Originally published on Forbes.com May 6th, 2014
I find it is more fun to read tax cases if I root for one side or the other. My principles of rooting are that I root for the taxpayer unless he or she is being really lame-brained. I will always root for widows, disabled veterans and Indian tribes. So when it came to the United States of America v Puyallup Tribe of Indians, which was recently decided by the United States District Court for the Western District of Washington, I was with the Puyallup, even though I can’t pronounce their name. The issue was whether the IRS can levy “per capita” payments to an enrolled member. I’m going to call him JT, since he probably has enough problems without popping up on forbes.com when somebody googles him.
Some Background On The Big Picture
Our system of sovereignty is fairly complicated with a federal government and fifty states, but there is more. There are also 562 Indian Nations (variously called tribes, nations, bands pueblos, communities, rancherias and native villages). Some are quite large such as the Cherokee with a population over 300,000 and Navajo Nation which at 27,413 square miles covering parts of Arizona, Utah and New Mexico is larger than 10 states. The Puyallup Tribe of Indians is one of the smaller ones in terms of area with less than 30 square miles. 2,500 of the 4,000 enrolled members live on the reservation, where they are outnumbered by non-members. The tribe apparently earns much of its revenue from the Emerald Queen Hotel and Casinos. This funds many tribal activities including a monthly per-capita payment of $2,000.
The Issue
JT was behind on paying his federal income taxes, so the IRS sought to levy on his per-capita payments. I thought that this might have raised issues of tribal sovereignty, but that is not what the decision turned on.
The parties dispute whether the per capita payments are “property” or “rights to property” and whether the per capita payments are “fixed and determinable” under federal law.
The Decision
The Court saw conflicting authority on whether the payments constitute “property” of “rights to property”, but it was relieved that it did not have to decide that, since the “fixed and determinable” answer settled things. The court determined that the payments were not fixed and determinable, since they depended on the discretion of the Puyallup Tribal Council. Even though the Council had been making the payments for quite a while and will likely continue them.
Just like there is no guarantee that a subsequent deposit will be made to a levied bank account, there is no guarantee that will receive another per capita payment. While the Tribe strives to provide for its members, it still makes a discretionary monthly decision whether it shall do so. Moreover, the fact that a payment is likely is the same as classifying a sale of personal property as likely. But, according to the regulations, a levy cannot attach until the individual has actually sold the item. Therefore, the Court concludes that the levies in question did not attach to ’s per capita payments.
I have not seen much coverage of this ruling. There is a summary with some good links at Turtle Talk, the Indigenous Policy Center Blog of the Michigan State UniversityCollege of Law.
On Per Capita Payments
It is not just the tribes that make per-capita payments. The State of Alaska also makes a distribution to all its residents, although it is much more modest than what the Puyallup pay. If you go back to the Founders, you will find that Thomas Paine advocated some sort of per-capita payment to recognize that unlike the state of nature where there were lots of things available if you were willing to do a bit of work, even by the late eighteenth century most of the world was owned by somebody.
Now we have the buzz over Thomas Pikety’s Capital In the Twenty-First Century, which predicts that the way capitalism works will lead to greater and greater concentration of wealth and income as time passes. Maybe the rest of us could learn something from the way the Tribal Nations are handling their resources.
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