NACS Files Comments on Proposal to Relax Tribal Recognition Rules

Comments oppose suggested reforms, which would relax criteria for tribal recognition, exacerbating problem of non-taxed tribal sales.

October 01, 2014

WASHINGTON – Yesterday, NACS filed comments with the Bureau of Indian Affairs opposing proposed reforms to the federal tribal recognition process. The proposed reforms would relax the decades-old criteria that applicants for tribal status have had to meet. If finalized, the reforms would likely increase the number of recognized tribes in the United States and exacerbate the problem of Native American tribes selling high-tax products (such as tobacco and motor fuels) without collecting and remitting state taxes, NACS said in its comments.

Beyond failing to collect and remit state taxes, NACS’s comments also outline how Native American tribes use their sovereign immunity (a legal doctrine granting immunity to a sovereign or state from civil suit or criminal prosecution) to prevent the enforcement of tax laws that the Supreme Court has deemed legal, which means states have no remedy to address this problem. In addition to the legal issues, the problem has also created civil unrest. For example, even after the Supreme Court upheld New York’s right to impose tobacco taxes on tribal sales to individuals who were not tribal members, New York chose not to enforce its tax laws because its initial attempts to do so in the late 1990s led to protests that included burning tires and the closing of the New York Thruway.

This is an exceedingly costly problem that diminishes states’ tax revenues while placing many convenience stores throughout the country at a competitive disadvantage. NACS estimates that tribal tax evasion has generated annual losses of approximately $600 million in economic activity adding up to billions of dollars in lost state revenue, and over 6,500 jobs. Tribal tax abuses have put some convenience stores out of business and retailers adjacent to reservations have lost approximately 80% of their tobacco sales revenue because of sales by tribal businesses that fail to apply taxes.  Thus, NACS urged the Bureau of Indian Affairs to address this problem by requiring all tribal applicants to consent to state suits to enforce the state tax code as a condition of recognition.

Given that the Bureau of Indian Affairs will need to analyze all public comments before issuing a final rule, a final rule is not expected until 2015 at the earliest.

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