WESLEY, Circuit Judge:
The Mashantucket Pequot Tribe (the "Tribe") challenges the Town of Ledyard's (the "Town") imposition of the State of Connecticut's (the "State") personal property tax on the lessors of slot machines used by the Tribe at Foxwoods Resort Casino and MGM Grand at Foxwoods (collectively "Foxwoods"), located in Ledyard, Connecticut. See Conn. Gen.Stat. §§ 12-40 et seq. (the "tax"). The Tribe filed complaints in August 2006 and September 2008 on behalf of two vendors who lease slot machines to the Tribe for use at Foxwoods. The Town and the State appeal
As a threshold matter, the Town and State assert that (1) the Tribe lacks standing; (2) the Tax Injunction Act, 28 U.S.C. § 1341, strips federal courts of jurisdiction over this action; and (3) principles of comity bar federal courts from deciding this action. On the merits, the Tribe defends the district court's order to invalidate the State's personal property tax as applied to the vendors, asserting that the tax is preempted (1) by the Indian Trader Statutes, 25 U.S.C. §§ 261-64; (2) by the Indian Gaming Regulatory Act ("IGRA"), 25 U.S.C. §§ 2701 et seq.; and (3) pursuant to the balancing test enunciated in White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 100 S.Ct. 2578, 65 L.Ed.2d 665 (1980).
We hold that: the district court properly exercised jurisdiction, and the Tribe has standing to pursue this claim; neither IGRA nor the Indian Trader Statutes expressly bar the tax; and, under the Bracker test, federal law does not implicitly bar the tax because State and Town interests in the integrity and uniform application of their tax system outweigh the federal and tribal interests reflected in IGRA. The district court erred in granting summary judgment for the Tribe and in denying summary judgment for the Town and State.
Connecticut imposes a generally-applicable personal property tax for the purpose of revenue collection for the municipalities that assess and collect the tax. State law requires nonresident owners of personal property, which includes slot machines, to file declarations spelling out the value of their property with the towns where their property is located. The towns apply a formula to the value of that property and bill the owners accordingly. Conn. Gen. Stat. § 12-43. To collect the tax, the Town relies heavily on "the willingness of taxpayers to comply with State law and file personal property declarations." Hopkins Decl. ¶ 8. This tax does not apply to Tribal property located on-reservation.
Connecticut's towns use these tax proceeds "to fund the operation of municipal government." Id. ¶ 5. The services provided by the Town include, inter alia, police and emergency-services functions, road maintenance, education, and trash collection. The Town maintains roads to and throughout the Indian reservation, provides emergency services to the Tribe, buses children living on-reservation to schools, and pays for the education of Tribal children on-reservation. The annual cost to the Town of educating Tribal children is at least $236,258.
The Mashantucket Pequot Gaming Enterprise (the "Enterprise") operates Foxwoods, the self-described largest casino and resort in the United States. The Enterprise employs 10,000 people, of whom approximately 150 are Tribal members. Although the Tribe has other sources of income, including at least four types of taxes it imposes on on-reservation activities, the majority of the Tribe's revenue comes from the Enterprise. Slot machines
IGRA defines slot machines as Class III games. See 25 C.F.R. § 502.4. The Final Mashantucket Pequot Gaming Procedures, promulgated by the Secretary of the Interior, governs the Tribe's use of Class III games. See Dist. Ct. Doc. No. 221-13, 56 Fed.Reg. 24996 (1991), 56 Fed.Reg. 15746-01 (1991) ("Gaming Procedures"). Under the Gaming Procedures, the State licenses gaming employees, requires enterprises to register before providing gaming, and collects compensation from the Tribe. Gaming Procedures at §§ 5-6. The Enterprise pays twenty-five percent of all proceeds from video facsimile games
The Enterprise obtains slot machines from different vendors, including Atlantic City Coin & Slot Company ("AC Coin")
AC Coin began leasing slot machines to the Tribe in 1997-98. These leases provided that "[t]axes and any license fees applicable to the use and operation of the [machines] shall be paid by [the] [c]asino." AC Coin Lease 10/11/2000. The agreements further provided that the Tribe:
Id. "AC Coin has used, and continues to use, this standard form tax and indemnification language ... in leases for both its tribal and non-tribal lessees." McCormick Aff. 2. AC Coin has paid Connecticut's personal property tax on slot machines leased to the tribes that operate both Foxwoods and Mohegan Sun, another Connecticut-based, Indian-run casino. Despite the permissive language in its leases, AC Coin has not sought or received reimbursement for the taxes that it has paid on gaming equipment leased to other casinos and had not sought reimbursement from the Tribe prior to this lawsuit.
WMS also leased slot machines to the Tribe pursuant to standard form leases, beginning in 1998. A 1998 lease with the Tribe contained standard language requiring that:
WMS Lease Agreement 10/15/98. Like AC Coin, WMS "has not sought reimbursement nor has it ever been reimbursed for personal property taxes it has paid on gaming equipment leased to casinos by any casino or Indian tribe, including the ... Enterprise and the Mohegan Sun casino." Town Rule 56(a)(1) Statement 7. Similarly, WMS "does not change the pricing, or lease rate, of leased slot machines because of personal property tax; the tax is not a factor in lease pricing." Id.
In the late 1990s, the Tribe decided that its vendors should not be subject to the tax. Despite the vendors' initial reluctance, the Tribe persuaded the vendors to modify the lease agreements to reflect this decision. The modified AC Coin lease indicated:
Town Rule 56(a)(1) Statement 4-5.
The modified language in the WMS lease agreement was substantially identical. See id. Despite the modifications, WMS and AC Coin continued to pay personal property taxes until the Tribe pressured them to stop.
In 2006, AC Coin pursued and lost an administrative appeal of the tax to the Town's Board of Assessment Appeals. In August 2006, the Tribe and AC Coin filed the complaint in this action in the United States District Court for the District of Connecticut.
In July 2008, the Town filed suit in Connecticut Superior Court to collect unpaid property taxes from WMS. In September 2008, the Tribe sued in federal court to enjoin the enforcement of the tax against WMS. The district court consolidated the two federal actions. The Superior Court has stayed Connecticut's action against WMS pending resolution of this case. Town of Ledyard v. WMS Gaming, KNL-cv08-5007839 (Conn. Sup. Ct.). The State intervened as a defendant in both federal cases. As relevant here, the parties filed cross-motions for summary judgment, which the district court resolved in favor of the Tribe.
The Town and State offer three independent reasons to dismiss this case for lack of jurisdiction: (1) standing, (2) the Tax Injunction Act ("T IA"), and (3) comity. The Tribe argues that jurisdiction was proper and that we should affirm the district court's opinion that the tax is preempted by (1) the Indian Trader Statutes,
The district court concluded that none of the Appellants' challenges to its jurisdiction were persuasive. See Mashantucket Pequot Tribe v. Town of Ledyard, No. 06-cv-1212(WWE), 2007 WL 1238338, at *1-2 (D.Conn. Apr. 25, 2007) ("Pequot I") (denying motion to dismiss based on the TIA and comity); Mashantucket Pequot Tribe v. Town of Ledyard, No. 06-cv-1212(WWE), 2012 WL 1069342, at *5-6 (D.Conn. Mar. 27, 2012) ("Pequot II") (denying motion to dismiss based on the TIA and lack of standing). We affirm that conclusion.
The Town alleges that the Tribe lacks standing to bring this claim. "To establish Article III standing, an injury must be `concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and redressable by a favorable ruling.'" Clapper v. Amnesty Intern. USA, ___ U.S. ___, 133 S.Ct. 1138, 1147, 185 L.Ed.2d 264 (2013) (quoting Monsanto Co. v. Geertson Seed Farms, 561 U.S. ___, 130 S.Ct. 2743, 2752, 177 L.Ed.2d 461 (2010)). Only the existence of a concrete, particularized injury is at issue in this case.
The Tribe argues, inter alia, that it has suffered an injury-in-fact because the tax infringes upon Tribal sovereignty. We agree that the Tribe's allegations are sufficient to confer standing.
Although Article III's standing requirement is not satisfied by mere assertions of trespass to tribal sovereignty, actual infringements on a tribe's sovereignty constitute a concrete injury sufficient to confer standing. This injury, distinct "from the monetary injury asserted by" the taxed parties, implicates "the substantive interest which Congress has sought to protect [in] tribal self-government." Moe v. Confederated Salish and Kootenai Tribes of Flathead Reservation, 425 U.S. 463, 469 n. 7, 96 S.Ct. 1634, 48 L.Ed.2d 96 (1976) (addressing state taxes imposed on on-reservation Indians directly implicating the tribe's relationship with its members). This rule exists because tribes, like states, are afforded "special solicitude in our standing analysis." Massachusetts v. EPA, 549 U.S. 497, 520, 127 S.Ct. 1438, 167 L.Ed.2d 248 (2007).
"The Supreme Court has consistently recognized that a tribe has an interest in protecting tribal self-government from the assertion by a state that it has regulatory or taxing authority over Indians and non-Indians conducting business on tribal reservations." Miccosukee Tribe of Indians of Fla. v. Fla. State Athletic Comm'n, 226 F.3d 1226, 1230 (11th Cir. 2000) (citing White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 100 S.Ct. 2578, 65 L.Ed.2d 665 (1980), and Ramah Navajo Sch. Bd. v. Bureau of Revenue of N.M., 458 U.S. 832, 845, 102 S.Ct. 3394, 73 L.Ed.2d 1174 (1982)). In Miccosukee, the Eleventh Circuit held that a tax imposed on revenues gained by a non-Indian boxing promoter from an on-reservation match constituted an affront to sovereignty sufficient to confer standing. Id. at 1230-31 (collecting cases in which the Supreme Court reached the merits of similar actions).
The Town relies on Reich v. Mashantucket Sand & Gravel, 95 F.3d 174 (2d
Here, the imposition of state taxes on slot machines operated only by the Tribe's casino and stored solely on-reservation impinges upon the Tribe's ability to regulate its affairs and to be the sole governmental organ influencing activities, including possession of property, on its reservation. The injury in this case is neither speculative nor generalized; there is a real tax with measurable interference in the Tribe's sovereignty on its reservation. Miccosukee, 226 F.3d at 1230, 1234. The Tribe has standing to vindicate these interests.
The State alleges that the Tribe's suit is barred by the TIA, which provides that "district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." 28 U.S.C. § 1341. The Tribe counters that a tribal exception recognized in Moe, 425 U.S. at 470-74, 96 S.Ct. 1634, undercuts the TIA's seemingly sweeping language. We agree with the Tribe.
Federal courts "have original jurisdiction of all [federal claims] brought by any Indian tribe or band with a governing body duly recognized by the Secretary of the Interior." 28 U.S.C. § 1362. In Moe, the Supreme Court permitted a Tribe to challenge, inter alia, the imposition of a state personal property tax imposed on-reservation. 425 U.S. at 469, 96 S.Ct. 1634. The Moe Court held that tribes are entitled to "treatment similar to that of the United States had it sued on their behalf." Id. at 474, 96 S.Ct. 1634. The Court further noted that the United States could sue to vindicate Indian interests that it had sought to protect through federal legislation and federal programs. Id. at 473, 96 S.Ct. 1634 (citing Heckman v. United States, 224 U.S. 413, 32 S.Ct. 424, 56 L.Ed. 820 (1912), and United States v. Rickert, 188 U.S. 432, 23 S.Ct. 478, 47 L.Ed. 532 (1903)). The tribe was therefore permitted to sue to dispute imposition of state personal property taxes and sales taxes as applied to on-reservation Indians. Id. at 474-75, 96 S.Ct. 1634.
If the Tribe were suing to enjoin enforcement of a state tax imposed directly on the Tribe, the action would not be barred by the TIA. Moe, 425 U.S. at 472-74, 96 S.Ct. 1634; see also Sac and Fox Nation of Missouri v. Pierce, 213 F.3d 566, 571-72 (10th Cir.2000). However, otherwise exempt parties are subject to the TIA when they sue on behalf of non-exempt institutions. FDIC v. New York, 928 F.2d 56, 59 (2d Cir.1991). Insofar as the Tribe is suing on behalf of the third-party vendors who are the taxed parties, its suit (like theirs) is barred by the TIA.
Here, the Tribe is suing to defend against the Town's and State's alleged encroachment upon aspects of tribal sovereignty protected by the Indian Trader
The State alleges that the district court abused its discretion in failing to dismiss this case under principles of comity. The Tribe asserts that the State forfeited this claim. We reject both arguments: the State adequately preserved its comity objection, but the district court was within its discretion in denying the motion to dismiss. See Joseph v. Hyman, 659 F.3d 215, 218 n. 1 (2d Cir.2011) ("where, as here, a district court dismisses the action based on comity, we review the decision for abuse of discretion").
The Tribe points to cases in which courts have held that arguments raised in the complaint were waived unless reiterated in opposition to motions for summary judgment. Tribe Br. 41 (citing, inter alia, Rocafort v. IBM Corp., 334 F.3d 115, 121 (1st Cir.2003)). These cases are unpersuasive in the context of "comity and federalism[, which] bear on the relations between court systems, [because] those relations will be affected whether or not the litigants have raised the issue themselves." Washington v. James, 996 F.2d 1442, 1448 (2d Cir.1993). Moreover, the district court considered and rejected the comity challenge prior to the motion for summary judgment. "After [the] final order, the district court's earlier denial of the motion to remand for lack of subject matter jurisdiction also is reviewable." Capitol Hill Grp. v. Pillsbury, Winthrop, Shaw, Pittman, LLC, 569 F.3d 485, 488 (D.C.Cir. 2009) (citing Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3740 (3d. ed.1998)). "To require [the State] to re-raise [its] objections would be an overly formalistic application of waiver." Dexia Credit Local v. Rogan, 602 F.3d 879, 884 (7th Cir.2010).
"More embracive than the TIA, the comity doctrine applicable in state taxation cases restrains federal courts from entertaining claims for relief that risk disrupting state tax administration." Levin v. Commerce Energy, Inc., 560 U.S. 413, 130 S.Ct. 2323, 2328, 176 L.Ed.2d 1131 (2010). The practical reasons for the stringent application of comity in the context of state tax law were explained by Justice Brennan:
Perez v. Ledesma, 401 U.S. 82, 128 n. 17, 91 S.Ct. 674, 27 L.Ed.2d 701 (1971) (concurring in part and dissenting in part). Recognizing the competence of the state courts to adjudicate federal issues "is essential to `Our Federalism,' particularly in the area of state taxation." Fair Assessment in Real Estate Ass'n v. McNary, 454 U.S. 100, 103, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981).
There is little precedent for applying the comity doctrine in cases brought by Indian tribes. Cf. Kiowa Tribe of Oklahoma v. Lewis, 777 F.2d 587, 592 (10th Cir.1985) (affirming the dismissal, on res judicata grounds, of an issue that had already been litigated and appealed through the entire Kansas state court system). The Sixth Circuit has upheld the dismissal on comity grounds of a lawsuit brought by a private Indian enterprise. Chippewa Trading Co. v. Cox, 365 F.3d 538, 544-46 (6th Cir.2004). However, in so holding, the court explicitly relied on the fact that the plaintiff "[wa]s not an `Indian tribe or band,' as the statutory exception [to the TIA] requires." Id. at 545. Cf. Winnebago Tribe of Neb. v. Kline, 297 F.Supp.2d 1291, 1301 (D.Kan. 2004).
Two factors counsel against dismissing due to comity in this case, brought by an actual Indian tribe and not yet litigated in state court.
On reaching the merits, the district court held that the tax was preempted by
"`In determining whether federal law preempts a state's authority to regulate activities on tribal lands, courts must apply standards different from those applied in other areas of federal preemption.'" Confederated Tribes of Siletz Indians of Or. v. Oregon, 143 F.3d 481, 486 (9th Cir.1998) (quoting Cabazon Band of Mission Indians v. Wilson, 37 F.3d 430, 433 (9th Cir. 1994)). "Although a State will certainly be without jurisdiction if its authority is preempted under familiar principles of preemption, we ... d[o] not limit preemption of State laws affecting Indian tribes to only those circumstances." New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 333-34, 103 S.Ct. 2378, 76 L.Ed.2d 611 (1983).
When examining whether a state tax is permissible, "the initial and frequently dispositive question in Indian tax cases is who bears the legal incidence of the tax, [as] the States are categorically barred from placing the legal incidence of an excise tax on a tribe or on tribal members for sales made inside Indian country without congressional authorization." Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95, 101, 126 S.Ct. 676, 163 L.Ed.2d 429 (2005) (internal quotation, alterations, and emphasis omitted). But here, the parties stipulate that the legal incidence of the tax falls on the vendors. The Supreme Court in White Mountain Apache Tribe v. Bracker laid out a mode of analysis for courts to use "where, as here, a State asserts authority over the conduct of non-Indians engaging in activity on the reservation." 448 U.S. 136, 145, 100 S.Ct. 2578, 65 L.Ed.2d 665 (1980); see also Wagnon, 546 U.S. at 102, 126 S.Ct. 676. Under Bracker, a state tax may be invalid because it is "pre-empted by federal law," or because it "unlawfully infringe[s] on the right of reservation Indians to make their own laws and be ruled by them." Id. at 143, 100 S.Ct. 2578 (internal quotation marks omitted).
In our view, neither the Indian Trader Statutes nor IGRA indicates congressional intent to bar the tax, and subjecting the "tax scheme over on-reservation, non-member activities to `a particularized inquiry into the nature of the state, federal, and tribal interests at stake'" leads us to conclude that the tax is a valid exercise of State authority. Oneida Nation, 645 F.3d at 165 (quoting Bracker, 448 U.S. at 145, 100 S.Ct. 2578).
The Tribe argues that the Indian Trader Statutes, 25 U.S.C. §§ 261 et seq., bar any state regulation in "the field of transactions with Indians occurring on reservations." Central Machinery Co. v. Ariz. State Tax Comm'n, 448 U.S. 160, 165, 100 S.Ct. 2592, 65 L.Ed.2d 684 (1980). Adopting a broad view of the Indian Trader Statutes, the district court held that "the state tax that is imposed upon the non-Indian entities for the ... leased equipment is preempted by the Indian Trader Statutes." Pequot II, 2012 WL 1069342, at *7. We disagree.
The Supreme Court initially interpreted these statutes very broadly. See Milhelm Attea, 512 U.S. at 75, 114 S.Ct. 2028; Warren Trading Post, 380 U.S. 685, 85 S.Ct. 1242. The district court relied on this interpretation, holding that wherever a product is bought, sold, or leased by a tribe on-reservation, state taxes may not be applied. Pequot II, 2012 WL 1069342, at *7. However, in Milhelm Attea, the Supreme Court backed away from this all-encompassing interpretation: "[a]lthough language in Warren Trading Post suggests that no state regulation of Indian traders can be valid, our subsequent decisions have undermined that proposition." 512 U.S. at 71, 114 S.Ct. 2028 (internal alteration and quotation marks omitted); see also Cotton Petroleum, 490 U.S. at 175, 109 S.Ct. 1698. "Indian traders are not wholly immune from state regulation that is reasonably necessary to the assessment or collection of lawful state taxes." Milhelm Attea, 512 U.S. at 75, 114 S.Ct. 2028.
Instead of "depend[ing] on `rigid rules' or on `mechanical or absolute conceptions of state or tribal sovereignty,'" preemption under the Indian Trader Statutes involves "`a particularized inquiry into the nature of the state, federal, and tribal interests at stake ... to determine whether, in the specific context, the exercise of state authority would violate federal law.'" Milhelm Attea, 512 U.S. at 73, 114 S.Ct. 2028 (quoting Bracker, 448 U.S. at 142, 145, 100 S.Ct. 2578) (alteration omitted). Thus where they are implicated, the Indian Trader Statutes require the Bracker balancing analysis.
The ability of a state to apply generally-applicable taxes to non-Indians performing otherwise-taxable functions on an Indian
The district court also determined that IGRA preempts the tax. Pequot II, 2012 WL 1069342, at *7-9. The Tribe is of the view that IGRA completely preempts all state legislation affecting the field of gaming. While the Tribe is correct that IGRA preempts certain state regulations affecting the governance of gaming, the tax at issue here does not affect the Tribe's "governance of gaming" on its reservation, see, e.g., Barona Band, 528 F.3d at 1192. Therefore, we conclude that IGRA does not preempt the tax.
The plain text of IGRA does not bar the tax. IGRA insists that "nothing in this section shall be interpreted as conferring upon a State or any of its political subdivisions authority to impose any tax, fee, charge, or other assessment upon an Indian tribe or upon any other person or entity authorized by an Indian tribe to engage in a class III activity." 25 U.S.C. § 2710(d)(4). IGRA does confer the authority, however, for states and tribes to include provisions in the Gaming Procedures, "relating to ... assessment[s] by the State of ... amounts [] necessary to defray the costs of regulating [Class III] activity." 25 U.S.C. § 2710(d)(3)(C)(iii).
In this case, the Gaming Procedures are silent as to the legality of Connecticut's generally-applicable personal property tax. Neither the State nor the Tribe sought to include language relating to the personal property tax in the Gaming Procedures. As a result, neither the Gaming Procedures nor, by extension, IGRA explicitly forbids (or permits) the State to apply its personal property tax to the vendors.
IGRA does not explicitly bar the tax, but the Tribe asserts that the provisions of IGRA demonstrate congressional intent to exempt non-Indian lessors of gaming equipment from a generally-applicable state property tax levied on property located within a reservation even though that tax does not produce acute economic effects that interfere with the relevant gaming practices. IGRA, passed in 1988 in response to the Supreme Court's decision in California v. Cabazon Band of Mission Indians, 480 U.S. 202, 107 S.Ct. 1083, 94 L.Ed.2d 244 (1987),
In determining whether a state tax imposed on a third party is preempted by IGRA's occupation of the "governance of gaming" field, courts have been quick to dismiss challenges to generally-applicable laws with de minimis effects on a tribe's ability to regulate its gambling operations. For example, courts have held that IGRA's preemptive scope is not implicated in cases involving gaming management and service contracts with a tribe, id. at 438-39; contracts to acquire materials to build a casino, Barona Band, 528 F.3d at 1192; and release of detailed investigative reports on the management of gaming, Siletz, 143 F.3d at 487. Similarly, we conclude that any preemption of the "field" of gaming regulations is not at issue here, where the state tax on property is not targeted at gaming. Instead, we apply the Bracker framework to determine whether the particular application of this tax conflicts with federal law. See Barona Band, 528 F.3d at 1193 ("If we were to accept the Tribe's argument that IGRA itself preempts the state taxation of non-Indian contractors working on tribal territory, we would effectively ignore Bracker and its progeny.").
The Tribe contends that, in order to assure the legality of a tax of general application, the State was required to include language in the Gaming Procedures reserving the right to apply the property tax to slot machine vendors. "[U]nder [IGRA], the only method by which a state can apply its general civil laws to gaming is through a tribal-state compact." Gaming Corp., 88 F.3d at 546. But under IGRA, mere ownership of slot machines by the vendors does not qualify as gaming, and taxing such ownership therefore does not interfere with the "governance of gaming."
Although the Gaming Procedures outline the Tribe's use of gaming services, nothing in the Gaming Procedures indicates that it delineates all of the rights and responsibilities of vendors engaged in gaming services. "Gaming services" in the Gaming Procedures is defined as "the providing of any goods or services to the Tribe directly in connection with the operation of Class III gaming in a gaming facility, including... manufacture, distribution, maintenance or repair of gaming equipment." Gaming Procedures § 2(m).
IGRA does not directly preempt, by its text or by plain implication, the imposition of Connecticut's generally-applicable personal property tax. It also does not explicitly authorize the tax; the Bracker balancing test is therefore in play.
Even when a state law is not barred by the text or plain implication of a federal statute, "it may unlawfully infringe `on the right of reservation Indians to make their own laws and be ruled by them.'" Bracker, 448 U.S. at 142, 100 S.Ct. 2578 (quoting Williams v. Lee, 358 U.S. 217, 220, 79 S.Ct. 269, 3 L.Ed.2d 251 (1959)); see also Wilson, 37 F.3d at 433. It may also unlawfully impinge upon the objectives of federal legislation. See Bracker, 448 U.S. at 149, 100 S.Ct. 2578. Such a tax is impermissible if "the imposition of the tax fails to satisfy the Bracker interest-balancing test." Wagnon, 546 U.S. at 102, 126 S.Ct. 676.
The Bracker test is "a flexible pre-emption analysis sensitive to the particular facts and legislation involved." Cotton Petroleum, 490 U.S. at 176, 109 S.Ct. 1698. We examine "federal statutes and treaties ... in light of `the broad policies that underlie them and the notions of sovereignty that have developed from historical traditions of tribal independence.'" Ramah, 458 U.S. at 838, 102 S.Ct. 3394 (quoting Bracker, 448 U.S. at 144-45, 100 S.Ct. 2578). We then weigh the "`independent but related' barriers" of (1) possible pre-emption under federal statutes, and (2) "interfere[nce] with [a] tribe's ability to exercise its sovereign functions." Id. at 837, 102 S.Ct. 3394 (quoting Bracker, 448 U.S. at 142, 100 S.Ct. 2578). Finally, "[t]he State's interest in exercising its regulatory authority over the activity in question must be examined and given appropriate weight." Id. at 838, 102 S.Ct. 3394. In balancing interests, "ambiguities in federal law should be construed generously, and federal pre-emption is not limited to those situations where Congress has explicitly announced an intention to pre-empt state activity." Id.
The Town and State contend that the balancing test does not apply and, in the alternative, that the Town and State interests at issue are more significant than the Tribal and federal interests at play. We find, first, that the Bracker test applies, and second, that it balances in favor of the Town and State.
The Town makes two arguments in support of its claim that the Bracker test does not apply: (1) the taxed "transaction" takes place off of the reservation, and (2) any needed balancing has already been conducted by the Supreme Court in Thomas v. Gay, 169 U.S. 264, 18 S.Ct. 340, 42 L.Ed. 740 (1898). Neither argument is persuasive.
First, "[t]he Bracker interest-balancing test has never been applied where ... the State asserts its taxing authority over non-Indians off the reservation." Wagnon, 546 U.S. at 110, 126 S.Ct. 676. In Wagnon, the Supreme Court held that a fuel tax imposed on distributors who received fuel off-reservation and delivered it to the Prairie Band Potawatomi Nation on-reservation was imposed on off-reservation transactions not subject to Bracker. Id. at 101-110, 126 S.Ct. 676. The tax at issue in Wagnon applied regardless of the disposition of the fuel because it was triggered by the off-reservation receipt of fuel. Here,
Second, the Town points to several late nineteenth-century cases ("Non-Indian Lessee Cases") in which the Supreme Court upheld taxes on property of non-Indians who resided on Indian reservations. In Thomas,
Thomas and the Non-Indian Lessee Cases are similar to this case insofar as the Court addressed state taxation with the incidence of the tax falling within Indian land despite the absence of a direct tax on the Indians. Cf. Colville, 447 U.S. at 183-86, 100 S.Ct. 2069 (Rehnquist, J., concurring). However, the law has changed since the 1890s; the Supreme Court has clarified the ways in which courts should evaluate assertions of preemption of state taxes. Bracker, 448 U.S. at 145, 100 S.Ct. 2578. "Each case `requires a particularized examination of the relevant state, federal, and tribal interests.'" Cotton Petroleum, 490 U.S. at 176, 109 S.Ct. 1698 (quoting Ramah, 458 U.S. at 838, 102 S.Ct. 3394). Moreover, Congress has established the importance of the specific federal interests at issue by enacting protective legislation such as IGRA. Cf. Thomas, 169 U.S. at 274-75, 18 S.Ct. 340 (conceding "[t]he unlimited power of [C]ongress to deal with the Indians" but noting that the tax at issue would not "be an interference with congressional power"). Although Thomas informs our inquiry, we cannot forgo Bracker's fact-specific analysis because the Supreme Court decided a related question 115 years ago.
For the purposes of the Bracker test, determining relevant federal interests "is primarily an exercise in examining congressional intent, [and] the history of tribal sovereignty serves as a necessary `backdrop' to that process." Cotton Petroleum, 490 U.S. at 176, 109 S.Ct. 1698. IGRA,
The tax, imposed on non-Indian vendors, is likely to have a minimal effect on the Tribe's economic development. While IGRA seeks to limit criminal activity at the casinos, nothing in Connecticut's tax makes it likely that Michael Corleone will arrive to take over the Tribe's operations. Moreover, IGRA presented an opportunity for Congress to preempt taxes exactly like this one; Congress chose to limit the scope of IGRA's preemptive effect to the "governance of gaming." Gaming Corp., 88 F.3d at 550. As imposed on the owners of vending machines leased by the Tribe, the tax entitles the State to a tangential benefit from the Tribe's gaming operation, but it does not prevent "the Indian tribe [from being] the primary beneficiary of the gaming operation." 25 U.S.C. § 2702(2) (emphasis added). The tax therefore has only a minimal effect on federal interests.
The tax implicates two Tribal interests — economic development and sovereignty over the reservation — but the parties dispute the magnitude of the tax's impact on each.
The economic effect of the tax on the Tribe is minimal.
As of September 2011, the Tribe had invested over $1.42 billion in its gaming operations at Foxwoods. Many of the vendors' most popular games are available by lease only, and the Tribe has elected to pursue leases of a significant duration; however, the challenged tax does not significantly compromise the profitability of these leases. The Tribe's payments to the State of twenty-five percent of its gross operating revenues from video facsimile games have exceeded $1.5 billion since 2003. Even if the Tribe were forced to reimburse the vendors, $20,000 per year would not pose a substantial threat to the revenue the Tribe derives from the vendors' games, and it does not make the State the "primary beneficiary" of even this part of the Tribe's gaming operation. The tax's economic effect on the Tribe is less than minimal.
The tax has a moderate effect on tribal sovereignty. "A tribe's power to exclude nonmembers entirely or to condition their presence on the reservation is ... well established." Mescalero Apache, 462 U.S. at 333, 103 S.Ct. 2378. However, "[w]e long ago departed from the `conceptual clarity of Mr. Chief Justice Marshall's view in Worcester [v. Georgia, 31 U.S. 515, 6 Pet. 515, 8 L.Ed. 483 (1832)]," "that Indian tribes were wholly distinct nations within whose boundaries `the laws of a State can have no force.'" Id. at 331, 103 S.Ct. 2378 (quoting Worcester, 31 U.S. at 561) (alterations omitted). The State's personal property tax, as imposed on the slot machines located entirely on-reservation, overlaps with the Tribe's ability to set the restrictions to property rights in its sovereign territory. "[U]nder some circumstances a State may exercise concurrent jurisdiction over non-Indians acting on tribal reservations." Id. at 333, 103 S.Ct. 2378 (citations omitted). Still, this encroachment into an area of tribal sovereignty, however modest, is a recognized injury that must be considered in a Bracker balancing.
In evaluating a State's economic interests for the purpose of Bracker balancing, we look for "a nexus between the taxed activity and the government function provided...." Barona Band, 528 F.3d at 1193; see also Ute Mountain Ute Tribe v. Rodriguez, 660 F.3d 1177, 1201 (10th Cir. 2011). In Mescalero, the challenged state
"There is nothing unique in the nature of a [generally-applicable] tax ... that requires a different analysis." Ramah, 458 U.S. at 843, 102 S.Ct. 3394. However, for a generally-applicable tax, a court may credit the services provided by the State to the Tribe more generally as "related" to the tax. In Cotton Petroleum, 490 U.S. at 185, 189-91, 109 S.Ct. 1698, the Supreme Court permitted application of a generalized tax on oil and gas production to on-reservation production, despite "evidence that tax payments by reservation lessees far exceed[ed] the value of services provided by the State to the lessees, or more generally, to the reservation as a whole." Id. at 189, 109 S.Ct. 1698. The Court reasoned that the State could point to "[t]he intangible value of citizenship in an organized society [that] is not easily measured in dollars and cents." Id. It also pointed out the "nightmarish administrative burdens" that would arise from requiring parity between state taxes and state services. Id. at 185 n. 15, 109 S.Ct. 1698.
In this case, the Town has a cognizable economic interest in imposing the tax. The Supreme Court has recognized "the dependency of state budgets on the receipt of local tax revenues" and "appreciate[s] the difficulties encountered by [local governments] should a substantial portion of [their] rightful tax revenue be tied up in" litigation. Rosewell v. LaSalle Nat'l Bank, 450 U.S. 503, 527-28, 101 S.Ct. 1221, 67 L.Ed.2d 464 (1981). The Town's economic interest therefore exceeds the value of the taxes on slot machines, insofar as a ruling favorable to the Tribe could invite other non-Indian owners of personal property on the reservation to initiate similar actions. According to the Town, the anticipated litigation from such an event would tie up hundreds of thousands of dollars per year. Hopkins Decl. ¶ 16. Moreover, if the legality of the tax hinges upon the extent to which the taxed property is used by the Tribe in connection with Class III gaming — or other gaming at Foxwoods — the Town would need to take careful account of the use to which property owned by non-Indians on the reservation was put. This additional level of analysis would further frustrate the Town's revenue collection and would render the State's tax more difficult and expensive to administer.
There is a nexus between the tax and the services that the Town provides. The Town funds "the education and bussing [sic] of the Tribe's children" and "[t]he maintenance of the roads to the Reservation," inter alia. Pequot II, 2012 WL 1069342, at *12. A well-maintained road system that brings in the customers is the lifeblood of the Tribe's gaming activities. That the Tribe benefits from generalized governmental functions performed by the Town reinforces the validity of generalized taxes imposed by the Town on third parties with whom the Tribe elects to do business. Cotton Petroleum, 490 U.S. at 189, 109 S.Ct. 1698. The Town's economic interest in the generally applicable tax is therefore connected, in some respect, to the generally available services that it provides.
The State has an interest in the uniform application of its tax code. Requiring the State to consider additional factors to determine the code's applicability would make it less predictable and more difficult
Finally, a State has a separate sovereign interest in being in control of, and able to apply, its laws throughout its territory. Cotton Petroleum, 490 U.S. at 188, 109 S.Ct. 1698. That interest is diminished where, as here, the sole application of the state law at issue is on the Tribe's reservation, which occupies a unique status within the State. Finally, if there is evidence of arbitrage or Tribal efforts to structure deals so as to avoid the State tax, the State's interests are stronger. See Barona Band, 528 F.3d at 1193-94.
The Town and State have more at stake than the Tribe. The economic effect of the tax on the Tribe is negligible; its economic value to the Town is not. The Tribe's sovereign interest in being able to exercise sole taxing authority over possession of property is insufficient to outweigh the State's interest in the uniform application of its generally-applicable tax, particularly where, as here, there is room for both State and Tribal taxation of the same activity. See Cotton Petroleum, 490 U.S. at 188-89, 109 S.Ct. 1698. Ultimately, applying a tax that covers all property in the State to non-Indian property located on-reservation is minimally intrusive. We find the Supreme Court's holding in Cotton Petroleum to be highly instructive. As in that case,
490 U.S. at 186-87, 109 S.Ct. 1698.
We recognize that this is arguably a close case. However, the Tribe's generalized interests in sovereignty and economic development are not significantly impeded by the State's generally-applicable tax; neither are the federal interests protected in IGRA. The Town has moderate economic and administrative interests at stake,
The Tribe alleges that, independent of all else, tribal sovereignty poses another hurdle to the imposition of the tax. The Tribe relies on two categories of cases: the Bracker line, and the Worcester line. However, Bracker and its progeny only cite tribal sovereignty among the interests in a balancing test where the incidence of a tax does not fall on the Tribe. See, e.g., Bracker, 448 U.S. at 142-45, 100 S.Ct. 2578; see also Wagnon, 546 U.S. at 101-02, 126 S.Ct. 676. Furthermore, cases such as Worcester, 31 U.S. 515, contain exactly the sort of "mechanical or absolute conceptions of state or tribal sovereignty" repudiated by Bracker, 448 U.S. at 145, 100 S.Ct. 2578; see also Mescalero Apache, 462 U.S. at 331, 103 S.Ct. 2378. Neither supports the Tribe's claim. Tribal sovereignty is an important consideration for a court weighing interests in the Bracker test, but it is insufficient in itself to bar the State's generally applicable tax imposed on non-Indians' ownership of on-reservation personal property.
The district court was not barred — by Article III, the TIA, or comity doctrines — from reaching the merits of this case. However, the district court erred in determining that Connecticut's generally-applicable personal property tax was barred by the Indian Trader Statutes, by IGRA, and pursuant to the Bracker balancing test.
For the foregoing reasons, the opinion and order of the district court is
The Tribe asserts that any tax, regardless of its size, is impermissible. The Tenth Circuit has held that, under some circumstances, preemption analysis "cannot turn on the severity of a direct economic burden on tribal revenues caused by the state tax." Indian Country, U.S.A., Inc. v. Okla. Tax Comm'n, 829 F.2d 967, 986 n. 9 (10th Cir. 1987). In Indian Country, the State taxed Indian sales of bingo tickets; the court held that IGRA's regulation of gaming itself is sufficiently comprehensive to prevent any tax on casino sales not accounted for in the compact. Id. In Bracker, the state sought to impose a motor carrier license tax and a use fuel tax on a subcontractor of a tribe's timber operations. 448 U.S. at 139, 100 S.Ct. 2578. The taxes burdened contracts for the sale of timber that were often "drafted by employees of the Federal Government," and the federal scheme Indian timber regulations were "so pervasive" that there was "no room for the[] taxes in the comprehensive federal regulatory scheme." Id. at 147, 148, 100 S.Ct. 2578. While IGRA may prevent any tax on gaming itself, a tax on personal property possessed by a non-Indian on the reservation does not fall within IGRA's pervasive reach. Cf. Casino Res. Corp., 243 F.3d at 439; Barona Band, 528 F.3d at 1192.
The Town and the State assert that the tax has no actual economic effect on the Tribe. Indeed, the record reflects that "the tax is not a factor in lease pricing" and that the vendors do not seek reimbursement from Tribal lessees. Tribe Rule 56(a)(2) Statement 12-14. Insofar as the Tribe challenges this assessment, it would constitute a "genuine dispute as to [a] material fact," Fed.R.Civ.P. 56(a); however, we construe the record as devoid of genuine dispute on this question, insofar as any effect on the Tribe is minimal compared to the other relevant interests. Nevertheless, the Tribe did, pursuant to industry standard lease agreements, assume contractual liability for the taxes incurred by the vendors. Deane Decl. 3-4. The extent of the legal liability that the Tribe theoretically incurred is relevant, though not particularly weighty, to the calculation of the Tribe's interest, even if the Tribe's actual cost associated with the tax hinged upon the vendors' decision to seek the reimbursement to which they were lawfully entitled. See Denney v. Deutsche Bank AG, 443 F.3d 253, 265 (2d Cir.2006) (listing "run[ning] the risk of being assessed a [cost]" as a cognizable injury, even if it is not clear that the debtor will seek repayment).
