Just Taxes Blog by ITEP

You Can’t Tax Stolen Land

April 12, 2019

The Montana Senate has stopped a bill this session that would have undermined tribal nations’ sovereignty by restructuring the temporary tribal tax exemption program for land on tribal reservations.

But the bill’s success in the Montana House is cause for concern. HB 733, the second version of the even worse HB 401, aimed to restructure the temporary tribal tax exemption program in ways that could lead to considerable legal costs for tribal nations and counties and would make tribal governments the only sovereignties on which Montana levies a tax. The proposal was an unfair and inequitable tax policy rooted in structural racism, and the Temporary Tribal Tax Exemption should be protected.

State Taxation of Tribal Nations

The title of land on a reservation is either held in trust by the federal government on behalf of an individual landowner or tribe, or privately owned. Privately owned land on a reservation is known as “fee simple land”. While fee simple land is subject to all applicable state and local taxation, land in trust status is not. This is because trust land is technically owned by the federal government. Federal law prohibits state and local governments from taxing tribal nations on their sovereign land—like how the federal government does not pay property taxes to the District of Columbia. However, the Supreme Court ruled that states can opt to levy property taxes on fee simple land.

To transfer a title held by a tribal nation or individual from fee simple to trust status is a lengthy and arduous process. In 2011, Montana lawmakers established the Temporary Tribal Property Tax Exemption, which exempts property with a pending trust application with the federal government from state and local taxation for five years. The legislation passed with overwhelming bipartisan support and recognized that given the difficulty of the application process, tribal governments were extremely judicious in selecting property for which to apply for trust status. Because of tribal governments’ care, the Bureau of Indian Affairs, the federal agency in charge of trust applications, rarely denied applications. The exemption program allows tribal governments access to much-needed revenue to provide essential services to community members on and off reservations. It is also in line with how Montana’s neighboring states address tribal taxation: Oregon exempts property while a trust application is pending, and Idaho exempts all tribally owned property on a reservation. And it comes at a very small cost to the state. HB 401, which would have eliminated the program, would have only generated about $125,000 over the next four years.

House Bill 733 Undermines Tribal Sovereignty

HB 733 would further delay the trust application process with appeals, and any revenue localities could hope to recapture through arbitration would be dwarfed by the legal costs, thus serving no fiscal or administrative benefit to the state. HB 733 does reinforce a racist ideology that refuses to accept the rights and sovereignty of tribal nations. Montana exempts all other government-owned property from taxation and tribal governments should not be treated any differently. The bill also places a greater burden on tribes seeking to reclaim land stolen through allotment. According to the Montana Budget and Policy Center:

“Between 1887 and 1934, under the General Allotment Act of 1887, Congress divided reservation lands into individual parcels, gave each tribal member or household a parcel, and sold surplus parcels to non-Indians. In total, the U.S. government took more than 90 million acres (roughly the size of present-day Montana) from tribes and sold it to settlers.”

As Montana tribal nations attempt to buy back land illegally seized from them, HB 733 would create an additional economic roadblock to justice. The goal of the Allotment Act of 1887 was to break up tribal governments and land and forcibly assimilate indigenous people into white society. Converting land to a trust status is an imperfect, though valiant, attempt at restorative justice for the communities decimated by misdeeds executed under decades-long Allotment Act policies Montana’s Temporary Tribal Property Tax Exemption program complements that effort.

Rather than using the tax code as an olive branch to begin restoring relationships between tribal and state governments, HB 733 would weaponize Montana’s tax code, pitting neighbors against one another and turning tax policy into a zero-sum game. HB 733 proponents argue that county governments need the property tax revenue from tribal nations to provide services for county residents. But that simple argument ignores the fact that the small share of county revenue lost (that conceivably could be made up by exploring other progressive revenue-raising options) represents a much larger share of tribal governments’ revenue. Tribal governments, in turn, use this revenue to provide services to tribe members residing on and off the reservation. Tribal governments are uniquely positioned to provide services that county and state governments cannot. Maintaining the Temporary Tribal Property Tax Exemption would not put county services in jeopardy for non-members of tribal nations, it would allow additional investments by tribal governments, and it would be a step toward returning land that was stolen from tribal nations.


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