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Flandreau Santee Sioux Tribe v. Haeder

United States Court of Appeals, Eighth Circuit

September 6, 2019

Flandreau Santee Sioux Tribe, a Federally-recognized Indian tribe Plaintiff - Appellee
Josh Haeder, Treasurer of the State of South Dakota, et al.[*] Defendants - Appellants

          Submitted: February 13, 2019

          Appeal from United States District Court for the District of South Dakota - Sioux Falls

          Before LOKEN, COLLOTON, and KELLY, Circuit Judges.


         In this case, as in Flandreau Santee Sioux Tribe v. Noem, No. 18-1271, also decided today, we are called upon to determine whether a South Dakota tax on nonmember activity on the Flandreau Indian Reservation in Moody County, South Dakota is preempted by federal law. South Dakota imposes a 2% excise tax on the gross receipts of a contractor if its services "entail the construction, building, installation, or repair of a fixture of realty" within the State. S.D.C.L. 10-46A-1. The issue is whether federal law preempts imposition of this statewide tax on the gross receipts of a nonmember contractor for services performed in renovating and expanding the Flandreau Santee Sioux Tribe's gaming casino located on the Reservation. The State appeals the district court's grant of summary judgment in favor of the Tribe. We review the grant of summary judgment de novo, and the facts in the light most favorable to the State, the non-moving party. See Casino Res. Corp. v. Harrah's Entm't, Inc., 243 F.3d 435, 437 (8th Cir. 2001) (standard of review). We conclude on the summary judgment record that the tax is not preempted and therefore reverse.

         I. Background.

         The Tribe owns and operates the Royal River Casino & Hotel (the "Casino") on the Reservation, where it conducts "Class III gaming" such as table games and slot machines. As required by the federal Indian Gaming Regulatory Act ("IGRA"), the Tribe and the State entered into a gaming compact that provides the terms under which the Tribe is authorized to conduct Class III gaming at the Casino. See 25 U.S.C. § 2710(d). The Casino, opened in 1990 and relocated in 1997, operates in a building that houses a gaming floor, a hotel, a restaurant, a bar, a gift shop, a snack bar, and a live entertainment venue.

         The Tribe planned and has partially implemented a $24 million renovation and expansion of the Casino, in part to compete with a newer, larger casino that opened nearby in 2011. To this end, the Tribe and the State agreed to double the number of slot machines allowed under the gaming compact. In October 2015, the Tribe contracted with a nonmember construction company, Henry Carlson Company, to carry out the planned renovation. It is undisputed that the Henry Carlson Company's construction services under this contract would be subject to the 2% excise tax if not performed on an Indian reservation. Cf. Valley Power Sys. v. S.D. Dep't of Revenue, 905 N.W.2d 328, 331 (S.D. 2017). The compact between the Tribe and the State is silent as to whether the State may impose the excise tax on a nonmember contractor performing construction services on the Casino's realty.

         Construction on the Casino project began in December 2016. Certain construction projects within Indian country, such as construction of schools and tribal government buildings, are exempt from the excise tax, based on a project-by-project analysis by the South Dakota Department of Revenue using criteria developed by the State from federal preemption decisions. Henry Carlson Company twice requested an exemption for the Casino renovation project. Both requests were denied by the Department of Revenue, which does not grant exemptions for nonmember contractor work on "commercial" projects such as a casino. Henry Carlson Company then remitted the excise tax under protest and requested that the State refund the tax to the Tribe. See S.D.C.L. 10-27-2. When the State denied the request, the Tribe filed this action in April 2017, seeking declaratory relief, an injunction, and a refund of the tax paid under protest.[1]

         Ruling on the parties' cross-motions for summary judgment, the district court concluded that IGRA expressly preempts the state excise tax for two reasons: (i) The federal statute comprehensively regulates gaming activity on tribal lands to provide tribes with revenue and to promote tribal self-sufficiency, and it requires a tribal resolution for the construction and maintenance of the gaming facility that is subject to approval by the Chairman of the National Indian Gaming Commission ("NIGC"), see 25 U.S.C. § 2710(2)(E). (ii) The Casino renovation project is "directly related" to Class III gaming within the meaning of 25 U.S.C. § 2710(d)(3)(C)(vii) because "without the construction project, the Tribe would be unable to operate its gaming activities." As the Tribe's compact with the State does not authorize the excise tax, it is preempted by 25 U.S.C. § 2710(d)(4). Alternatively, the court held that the tax is preempted under the balancing test set forth in White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980), because it "infringes on the Tribe's ability to govern itself" and there is no "nexus between any services the State provides to the Tribe or the contractor and the imposition of the excise tax."

         II. Discussion.

         The analysis begins with Part I of our opinion in Flandreau Santee Sioux Tribe v. Noem, No. 18-1271, slip op. at 4-13, which is hereby incorporated by reference. Because the legal incidence of the excise tax falls on the nonmember contractor, not on the Tribe, the tax is not per se invalid. See Okla. Tax Comm'n v. Chickasaw Nation, 515 U.S. 450, 453 (1995). Therefore, a particularized inquiry is required to determine whether federal interests as expressed in IGRA outweigh the State's interest in taxing nonmember Henry Carlson Company for its work on the Casino's realty. See Ramah Navajo School Bd., Inc. v. Bureau of Revenue of N.M., 458 U.S. 832, 838 (1982) ("Pre-emption analysis in this area is not controlled by mechanical or absolute conceptions of state or tribal sovereignty; it requires a particularized examination of the relevant state, federal, and tribal interests."). Determining whether federal legislation has preempted state taxation of nonmember activity on Indian land is "primarily an exercise in examining congressional intent." Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 176 (1989).

         In Noem, we concluded that the district court erred in ruling that imposing the South Dakota use tax on amenities sold to nonmember customers of the Casino was expressly preempted by IGRA. For the most part, our reasoning in Noem establishes that the district court likewise erred in concluding that the State's excise tax on nonmember construction contractors is expressly preempted:

-- As we explained in Noem, 25 U.S.C. § 2710(d)(4) does not preempt state taxation of nonmember activities on a reservation, other than Class III gaming activity, which the Supreme Court has defined as "what goes on in a casino." As to other state taxes, subsection (d)(4) is a lack of authorization, not a prohibition. "Congress chose to limit the scope of IGRA's preemptive effect to the governance of gaming." Mashantucket Pequot Tribe v. Town of Ledyard, 722 F.3d 457, 473 (2nd Cir. 2013) (upholding imposition of ...

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