The state of Michigan cannot impose property taxes on the land owned by members of the Keweenaw Bay Indian Community, a federal judge ruled on Wednesday.
In an 18-page opinion, U.S. District Judge David W. McKeague said the state has no right to tax tribal lands because Congress has not authorized it. “Indian reservation land is generally exempt from state and local taxation absent cession of jurisdiction or other federal statute permitting it,” he wrote in the decision dated May 27 and filed yesterday.
The ruling comes in a a long-running dispute between the tribe and the state. Citing U.S. Supreme Court precedent, the state tax commission authorized local assessors to place tribal property on the tax rolls.
Calling state taxation “an insult to tribal sovereignty” the KBIC council fought the decision and won a ruling in the state Court of Appeals in 2002. But the state Supreme Court reversed a year later, leading to tax bills sent to the tribe and tribal members for land within the 59,840-acre reservation.
The dispute centered on the interpretation of Cass County v. Leech Lake Band of Ojibwe, a Supreme Court ruling from 1998. In the unanimous decision, the justices said that an act of Congress opening up the reservation to allotment as an “unmistakably clear” sign that state and local taxation is allowed.
The state sought to extend this logic to an 1854 treaty between the Keweenaw Bay ancestors and the United States. Language in the treaty did in fact refer to allotment of tribal lands.
But McKeague said a “liberal” interpretation of the treaty doesn’t support the state’s argument. “It defies logic to believe that the Indians would have signed a treaty ceding over seven million acres to the United States, knowing that they could lose the land they kept as a reservation the following year, due to non-payment of taxes,” he wrote.
He also said that the Cass County decision is limited to acts of Congress — not treaties. Agreeing with the state’s expansive interpretation would be judicial activism, McKeague warned.
“Anticipating the direction in which the Supreme Court will direct the law may indeed be an exciting proposition, but it is not the proper role for this court,” he stated in granting summary judgment to the tribe.
Taxation has been a major issue for Keweenaw Bay members in recent years. In 2002, the tribe refused to sign an agreement with the state covering tax issues. Former chairman Fred Dakota, who currently serves on the council, has been leading protests against potential settlement with the state.
The tribe and business owners on the reservation have long resisted efforts by the state to tax tobacco products. The state has occasionally seized cigarettes that do not bear state tax stamps.
In addition to property and sales taxes, there is a dispute over car use taxes imposed on the reservation. The Michigan Tax Tribunal in April ordered the state to pay more than $990 back to a tribal member for an illegal tax.
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