SEMINOLE TRIBE OF FLORIDA, a Federally recognized Indian Tribe, Plaintiff - Appellee, versus MARSHALL STRANBURG, Interim Executive Director And Deputy Executive Director, Defendant - Appellant.
No. 14-14524
United States Court of Appeals for the Eleventh Circuit
August 26, 2015
D.C. Docket No. 0:12-cv-62140-RNS. [PUBLISH]
(August 26, 2015)
ROSENBAUM, Circuit Judge:
Benjamin Franklin said, “[I]n this world nothing can be said to be certain, except death and taxes.”1 He was almost right. As this case illustrates, even taxes are not certain when it comes to matters affecting Indian tribes. In this appeal, we consider whether Florida‘s Rental Tax and Florida‘s Utility Tax, as applied to matters occurring on Seminole Tribe lands, violate the tenets of federal Indian law. For the reasons that follow, we find that the Utility Tax as it involves activities on Tribe land does not, but the Rental Tax does.
I. Background
A. Factual Background
The Seminole Tribe of Florida (“the Tribe“) is a federally recognized Indian tribe with multiple reservations in Florida, including one near the city of Hollywood and one near the city of Tampa. The Tribe operates casinos on its Hollywood and Tampa reservations.
In May 2005, the Tribe entered into 25-year leases with two non-Indian corporations—Ark Hollywood, LLC, and Ark Tampa, LLC (“the Ark Entities“)—to provide food-court operations at each casino. The leases required the Ark Entities to pay “to the applicable Federal, tribal and/or Florida governmental authority, any and all sales, excise, property and other taxes levied, imposed or assessed.”2 Through the Bureau of Indian Affairs (“BIA“), the Secretary of the Interior approved the leases, as required by statute.
The State of Florida taxes commercial rent payments (the “Rental Tax“). See
Florida also imposes a tax “on gross receipts from utility services that are delivered to a retail consumer” in Florida
Similarly, Florida‘s administrative regulations specify that even when stated on the consumer‘s bill, the “tax is imposed on the privilege of doing business, and it is an item of cost to the distribution company,” who “remains fully and completely liable for the payment of the tax, even when the tax is wholly or partially separately itemized on the customer‘s bill.”
Florida assessed the Rental Tax against the Ark Entities for the period of July 2005 through June 2008. The Tribe has paid the Utility Tax stated as a component of its utility bill. Although the Tribe applied to the Florida Department of Revenue for a refund of the amount of the Utility Tax it paid beginning in 2008 through July 2011, it was denied a refund. The Ark Entities also applied for a refund of the Rental Tax, which was denied.
B. Procedural History
Following these denials, on October 30, 2012, the Tribe filed a federal complaint against the State of Florida and Marshall Stranburg, the interim Executive Director of the Florida Department of Revenue,4 seeking declaratory and injunctive relief. Within the next few days, the Ark Entities filed suits in the Florida state courts contesting the denials of their refunds. Both state cases were still pending at the time this appeal was filed, although the case related to the Hollywood casino was apparently stayed pending the disposition of the federal case.
Stranburg sought dismissal of the Tribe‘s federal complaint on multiple grounds, including “the abstention doctrine and the principles of exhaustion and comity.” The United States District Court for the Southern District of Florida rejected the abstention argument, noting that “this case involves a different plaintiff, seeking prospective injunctive relief and declaratory relief unrelated to Ark Hollywood‘s and Ark Tampa‘s requested refund. This Court will not shirk its obligation to adjudicate this matter, when it so clearly has jurisdiction over the issues presented.” Stranburg did not raise the comity or abstention issue again in the district court.5
As for the Utility Tax, the district court similarly found it to be impermissible. In particular, the court reasoned that the legal incidence of the Utility Tax fell on the Tribe, not on the utility company, and federal law generally prohibits taxing Indians for on-reservation activities. See id. at 1103-08.
Stranburg now appeals the district court‘s rulings. With respect to the Rental Tax, Stranburg contends that the district court erred both in finding a statutory prohibition of the tax and federal preemption of the tax. Stranburg also revives his comity argument, asserting that the district court should never have adjudicated the Rental Tax claim while the Ark Entities’ state-court cases were pending.
Stranburg further contends that the district court erred in determining the legal incidence of the Utility Tax to be on the Tribe rather than on the utility company. Because, in Stranburg‘s view, the tax falls on the utility company, he argues that the district court should have conducted a preemption inquiry. With the benefit of the parties’ briefs and oral argument, we now affirm in part and reverse in part.
II. Standards of Review
We review a district court‘s grant of summary judgment de novo, considering all the evidence and viewing facts in the light most favorable to the non-moving party. Morales v. Zenith Ins. Co., 714 F.3d 1220, 1226 (11th Cir. 2013). Summary judgment is appropriate only when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Id. A court should grant summary judgment against a party “who fails to make a showing sufficient to establish the existence of an element essential to that party‘s case.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552 (1986).
We review a district court‘s ruling on abstention for an abuse of discretion. Ambrosia Coal & Constr. Co. v. Pagés Morales, 368 F.3d 1320, 1332 (11th Cir. 2004). A district court abuses its discretion if it misapplies the law or makes findings of fact that are clearly erroneous. Id. (citations omitted).
III. Florida‘s Rental Tax
Stranburg contends on appeal that the district court erred in finding the Ark Entities statutorily exempt from Florida‘s Rental Tax, in its alternative holding that federal law preempts the Rental Tax, and in its failure to dismiss the Tribe‘s challenge on comity grounds. After carefully considering this issue of first impression in our Circuit, we conclude that the district court correctly interpreted
We further hold that, even if the statutory exemption did not apply, federal law preempts the Rental Tax in this case under the balancing inquiry outlined in White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 100 S. Ct. 2578 (1980). While we respectfully disagree with the district court‘s application of the Bracker inquiry because it relied on a conclusion of preemption promulgated by the Secretary of the Interior instead of conducting its own particularized inquiry, we nonetheless affirm the ultimate preemption holding based on a de novo Bracker analysis of the record before us.
A. Statutory Exemption
The district court concluded that
The Indian Reorganization Act of 1934 was passed by Congress with the intent of “rehabilitat[ing] the Indian‘s economic life and [giving] him a chance to develop the initiative destroyed by a century of oppression and paternalism,” through, among other things, giving tribes greater control over their affairs and property. See Mescalero, 411 U.S. at 152, 93 S. Ct. at 1272 (citations and internal quotation marks omitted). Section 5 of the Act, codified at
In Mescalero, the Indian plaintiffs operated a ski resort on off-reservation land in New Mexico that was developed under the 1934 Act.7 Id. at 146, 93 S. Ct. at 1269. New Mexico sought to levy two taxes related to the ski resort: a gross-receipts tax from the sale of services and tangible property at the resort and a use tax based on the purchase price of materials used to construct two ski lifts at the resort. Id. at 147, 93 S. Ct. at 1269-70. The Supreme
In analyzing
In contrast, the Court did hold that
In our view, Mescalero stands for the proposition that
Stranburg attempts to overcome this analysis in several ways. First, he tries to distinguish the Rental Tax from the tax in Mescalero and limit the holding of that case. Next, he asserts that the Supreme Court has foreclosed the district court‘s reading of Mescalero with its decision in Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 109 S. Ct. 1698 (1989). And finally, he relies on caselaw from the Ninth Circuit purportedly upholding a similar tax in California. We
1. The Rental Tax Is Not Materially Distinguishable from the Use Tax in Mescalero that the Supreme Court Determined Violated § 465
Stranburg‘s efforts to distinguish the Rental Tax from the tax at issue in Mescalero gain no traction. Specifically, Stranburg characterizes the Rental Tax as a “transactional tax on the payment of rent” and likens it more to the gross-receipts tax in Mescalero as a tax on income rather than on the land.8 And, of course, the Tribe receives income from the rent payments.
But these payments secure a lessee‘s possessory interest in the land for the duration of the lease. See generally Winters Coal Co. v. Comm‘r, 496 F.2d 995, 998 (5th Cir. 1974) (plurality op.) (“There is little conflict or disagreement with the old hornbook principle that a lease is a conveyance and creates in the lessee an estate which entitles him to exclusive possession unless certain rights are reserved by the lessor.“); Lease, Black‘s Law Dictionary (10th ed. 2014) (“A contract by which a rightful possessor of real property conveys the right to use and occupy the property in exchange for consideration, usu[ally] rent“). Just as the use of
permanent improvements on land “is so intimately connected with use of the land itself,” Mescalero, 411 U.S. at 158, 93 S. Ct. at 1275, payment under a lease is intimately and indistinguishably connected to the leasing of the land itself. And in this respect, the Rental Tax is distinguishable from the gross-receipts sales tax in Mescalero or the severance and excise taxes discussed in cases like Cotton Petroleum, 490 U.S. at 168-69 & n.4, 109 S. Ct. at 1703, or Oklahoma Tax Commission v. Texas Co., 336 U.S. 342, 345-47, 69 S. Ct. 561, 563-64 (1949).9 Florida‘s Rental Tax is
activity (sales receipts) or tangible property (oil or gas) removed by one or more degrees from the land.
Additionally, to the extent any ambiguity exists with respect to the tax exemption contained in
In sum, we find that construing
2. Cotton Petroleum Does Not Foreclose the Statutory Exemption
Stranburg argues further, though, that even if Mescalero can be read to preclude the Rental Tax, that reading was subsequently abrogated by the Supreme Court in Cotton Petroleum. We disagree.
In Cotton Petroleum, the Supreme Court confronted the question of whether New Mexico could impose taxes on oil and gas produced by non-Indian lessees of wells located on the tribe‘s reservation. 490 U.S. at 166, 109 S. Ct. at 1702. In answering that question, the Court looked to the Indian Mineral Leasing Act of 1938 (“1938 Act“),
The Court recounted its shifting doctrines concerning state taxation of non-Indian lessees’ oil production, noting that its old rule required the tax to be specifically authorized by Congress, while the new rule upheld the state‘s tax unless it was “expressly or impliedly prohibited by Congress.” Id. at 173, 109 S. Ct. at 1706. The “current doctrine” permits a state, absent a grant of tax immunity by Congress, to “impose a nondiscriminatory tax
Although the Court found no express discussion of taxation in the 1938 Act, it concluded that the silence of Congress on the issue was explained by the shifting doctrines. As the Court noted, predecessors to the 1938 Act dealing with leasing of Indian lands for mineral exploitation expressly permitted state taxation. See id. at 181-83, 109 S. Ct. at 1710-11; see also
Although the Cotton Petroleum Court was analyzing the 1938 Act, in a footnote, it commented that the Indian Reorganization Act of 1934, among other Indian-related statutes, “no more express[es] a congressional intent to pre-empt state taxation of oil and gas lessees than does the 1938 Act.” Id. at 183 n.14, 109 S. Ct. at 1711 n.14 (emphasis added). Based on this footnote, Stranburg asserts that the Supreme Court “concluded squarely” that
3. The Ninth Circuit‘s Construction of the Statute
Stranburg also relies heavily on the Ninth Circuit cases of Agua Caliente Band of Mission Indians v. Riverside County, 442 F.2d 1184 (9th Cir. 1971), Fort Mojave Tribe v. San Bernardino County, 543 F.2d 1253 (9th Cir. 1976), and Confederated Tribes of Chehalis Reservation v. Thurston County Board of Equalization, 724 F.3d 1153, 1158 n.7 (9th Cir. 2013), for the proposition that
In Chehalis Reservation, the Ninth Circuit recently invalidated a Washington state tax on permanent improvements owned by a non-Indian corporation on Indian land acquired under
Stranburg argues that after Chehalis Reservation, the Ninth Circuit has determined that
necessary implication is that some use taxes, of which permanent improvements are but one, may be deemed so akin to property taxes that
Further, while the language of the Chehalis Reservation footnote suggests that the Ninth Circuit determined in Agua Caliente that
Diving more deeply into the Ninth Circuit cases similarly does not help Stranburg. Significantly, Agua Caliente was decided before Mescalero. In the absence of Mescalero, the Ninth Circuit likened California‘s tax to the tax found permissible in United States v. City of Detroit, 355 U.S. 466, 78 S. Ct. 474 (1958), in which the Supreme Court upheld a state tax on the privilege of commercially renting property, even though the property in question was owned by the United States. At the time that the cases were decided, the Supreme Court in City of Detroit and the Ninth Circuit in Agua Caliente both viewed a “tax impоsed upon the use of property [as] something distinct from a tax imposed upon the property itself.” City of Detroit, 355 U.S. at 470, 78 S. Ct. at 476; Agua Caliente, 442 F.2d at 1186-87.
But two problems exist with relying on these cases here. First, the Supreme Court‘s subsequent decision in Mescalero expressly recognized that some uses are so intimately connected with the land that a tax on those uses is essentially a tax on the land, obliterating any categorical distinction between use taxes and property taxes. See Mescalero, 411 U.S. at 158, 93 S. Ct. at 1275-76.
Second, City of Detroit is distinguishable in that the source of any tax exemption for the United States was the intergovernmental immunity doctrine, a doctrine that has been “‘thoroughly repudiated’ by modern case law.” See Cotton Petroleum, 490 U.S. at 174, 109 S. Ct. at 1706. Here, the source of the tax exemption is a federal statute.
B. Federal Law Preempts the Rental Tax
We could, of course, stop our analysis regarding the Rental Tax at this point, since we have concluded that application of the Rental Tax in this case violates
Even if
On appeal, Stranburg contests this ruling on a number of fronts. He contends that the Secretary‘s analysis is entitled to no deference by any court because, in Stranburg‘s view, it does not purport to decide the preemption question, it was the product of flawed rulemaking, and it is substantively incorrect. Stranburg also suggests that even if the regulations and analysis must be given weight, that weight should be minimal because the terms of the Ark Entities’ leases are controlling. And finally, Stranburg argues that he prevails on a de novo Bracker balancing analysis because the Tribe has not put forth any evidence of its interests while the state has demonstrated its interest in the Rental Tax based on the services it provides on the Tribe‘s reservations. Although we decline to accord the regulations deference in conducting a Bracker inquiry, we nonetheless find that under a de novo Bracker analysis, the Rental Tax is preempted by federal law.
In Bracker, the Supreme Court addressed a challenge to Arizona‘s motor-carrier license and use fuel taxes as applied to non-Indian timber enterprises harvesting timber on reservation land. 448 U.S. at 137-38, 100 S. Ct. at 2580-81. The Court outlined several general Indian law taxation principles, including “two independent but related barriers to the assertion of state regulatory authority over tribal reservations and members. First, the exercise of such authority may be preempted by federal law. . . . Second, it may unlawfully infringe ‘on the right of reservation Indians to make their own laws and be ruled by them.‘” Id. at 142, 100 S. Ct. at 2583 (citations omitted). The Court also “rejected the proposition that in order to find a particular state law to have been preempted by operation of federal law, an express congressional statement to that effect is required.” Id. at 144, 100 S. Ct. at 2584. Of note, the Court commented that it is “generally unhelpful” to apply existing law regarding federal-state preemption to Indian law preemption. Id. at 143, 100 S. Ct. 2583.
In turning to Arizona‘s tax scheme, the Court first considered the federal interests at stake, observing that the “Federal Government‘s regulation of the harvesting of Indian timber is comprehensive” and citing congressional statutes, Department of the Interior regulations, and day-to-day supervision by the BIA. Id. at 145-48, 100 S. Ct. at 2584-86. Indeed, the Court stated, the “federal regulatory scheme is so pervasive as to preclude the additional burdens sought to be imposed” by the state taxes. Id. at 148, 100 S. Ct. at 2586. Moreover, the Court reasoned that the state taxes would undermine federal policies of guaranteeing the benefit of timber harvests to Indians, as well as general policies designed to revitalize Indian economies and self-government. Id. at 149, 100 S. Ct. at 2586. For instance, the Court determined that thе taxes would complicate the Secretary‘s setting of fees, reduce tribal revenues, and diminish the profit that potential contractors could realize. Id. at 149, 100 S. Ct. at 2587.
With regard to the state‘s interest, the Court found none beyond a “general desire to raise revenue.” Id. at 150, 100 S. Ct. at 2587. Nor, as the Court observed, was this “a case in which the State seeks to assess taxes in return for governmental functions it performs for those on whom the taxes fall.” Id., 100 S. Ct. at 2587. Even though the fuel tax was designed to compensate the state for the use of its highways, the on-reservation roads at issue were neither built nor maintained by the state. Id. As a result, the Court concluded that the state‘s generalized interest was insufficient to overcome the comprehensive and pervasive regulation of the harvesting of Indian timber and the threats to federal policies posed by the taxes. See id. at 151, 100 S. Ct. at 2588.
Two years later, the Court decided Ramah Navajo School Board v. Bureau of Revenue, 458 U.S. 832, 102 S. Ct. 3394 (1982). In Ramah, the Court struck down New Mexico‘s gross-receipts tax as assessed on a non-Indian contractor who built a school on the reservation. Id. at 834, 102 S. Ct. at 3396. The Court found the tax preempted, in part, because the state did “not seek to assess its tax in return for the governmental functions it provides to those who must bear the burden of paying this tax.” Id. at 843, 102 S. Ct. at 3401. While the New Mexico tax was “intended to compensate the State for granting ‘the privilege of engaging in business,‘” the state had “not explained the source of its power to levy such a tax . . . where the ‘privilege of doing business’ on an Indian reservation is exclusively bestowed by the Federal Government.” Id. at 844, 102 S. Ct. at 3402.
The Supreme Court once again applied the Bracker balancing test in Cotton Petroleum, this time upholding the state tax. In so doing, the Court emphasized that the test is a “flexible one sensitive to the particular state, federal, and tribal interests involved.” Cotton Petroleum, 490 U.S. at 184, 109 S. Ct. at 1711. In contrasting Cotton Petroleum‘s situation with those found in Bracker and Ramah, the Court
To summarize, then, Bracker requires a particularized inquiry into the federal, tribal, and state interests implicated by a state‘s tax on non-Indians for on-reservation activity. Bracker, 448 U.S. at 144-45, 100 S. Ct. at 2584. Federal statutes, agency regulations, and day-to-day agency supervision can all inform the federal and tribal interests and can also signal a federal regulatory scheme that is so pervasive that it preempts the state tax. Id. at 145-48, 100 S. Ct. at 2584-86. A state‘s interests in a particular tax can outweigh federal and tribal interests, but to do so, the state‘s tax must relate to services it provides in connection with the entity and activity being taxed and not merely serve a generalized interest in raising revenue. Id. at 150-51, 100 S. Ct. at 2587-88.
1. Should the Secretary‘s Analysis Be Accorded Deference?
Before turning to the merits of the Bracker analysis, we must first address what measure of deference, if any, courts should accord to the Secretary of the Interior‘s Bracker-like balancing conducted in the regulatory context. The issue arises because the Seсretary of the Interior adopted substantial regulations, made effective in January 2013, concerning the Secretary‘s approval and supervision of Indian land leases. See
According to the regulations’ preamble published in the Federal Register, this section was added as “clarification regarding other taxation arising in the context of leasing Indian land.” Residential, Business, and Wind and Solar Resource Leases on Indian Land, 77 Fed. Reg. 72,440, 72,447 (Dec. 5, 2012) (codified at
First, the Secretary listed the extensive federal regulations that it said “occupy and preempt the field of Indian leasing.” 77 Fed. Reg. at 72,447. The Secretary also analyzed the federal and tribal policies at stake in land leasing and noted that the “ability of a tribe . . . to convey an interest in trust or restricted land arises under Federal law, not State law [and] Federal legislation has
The district court concluded that the regulations, including the Secretary‘s Bracker analysis in the Preamble, were entitled to the “full amount of deference available under the law,” which it defined as “some deference” short of full Chevron11 deference. Seminole Tribe, 49 F. Supp. 3d at 1099-100. Relying on Wyeth v. Levine, 555 U.S. 555, 129 S. Ct. 1187 (2009), the district court reasoned that deference was appropriate based on the specialized experience of the Secretary in Indian affairs, the complex and extensive history of federal Indian law, and the thoroughness and persuasiveness of the Secretary‘s analysis. 49 F. Supp. 3d at 1099-100. Ultimately, the district court held, based on “the reasons detailed by the Secretary of the Interior,” that federal regulation of Indian land leasing was so pervasive as to preclude the additional burdens of Florida‘s Rental Tax and that, “in these circumstances,
We agree with the district court‘s ultimate conclusion. But to the extent that the district court gave deference to the Secretary‘s ultimate application of Bracker and the agency‘s conclusion that federal law preempts lease-related taxation, we find that the district court went a step too far. Bracker and its progeny call for a
particularized balancing of the specific federal, tribal, and state interests involved. See Bracker, 448 U.S. at 145, 100 S. Ct. at 2584 (“This inquiry . . . has called for a particularized inquiry into the nature of the state, federal, and tribal interests at stake, an inquiry designed to determine whether, in the specific context, the exercise of state authority would violate federal law.” (emphasis added)); Ramah, 458 U.S. at 838, 102 S. Ct. at 3398 (“Pre-emption analysis . . . requires a particularized examination of the relevant state, federal, and tribal interests.” (emphasis added)); Cotton Petroleum, 490 U.S. at 176, 109 S. Ct. at 1707 (“Instead, we have applied a flexible pre-emption analysis sensitive to the particular facts and legislation involved.” (emphasis added)). Because the Secretary‘s analysis did not examine Florida‘s interests in imposing this particular Rental Tax, the balancing in the Preamble cannot substitute for the particularized inquiry required by Bracker. As for Wyeth, although it dealt with preemption outside the сontext of federal Indian law, that decision observed that while some weight can be given to an agency‘s views on a state law‘s impact on a federal regulatory scheme, deference to an agency‘s ultimate conclusion of federal preemption is inappropriate. See Wyeth, 555 U.S. at 576-77, 129 S. Ct. at 1201.
2. The Federal and Tribal Interests at Stake
This is not to say that the Secretary‘s analysis is not without value in delineating the federal and tribal interests implicated in the leasing of Indian land. As Wyeth noted, an agency‘s analysis of the regulatory scheme it administers deserves some weight, particularly when the subject matter and history are complex and extensive, and the analysis is thorough, consistent, and persuasive. 555 U.S. at 576-77, 129 S. Ct. at 1201. Here, those factors apply with force. Accordingly, the Preamble analysis and the actual statutes and regulations themselves provide, in this case, substantial evidence of the extensive federal regulation of Indian land leasing to inform the Bracker balancing inquiry.
Stranburg raises a number of specific arguments about why deference is inappropriate, but none of those arguments succeed in showing why the Secretary‘s analysis cannot serve as evidence of the federal and tribal interests involved. Because we have determined that deference to the Secretary‘s preemption conclusion is inappropriate and will conduct an independent Bracker inquiry, we need not address Stranburg‘s deference arguments in further depth.
Although we cannot defer to the Secretary‘s ultimate conclusion that federal law preempts the Rental Tax, we nonetheless agree that is the correct conclusion. As in the cases of Bracker and Ramah, the extensive and exclusive federal regulation of Indian leasing—as evidenced by federal law and regulations—precludes the imposition of state taxes on that activity. See Bracker, 448 U.S. at 148-49, 100 S. Ct. at 2586; Ramah, 458 U.S. at 841-42, 102 S. Ct. at 3400-01; see also, e.g.,
Nor are we persuaded by Stranburg‘s various arguments that the inquiry should tip in his favor. Initially, he attacks the pervasive character of the federal regulatory scheme, asserting that Cotton Petroleum established that regulation of all lessees of Indian land is not exclusively federal. See Cotton Petroleum, 109 S. Ct. at 185-86, 109 S. Ct. at 1712-13 (holding that the state‘s regulation of oil-well spacing and integrity meant that federal regulation, while extensive, was not exclusive). In support of this point, Stranburg contends that the oil and gas leases in Cotton Petroleum were subject to the same federal regulations that govern the Ark Entities’ leases, and since federal regulation was not deemed exclusive in Cotton Petroleum, it cannot be deemed exclusive here.
This argument fails, though, for a number of reasons. First, Bracker requires a particularized balancing of specific interests. In Cotton Petroleum, the Supreme Court pointed to state regulation of oil wells independent of the federal regulations. Stranburg, however, has not pointed to any Florida regulation of the commercial leasing of Indian land or regulation of the activities occurring under the lease. Second, the federal regulations concerning Indian oil leases are separate and distinct from the Indian surface land-leasing regulations. See
Similarly, Stranburg‘s reliance here on the case of Gila River Indian Community v. Waddell, 91 F.3d 1232 (9th Cir. 1996), cannot help him. Contrary to Stranburg‘s suggestion, Waddell did not make a broad
Stranburg next remarks that the federal interest in promoting Indian economic development does not automatically preempt all state taxes when any reduction of Indian income is threatened. This proposition certainly is true. See Cotton Petroleum, 490 U.S. at 180, 109 S. Ct. at 1709 (“We thus agree that a purpose of the 1938 Act is to provide Indian tribes with badly needed revenue, but find no evidence for the further supposition that Congress intended to remove all barriers to profit maximization.“); id. at 187, 109 S. Ct. at 1713 (rejecting the notion that “[a]ny adverse effect on the Tribe‘s finances caused by the taxation of a private party contracting with the Tribe would be ground to strike the state tax.“). But this argument goes only so far because the Tribe is not contending that the sole federal interest at stake here is income maximization or that income maximization automatically preempts any state taxation. Rather, Indian economic well-being is one of the many federal interests embodied in the extensive federal regulation of leasing activity, and it is a valid interest weighing in favor of preemption in the final balance. See Bracker, 448 U.S. at 149, 100 S. Ct. at 2586.
Stranburg further asserts that tribal interest in self-government is not threatened by dual state taxation. But while the Supreme Court precedent seems clear that dual taxation does not threaten tribal interests, see Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95, 114-15, 126 S. Ct. 676, 688-89 (2005), that fact is of limited utility here because the Tribe is not assessing its own rental tax (or even arguing on appeal that the state tax precludes it from doing so). So though the Preamble‘s general statements expressing concern about the potential of state taxes to “chill” the imposition of tribal taxes cannot support a federal or tribal interest in avoiding dual taxation, Preamble at 72,448, that fact removes little weight from the Tribe‘s side of the scale here under the particularized circumstances of this case.
Finally, in a variation on the income-maximization argument, Stranburg asserts that any increase in costs for on-reservation projects attributable to the state tax is too indirect for the economic consequences of the tax to support preemption. Of course, it is true that Cotton Petroleum held that such indirect burdens were insufficient to support preemption. 490 U.S. at 186-87, 109 S. Ct. at 1713. But Cotton Petroleum indicated that such indirect burdens were insufficient “absent some special factor such as those present in [Bracker and Ramah],” with that special factor necessarily being the extensive and exclusive federal regulation of the activities at issue in those two cases. See id.; see also id. at 184-86, 109 S. Ct. at 1711-1713; see also Bracker, 448 U.S. at 151 & n.15, 100 S. Ct. at 2587-88 & n.15. As in Bracker and Ramah, the Tribe is not relying
In sum, the federal government administers an extensive, exclusive, comprehensive, and pervasive regulatory framework governing the leasing of Indian land. Stranburg‘s attempt to diminish the value of tribal economic and taxing interests does nothing to minimize the pervasiveness of the federal regulatory scheme, which involves dozens of congressional statutes and federal regulations. See, e.g.,
Stranburg cannot alter the results of this analysis through his assertions that the Tribe did not meet its burden13 of producing any evidence on the federal and
tribal interests at stake because it “introduced no record evidence whatsoever of the impact of the Rental tax on the Tribe‘s business operations or its sovereignty.” In Stranburg‘s view, the Tribe was required to put forth evidence that “it was less able to lease the property, had to engage in unique marketing efforts, or had to reduce the rent to accommodate the tax.” According to Stranburg, the Tribe‘s reliance on generalized economic arguments is insufficient to support preemption after Cotton Petroleum rejected the indirect-economic-consequences argument. As discussed above, though, the Supreme Court‘s rejection of that argument matters only in the absence of an extensive and exclusive federal regulatory scheme. While such specific economic evidence certainly would have bolstered the Tribe‘s argument, thе regulatory scheme itself is a sufficient federal interest to satisfy the Tribe‘s burden of production here.
3. The State‘s Interest at Stake
To establish the state‘s interest in imposing the Rental Tax, Stranburg points to the evidence he introduced of the services that the state provides on the reservation, including law enforcement, criminal prosecution, and health services, as well as “intangible off-reservation benefits . . . such as infrastructure and transportation services.” But none of these services are tied
Even Cotton Petroleum, while finding that some state services were provided to the plaintiff and tribe, affirmed the general principle that the services rendered must be connected to the tax. See 490 U.S. at 185, 109 S. Ct. at 1712 (“Rather, [Bracker and Ramah] involved complete abdication or noninvolvement of the State in the on-reservation activity.” (emphasis added)); cf. id. at 186, 109 S. Ct. at 1713 (“This is not a case in which the State has had nothing to do with the on-reservation activity, save tax it.” (emphasis added)). Here, Stranburg has offered no evidence that Florida is involved in any way with a non-Indian‘s leasing of сommercial property from an Indian tribe on Indian land except taxing it.
Nor can Stranburg‘s reliance on Waddell rescue the state‘s interest from being insufficient to sustain the tax. The relationship of the services provided to the interest taxed differed materially in Waddell. In Waddell, the Ninth Circuit concluded that the provision of the law-enforcement services, including crowd and traffic control, “was critical to the success” of the specific entertainment events being taxed. Waddell, 91 F.3d at 1238-39. Stranburg has not shown a similar link here.
Stranburg also cites Ute Mountain Ute Tribe v. Rodriguez, 660 F.3d 1177, 1199-1200 (10th Cir. 2011), for the proposition that off-reservation services can support a state interest. But Ute Mountain addressed New Mexico‘s oil and gas taxes and found that they supported “the off-reservation infrastructure used to transport the oil and gas after it is severed.” Id. at 1199.
In both of these cases, the tax was clearly and critically connected to the services rendered. While the dollar value of services rendered need not match the amount of taxes paid, Cotton Petroleum, 490 U.S. at 185, 109 S. Ct. at 1712, the services and taxes nonetheless must be connected beyond a mere desire to raise revenue. Although the presence of law enforcement or off-reservation roads in some sense makes leasing on-reservation property more attractive, none of the
services cited by Stranburg is critically connected to the business of commercial land leasing on Indian property—the activity taxed by the Rental Tax—in the way that crowd and traffic control was to entertainment events in Waddell and the use of off-reservation roads was to the transportation of oil and gas from Indian lands in Ute Mountain.
In conclusion, we do not defer to the Secretary‘s ultimate determination of federal preemption because Bracker and its progeny require a particularized, case-specific balancing of federal, tribal, and statе interests. Nevertheless, Florida‘s Rental Tax is preempted by federal law under Bracker. Federal statutes, regulations,
C. Does Comity Require Dismissal of the Rental Tax Challenge?
Stranburg concludes his attack on the district court‘s Rental Tax ruling by renewing his argument that the district court should have abstained from reaching the merits of the Rental Tax issue in the first place. He mentions in passing that the Tribe “should not be able to create an end-run around” the
This issue was raised and rejected at the motion-to-dismiss stage. Stranburg did not renew the comity argument at the summary-judgment stage. More significantly, Stranburg did not include the district court‘s ruling on the motion to dismiss in his Notice of Appeal, which mentioned just the final judgment order and the summary-judgment order as the rulings appealed.
This Court has determined that it lacks jurisdiction to consider an appeal of an order not specifically mentioned in the appellant‘s Notice of Appeal. See Osterneck v. E.T. Barwick Indus., Inc., 825 F.2d 1521, 1528-29 (11th Cir. 1987); Pitney Bowes, Inc. v. Mestre, 701 F.2d 1365, 1374-75 (11th Cir. 1983). “We have previously
But even if no jurisdictional bar existed, we find that the district court did not abuse its discretion when it declined to dismiss the federal suit on comity grounds. In the district court, Stranburg primarily invoked Younger abstention,15 but on appeal, he instead relies heavily on Levin v. Commerce Energy, Inc., 560 U.S. 413 (2010), a case focused more on the comity doctrine in the context of federal challenges to state tax statutes.
In Levin, the Supreme Court decided that a federal court should decline a constitutional challenge to allegedly discriminatory state tax exemptions when an adequate state-court forum is available to decide the challenge. 560 U.S. at 421. In reaching this conclusion, the Supreme Court relied on a unique confluence of factors: the plaintiff sought federal-court review of commercial matters over which the state had wide regulatory authority; the suit did not involve fundamental rights or heightened judicial scrutiny; the plaintiffs were essentially seeking to improve their own economic position in relation to other private parties; and, the state courts were more familiar with the state legislative preferences at stake and were not hampered in the type of remedies they could administer, unlike federal courts constrained by the Tax Injunction Act. Id. at 431-32. On appeal, Stranburg asserts generally that the same considerations motivating abstention in Levin apply here.
Stranburg acknowledges that the Supreme Court has not had occasion to consider Levin in the context of federal Indian law, and he admits that the Second Circuit has rejected dismissal on comity grounds when an Indian tribe challenges state taxation. In Mashantucket Pequot Tribe v. Town of Ledyard, 722 F.3d 457, 465-66 (2d Cir. 2013), the Second Circuit concluded that two factors counseled against applying Levin‘s comity analysis in an Indian case: a strong federal interest in determining the contours of a pervasive federal regulatory scheme, particularly when Congress has favored a federal forum for Indians to vindicate federal rights, and the
Stranburg tries to distinguish Mashantucket by pointing out that there, the state-court action was filed two years after the federal action, whereas here, the state action was filed just two days after the federal action. But Mashantucket acknowledged only that the state-court proceedings would have merited greater deference if they had been filed before the federal proceedings. 722 F.3d at 466 n.6. In any event, the two factors counseling against a comity dismissal in Mashantucket do not turn on the filing date of related state-court proceedings.
Beyond the factors in Mashantucket, this case presents other facts that distinguish it from Levin. First, the key legal issue here does not involve interpretation оf state law, but rather interpretation of federal Indian law, federal statutes, and federal preemption. Little reason exists to believe that a federal court would be less suited than a state court to adjudicate these issues. Second, unlike in Levin, the Tax Injunction Act would not preclude or constrain any federal remedies because the plaintiff here is an Indian Tribe. In light of these circumstances, the district court did not abuse its discretion in declining to dismiss the Tribe‘s Rental Tax claim on comity grounds.
IV. Florida‘s Gross-Receipts Utility Tax
Stranburg contends on appeal that the district court also erred in finding that the legal incidence of Florida‘s Gross-Receipts Utility Tax falls on the Tribe. After careful consideration of the Florida tax scheme, we agree with Stranburg and hold that the legal incidence of the tax falls on the non-Indian utility company. Although the district court did not conduct an alternative Bracker inquiry for the Utility Tax, we also find that the Tribe has not established as a matter of law that federal law preempts the Utility Tax.
A. Legal Incidence
The district court concluded that the legal incidence of Florida‘s Gross-Receipts Utility Tax fell on the Tribe. Seminole Tribe, 49 F. Supp. 3d at 1103-08. Relying on Oklahoma Tax Commission v. Chickasaw Nation, 515 U.S. 450 (1995), the district court determined that the Utility Tax was categorically barred as an “impermissible direct tax upon the Seminole Tribe on its reservation.” Id. at 1108. While both parties’ positions have some merit, following a de novo review, we conclude that the district court‘s legal-incidence determination is not the “fair[est]” reading of the Florida taxing scheme, Chickasaw Nation, 515 U.S. at 461, so we find that the district court erred in placing the legal incidence on the Tribe.
1. Chickasaw Nation and the Legal Incidence Inquiry
In Chickasaw Nation, the Supreme Court considered a tribal challenge to Oklahoma‘s fuel excise tax.16 515 U.S. at 452-53. The tribe contended that Oklahoma‘s tax fell on the
Because the tax did not fall on the tribe, the state argued, its interest in imposing the tax outweighed any incompatible federal or tribal interests. See id.
The Supreme Court first recalled that, generally, a state may not levy a tax on an Indian tribe or its members for on-reservation activities. Id. at 458. In the Court‘s view, “[t]he initial and frequently dispositive question in Indian tax cases, therefore, is who bears the legal incidence of a tax.” Id. (emphasis added). The Court specifically rejected a test that would focus on economic realities, finding that legal incidence provided a predictable and certain test for state taxing authorities. Id. at 459-60. In doing so, the Court conceded that it would be easy for the state to amend its law and shift the legal incidence by simply “declaring the tax to fall on the consumer and directing the Tribe to collect and remit the levy.” Id. at 460 (internal quotation marks omitted).
As a result, the legal incidence of a tax is a question of state law. See id. at 460-61. A clear declaration of legal incidence or a mandatory “pass through” provision requiring a tax to be passed on to the consumer is “dispositive language” of legal incidence. See id. at 461. But “[i]n the absence of such dispositive language, the question is one of ‘fair interpretation of the taxing statute as written and applied.‘” Id. (quoting California Board of Equalization v. Chemehuevi Tribe, 474 U.S. 9, 11 (1985) (per curiam)).
Because the Oklahoma statute did not contain dispositive language, the Court analyzed several factors in concluding that the legal incidence of the fuel tax fell on the tribal retailers. First, the Court observed that the statutory language required the distributor to remit the tax due “on behalf of a licensed retailer.” Id. at 461 (emphasis omitted). Second, the Court took into account the fact that the tax was not imposed on sales between distributors, but was imposed on sales from a distributor to a retailer. Id. at 461. Third, the Court noted the distributor‘s ability under the law to deduct any subsequently uncollected amount of tax previously paid. Id. And fourth, the fact that the distributor was able to retain a small portion of the tax as compensation for serving as the state‘s tax collector also pointed towards the determination that the legal incidence of the fuel tax fell on the tribal retailers. Id. at 462. In view of these circumstances, the Court determined that the distributor served as merely a “transmittal agent” for taxes imposed on the retailer. Id. at 462. The lack of any similar statutory language regarding the relationship between retailers and consumers, the Court concluded, meant that the tax was legally imposed on the retailer. Id.
2. The Legal Incidence of Florida‘s Utility Tax Falls on the Utility Company
Florida imposes a tax on the “gross receipts from utility services that are delivered to a retail consumer” in Florida. See
The statute, which is contained in
In determining that the legal incidence of Florida‘s Utility Tax fell on the consumer Tribe, the district court relied on
Although an itemized amount of the Utility Tax becomes a component of the consumer‘s bill that is, in a sense, transmitted by the utility to the state once collected, it is key in our view that nothing about this section requires a utility provider ever to itemize the tax. Ultimately, then, there is no requirement from the legislature to pass the tax through to the consumer, and it is the requirement that matters. See Chickasaw Nation, 515 U.S. at 459-60 (rejecting an “economic realities” inquiry into, among other things, “how completely retailers can pass along tax increases“); id. at 461 (“[N]or does it contain a ‘pass through’ provision, requiring distributors and retailers to pass on the tax‘s cost to consumers.” (emphasis added)); see also Wagnon, 546 U.S. at 103 (“While the distributors are ‘entitled’ to pass along the cost of the tax to downstream purchasers, . . . they are not required to do so.” (citation omitted)); Chemehuevi Indian Tribe, 474 U.S. at 10-11; United States v. State Tax Comm‘n of Miss., 421 U.S. 599, 608 (1975) (“[W]here a State requires that its sales tax be passed on to the purchaser and be collected by the vendor from him, this establishes as a matter of law that the legal incidence of the tax falls upon the
The district court also looked at Florida‘s administrative regulations and concluded that, under them, “[i]f the consumer does not remit the tax to the utility company, then the utility company is not required to pay the tax over to the State.” Seminole Tribe, 49 F. Supp. 3d at 1104. Based on this reasoning, the district court determined that the utility serves merely as a transmittal agent not unlike the distributors in Chickasaw Nation. Id. This comparison elides a necessary distinction between an excise tax and a gross-receipts tax, though.
Florida‘s Utility Tax law taxes receipts of payments. As detailed in the regulations cited by the district court, though, the utility may elect to pay the tax to the state based on total billings for the month as opposed to total receipts. See
But the nature of Florida‘s tax necessitates a different result. The taxable event under the Florida tax is the receipt of payments, while in Chickasaw Nation, the taxable event was the sale of fuel to the retailer. See Chickasaw Nation, 515 U.S. at 462. Under the Utility Tax law, no tax liability exists until a consumer actually pays the utility something.18 Consequently, when a Florida utility takes a credit for uncollected billings, it is seeking a refund to itself of a tax that it never owed in the first place. In contrast, in Chickasaw Nation, the tax was still owed by the retailer and any credit sought by the distributor was merely for taxes it prematurely transmitted. Given the nature of the Florida tax, the refund and credit regulations are far less indicative of transmittal-agent status19 here than in Chickasaw Nation.
This holding rests upon the notion that consumer-based exemptions illustrate that the legislature implicitly intended the tax to fall on consumers because the exemptions necessarily recognize that the tax can be passed through to consumers. But as with the provision allowing for optional itemization of the bill to reflect the amount of the Utility Tax, recognition that a tax may, or even likely will be passed through to a consumer is not the same as mandating that the tax be passed through.20 To shift the legal incidence to a consumer, Chickasaw Nation insists that any pass-through be mandatory.
Similarly, the district court pointed to another provision of Florida‘s overall gross-receipts tax code that it interpreted as “expressly stat[ing] that no other ‘exemptions or exceptions’ apply to the Utility Tax.” Seminole Tribe, 49 F. Supp. 3d at 1104-05 (citing
We respectfully disagree with this conclusion. First, this passage of Florida law merely creates a statutory rule of construction requiring that any tax exceptions or exemptions be clearly expressed by the legislature.
In essence, arguments concerning consumer-based tax exemptions appear to us to conflate legal and economic incidence by viewing economically inevitable pass-through as indistinguishable from legally mandatory pass-through. See, e.g., Seminole Tribe, 49 F. Supp. 3d at 1105 (“Under Florida law the tax is passed on to consumers, whether it is separately itemized or not . . . .” (emphasis added)). But Chickasaw Nation insists on mandatory legal requirements over economic realities, no matter how “automatic” those realities may be.
The district court also contrasts this case with Wagnon, where the Kansas statute expressly permitted the distributor to pass on the tax without requiring it to do so. See Seminole Tribe, 49 F. Supp. 3d at 1105 (citing Wagnon, 546 U.S. at 103). But the absence of statutory language expressly permitting pass-through of a tax does not equate to a statutory requirement that the tax must be passed through, even when the economic realities of the situation all but make such pass-through automatic. The distinction might be one of form over substance, but the Supreme Court recognized as much was possible when it acknowledged that a state can shift the legal incidence of a tax through wordsmithing. See Chickasaw Nation, 515 U.S. at 460.
Of course, a pass-through requirement need not be explicitly stated in dispositive language and instead may be fairly interpreted from the statute and its application. Chemehuevi Indian Tribe, 474 U.S. at 10-11. But it must be a requirement nonetheless. See id.; Chickasaw Nation, 515 U.S. at 461; Wagnon, 546 U.S. at 103; Miss. Tax Comm‘n, 421 U.S. at 608. Despite the Tribe‘s emphasis on the inevitability of pass-through, at the end of the day, there is simply nothing in the Florida scheme requiring a utility to pass the tax along to its customers.
Finally, the Tribe attempts to liken Florida‘s gross-receipts tax to a sales tax, where, generally under Florida law, the legal incidence falls on the consumer. See Fla. Dep‘t of Revenue v. Naval Aviation Museum Found., Inc., 907 So. 2d 586, 587 (Fla. 1st DCA 2005). And, indeed, Florida‘s sales-tax statute initially describes the sales tax in a manner similar to the Utility Tax. Compare
The Supreme Court has recognized that sales and gross-receipts taxes are distinguishable based on the legal incidence of the tax:
We follow standard usage, under which gross receipts taxes are on the gross receipts from sales payable by the seller, in contrast to sales taxes, which are also
levied on the gross receipts from sales but are payable by the buyer (although they are collected by the seller and remitted to the taxing entity).
Okla. Tax Comm‘n v. Jefferson Lines, Inc., 514 U.S. 175, 179 n.3 (1995). Florida has embraced this distinction by labeling the Utility Tax as a gross-receipts tax and codifying it in a separate chapter—Chapter 203—from Florida‘s sales taxes, which are found in Chapter 212.
Beyond the traditional definitions, Florida has also expressly codified that the sales tax must be passed through to, and be paid by, the consumer—something it has not done with respect to the gross-receipts tax. See, e.g.,
Additionally, the State of Florida cannot pursue utility customers for unpaid Utility Tax amounts, while it can pursue purchasers for unpaid sales taxes.
Finally, we observe that Florida also levies a sales tax on electricity, the legal incidence of which falls on the purchaser of electricity.
This is not to say that the district court‘s analysis is not valid in other respects, and in fact, the Florida tax does bear some hallmarks of the Oklahoma tax discussed in Chickasaw Nation. For example, just as Oklahoma did not tax sales between distributors in Chickasaw Nation, Florida generally does nоt apply its tax to sales of natural gas or electricity from one utility service provider to another. See
B. Is the Utility Tax Preempted Under Bracker?
Having concluded that the Utility Tax impermissibly fell on the Tribe, the district court declined to determine in the alternative whether the Utility Tax would be preempted by federal law under Bracker. See Seminole Tribe, 49 F. Supp. 3d at 1108. Now that we have reached the opposite conclusion, we must determine whether federal law preempts imposition of the Utility Tax on non-Indian utility companies operating on-reservation.21 After careful consideration, we hold that the Utility Tax does not violate federal law.
Whether the Utility Tax is preempted by federal law is ultimately a question of congressional intent. Cotton Petroleum, 490 U.S. at 175-76. Although an express congressional declaration of preemption is not required, the federal and tribal interests at stake must be sufficient to establish that the exercise of the state‘s taxing authority here violates congressional intent. See id. at 176-77; Bracker, 448 U.S. at 144-45. Unlike in the case of the Rental Tax, we discern here no pervasive federal interest or comprehensive regulatory scheme covering on-reservation utility delivery and use sufficient to demonstrate a congressional intent to preempt state taxation of a utility provider‘s receipts derived from on-reservation utility service.
The Tribe asserts that the tax is preempted because the Tribe uses electricity in connection with various activities whose regulation is preempted by federal law, including the provision of essential government services, leasing of Indian land, and Indian gaming. In the Tribe‘s view, the Utility Tax is indistinguishable from the tax on fuel preempted in Bracker because fuel use was essential to the heavily regulated timber activities that preempted the tax, and electricity is essential to all on-reservation activities.
The problem with the Tribe‘s argument is that it ignores the nature of the Bracker inquiry—a “particularized” and “flexible” test “sensitive to the particular state, federal, and tribal interests involved.” Bracker, 448 U.S. at 145. Cotton Petroleum, 490 U.S. at 184. The fuel tax was preempted in Bracker as applied to the timber company because of the extensive federal regulation of Indian timber harvesting. Bracker did not invalidate (or even discuss) the application of Arizona‘s fuel tax to other
V. Conclusion
In conclusion, we hold that Florida‘s Rental Tax is expressly precluded by
AFFIRMED IN PART and REVERSED IN PART.
Notes
Tenant shall pay . . . to the applicable Federal, tribal and/or Florida governmental authority, any and all sales, excise, property and other taxes levied, imposed or assessed with respect to (i) the occupancy by Tenant of space on Reservation Land, (ii) the operation of Tenant‘s business, (iii) Tenant‘s inventory, furniture, trade fixtures, apparatus, equipment, and all leasehold improvements installed by Tenant or by Landlord on behalf of Tenant (except to the extent such leasehold improvements shall be covered by Taxes referred to in Section 6.1) and any other property of Tenant, and/or (iv) utility services provided to Tenant at the Premises (except those provided by Landlord), including, without limitation, [Broward County/Hillsborough County] taxes on electricity, gas, water and telecommunication services.
In its discussion of New Mexico‘s gross-receipts tax, Mescalero also cited Texas Co. for the proposition that “[l]essees of otherwise exempt Indian lands are also subject to taxation.” Mescalero, 411 U.S. at 157, 93 S. Ct. at 1275. Stranburg seizes on this statement as a declaration that all lessees of Indian land are subject to all state taxation. But Stranburg‘s assertion ignores both the context of Mescalero—where the statement was included in the discussion of the gross-receipts tax, and not the tax on land—and the context of Texas Co.—which dealt with taxes on oil that had been removed from the land. Accordingly, the citation to Texas Co. in Mescalero does not have the reach Stranburg attributes to it and stands for the now uncontroversial proposition that non-Indian lessees of Indian land may be subject to some state taxation. See, e.g., Cotton Petroleum, 490 U.S. at 175, 109 S. Ct. at 1707.