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The Supreme Court

Gambling Taxes Collected at Indian Reservations

Companies that run gaming operations must pay federal wagering excise and occupational taxes. State-sponsored gambling activities are exempt from these taxes. The Chickasaw Nation wanted that state exemption as well and filed a case in federal court. The court of appeals rejected that claim and the Chickasaw Nation took the case to the Supreme Court in 2001.

This case was based on the Indian Gaming Regulatory Act, which permits and governs gambling operations on Indian reservations. The Chickasaw Nation believed this act was written in such a way to exempt Indian nations from taxes that state governments don't have to pay.

Just the Facts

The Indian Gaming Regulatory Act was passed in 1988 to govern Indian gaming. There are three classes of gaming specified in the act. Class I is traditional Indian social gaming for minimal prizes, which is exclusively regulated by tribal governments. Class II are common games of chance, such as bingo. Tribal governments are responsible for regulating this class with oversight by the National Indian Gaming Commission. Class III includes all games not in Class I or II, such as slot machines, black jack, craps and roulette, and is fully regulated by the commission.

The Indians based their claim on a technicality that involved certain wording in parenthetical reference. The Supreme Court ruled that the language outside the parenthesis was unambiguous and related only to the reporting and withholding of taxes.

In the majority opinion announced on November 27, 2001, the Supreme Court declared this a drafting mistake and said it could “find no comparable instance in which Congress legislated an exemption through a parenthetical numerical cross-reference.”

Associate Justice Sandra Day O'Connor dissented in this case in support of the Indian Nations and she was joined by Souter. In her dissent, she said:

  • “Exempting Nations from federal gaming taxation in the same manner as States preserves the Nations' sovereignty and avoids giving state gaming a competitive advantage that would interfere with the Nations' ability to raise revenue in this manner. Because nothing in the text, legislative history, or underlying policies … clearly resolves the contradiction inherent in the section, it is appropriate to turn to canons of statutory construction. The Nations urge the Court to rely upon the Indian canon, that 'statutes are to be construed liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit.' … In this case, because Congress has chosen gaming as a means of enabling the Nations to achieve self-sufficiency, the Indian canon rightly dictates that Congress should be presumed to have intended the Nations to receive more, rather than less, revenue from this enterprise.”

Indian nations were not granted exemption and must pay the same taxes as other nongovernmental gambling operations.

book cover

Excerpted from The Complete Idiot's Guide to The Supreme Court © 2004 by Lita Epstein, J.D.. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.


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