899 F.3d 954
9th Cir.2018Background
- Delbert Wheeler (a Yakama allottee) purchased trust land and founded King Mountain Tobacco Co., which manufactures cigarettes and roll-your-own tobacco on Yakama trust/allotted lands; King Mountain had a federal manufacturer’s permit.
- King Mountain initially paid excise taxes but became delinquent in 2009; the Treasury assessed unpaid excise taxes, penalties, and interest and the company later stopped paying.
- The United States sued to collect unpaid federal tobacco excise taxes; King Mountain asserted exemptions based on the General Allotment Act (Dawes Act) and the 1855 Treaty with the Yakamas.
- District court granted summary judgment for the government; holdings were affirmed on appeal and the district court later entered an amended money judgment of $57,914,811.27 plus statutory additions.
- The Ninth Circuit considered appellate jurisdiction over the amended money judgment and then addressed the merits: whether the General Allotment Act or the Yakama Treaty exempt King Mountain (a tribal manufacturer using trust-grown tobacco) from the federal excise tax assessed when products are removed from the factory.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the amended judgment was final and appealable | Amended judgment omitted breakdowns; appeal premature | Judgment specified total and mechanical formula for additions; Blue Ribbon Transcript supplies details | Judgment final and appealable; appellate jurisdiction exists |
| Whether the General Allotment Act exempts King Mountain from federal excise tax | Allotted trust lands (and income from them) are exempt from taxation; exemption should extend to excise on products manufactured from trust-grown tobacco | Capoeman and subsequent cases limit exemption to land and income directly derived from land; excise taxes are distinct and not covered | No exemption under the General Allotment Act for federal excise tax; King Mountain liable |
| Whether an excise tax on manufactured tobacco "encumbers" allotment land (so as to be barred) | Tax liability results in encumbrance/forfeiture risk on allotment land, invoking Act’s protections | King Mountain is not the allottee; trust title is in the U.S.; liens/forfeiture do not apply to trust allotments; regulations preclude liens on certain trust property | Excise tax does not encumber allotment land here; forfeiture/lien arguments fail |
| Whether the Treaty with the Yakamas contains express tax-exemptive language | Treaty Articles II, III, VI (exclusive use and benefit; travel/access; allotment/alienation restrictions) imply exemption from federal taxation of manufactured tobacco | Treaty language (per precedent) only supports exemption for land or income directly from land; no express exemptive language for federal excises | Treaty provides no express exemption; Indian canons not invoked; King Mountain not exempt |
Key Cases Cited
- Squire v. Capoeman, 351 U.S. 1 (1956) (interprets General Allotment Act to exempt allotted trust land and income directly derived from it from federal taxation)
- County of Yakima v. Confederated Tribes and Bands of the Yakima Indian Nation, 502 U.S. 251 (1992) (distinguishes taxes "of land" from taxes on activities; General Allotment Act does not authorize taxation of transactions involving land)
- Hoptowit v. Commissioner, 709 F.2d 564 (9th Cir. 1983) (treaty language limiting "exclusive use and benefit" tracks Capoeman exemption scope: land and income directly from land)
- Ramsey v. United States, 302 F.3d 1074 (9th Cir. 2002) (Treaty Article III does not contain express exemptive language from federal excise taxation)
- Dillon v. United States, 792 F.2d 849 (9th Cir. 1986) (alienation restrictions in treaty/allotment provisions do not imply a broad income-tax exemption)