taxing the Great Wolf Lodge during the time in which the Grand Mound Property was owned by the United States and held in trust pursuant to. Id. at. As noted, the Ninth Circuit rejected a Bracker analysis and focused only on permanent improvements. Id. at,. Since the Ninth Circuit considered only permanent improvements and did not consider the removable business personal property in its opinion, this Court s Order stating that the property tax was not preempted should remain in effect with regard to the removable business personal property. U.S.C. states, in pertinent part: The Secretary of the Interior is authorized, in his discretion, to acquire, through purchase, relinquishment, gift, exchange, or assignment, any interest in lands, water rights, or surface rights to lands, within or without existing reservations, including trust or otherwise restricted allotments, whether the allottee be living or deceased, for the purpose of providing land for Indians..... Title to any lands or rights acquired pursuant to this Act or the Act of July, ( Stat., as amended ( U.S.C. 0 et seq. shall be taken in the name of the United States in trust for the Indian tribe or individual Indian for which the land is acquired, and such lands or rights shall be exempt from State and local taxation. U.S.C.. This section makes clear it applies to interests in land, water rights, or surface rights to lands. As the Ninth Circuit explained: Where a state or local government assesses a tax on land or improvements covered by, we are bound by and Mescalero to invalidate such taxes.... This is not so, however, when state or local governments impose taxes on interests other than the "lands or rights" covered by. In Agua Caliente, for example, we stressed that "[t]he California tax on possessory interests does not purport to tax the land as such," which would be barred by, "but rather taxes the 'full cash value' of the lessee's interest in it," which is not covered by. Confederated Tribes, F.d at n. (citing Agua Caliente Band of Mission Indians v. Cnty. of Riverside, F.d, (th Cir.. Because the Ninth Circuit opinion was premised on the DEFENDANTS MOTION FOR DECLARATORY JUDGMENT - Cause No: C0 BHS 000 Lakeridge Dr. SW, Bldg. Olympia, WA 0 0/- FAX 0/0-00
Case :0-cv-0-BHS Document 0 Filed // Page of 0 0 exemption from taxation in, the opinion does not address CTGW s removable personal property. Because the Ninth Circuit determined that the permanent improvements at the Great Wolf Lodge are not taxable based on Mescalero, Rickert, and U.S.C., the court did not address property other than land or rights covered by. Id. The panel opinion left intact this Court s Order regarding CTGW s removable personal property. In recently promulgated regulations, CFR Part, the Bureau of Indian Affairs interpreted. Id. at n.. The regulations define permanent improvements as buildings, other structures, and associated infrastructure attached to the leased premises. CFR.00. Taxing removable personal property was not addressed in the regulations interpreting. The regulations provide only that, Subject only to applicable Federal law permanent improvements on leased land, activities under a lease, and the leasehold or possessory interest are not subject to state tax. CFR.0. Because applies to land and rights in land, the regulations logically are limited to those rights and do not mention removable personal property. The regulations, therefore, further illustrate why the Mescalero decision interpreting did not encompass removable business personal property. Likewise, the Ninth Circuit did not determine the taxability of removable business personal property, leaving this Court s summary judgment order in effect as to the tax assessment of the removable personal property at the Great Wolf Lodge. IV. CONCLUSION For the aforementioned reasons, the Defendants respectfully request that this Court enter a declaratory judgment that the property taxes on the non-permanent, removable business personal // // // DEFENDANTS MOTION FOR DECLARATORY JUDGMENT - Cause No: C0 BHS 000 Lakeridge Dr. SW, Bldg. Olympia, WA 0 0/- FAX 0/0-00
Case :0-cv-0-BHS Document 0 Filed // Page of 0 property are not preempted as a matter of law in accordance with this Court s order granting summary judgment on April, 00. Dkt.. DATED this st day of November, 0. PROSECUTING ATTORNEY /s/ Jane Futterman /s/ Scott C. Cushing JANE FUTTERMAN, WSBA # SCOTT C. CUSHING, WSBA #00 Deputy Prosecuting Attorneys Prosecuting Attorney s Office 000 Lakeridge Dr. SW, Bldg. Olympia, WA 0 (0 - Fax: (0 0-00 futterj@co.thurston.wa.us cushins@co.thurston.wa.us Attorneys for Thurston County Defendants I hereby certify that on the st day of November, 0, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following attorneys for plaintiffs: 0 Gabriel S. Galanda Galanda Broadman, PLLC P.O. Box Seattle, WA gabe@galandabroadman.com Anthony S. Broadman Galanda Broadman, PLLC P.O. Box Seattle, WA anthony@galandabroadman.com /s/ Linda Olsen Linda Olsen, Paralegal to Attorneys for Thurston County Defendants DEFENDANTS MOTION FOR DECLARATORY JUDGMENT - Cause No: C0 BHS 000 Lakeridge Dr. SW, Bldg. Olympia, WA 0 0/- FAX 0/0-00