State Taxation Precluded by Extensive and Exclusive Federal Regulation of Indian Leasing

On August 26, 2015, in Seminole Tribe of Florida v. Stranburg,1 the Eleventh Circuit affirmed in part and reversed in part the United States District Court for the Southern District of Florida’s decision,2 holding that certain state taxes were unlawfully imposed on the Seminole Tribe. The Eleventh Circuit held that Florida’s rental tax violated federal law and was preempted by federal law, whereas the utility tax did not.  On October 27, 2015, the Eleventh Circuit denied the Tribe’s request for rehearing on the validity of the utility tax.

Procedural Background:

The Seminole Tribe of Florida (Tribe), entered into 25-year leases with two non-Indian corporations to provide food-court operations at two of the Tribe’s casinos.  The leases required the non-Indian corporations to pay applicable federal, tribal, or state taxes imposed or assessed.  Florida imposed two taxes on the non-Indian corporations—rental tax—a “tax on the ‘privilege [of engaging] in the business of renting, leasing, letting, or granting a license for the use of any real property’ in the state,” and a utility tax—a tax on gross receipts from utility services delivered to a retail customer.3  The Tribe paid the utility tax as part of its utility bill, and applied to the Florida Department of Revenue for a refund of the Utility Tax, but it was denied.  The Tribe then filed a complaint in federal court seeking declaratory and injunctive relief.

District Court Decision:

The district court found both the utility tax and the rental tax impermissible.  In so doing, the court relied heavily on the current BIA’s Business Site leasing regulations, which were amended on January 3, 2013, to conclude that the rental tax was prohibited.  The court quoted 25 C.F.R. § 162.017, which states, in part, that a “leasehold or possessory interest is not subject to any fee, tax, assessment, levy, or other [charge] imposed by a State or political subdivision of a State.”  The court held that “the federal regulatory scheme regarding leases of restricted Indian land is so pervasive that it precludes the additional burdens imposed by Florida’s Rental Tax.” The court also invalidated Florida’s imposition of the utility tax, because it concluded that the “legal incidence” of the tax fell upon the Tribe, as the consumer, and not the utility, and was therefore barred under Oklahoma Tax Commission v. Chickasaw Nation.4  Significantly, in analyzing both taxes, the district court failed to address the conditional language of the leasing regulation, that the prohibition on state taxation is “[s]ubject only to applicable Federal law.”5  Federal law, including federal case law, has specifically provided for circumstances under which state taxation on activities or property in Indian country is appropriate.

Eleventh Circuit’s Decision:

The Eleventh Circuit affirmed invalidation of the rental tax but reversed the district court’s rejection of the utility tax.

Florida’s Rental Tax Impermissible:

The Eleventh Circuit first held that Florida’s rental tax violated 25 U.S.C. § 465, which the Supreme Court has construed as prohibiting state taxation on tribal lands acquired pursuant to a fund established by a 1955 statute and held in trust or upon rights in such lands, while not prohibiting state taxation of income derived from the use of the lands.  The Eleventh Circuit concluded that Florida’s rental tax “tax[ed] a privilege of ownership,” and thus was unlawful.

While agreeing with the district court that the rental tax was preempted by federal law, the Eleventh Circuit faulted the district court for its uncritical reliance on the regulation and failure to undertake an independent preemption analysis as required by White Mountain Apache Tribe v. Bracker,6 characterizing the Interior’s analysis in the Federal Register preamble adopting the leasing regulations as a “Bracker-like” balancing analysis, but not relieving the lower courts of independent application of the Bracker test. The Eleventh Circuit undertook the Bracker analysis and weighed the federal interests against the State’s interest.  In so doing, the court pointed to the Secretary’s analysis in the preamble as further evidence of the federal and tribal interests implicated by the leasing of tribal lands.  The court concluded: “The extensive and exclusive federal regulation of Indian leasing—as evidenced by federal law and regulations—precludes the imposition of state taxes on that activity.”7

Florida’s Utility Tax Permissible:

With respect to the utility tax, the Eleventh Circuit court concluded that the legal incidence of gross-receipts utility tax fell on the non-Indian utility company.  The Eleventh Circuit found that the district court’s contrary legal-incidence determination was not the fairest reading8 of the Florida taxing scheme.  The court reviewed the language of the statute authorizing the tax, and, while not dispositive, concluded that it “point[ed] strongly towards a legislative intent to impose the tax on utility companies.”9  The court then performed a Bracker analysis and held the utility tax was not preempted because there was no “pervasive federal interest or comprehensive regulatory scheme covering on-reservation utility delivery and use sufficient…to preempt state taxation.”10


The Eleventh Circuit’s decision demonstrates that a State may lack authority to impose certain taxes on leased tribal lands, but based on specific analysis—not the broad statements in BIA regulations.  This holding may provide arguments for developers who oppose facing “dual” taxation burdens from both a tribe and a State.  The BIA’s recently promulgated revisions to the regulations governing rights-of-way across Indian lands contain the same language as the leasing regulations, which suggests a similar analysis should apply to state taxation of rights-of-way.

  1. 1. 799 F.3d 1324 (11th Cir. 2015).
  2. 2. 49 F. Supp. 3d. 1095 (S.D. Fla. 2014).
  3. 3. 799 F.3d at 1326.
  4. 4. 515 U.S. 450, 458 (1995).
  5. 5. See 25 C.F.R. § 162.017.
  6. 6. 448 U.S. 136 (1980).
  7. 7. 799 F.3d at 1338.
  8. 8. Id. at 1345 (quoting Oklahoma Tax Comm’n v. Chickasaw Nation, 515 U.S. 450, 461 (1995)).
  9. 9. Id. at 1347.
  10. 10. Id. at 1352.

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