Robert Wood has an interesting article on how the IRS has won a fight with a native American tribe. It shares two aspects that expats and “foreign” banks face due to FATCA.
Background: American Indian tribes are sovereign nations and cannot be taxed. However, individual members of a tribe are USCs and they can be taxed. A recent court battle in Florida brings to mind the 2009 situation with Swiss banks. The IRS was investigating gambling profits ( tribes can conduct gaming on Native American lands independently of state regulation in states that allow gaming). The IRS wants to see if federal tax withholding/reporting requirements were met for profits distributed to 600 members of the tribe. The tribe claimed immunity. A court of appeals ruled that the bank records could be subpoenaed. Here is where the situation becomes interesting (emphasis mine):
1)The tribe refused to hand over the records so the IRS subpoenaed the documents from four banks. In addition to arguing sovereign immunity, the tribe argued that the records would reveal confidential financial information and force them to change their banking practices to keep money on the reservation. … According to the court, the records became the property of the banks, not the tribe.
2) Around 100 Miccosukee owe the IRS a combined $25 million in unpaid taxes, penalties and interest. Their former chairman, Billy Cypress, owes over an alleged $26 million in gambling profits and was aided by two former US attorneys.
In the first point, once again, the IRS is attempting to force the release of confidential financial information which would force a change in banking practices, not unlike banks in Europe (and elsewhere) who are dropping USC accounts. The IRS managed to get around the privacy/confidentiality issue by claiming the records belong to the banks. And the second, the apparent justification for these actions are based upon seemingly unrelated tax problems of individual bank members. There isn’t enough information given to tie the dates being investigated to the back amounts owed by individuals.This reminds me of the wealthy homelanders who evade tax via foreign banks as the justification for going after USC’s in foreign countries. There is just the assumption that since some are guilty, a fishing expedition is allowed to begin. And what irony, instead of being aided by Swiss bankers, we have former US attorneys.
I am wondering if there isn’t something that isn’t being addressed – there seems to be a built-in contradiction here. What is the point of a tribe being a sovereign nation if it’s members have to pay taxes?
Am I missing something here?
http://www.forbes.com/sites/robertwood/2012/10/19/irs-wins-fight-with-native-american-tribe/
@Nobledreamer- You aren’t missing anything at all. The position of the U.S. courts is completely contradictory. If the tribe as a communal entity has immunity then so do the individual members of that tribe. To divorce the tribe from its members is a logical contratidiction. The fact that the courts don’t hold to such a distinction between the entity and the members which compose the entity can be seen in the court’s decision to extend free speech rights to corporations.
The logic there was that if the individuals who make up the ownership of the corporation have free speech rights then those rights are also possessed by the corporation of which they are members.
It is just another classic case of the courts and the government interpreting the law according to their vested interest. As I have said before, tax law is a total tautology. You can’t win and if you do win it will cost you a lot of money to find out.
This whole thing makes about as much sense as the so called tax treaties that the U.S. signs, which are suppose to protect U.S. citizens from double taxation. Now on the surface of it anyone with an ounce of sense would interpret such a wording as meaning that you don’t have to be accountable for the same income stream to two different tax regimes. However as logical as such an assumption would be the U.S. decides to play a game of splitting hairs and inserts a clause, the reserve clause, that nullifies the puported intent of the treaty. This is just another example of how the U.S. negotiates in bad faith.
The idea that those bank records are the property of the bank is a violation of the fiduciary duty that financial institutions have to protect the privacy of and financial affairs of their clients. Those bank records are records of a person’s private property and they would not be there were it not for the person who earns and has sole say over the storage of that property.
It is hypocritical for the U.S. to parade itself around the world as the promoter of human rights and the rule of law when it stomps on the rights of its own citizens.
*Curious as to why the reservations don’t start their own banks on their reservations and use them. Would a reservation owned credit union or bank located on the reservation be subject to reporting to IRS if reservations are viewed as sovereign nations? I’m just curious. I know nothing about how this works.
The text of the 1924 Indian Citizenship Act (43 U.S. Stats. At Large, Ch. 233, p. 253 (1924)) reads as follows:
BE IT ENACTED by the Senate and house of Representatives of the
United States of America in Congress assembled, That all non citizen
Indians born within the territorial limits of the United States be, and
they are hereby, declared to be citizens of the United States: Provided
That the granting of such citizenship shall not in any manner impair or
otherwise affect the right of any Indian to tribal or other property.”
There is no hope, slave. You are slave whether you are on the reservation or off.
In this case, it seems that ConfederateH is right. The Indian Citizenship Act means that the Indians are not really sovereign nations, but taxpayers like all other citizens. In the original Constitution and indeed even the 14th Amendment, Indians were not citizens, but they weren’t subject to federal taxes either. In all cases, the power to tax is the power to destroy. The natives thus who have been subjugated to taxation are not in any sense of the term sovereign nations but slaves of the state, just like the rest of us.
@Kevin Z- As I have come to understand things I don’t think that even taking that step would be enough because they would still be using U.S. treasury notes. But even if they were to issue their own legal tender for the reservation that still wouldn’t be enough.
Their situation does indeed mimic the very situation of expats the only difference being that the natives still live within U.S. territorial limits.
However I do not believe that any of the native tribes who signed treaties with the U.S. ever thought that the U.S. would unilaterally destroy those treaties by turning the tribal members into citizens of the U.S. Just one more example of how treaties mean nothing to the American government. Native sovereignty is then nothing more than an abstract fiction.
If the Russians, Chinese, North Koreans, Cubans etc., the members of America’s so called axis of evil, were to perpetuate on their expat citizens the same things that America does on its expats, you can believe that the members of Congress and the Executive branch would be falling all over themselves fighting for the human rights of those oppressed people.
@recalcitrantexpat,
You wrote:
“If the Russians, Chinese, North Koreans, Cubans etc., the members of America’s so called axis of evil, were to perpetuate on their expat citizens the same things that America does on its expats, you can believe that the members of Congress and the Executive branch would be falling all over themselves fighting for the human rights of those oppressed people.”
Ain’t that the truth!
Members of the US Congress and the Executive branch would certainly introduce some new legislation like the Jackson–Vanik Amendment which slapped trade restrictions on the Russians for their restrictions on the emigration of Jews, ie. Exit Taxes (sound familiar?).
http://en.wikipedia.org/wiki/Jackson-Vanik_amendment
The Jews who were refused from expatriating from the Soviet Union were called “Refuseniks.” Chuck Schumer’s Ex-Patriot Act is aimed directly at Americans wanting to expatriate. It would further strengthen the current legislation aimed at Americans wishing to expatriate which could rightfully be referred to as “America’s Refuseniks.”
http://en.wikipedia.org/wiki/Refusenik
Petros, I actually interpret that quote from Indian Citizenship Act differently. The ICA says that they are citizens. But I read it to also imply that they should not be subject to any taxes–because it says “Provided that the granting of such citizenship shall not in any manner impair or otherwise affect the right of any Indian to tribal or other property”. And you rightfully mention that the power to tax is the power to destroy. So taxing native Americans is affecting their right to their own property and thus the taxes would seem to violate the ICA.
That said, I agree about the end result. Because they are taxed just as all other USCs are, then they are not really sovereign states at all.
Recalcitrant hit the nail on the head that tax law is all tautology. And even when the US government is found to be violating their own laws, they just change them or interpret them to their own favor to do what they want in the end.
According to the Constitution, the federal government possesses jurisdiction over Indian reservations. The issue of Native
American sovereignty has been debated for over 200 years. The concept of “tribal quasi-sovereignty was advocated by Chief Justice John Marshall. For truly sickening examples of American exceptionalism, see: http://www.vlib.us/amdocs/texts/cherokee.htm http://www.umass.edu/legal/derrico/marshall_jow.html
Under the 1924 Act indigenous people did not have to apply for citizenship, nor did they have to give up their tribal citizenship to become a U.S. citizen. Most tribes had communal property and in order to have a right to the land, Indians had to belong to the tribe. In effect, dual citizenship was
allowed. Sounds familiar, doesn’t it?
Decades later, several court cases resulted in the Indian Gaming Regulatory Act of 1988. Outcomes of this Act:
are not subject to federal income
taxes on their earnings
The two 2 Court cases that paved the way for IGRA of 1988:
Bryan v. Itasca County
Itasca county (in
Minnesota) tried to collect state property taxes on the mobile home of the Bryans (Chippewa Tribe). District and State Supreme Court ruled in favor of the County but were overturned by SCOTUS which ruled that states were given jurisdiction over criminal laws on reservations, but not over civil regulatory
laws. The Court interpreted Public Law 280, passed by Congress in 1953, as being designed to address only “crimes and civil disputes, not a unilateral grant of broad authority to states.
California v. Cabazon
Band of Mission Indians
In the mid-1980’s, the Cabazon
Band of Mission Indians started a small bingo parlor and card club on their southern California reservation. The state attempted to shut them down and the tribe filed a lawsuit against the state, claiming that such an action was illegal in light of prior court rulings regarding the sovereign rights of the
reservation. SCOTUS ruled the
gambling laws were regulatory and not prohibitory; also, the state lottery
existed as a form of gambling. Gambling could not be regulated by states unless
all forms of gambling were prohibited. This ruling recognized the sovereign rights of Indian tribes living on reservations.
States began lobbying the federal government to allow states to regulate Indian gaming. They claimed that regulation was necessary to stop infiltration by organized crime. States also wanted to tax revenues gained by Indian gaming. Tribes fought the states in an effort both to maintain tribal sovereignty and to protect Indian gaming
revenues to support economic development. These situations led to the creation
of the IGRA of 1988 sponsored by Sen. Daniel Inouye of Hawaii, Sen. McCain of Arizona and Rep. Mo Udall of Arizona.
http://en.wikipedia.org/wiki/Indian_Gaming_Regulatory_Act
Another case centered around the issue of tax is the Chickasaw Nation v. United States , 2001. The tribe used a sort of pull-tab, like a scratch-off on a lottery ticket. The IRS decided they were liable for excise taxes and federal occupational taxes on the revenue generated. The tribes argued that they were exempt from such taxes due to a provision of the IGRA that indicated that the tax laws applied to tribes in the same manner as to the states, which did not have to pay such taxes. SCOTUS held that the tribe was liable for the taxes. Dissenting were Justices Sandra Day O’Connor and David Souter. O’Connor said the standard statutory construction involving Indian tribes required that “statutes are to be construed liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit.”
http://en.wikipedia.org/wiki/Chickasaw_Nation_v._United_States
Following the creation of the IGRA, The National Indian Gaming Commission was established
as a federal regulatory body. Lobbyists Jack Abramoff, Ralph Reed, Jr., Grover
Norquist, and Michael Scanlon, bribed members of Congress when lobbying for
Indian casinos; they then over charged
their Indian clients. See: http://en.wikipedia.org/wiki/Jack_Abramoff_Indian_lobbying_scandal
It would seem that it is highly questionable whether Indians are required to pay personal taxes. Thomas’ comments zero in on that along with all these examples. It sucks.