Seventh Circuit Holds That States Cannot Tax Reacquired Tribal Land

By Heidi McNeil Staudenmaier and Jacklyn M. Branby

In a recent case decision, the Seventh Circuit Court of Appeals held that neither the State of Wisconsin nor its localities can tax Native American Tribes that own land that had been sold to non-Native Americans and later reacquired by tribal members.¹ The case concerned a portion of Tribal lands which, though owned today by Ojibwe tribal members, were sold by past tribal owners to non-Native Americans before coming back into tribal ownership.² The parcels are fully alienable and can be sold at will, — “an unusual fact that makes the issue of [the] appeal narrow and novel."³ No circuit court has considered whether the sale of tax-exempt tribal land to a non-Native American ends the land’s tax immunity as against all subsequent tribal member owners, nor does Supreme Court precedent supply an answer.

The State of Wisconsin argued that the one-time act of alienating the reservation property to a non-Native American surrenders the parcels’ tax immunity for all time.  While the United States District Court, District of Wisconsin agreed with the State and ruled the lands were subject to tax, the Seventh Circuit Court of Appeals reversed and said Native American Tribes retain a treaty-based right not to pay taxes on those lands and the State didn't overcome the "sanctity" of tribal tax immunity under U.S. Supreme Court precedent.⁴   

The Seventh Circuit panel unanimously stated that Native American Tribes cannot be taxed on reservation lands without Congressional authorization, calling the principle “the very essence of the categorical rule employed in the Supreme Court's Indian tax cases."⁵ As the Seventh Circuit pointed out, “the Constitution makes clear that that Congress alone may diminish the inherent sovereignty of the Indian tribes, particularly where taxes are concerned."⁶ Congress, however, has not authorized the State to tax the Ojibwe lands and the 1854 Treaty is best read to promise tax immunity for even reacquired lands.⁷