‘While the Osage Allotment Act reflected a “policy of assimilation,” it did not contain language of disestablishment of the reservation, said Thomas P. Schlosser, attorney for the Osage.’

 

DENVER – The principal chief of the Osage Nation cautioned opponents in a tax case that an Osage loss could work to their detriment, as well.

“An enormous economy is built around tribal boundaries,” said James Roan Gray, whose counsel argued in the 10th U.S. Circuit Court of Appeals that Osage tribal members’ income is immune from state income taxation in Oklahoma’s Osage County and that the county constitutes the Osage Reservation.

The tribe – said by tribal leaders to be the largest employer of non-Indians in Osage County – works with state and local government and brings vast resources to bear “so that everyone enjoys the benefits.”

If the court were to rule Osage Nation income on its tribal lands northwest of Tulsa could be taxed, it would be a “limited” benefit to the county and state “compared to what the tribe can bring in” to aid in economic opportunity, road-building and repair, public schools’ improvement, and other benefits, Gray said Jan. 11.

The tribe appealed a decision by Oklahoma District Court Judge James Payne, who said in his earlier ruling, “Recognizing Osage County as a reservation and ousting Oklahoma income taxation over Osage members would have significant practical consequences not only for income taxation, but potentially for civil, criminal and regulatory jurisdiction in Osage County.”

He said the state can tax the income of Osage tribal members working in the county and ruled that the Osage Reservation and Osage County, approximately 80 percent non-Native, are not the same.

The decision echoed concerns expressed by businesses, utilities, oil interests, farmers and ranchers that the Osage Nation would tax or otherwise exert punitive control over them in what Gray termed a “scare tactic” since such taxation, for example, would be outside the tribe’s authority.

Instead, Gray reiterated, everyone benefits from the tribe’s infusion of cash into the local economy and it would be beneficial for the state and tribe “to work this out.”

The Oklahoma Tax Commission reminded the three-judge federal appellate panel that the court had earlier characterized the Osage Nation’s position as a “virtual land-grab” with “far-reaching implications on Oklahoma sovereignty.”

Two years ago the 10th Circuit allowed limited pursuit of an exemption from state income tax laws after the Osage Nation sued the state of Oklahoma for taxing the income of tribal members who lived and worked on the reservation.

The Osage then and at present argued that the 2,250-square-mile county remains the original Osage Indian Reservation, despite the state’s argument that, except for specific trust lands, the reservation lost its status with Oklahoma statehood.

Gray said the reservation’s status remains the key issue before the court: “The original boundaries of the Osage Reservation can only be abolished by an act of Congress. This reservation has never been disestablished and no acts of Congress have authorized that.”

Many of the other issues raised are red herrings, including the intricacies of whether, when, and under what circumstances original allotments could be sold or inherited, tribal observers said.

Counsel for the tribe told the court that precedents exist for counties that are entirely Indian reservations, including those in North and South Dakota and in Nebraska. An act of Congress in 1872 set apart the Osage Reservation, where the subsurface was held in trust for the tribe and about one-seventh of the 1.5 million-acre reservation is held by Natives.

While the Osage Allotment Act reflected a “policy of assimilation,” it did not contain language of disestablishment of the reservation, said Thomas P. Schlosser, attorney for the Osage. No surplus lands were sold to non-Indians and no portion of the reservation was opened to non-Indian settlement.

There have been rulings that earnings from mineral resources are taxable, but no rulings that wages are taxable, he said. In fact, unless Congress has specifically authorized a tax, Indians are not taxable if they are working and living within Indian country.

The Oklahoma Tax Commission contends that since the early 1930s the state has been imposing income tax on Osage members and at various times the reservation appears to have been disestablished.

“They seem to believe that if we win this thing the world is coming to an end,” Gray said, countering both the state’s argument and the related fears expressed by business and civic groups.

Osage tribal members have been told they can pay the taxes in question under protest and could be reimbursed later, if the federal appeals court renders a favorable decision at an unspecified future date.

One positive sign for the Osages may be that the National Indian Gaming Commission approved the tribe’s claim that Osage County and the reservation were one and the compact was signed by the state, noted a tribal member who attended the hearing in the 10th Circuit Court.

Be careful what you wish for, a court case suggests

By Carol Berry, Today correspondent

Story Published: Jan 28, 2010  Story Updated: Jan 22, 2010 , Indian County Today