ALICE PERKINS, FREDRICK PERKINS, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
Docket No. 19-2481
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
August 12, 2020
August Term 2019
(Argued: May 21, 2020 | Decided: August 12, 2020)
SACK, WESLEY, LIVINGSTON, Circuit Judges.
Alice and Fredrick Perkins (the “Perkinses“) operate a company that sold gravel mined from land belonging to the Seneca Nation of Indians. The Perkinses filed this action in tax court seeking a redetermination of their 2008 and 2009 joint individual tax returns, in which they sought an exemption for income derived from their gravel operation. The Perkinses argue that their gravel sales during 2008 and 2009 were exempt from federal income taxes pursuant to two treaties between the United States and the Seneca Nation: the 1794 Treaty of Canandaigua and the 1842 Treaty with the Seneca. The tax court found that neither treaty created an exemption from federal income taxes and assessed penalties.
In an issue of first impression for this Court, we agree with the tax court that neither the 1794 Treaty of Canandaigua nor the 1842 Treaty with the Seneca create an individualized exemption from federal income taxes for income “derived from” Seneca land. We reject the Perkinses’ argument suggesting otherwise because that view is premised upon the erroneous presumption that an exemption from federal taxes for income derived from land held in trust for American Indians extends to land that remains in the possession of the Seneca Nation of Indians. Finally, we note that, to the extent the 1842 Treaty with the Seneca creates an exemption from taxes on Seneca land, that exemption does not cover income derived from Seneca land by individual enrolled members of the Seneca Nation.
We AFFIRM the tax court and remand for further proceedings consistent with this opinion.
MARGARET A. MURPHY, Hamburg, NY (Gary D. Borek, Cheektowaga, NY, on the brief), for Petitioners-Appellants.
JACOB CHRISTENSEN, Attorney (Travis A. Greaves, Deputy Assistant Attorney General, Francesca Ugolini, Attorney, on the brief), for Richard E. Zuckerman, Principal Deputy Assistant Attorney General, Tax Division, U.S. Department of Justice, Washington, DC.
Alice Perkins is an enrolled member of the Seneca Nation of Indians (the “Seneca Nation” or the “Nation“) who resides on the Seneca Nation‘s Allegany Territories with her husband, Fredrick.1 Together they operate A&F Trucking, which was involved in the mining and sale of gravel from land located within the Allegany Territories. The Perkinses filed their income taxes for the 2008 and 2009 years well after the filing due dates, claiming that the income earned from the sale of gravel mined on Seneca land was exempt from federal income tax by operation of a statute and two treaties between the United States and the Seneca Nation. After an audit, the Internal Revenue Service (“IRS“) disagreed that the revenue generated from A&F Trucking‘s gravel sales was exempt from federal taxes and issued a notice of deficiency to the Perkinses assessing penalties for their late filings.
In November of 2014, the Perkinses filed this action in tax court seeking redetermination of their tax liabilities. They initially argued that a federal statute, the General Allotment Act of 1887, 24 Stat. 388 (codified at
On appeal, the Perkinses argue that the tax court failed to liberally construe the treaties and that doing so would have shown the treaties supported an exemption to federal income taxes. See, e.g., Pet‘rs’ Br. 13-25, 29-36. They also urge us to endorse language in several cases from other Courts of Appeals suggesting that income derived from Seneca land may be exempt under the Treaty of Canandaigua and the Treaty with the Seneca—which the Perkinses argue must be read together. See id. at 18-29.
We agree with the tax court. To the extent the language of either treaty could be construed to offer an exemption from taxes, those exemptions are constrained by the historical contexts under which they were drafted and therefore neither exemption extends to the Perkinses’ gravel mining revenue. The text and context of the Treaty of Canandaigua demonstrates that it creates no tax exemption applicable to the Perkinses. Dicta in other cases suggesting the opposite are incorrect; they would require the erroneous extension of a Supreme Court case that is inapposite where the land from which the income is derived is not held in trust by the United States for an American Indian taxpayer. While the 1842 Treaty with the Seneca contains an explicit exemption for taxes on Seneca land, we reject that a tax exemption applying to Seneca land must necessarily extend to income derived by individual members from Seneca land.
Because neither treaty exempts the Perkinses’ gravel-mining income from federal income taxation, we affirm the tax court‘s decision and remand for further proceedings consistent with this opinion.
BACKGROUND
I. Factual Background
The Seneca Nation of Indians (the “Seneca Nation” or the “Nation“), was the largest of the Six Nations comprising the Iroquois Confederacy, otherwise known as the Haudenosaunee. See generally Lazore v. Comm‘r, 11 F.3d 1180, 1182 (3d Cir. 1993) (discussing uncontradicted trial evidence); see also Culture, supra n.1. Historically, the Seneca Nation occupied territory throughout Central and Western New York. See Culture, supra n.1. The Seneca Nation continues to own and occupy land in Western New York, including an area known as the Allegany Indian Territories (the “Allegany Territories“) near the border of Pennsylvania. See, e.g., Seneca Nation of Indians, Territories, https://sni.org/government/territories/ (last visited August 11, 2020).
A. The Seneca Nation‘s Sand & Gravel Permitting Laws
The Seneca Nation retains ownership of land on its territories, and “allots” to individual members possessory interests in the use of a plot of the Nation‘s land. J.A. 98 § 102(C). Any land that is unallotted to individual members is retained by the Nation. J.A. 99 § 102(F). The Nation defines any “Nation Land” to mean “any lands” owned in fee simple by the Nation and subject to federal restrictions upon alienation, including the Allegany Territories. J.A. 100 § 102(R).
The Seneca Nation has specific laws governing the extraction and mining of natural resources on its land. “[A]ll minerals, including ... gravel located within any Nation lands shall be and remain the sole and exclusive property of the Nation.” J.A. 102 § 301. To lawfully extract gravel from land belonging to the Seneca Nation, the Nation must issue a permit. J.A. 102
Individual members of the Seneca Nation do not own land on its territories in fee simple. Instead, the Nation provides to individual members lifetime possessory interests in land. See Statement of Undisputed Facts, Perkins v. United States, No. 16-cv-00495, Dkt. 72-1 at ¶ 8 (W.D.N.Y).2 The Nation retains ownership over the subsurface rights to all land in its territories. See id. at ¶ 9.
B. The Perkinses & A&F Trucking
Petitioner Alice Perkins is an enrolled member of the Seneca Nation and, with her husband Fredrick, operates A&F Trucking (“A&F“). Alice and Fredrick (together, the “Perkinses“) live on the Allegany Territories. In 2008, the Seneca Nation issued Alice and A&F a permit to mine gravel from certain land located in the Allegany Territories. In exchange for the right to mine gravel from land belonging to the Seneca Nation, A&F paid the Nation royalties on the proceeds earned from selling that gravel. A&F‘s permit was valid through June of 2009,
when the Nation imposed a moratorium on mining and withdrew A&F‘s permit. A&F continued selling gravel that had already been mined through 2011.
Alton Jimerson, a member of the Seneca Nation, had a lifetime possessory interest over the 116-Acre plot of land from which A&F mined gravel. See Statement of Undisputed Facts, Perkins v. United States, No. 16-cv-00495, Dkt. 72-1 at ¶¶ 8-9 (W.D.N.Y June 15, 2018). Alice Perkins and A&F obtained permission from Jimerson, pending approval by the Seneca Nation, to mine gravel from the 116-Acre plot. The Perkinses mined gravel from Jimerson‘s land until A&F‘s permit was withdrawn by the Seneca Nation in 2009.
C. The Perkinses’ Tax Returns
The Perkinses filed their joint individual income tax returns for the 2008 and 2009 years in October of 2011, well after the filing due dates. The Perkinses attached a “detail sheet” to their returns and claimed that the income generated from A&F‘s sale of gravel during 2008 and 2009 was exempt from federal income tax under the General Allotment Act of 1887,
The Perkinses claimed the same exemption in their 2010 tax return. They paid the
II. Procedural History
In response to the Commissioner‘s notice of deficiency, the Perkinses filed a tax court petition seeking redetermination of their tax liabilities for the 2008 and 2009 tax years. Initially, they argued that the revenues from A&F‘s sale of gravel were not subject to federal income taxation because that income was “earned from the depletion” of American Indian land held in trust by the United States under the Indian General Allotment Act of 1887. See J.A. 84-85 (citing Squire v. Capoeman, 351 U.S. 1 (1956)).
The Perkinses later abandoned this argument for the reasons discussed below, and instead claimed that two treaties between the United States and the Seneca Nation created an exemption from federal income taxation for income derived from Seneca land. They argued that the 1794 Treaty of Canandaigua,
The Commissioner moved for summary judgment.4 The tax court found that the Treaty of Canandaigua did not exempt from taxation the income of individual members of the Seneca Nation, and that the tax exemption that appears on the face of the Treaty with the Seneca was directed at taxes on real property and not income derived from the sale of gravel. The tax court also determined that the Perkinses were liable for late filing penalties under
DISCUSSION
I. Jurisdiction & Standard of Review
This Court has jurisdiction to review decisions of the tax court and does so “in the same manner and to the same extent as decisions of the district courts in civil actions tried without a jury.”
We review the tax court‘s grant of the Commissioner‘s motion for summary judgment de novo. See Williams v. Comm‘r, 718 F.3d 89, 91 (2d Cir. 2013) (per curiam). Because neither party raised as an issue before this Court penalties or
II. General Principles of The Internal Revenue Code and the Interpretation of American Indian Treaties
American Indian nations are “regarded as dependent nations, and treaties with them have been looked upon not as contracts, but as public laws which could be abrogated at the will of the United States.” Choate v. Trapp, 224 U.S. 665, 671 (1912). Congress‘s “power to unilaterally abrogate provisions of treaties with [American] Indians is firmly established.” Lazore v. Comm‘r, 11 F.3d 1180, 1183 (3d Cir. 1993). Furthermore, it is “well settled by many decisions of [the Supreme] Court that a general statute in terms applying to all persons includes [American] Indians and their property interests.” Fed. Power Comm‘n v. Tuscarora Indian Nation, 362 U.S. 99, 116 (1960). The Internal Revenue Code applies to every individual and taxes “all income from whatever source derived.” See
While the Tax Code generally applies to American Indian citizens, “[i]n the area of taxation, Congress has passed neither a statute specifically abrogating the provisions of Indian treaties nor a statute of general application that has the effect of abrogating Indian treaties.” Lazore, 11 F.3d at 1183. Instead, the Internal Revenue Code must be applied “with due regard to any treaty obligation of the United States which applies to [the] taxpayer.”
Initially the Perkinses argued that the General Allotment Act of 1887, and a Supreme Court case interpreting that act, Squire v. Capoeman, 351 U.S. 1, 6-8 (1956), exempted their gravel-mining income from federal income taxation. For the reasons we discuss below, the Perkinses wisely abandoned that argument. Because they point to no other act of Congress that could create an exemption covering their gravel-mining income, the only question is whether a treaty between the United States and the Seneca Nation creates such an exemption.
A. Interpreting Treaties with American Indian Nations
To determine whether an American Indian treaty creates an exemption from federal income taxes we “look beyond the written words to the larger context that frames the Treaty, including ‘the history of the treaty, the negotiations, and the practical construction adopted by the parties.‘” Minnesota v. Mille Lacs Band of Chippewa Indians, 526 U.S. 172, 196 (1999) (quoting United States” cite=“318 U.S. 423” pinpoint=“432” court=“U.S.” date=“1943“>Choctaw Nation of Indians v. United States, 318 U.S. 423, 432 (1943)); see also Seneca Nation of Indians v. New York, 382 F.3d 245, 259 (2d Cir. 2004).
“[W]e interpret Indian treaties to give effect to the terms as the Indians
Furthermore, “to be valid, exemptions to tax laws should be clearly expressed.” Squire, 351 U.S. at 6. Therefore, a tax exemption must “derive plainly” from the treaty itself, and “[t]he intent to exclude must be definitely expressed, where, . . . the general language of the act laying the tax is broad enough to include the subject-matter.” Superintendent of Five Civilized Tribes v. Comm‘r, 295 U.S. 418, 420 (1935) (citations omitted). The Supreme Court has “repeatedly said that tax exemptions are not granted by implication” and “can not rest on dubious inferences.” Mescalero Apache Tribe v. Jones, 411 U.S. 145, 156 (1973) (citations omitted) (interpreting the application of the Indian Reorganization Act,
The problem is more difficult when tasked with determining if an American Indian treaty, as opposed to a statute, gives rise to a tax exemption. The federal income tax did not exist in its present form until 1913, when the Sixteenth Amendment took effect. See
Thus, we are presented with contradictory doctrines: we interpret Indian treaties liberally in favor of the American Indians, but tax code exemptions cannot be implied. Our sister circuits have ably dealt with the same question. See, e.g., Lazore, 11 F.3d at 1184; Ramsey v. United States, 302 F.3d 1074, 1078-79 (9th Cir. 2002). Although they appear to disagree as to how they solve this riddle, see, e.g., Lazore, 11 F.3d at 1184-85 & n.2, we think this disagreement is without real difference.6
III. The 1794 Treaty of Canandaigua
A. Historical Background
During the American Revolutionary War, the Seneca Nation, along with the Cayuga, Onondaga, and Mohawk nations aligned themselves with Great Britain. See, e.g., Oneida Indian Nation of N.Y. v. New York, 691 F.2d 1070, 1077 (2d Cir. 1982).
While the 1783 Treaty of Paris,
The Treaty of Fort Stanwix treated the loyalist Haudenosaunee nations harshly compared to the Oneida and Tuscarora: it required significant land cessions from the Seneca, including the cession of the Six Nations’ claims to land in the Ohio Valley. See id. at Art. I-III. “The net effect of this cession was to force the Senecas to give up most of their land in New York to the national government.” Jack Campisi & William A. Starna, On The Road to Canandaigua: The Treaty of 1794, 19 Am. Indian Q. 467, 469 (1995). The Treaty of Fort Stanwix, along with the later treaties of Fort McIntosh and Fort Harmar,
Thus, the negotiations leading to the Treaty of Canandaigua that took place from 1789 to 1794 were motivated by the United States’ desire to secure the neutrality of the Haudenosaunee nations as the United States engaged in likely—and then open—warfare with American Indian nations in the Ohio Valley. See generally id. at 471-81. The primary issue resolved by the Treaty of Canandaigua was disputed land cessions stemming from both the Treaty of Fort Stanwix and the Treaty of Fort Harmar. See id. at 470, 478-79 (“The great object of the treaty ... was to remove complaints respecting lands” (quoting the United States’ chief negotiator, Thomas Pickering)). The effect of the Treaty of Canandaigua was to restore to the Six Nations—in particular, the Seneca—land ceded to the United States, New York, and Pennsylvania. It also relinquished Haudenosaunee—in particular, Seneca—claims over the Erie Triangle, a tract of land near present Erie, Pennsylvania that runs from New York‘s western border to Ohio‘s eastern border and guarantees Pennsylvania access to Lake Erie. See id. at 483-86.
The Treaty of Canandaigua thus accomplished three objectives: “(1) it secured for the United States whatever title the Six Nations had to the Ohio Valley, thereby strengthening its claims against those of other nations [such as the British and French]; (2) it returned to the Senecas the land they had lost at Fort Stanwix in 1784; and (3) it secured by treaty, which seemed a stronger assurance than legislation to the Six Nations, their reservations in New York, laid out in state agreements.” Id. at 486. The core of the Treaty of Canandaigua concerned the Senecas, “and those segments of other tribes that shared their territory, the Cayugas and Onondagas,” because those nations in particular “presented a threat to national security” by virtue of being among the most powerful of the Six Nations, the most aggrieved by previous treaties, and therefore the most likely to present a military impediment to the United States’ war with the nations in the Ohio Valley. See id.
1. The Treaty of Canandaigua
The Treaty of Canandaigua contains seven articles. See
Now, the United States acknowledge all the land within the aforementioned boundaries, to be the property of the [Seneca] nation; and the United States will never claim the same, nor disturb the [Seneca] nation, nor any of the Six Nations, or of their Indian friends residing thereon and united with them, in the free use and enjoyment thereof: but it shall remain theirs, until they choose to sell the same to the people of the United States, who have the right to purchase.
B. The Treaty of Canandaigua Creates No Exemption to Federal Income Taxation.
The Treaty of Canandaigua offers no textual support for an exemption to the federal income tax. Article III‘s promise not to “disturb the [Seneca] . . . in the free use and enjoyment” of their land cannot be “reasonably construed as supporting an exemption from the income tax.” See Lazore, 11 F.3d at 1187. Several other circuit courts have examined the Treaty of Canandaigua and rejected the idea that this language created an exemption from similar federal taxes. See, e.g., Lazore, 11 F.3d at 1186–87 (finding members of the Mohawk Nation were not exempt from federal income taxation by virtue of their status or by operation of the Treaty of Canandaigua); Cook v. United States, 86 F.3d 1095, 1097–98 (Fed. Cir. 1996) (rejecting an argument that the Treaty of Canandaigua created an exemption for members of the Onondaga Nation from federal excise taxes on the sale of diesel fuel on Onondaga land). Like other treaty provisions which secure the “peaceful possession” of American Indian land, guaranteeing the “free use and enjoyment” of the land “applies to the use of land,” not to taxes levied upon individuals who profited from the use of the land. See Cook, 86 F.3d at 1097–98.
Neither the context of nor history surrounding the Treaty of Canandaigua suggests that the parties intended to address taxation at all. The Perkinses argue, counterfactually, that the United States’ goal of “removing from [the Six Nations‘] minds all causes of complaint,”
Thus “free use and enjoyment” is better interpreted as preventing American encroachment onto Seneca lands, or interference with the Seneca Nation‘s use of its lands. See, e.g., Jourdain v. Comm‘r, 617 F.2d 507, 508–509 (8th Cir. 1980) (per curiam) (finding language in the Treaty with
This conclusion is supported by more contemporaneous examples of encroachment by private citizens onto Seneca land. For example, less than sixty years after the Treaty was concluded, the Supreme Court applied the Treaty of Canandaigua and two later treaties, the 1838 Treaty with the New York Indians (hereinafter the “Treaty of Buffalo Creek“) and the 1842 Treaty with the Seneca, to permit an action in trespass against private citizens who forcibly removed a member of the Seneca Nation from the Tonawanda territory. See, e.g., Fellows v. Blacksmith, 60 U.S. 366, 371–72 (1856). Therefore, we find the language “free use and enjoyment” creates no exemption from federal income taxation.
The Perkinses urge us to follow dicta from several courts interpreting the Treaty of Canandaigua or analogous language that suggests the treaty might create an exemption for income derived from the land. See, e.g., Lazore, 11 F.3d at 1187; Hoptowit v. Comm‘r, 709 F.2d 564, 566 (9th Cir. 1983). The Third Circuit, for example, hypothesized that the Treaty of Canandaigua‘s guarantee of “free use and enjoyment” “might be sufficient to support an exemption from a tax on income derived directly from the land.” Lazore, 11 F.3d at 1187 (citation omitted).
In Lazore, two members of the Mohawk Nation claimed they were generally exempt from paying federal income taxes by virtue of their membership in the Mohawk Nation. See id. at 1181. The Lazores received income as compensation for their employment, Mr. Lazore was a mechanic and Mrs. Lazore was an executive director for the Mohawk Indian Housing Corporation. They claimed that their membership in the Mohawk Nation exempted them from federal taxes, and did so by pointing to, among other sources, the Treaty of Canandaigua. See id. at 1182. The Third Circuit disagreed with the Lazores that the Treaty of Canandaigua‘s guarantee of “free use and enjoyment” was “capable of being reasonably construed as supporting an exemption from the income tax,” but speculated based on the Circuit‘s analysis of Hoptowit that “[t]he language relied on by the Lazores might be sufficient to support an exemption from a tax on income derived directly from the land.” Id. at 1187 (citing Hoptowit, 709 F.2d at 566). Because the language could not be construed more broadly to serve as a general exemption from income tax liability, the Third Circuit rejected the Lazores’ claim. See id.
Similarly, the Ninth Circuit postulated that “any tax exemption created by” the language “exclusive use and benefit” in the Treaty with the Yakimas of 1855,
The Perkinses argue that Lazore and Hoptowit compel us to accept that “free use and enjoyment” “confer[s] a federal tax exemption for income earned from the sale of gravel mined on the Seneca Nation‘s territory.” Pet‘rs’ Br. 27–28. We disagree. Lazore and Hoptowit attempt to extend the Supreme Court‘s logic in Squire beyond the statutory context—the
The
In Squire v. Capoeman, 351 U.S. 1 (1956), the Supreme Court found that the
Other courts have rightly refused to extend Squire to income derived from land that is not allotted to an American Indian taxpayer.13 The specific tax exemption created by the Supreme Court‘s interpretation of the
The logic of Squire does not extend to exempt from taxation income derived from land reserved to the Seneca Nation by the Treaty of Canandaigua. To the extent dicta in Lazore and Hoptowit suggests otherwise, we disagree. The Seneca Nation‘s land was never subject to the
The Perkinses further argue that the Treaty of Canandaigua‘s promise of “free use and enjoyment” to the Seneca Nation itself extends to the Nation‘s “Indian friends,” a term which they assert includes Alice as a member of the Seneca Nation. We disagree. That term is better understood as referring to the affiliated nations making up the Six Nations, including the Onondagas and Cayugas. The Supreme Court has interpreted that term in other treaties with the Seneca to specifically refer to the Cayugas and Onondagas. See, e.g., Fellows v. Blacksmith, 60 U.S. 366, 368 (1856) (discussing that the Treaty of Buffalo Creek set aside land west of Missouri as intended for the “[t]he Seneca tribe, including among them their friends, the Onondagas and Cayugas . . . .“); see also 1838 Treaty of Buffalo Creek,
To the contrary, the context and negotiations surrounding the Treaty of Canandaigua demonstrates that “Indian friends” refers to the nations affiliated with the Senecas. The Senecas and their allies (their “friends“) presented a military threat to the United States that the federal government sought to neutralize through treaty. And if there were any doubt, that language is not used in Article VII, wherein the United States and the Six Nations specifically address actions by “individuals on either side.”
Finally, in an effort to construe “free use and enjoyment” as providing textual support for an exemption from taxes, the Perkinses argue that the Treaty of Canandaigua must be read in pari materia, or construed together, with the 1842 Treaty with the Seneca, which contains an explicit textual exemption from taxation that we discuss in detail below. See Pet‘rs’ Br. at 21–25. We disagree that the two treaties must be construed together. The Treaty with the Seneca was concluded in large part to remedy a specific grievance related to state taxes and liens placed upon Seneca land. In contrast, the language “free use and enjoyment” in the Treaty of Canandaigua is better understood as restoring to the Seneca Nation autonomy and control over specific lands that were ceded in the treaties of Fort Stanwix and Fort Harmar.
We therefore reject the Perkinses argument that any guarantee of “free use and enjoyment” in the Treaty of Canandaigua exempts their gravel-mining income from federal income taxation. Because the Treaty of Canandaigua contains no textual support for an individual exemption from federal income taxation, we need not proceed to interpret the treaty liberally.
IV. The 1842 Treaty with the Seneca
A. Historical Background
The Treaty with the Seneca has a more convoluted history than the Treaty of Canandaigua. In 1786, Massachusetts settled a dispute over territory with New York by purchasing rights of pre-emption over
In 1838, Ogden and Fellows purchased all of the Seneca Nation‘s land in New York, including the Buffalo Creek, Cattaraugus, Allegany, and Tonawanda territories for $202,000. With this purchase, the Seneca Nation entered into the 1838 Treaty of Buffalo Creek,
In 1840 the legislature of the State of New York passed an act assessing a highway tax on the Allegany and Cattaraugus territories. See id. In 1841, the legislature passed another act that authorized county assessors to assess taxes and survey for roads on land in the Allegany, Cattaraugus, and Buffalo Creek territories. See id. at 763–64. Under those two acts, county supervisors assessed taxes on land that was part of the Cattaraugus territory—land still occupied by the Seneca Nation, and not yet vested to Ogden and Fellows. See id. at 764. When those taxes went unpaid, the state imposed liens upon the assessed land and seized that land which, under the Treaty of Buffalo Creek, the Senecas had a right to occupy until 1845. See id. at 764–65. From 1840 to 1843, portions of the Cattaraugus territory were sold for unpaid taxes, despite the fact that the Seneca Nation continued to occupy the land. Id. The Supreme Court eventually invalidated those taxes under the Treaty of Buffalo Creek and the Treaty with the Seneca, see New York Indians, 74 U.S. at 767–72 (finding the taxes imposed on land occupied by the American Indian nations at issue were invalid until after the Senecas had vacated the land), but there were other disagreements between Ogden, Fellows, and the Seneca Nation arising from the Treaty of Buffalo Creek, see, e.g., Fellows, 60 U.S. at 367-72.
For example, although the Treaty of Buffalo Creek contemplated that the Haudenosaunee would relocate West of the Mississippi within five years, there were no provisions outlining any method of removal. See, e.g., Fellows, 60 U.S. at 366. Even after the later 1842 Treaty with the Seneca, the Supreme Court entertained an action for trespass brought by a member of the Tonawanda band of the Seneca Nation against Fellows and several other men who had taken possession of his timber mill through force of arms. See generally Fellows, 60 U.S. at 367–73. Furthermore,
1. The 1842 Treaty with the Seneca
The United States concluded the 1842 Treaty with the Seneca in an effort to resolve disagreements stemming from the Treaty of Buffalo Creek, including restoration of Seneca ownership over the Allegany and Cattaraugus territories. See 1842 Treaty with the Seneca,
Article IX of the Treaty with the Seneca states:
The parties to this compact mutually agree to solicit the influence of the Government of the United States to protect such of the lands of the Seneca Indians, within the State of New York, as may from time to time remain in their possession from all taxes, and assessments for roads, highways, or any other purpose until such lands shall be sold and conveyed by the said Indians, and the possession thereof shall have been relinquished by them.
B. The Text of the 1842 Treaty with the Seneca Does Not Support an Exemption to Federal Income Taxation
Because the Treaty with the Seneca clearly contains textual support for an exemption from taxes of some kind, this Court must construe the treaty liberally, interpreting it as the Seneca would have understood it, and analyzing the language employed in light of its historical background. See Mille Lacs Band of Chippewa Indians, 526 U.S. at 196; Choctaw Nation of Indians, 318 U.S. at 432 (“[T]reaties cannot be re-written or expanded beyond their clear terms to remedy a claimed injustice or to achieve the asserted understanding of the parties.“); Seneca Nation of Indians, 382 F.3d at 259. However, even construing the Treaty with the Seneca liberally, we find insufficient textual and historical support to read into the treaty an exemption for individual members of the Seneca Nation for taxes on income derived from Seneca land.
Article IX exempts “the lands of the Seneca Indians” “from all taxes, and assessments for roads, highways, or any other purpose until such lands be sold and conveyed” by the Seneca.
Only by reading the specific words “to protect such of the lands of the Seneca . . . from all taxes” in isolation is it possible to ignore that Article IX as a whole was intended to prevent the imposition of specific taxes imposed by the State of New York on land belonging to the Nation. See New York Indians, 72 U.S. at 763–64. As a result, Article IX of the Treaty with the Seneca cannot be construed to create an exemption to income taxes on income earned from land owned by the Seneca Nation. See, e.g., Choctaw Nation of Indians, 318 U.S. at 432 (finding that, absent evidence of understanding warranting departure from plain language of agreement it “must be interpreted according to its unambiguous language“); Mescalero Apache Tribe, 411 U.S. at 156 (“[A]bsent clear statutory guidance, courts ordinarily will not imply tax exemptions and will not exempt off-reservation income from tax simply because the land from which it is derived, or its other source, is itself exempt from tax.“);17 Ramsey, 302 F.3d at 1078.
None of the cases specifically interpreting the Treaty with the Seneca suggest otherwise. For example, New York Indians invalidated New York State‘s tax assessments on Seneca land, which implicated the very purpose and language of the Treaty with the Seneca. See 72 U.S. at 769–72. Furthermore, contrary to the Perkinses’ argument, Fellows v. Blacksmith, 60 U.S. 366 (1856), is inapposite. Fellows permitted a member of the Tonawanda band of the Seneca Nation to sue Joseph Fellows and other individuals for trespass after they sought to forcibly dispossess him of his land in Genesee County. See id. at 366–69. An individual right to an exemption from federal income taxes does not reason from a legal conclusion affirming a possessory interest in land. Nor did the Supreme Court discuss or interpret Article IX—even though it recited and discussed several of the other articles of the Treaty with the Seneca. See generally id.
In United States v. Kaid, 241 F. App’x 747 (2d Cir. 2007) (summary order), this Court rejected arguments that the Treaty with the Seneca prohibited taxation of cigarette sales made on reservations to non-American Indians, because “the treaty . . . clearly prohibit[s] only the taxation of real property, not chattels like cigarettes.” Id. at 750–51 (citing Snyder v. Wetzler, 193 A.D.2d 329, 330–32 (3d Dep’t 1993) (finding Article IX of the Treaty with the Seneca “refers only to taxes levied upon real property or land” in light of the history behind the treaty), aff’d, 84 N.Y.2d 941 (1994)). The Perkinses are correct that Kaid is not binding on this panel; and their argument is supported by the fact that Kaid and other state court decisions interpreting the Treaty with the Seneca deal with excise taxes on goods rather
C. That the Perkinses’ Income Derives from Seneca Land Does Not Compel a Different Result.
Although we find the tax exemption contained in Article IX is limited to Seneca land,18 we must determine whether an exemption from taxes on land must extend to the Perkinses’ gravel-mining income since their income “derives” from Seneca land. It does not. There are good reasons to treat income earned on the sale of gravel extracted from Seneca land differently than the real property itself. First, there is a meaningful difference between taxing income derived from land allotted to individual American Indians under the
Second, ownership of mineral rights, including for the mining of gravel and sand, are routinely separated from ownership of real property. Many states—including New York—have historically taxed mineral and subsurface rights separately from real property itself. See, e.g., Smith v. Mayor of New York, 68 N.Y. 552, 555 (1877) (“[O]ne may be taxed as owner of the fee of land, and another for the trees, buildings and other structures thereon, and the minerals and quarries therein.“). To the extent natural resources such as gravel or timber can be harvested and then sold, it is obvious that those items are severable from, and can be taxed separately from, the land itself. Article IX of the Treaty with the Seneca was aimed at preventing the State of New York from taxing land belonging to the Seneca Nation, not the sale of resources derived from that land. Finally, the Seneca Nation treats ownership of the land, possessory interests in land, and the right to extract gravel and other resources from its land differently. See, e.g., J.A. 98–102 §§ 102(C), (F), (R), (U), 302. The Nation itself holds the land in the Allegany and Cattaraugus territories in fee simple, and it grants to individual members possessory interests in plots of land. See J.A. 100 § 102(R); see also Statement of Undisputed Facts, Perkins v. United States, No. 16-cv-00495 Dkt. 72-1 at ¶ 8 (W.D.N.Y). The Nation may then permit members or non-members to extract gravel from land belonging to the Nation. See J.A. 102 § 302.
Because a property interest in a permit to extract gravel from certain land is different from possession of the land in fee simple, it is logical that one rule would apply to taxation of the surface or subsurface of the land and another would apply to the product of mining from a permit to
We find neither textual nor contextual support for extending the tax exemption contained in Article IX to income derived by individuals from Seneca land.
CONCLUSION
We AFFIRM the judgment of the tax court and remand for further proceedings consistent with this opinion.