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U.S. Court of Appeals, Federal Circuit
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No. 99-5083
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280 F.3d 1371, 2002.CFC.0000078 <http://www.versuslaw.com>,
89 A.F.T.R.2d 2002
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February 19, 2002
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LITTLE SIX, INC. AND SHAKOPEE MDEWAKANTON SIOUX (DAKOTA) COMMUNITY,
PLAINTIFFS-APPELLANTS,
v.
UNITED STATES,
DEFENDANT-APPELLEE.
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Mary J. Streitz, Dorsey & Whitney, Llp, of Minneapolis, Minnesota,
for plaintiffs-appellants. Of counsel was Kurt V. BlueDog, BlueDog, Olson
& Small P.L.L.P., of Minneapolis, Minnesota. Charles F. Marshall,
Attorney, Appellate Section, Tax Division, Department of Justice, of
Washington, Dc, for appellee.
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Before Mayer, Chief Judge, Lourie and Schall, Circuit
Judges.
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The opinion of the court was delivered by: Lourie, Circuit
Judge.
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On remand from the Supreme Court of the United States
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This case is back in this court on remand from the Supreme Court of
the United States for further consideration in light of Chickasaw Nation
v. United States, 122 S. Ct. 528 (2001). United States v. Little Six,
Inc., No. 00-1115 (U.S. Dec. 3, 2001). The Court had granted a petition
for certiorari following our earlier decision in this case, vacated our
decision, and remanded following its decision in Chickasaw Nation. The
issue addressed in part A of this opinion, whether wagers on Indian
pull-tab games are subject to taxation under I.R.C. §§ 4401 and 4411, was
not implicated in Chickasaw Nation and we therefore reiterate our earlier
decision with regard to that aspect of this appeal. The issue in part B,
however, whether appellants are exempt from those taxes under 25 U.S.C. §
2719(d)(1), is directly governed by Chickasaw Nation and thus we modify
our initial disposition of that issue in accordance with the Court's
decision. For the reasons set forth below, we conclude that appellants
were properly taxed under §§ 4401 and 4411 and, because 25 U.S.C. §
2719(d)(1) does not exempt them from those taxes under the controlling
authority of Chickasaw Nation, we affirm the decision of the Court of
Federal Claims.
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BACKGROUND
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This is an appeal brought by the Shakopee Mdewakanton Sioux (Dakota)
Community and its wholly-owned corporation, Little Six, Inc. (collectively
"Little Six"), from the decision of the United States Court of Federal
Claims denying their claim for a refund of federal excise taxes and
related occupational taxes paid on income they received from wagers placed
on "pull-tab" games *fn1
conducted on their reservation in Minnesota between 1986 and 1992. Little
Six, Inc. v. United States, No. 96-468 T, slip op. at 5 (Fed. Cl. Mar. 2,
1999). After conducting an audit, the Internal Revenue Service ("IRS")
assessed taxes against Little Six according to I.R.C. §§ 4401 and 4411 in
the amount of $174,289, which Little Six paid under protest. Id. After the
IRS denied its administrative claim, Little Six filed this suit in the
Court of Federal Claims. Id.
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The Court of Federal Claims granted the government's motion for
summary judgment and denied Little Six's cross-motion. Id. The court held
that Indian gaming was subject to taxation under §§ 4401 and 4411,
rejecting Little Six's argument that those taxes did not apply to wagers
on pull-tab games because they were not "state authorized." Id. at 3, 5.
The court further held that Little Six had not demonstrated any valid
exemption from such taxes, rejecting Little Six's alternative argument
that 25 U.S.C. § 2719(d)(1) exempts Indian tribes from the taxes at issue.
Id. at 3-5. We have jurisdiction over this appeal pursuant to 28 U.S.C. §
1295(a)(3).
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DISCUSSION
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We review the Court of Federal Claims' grant of a motion for summary
judgment "completely and independently, construing the facts in the light
most favorable to the non-moving party." Am. Airlines, Inc. v. United
States, 204 F.3d 1103, 1108 (Fed. Cir. 2000) (quoting Good v. United
States, 189 F.3d 1355, 1360 (Fed. Cir. 1999)). In reviewing a denial of a
motion for summary judgment, we give considerable deference to the trial
court, and "will not disturb the trial court's denial of summary judgment
unless we find that the court has indeed abused its discretion." SunTiger,
Inc. v. Scientific Research Funding Group, 189 F.3d 1327, 1333 (Fed. Cir.
1999). Summary judgment is appropriate only when there are no genuine
issues of material fact and the moving party is entitled to judgment as a
matter of law. Id. When both parties move for summary judgment, the court
must evaluate each motion on its own merits, resolving all reasonable
inferences against the party whose motion is under consideration. McKay v.
United States, 199 F.3d 1376, 1380 (Fed. Cir. 1999).
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A. State Authorized Wagers
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We first address the parties' arguments concerning whether wagers
placed on Indian pull-tab games are subject to taxation under I.R.C. §§
4401 and 4411. Little Six argues that those tax provisions only apply to
wagers authorized under state law and therefore do not apply to pull-tab
games, which are authorized under federal law. The government responds
that those tax provisions do apply to wagers on pull-tab games because all
legal wagers, including those authorized under federal law, are "state
authorized."
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We agree with the government that wagers placed on Indian pull-tab
games are subject to taxation under §§ 4401 and 4411 because they are
"state authorized." We reach this conclusion based upon the plain language
of the relevant statutes. See Consumer Prod. Safety Comm'n v. GTE
Sylvania, Inc., 447 U.S. 102, 108 (1980) ("[T]he starting point for
interpreting a statute is the language of the statute itself. Absent a
clearly expressed legislative intention to the contrary, that language
must ordinarily be regarded as conclusive."). Section 4401(a) provides as
follows:
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(1) State authorized wagers.-There shall be imposed on any wager
authorized under the law of the State in which accepted an excise tax
equal to 0.25 percent of the amount of such wager.
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(2) Unauthorized wagers.-There shall be imposed on any wager not
described in paragraph (1) an excise tax equal to 2 percent of the amount
of such wager. I.R.C. § 4401(a) (1994) (emphasis added).
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Section 4411 imposes a related occupational tax and provides in
relevant part that:
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(a) In general.-There shall be imposed a special tax of $500 per year
to be paid by each person who is liable for the tax imposed under section
4401 . . . .
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(b) Authorized persons.-Subsection (a) shall be applied by
substituting "$50" for "$500" in the case of-
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(1) any person whose liability for tax under section 4401 is
determined only under paragraph (1) of section 4401(a), and
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(2) any person who is engaged in receiving wagers only for or on
behalf of persons described in paragraph (1). I.R.C. § 4411
(1994).
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Thus, according to the clear language of these two statutes, all
wagers are either "state authorized" or "unauthorized," and any person who
is liable for the excise tax under § 4401 must also pay the related
occupational tax under § 4411.
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The statutory basis for the regulation of Indian gaming is set forth
in the Indian Gaming Regulation Act ("IGRA"), 25 U.S.C. §§ 2701- 2721, 18
U.S.C. § 1166. Under the IGRA, tribes may operate "class II gaming"
activities, which includes pull-tabs, provided that "such Indian gaming is
located within a State that permits such gaming for any purpose by any
person, organization or entity." 25 U.S.C. § 2710(b)(1)(A) (1994); see
also id. § 2703(7)(A)(i) (1994) (defining "class II gaming" to include
pull-tabs). Thus, in order for pull-tab games to be authorized under
federal law, class II gaming must be permitted by the state in which such
gaming is located.
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In the present case, the parties do not dispute the fact that
Minnesota permits non-profit organizations to conduct pull-tab games.
Thus, "such Indian gaming is located within a state that permits such
gaming" by an organization. Id. § 2710(b)(1)(A). Accordingly, any wagers
placed on Indian pull-tab games cannot be "unauthorized" because they are
authorized under the IGRA. Id.; id. § 2703(7)(A)(i). We therefore conclude
that pull-tab games are authorized under both federal law and the law of
the state in which they are conducted, and that wagers placed on those
games are "state authorized" for the purpose of assessing taxes under §§
4401 and 4411 of the Internal Revenue Code.
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B. Wagers Tax Exemptions
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Having determined that wagers placed on Indian pull-tab games are
subject to taxation under §§ 4401 and 4411, we next turn to the issue
whether Little Six is nevertheless exempt from those excise and
occupational taxes under 25 U.S.C. § 2719(d)(1), which provides in
relevant part that
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[t]he provisions of the Internal Revenue Code of 1986 (including
sections 1441, 3402(q), 6041, and 6050I, and chapter 35 of such Code)
concerning the reporting and withholding of taxes with respect to the
winnings from gaming or wagering operations shall apply to Indian gaming
operations conducted pursuant to this chapter . . . in the same manner as
such provisions apply to State gaming and wagering operations. 25 U.S.C. §
2719(d)(1) (1994).
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We previously held that § 2719(d)(1) provides Little Six with an
exemption from the gambling-related taxes imposed under chapter 35 of the
Internal Revenue Code, including §§ 4401 and 4411. Little Six, Inc. v.
United States, 210 F.3d 1361 (Fed. Cir. 2000), vacated, United States v.
Little Six, Inc., No. 00-1115 (U.S. Dec. 3, 2001). We reached that
conclusion because we determined that the inclusion within the parentheses
of the phrase "chapter 35 of such Code," which contains a provision
expressly exempting taxes on state wagering operations, rendered §
2719(d)(1) ambiguous when considered in conjunction with the language
outside the parentheses indicating that Indian tribes are only exempt from
tax provisions that "concern[] the reporting and withholding of taxes."
Id. at 1365. In light of that ambiguity, we held that the Indian canon of
construction set forth in Montana v. Blackfeet Tribe of Indians, 471 U.S.
759, 766 (1985), required § 2719(d)(1) to be interpreted in favor of
Little Six and therefore provided it with an exemption from the excise and
occupational taxes imposed under §§ 4401 and 4411. Little Six, 210 F.2d at
1366.
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The Tenth Circuit, however, when presented with the identical issue,
interpreted § 2719(d)(1) to apply only to those provisions in the Internal
Revenue Code "concerning the reporting and withholding of taxes," and thus
held that § 2719(d)(1) does not provide Indian tribes with an exemption
from gambling-related taxes imposed under chapter 35 of the Internal
Revenue Code. Chickasaw Nation v. United States, 208 F.3d 871, 883-84
(10th Cir. 2000). The Supreme Court thereafter granted certiorari in the
Chickasaw Nation case to resolve the conflict between that decision and
this court's opinion in Little Six.
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The Supreme Court agreed with the Tenth Circuit's interpretation of §
2719(d)(1). Chickasaw Nation v. United States, 122 S. Ct. 528 (2001). The
Court determined that the parenthetical language "and chapter 35 of such
Code" was merely a "bad example" that was mistakenly placed in the
statute; it stated that the unambiguous language outside of the
parentheses makes clear that § 2719(d)(1) only applies to tax provisions
"concerning the reporting and withholding of taxes." Id. at 533. The Court
also concluded that the original Senate bill that eventually led to the
enactment of § 2719(d)(1) applied to "taxation" provisions as well as
"reporting and withholding" provisions, and that therefore the removal of
the term "taxation" from that bill demonstrates Congress's intent that §
2719(d)(1) apply only to the latter category of tax provisions, not to
exemption from taxation. Id. at 534. Finally, the Court held that the
Indian canon could not overcome both the evidence of congressional intent
and "the canon that warns us against interpreting federal statutes as
providing tax exemptions unless those exemptions are clearly expressed."
Id. at 535 (citations omitted).
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In light of the Supreme Court's holding in Chickasaw Nation, §
2719(d)(1) does not exempt Little Six from gambling-related taxes imposed
under chapter 35 of the Internal Revenue Code. Little Six is therefore not
exempt from the excise and occupational taxes imposed by I.R.C. §§ 4401
and 4411.
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CONCLUSION
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We conclude that wagers on Indian pull-tab games are properly subject
to taxation under I.R.C. §§ 4401 and 4411, and that 25 U.S.C. § 2719(d)(1)
does not provide Little Six with an exemption from those taxes under
Chickasaw Nation. Accordingly, we AFFIRM.
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Opinion Footnotes |
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*fn1
Pull- tab games are similar to state- conducted lotteries. Each pull- tab
card has four or five tabs that can be peeled back to reveal whether the
purchaser is entitled to a cash prize.
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