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(Cite as: 2003 WL 22709023 (Conn.Super.))

UNPUBLISHED OPINION. CHECK COURT RULES BEFORE CITING.

Superior Court of Connecticut,

Judicial District of New Britain.

Jo-Ann DARK-EYES,

v.

COMMISSIONER OF REVENUE SERVICES.

No. CV020512959S.

Oct. 30, 2003.

*1 The issue in this tax appeal is whether the plaintiff, Jo-Ann Dark-Eyes (Dark-Eyes), a member of the Mashantucket Pequot Indian Tribal Nation (Tribe), residing on property owned by the Tribe but located off the Tribe's reservation, was residing in "Indian country" for the calendar years of 1996, 1997 and 1998, and therefore not subject to the payment of the Connecticut state income tax on income earned from the Tribe during those tax years. The reason why this is an issue is that constitutional principles govern the state's lack of power to impose an income tax on Indians living in "Indian country," but have the power to tax Indians living outside of "Indian country." 2 Hellerstein & Hellerstein, State Taxation (3rd Ed.) § 22.07(1)(2). See also Oklahoma Tax Commission v. Chickasaw Nation, 515 U.S. 450, 115 S.Ct. 2214, 132 L.Ed.2d 400.

"Indian tribes have an ambiguous status in American law. They are neither states nor foreign governments, but for many purposes are sovereign nations. In describing the Indians as 'domestic, dependent nations,' Chief Justice Marshall recognized that the conditions of the Indians in relation to the United States is perhaps unlike that of any other two people in existence." (Quotation marks and citations omitted.) Taxation of American Indians, Vol. 3, Pomp & Oldman, State & Local Taxation, Fourth Ed. Revised 2001, Ch. 15, p. 15-1.

Dark-Eyes is an enrolled member of the Tribe. During the period of 1996, 1997 and 1998, Dark-Eyes earned income from the Mashantucket Pequot Tribal Council. For the taxable years of 1996, 1997 and 1998, Dark-Eyes filed a resident Connecticut income tax return claiming that, as an enrolled member of the Tribe, she was exempt from the Connecticut income tax on the grounds that she resided in "Indian country," and requested a refund for the taxable year of 1996 and an exemption from future state income taxation on these grounds.

The Commissioner concluded that Dark-Eyes was not residing on land taken into trust by the United States for the benefit of the Tribe as part of its reservation until after August 25, 1998. Therefore, she was not exempt from the payment of the Connecticut income tax for the years in question because she was not living in "Indian country." See Stipulated Exhibit 13, Department of Revenue Services Informational Publication 99(29), "Connecticut Income Tax Obligations of Enrolled Members of The Mashantucket Pequot Tribe."

The parties have stipulated to the following facts:

1. In 1983, the United States Congress enacted the Mashantucket Pequot Indian Land Claims Settlement Act ("Settlement Act") for the purpose of implementing a settlement agreement in a civil action initiated by the Tribe to recover "Indian lands" against individual private property owners in Ledyard, Connecticut. 25 U.S.C. § 1751 et seq.

2. The Settlement Act extended federal recognition to the Tribe. 25 U.S.C. § 1758.

3. In addition, the Settlement Act established an initial reservation for the Tribe and a settlement fund pursuant to which the Tribe could purchase land from willing sellers within a statutorily designated settlement area of approximately 2200 acres (the "settlement lands"). [FN1] Certain lands purchased with settlement funds were deeded directly to the United States in trust for the Tribe. Certain lands purchased by the Tribe within the settlement lands with funds other than settlement funds have been transferred to the United States to be held in trust for the Tribe for its reservation. [FN2]

FN1. Although this stipulation recites 2200 acres, the plaintiff acknowledges and documents the "settlement lands" to encompass only 800 acres. See plaintiff's reply memorandum dated September 18, 2003, p. 2-3 ("The Tribe sued for 800 acres and relinquished its claim to those 800 acres in exchange for the right to purchase 800 acres within an area defined by Congress"). See also exhibit 13, Stipulation Re: Exhibits dated June 2003 showing a map outlining the 800 acres.

FN2. There are two components to the definition of "settlement lands." "Settlement lands" means (1) eight hundred acres of privately held lands identified on the map filed with the secretary of state and land known as Cedar Swamp adjacent to the Mashantucket Pequot reservation as it existed on October 18, 1983, both lands called "private settlement lands," and (2) "lands described in Sections 2(a) and 3 of the Act to Implement the Settlement of the Mashantucket Pequot Indian Land Claims as enacted by the State of Connecticut and approved on June 9, 1982." 25 U.S.C. § 1752. Definitions.

*2 4. Since 1983, the Tribe has purchased some but not all of the land within the settlement lands and the United States has accepted some but not all of the settlement lands in trust for the benefit of the Tribe.

5. At all times relevant to this complaint, the plaintiff was a Connecticut resident and an enrolled member of the Tribe.

6. From November 1, 1993 through September 30, 1998, the plaintiff resided at 59 Coachman Pike, in Ledyard, Connecticut.

7. From August 3, 1993 through August 25, 1998, the Tribe owned the 59 Coachman Pike property, which was located within the settlement lands, in fee simple.

8. On August 25, 1998, the Tribe conveyed the 59 Coachman Pike property to the United States to be held in trust for the Tribe as part of its reservation.

9. Prior to August 25, 1998, the Tribe paid property taxes on the 59 Coachman Pike property to the town of Ledyard. The plaintiff had no control over whether the Tribe paid property taxes on the subject property to the town of Ledyard.

10. From October 1, 1998 through December 31, 1998, the plaintiff resided at 1004 Shewville Road, in Ledyard, Connecticut.

11. The Tribe owns 1004 Shewville Road, and has owned that property since July 14, 1993.

12. The 1004 Shewville Road property is outside of, but close to, the settlement lands boundary established by the Settlement Act. The Tribe did not use settlement funds as defined in the Settlement Act to purchase this property.

13. For the taxable years 1996, 1997 and 1998 (the "taxable years"), the plaintiff received earned income from the following payers.

1996 Mashantucket Pequot Tribal Council--$1,307,713

1997 Mashantucket Pequot Tribal Council--$1,666,950

1998 Mashantucket Pequot Tribal Council--$654,381

"[L]and in Indian country, including reservation land, is not subject to state taxation absent express congressional authorization. The treaties and laws of the United States contemplate the Indian territory as completely separated from that of the states; and provide that all intercourse with them shall be carried on exclusively by the government of the union. Worcester v. Georgia, 31 U.S. 515, 557 ... (1832); see also White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 151 (1980); Montana v. Blackfeet Tribe of Indians, 471 U.S. 759, 765 ... (1985) ( [T]he court consistently has held that it will find the Indians' exemption from state taxes lifted only when Congress has made its intention to do so unmistakably clear); McClanahan v. Ariz. State Tax Comm'n., 411 U.S. 164, 173-81 ... (1973); Mescalero Apache Tribe v. Jones, 411 U.S. 145, 148 ... (1973)." (Citations omitted; internal quotation marks omitted.) Oneida Indian Nation of New York v. Sherrill, 337 F.3d 139, 154 (2nd Cir.2003). This concept comes from the historical claim of Indians to title and fee ownership of aboriginal lands that Indians have inhabited from time immemorial, and therefore any tribal lands which Indians reacquire, become Indian country. Id.

*3 However, in Connecticut, as a result of aboriginal land claims by the Mashantuckets to fee ownership of private lands in the town of Ledyard, Congress enacted the Connecticut Indian Land Claims Settlement Act, 25 U.S.C. § 1751 et seq. The purpose of this act was to resolve claims of the Mashantuckets to certain tribal lands and to remove the cloud on title to privately held lands in the town of Ledyard. 25 U.S.C. § 1751(b) and (c). As a result of this Settlement Act, the state of Connecticut conveyed twenty acres of an ancient Pequot Burial Ground located in a state park to the Mashantuckets as reservation land in addition to other reservation land described in No. 82- 31 of the 1982 Special Acts, An Act to Implement the Settlement of the Mashantucket Pequot Indian Land Claims, and the Mashantuckets in exchange gave up their claim of aboriginal title to all other privately owned lands in the town of Ledyard. 25 U.S.C. § 1753(a), (b) and (c). See Mashantucket Pequot Tribe v. McGuigan, 626 F.Sup. 245, 246-47 (D.Conn.1986). [FN3]

FN3. "The tribe is the successor to the claims of Western Pequot Tribe of Indians asserting right, title or interest in and to public and private lands allegedly originally the property of the tribe and wrongfully misappropriated from the tribe in violation of the Constitution and the laws of the United States, including, without limitation, the Trade and Intercourse Act of 1790, Act of July 22, 1790 (Ch. 33 Sec. 4, 1 Stat. 137, 138), and the Amendments thereto. These claims were the subject of a lawsuit in this court, Western Pequot Tribe of Indians v. Holdridge Enterprises, Inc., Civil H-76-193." Mashantucket Pequot Tribe v. McGuigan, supra, 626 F.Sup. at 246.

Historically, in dealing with Indian tribal members residing in the town of Ledyard, all of their rights of ownership of land flows from the so-called Settlement Act. "The Settlement Act extinguished the Tribe's claims to hundreds of acres of land. See 25 U.S.C. § 1753. In exchange, the Settlement Act: (1) provided for federal recognition of the Tribe, [see 25 U.S.C. § 1758]; (2) established a $900,000 fund (the 'settlement fund'), designed principally for the purchase of private property, [see 25 U.S.C. § 1754]; and (3) identified boundaries within which lands acquired by the Tribe would be held in trust by the Secretary [of Interior] and would constitute the Tribe's reservation, the so-called settlement lands, [see 25 U.S .C. § 1752(3), (4) & (7) ]." Connecticut v. U.S. Department of Interior, 228 F.3d 82, 86 (2nd Cir.2000).

Following the passage of the Settlement Act and the extinguishment of the Tribe's claim to privately held land in the town of Ledyard, members of the Tribe resided in Ledyard either on:

(1) Reservation land containing the original land conveyed to the Tribe by the state of Connecticut pursuant to the Settlement Act; [FN4]

FN4. See 25 U.S.C. § 1751(f), and S.A. 82-31 § 1.

(2) Land within the eight hundred acres designated as settlement lands purchased with settlement funds and incorporated within the reservation by virtue of the Secretary of the Interior holding such land in trust. See Connecticut v. U.S. Department of Interior, supra, 228 F.3d at 87;

(3) Land purchased by the Tribe with settlement funds but outside the settlement lands; [FN5]

FN5. "[N]on-settlement lands acquired with settlement funds are to be held in fee by the Tribe and the United States shall have no further trust responsibility with respect to such land." Connecticut v. U.S. Department of Interior, supra, 228 F.3d at 87.

(4) Land purchased by the Tribe located outside of the settlement lands with non-settlement funds. [FN6]

FN6. The Settlement Act does not apply to land purchased by the Tribe with funds that are not settlement funds and located outside the boundaries of the settlement lands. However, the Secretary of Interior may, under the 1934 Indian Reorganization Act, 25 U.S.C. § 461 et seq. (the IRA), incorporate these lands within the reservation as trust property for the benefit of the Tribe. The consequence of this is that the land taken in trust for the Tribe is not subject to state and local taxation; local zoning and regulatory requirements; or state criminal and civil jurisdiction unless the Tribe consents to jurisdiction. Connecticut v. U.S. Department of Interior, supra, 228 F.3d at 85-86, 88.

Land that is considered to be "Indian country" under the Settlement Act is that land which is part of the Tribe's reservation . [FN7]

FN7. 25 U.S.C. § 1755 provides that "the reservation of the Tribe is declared to be Indian country ..."

Dark-Eyes' residence at 59 Coachman Pike was located within the settlement lands but the residence was not purchased with settlement funds. The significance of this is that although Congress identified the eight hundred acres which could become part of the Tribal reservation, it could only become part of the reservation if the land were purchased with settlement funds and the Secretary took the land in trust by the United States for the Tribe. [FN8] The settlement agreement contemplates that the eight hundred acres owned by private individuals including non-Indians could be acquired by the Tribe if the private owners agreed to sell. If the Tribe purchases the land within the eight hundred acres, the question is whether the purchase was made with settlement funds or private funds. If the purchase was made with settlement funds, then the Secretary is authorized by the Settlement Act to take the land so purchased in trust as part of the reservation. Connecticut v. U.S. Department of Interior, supra, 228 F.3d at 88. However, if the privately held land within the eight hundred acres was purchased with private funds, as in this case, such land could not become a part of the reservation unless and until the Secretary uses his powers given to him by the IRA to acquire the land in trust for the Tribe since no such authority exists within the Settlement Act to do so. Id., at 88.

FN8. 25 U.S.C. § 1752(7).

*4 In Connecticut v. U.S. Department of Interior, supra, the Tribe purchased 165 acres of land outside of the settlement lands with funds that were not supplied by the settlement funds. The Tribe sought to have the Secretary take the 165 acres of land in trust as part of the Indian reservation. The state of Connecticut and the towns of North Stonington, Ledyard and Preston brought suit to enjoin the Secretary from doing so. The argument of the plaintiffs was that allowing the Tribe to take in the 165 acres of land in this fashion would allow the Tribe to purchase any land outside of the settlement lands and include that purchase within the reservation thereby depriving towns of control of zoning, regulations and taxes. The Circuit court concluded that the Settlement Act did not define, once and for all, the confines of the Tribe's reservation as being the eight hundred acres, but rather settled a specific dispute between the Tribe, the towns and title to lands of private property owners. Id., at 90. The Settlement Act was a quid pro quo, with the Tribe giving up claims to title of lands in exchange for twenty acres of land conveyed by the state of Connecticut to the Tribe, and a settlement fund of $900,000 provided by Congress to allow the Tribe to purchase land within the eight hundred acres and add this land to the reservation. With this understanding of the Settlement Act, the court in Connecticut saw no prohibition on the Tribe purchasing land anywhere in Connecticut with its own funds and asking the Secretary to take that land in trust for the benefit of the Tribe pursuant to the IRA. Id., at 90-91.

The present property located at 59 Coachman Pike cannot be construed as "Indian country" at the time that Dark Eyes resided on the premises because the property, although located within the settlement lands, was purchased by the Tribe with non-settlement funds and the property had not been conveyed to the United States in trust for the Tribe. We note, as part of the stipulation of the parties, the Tribe did convey this property to the United States in trust for the benefit of the Tribe on August 25, 1998 after the plaintiff moved her residence to 1004 Shewville Road. Once 59 Coachman Pike was conveyed to the United States, the land became part of the reservation, and was therefore "Indian country" free from taxation by the state of Connecticut and the town wherein the land was located. Until the conveyance of 59 Coachman Pike to be held in trust by the United States, the plaintiff's residence was not in "Indian country," and therefor she was not exempt from the obligation to pay a state income tax on her earnings during the years in question.

The plaintiff raises an additional issue that the subject property at 59 Coachman Pike is located within a "dependent Indian community" and therefore comes within the definition of "Indian country" found in 18 U.S.C. § 1151. [FN9] Section 1151 defines "Indian country" in three separate ways. Of relevance here is Sec. 1151(b), which defines "Indian country" as "all dependent Indian communities within the borders of the United States whether within or without the limits of a state ..." In Alaska v. Native Village of Venetie, 522 U.S. 520, 527, 118 S.Ct. 948, 140 L.Ed 2d 30 (1998), the Supreme Court interpreted the term "dependent Indian community" for the first time, stating that "it refers to a limited category of Indian lands that ... satisfy two requirements--first, they must have been set aside by the Federal Government for the use, of the Indians as Indian land; second, they must be under federal superintendence." This interpretation "indicates a change in the focus of the 'dependent Indian community' analysis by shifting the emphasis from the inhabitants and their day-to-day relationship with the [federal] government to a land-based inquiry." (Internal quotation marks omitted.) Thompson v. County of Franklin, 127 F.Sup.2d 145, 155 (N.D.N.Y.2000).

FN9. "While § 1151 is concerned, on its face, only with criminal jurisdiction, the [Supreme] Court has recognized that it generally applies as well to questions of civil jurisdiction." DeCoteau v. District County Court for Tenth Judicial District, 420 U.S. 425, 427 n. 2, 95 S.Ct. 1082, 43 L.Ed.2d 300 (1975).

*5 In applying the analysis it had just articulated, the Supreme Court in Alaska v. Native Village of Venetie, supra, 522 U.S. at 532, held that the land in question was not a "dependent Indian community." The Supreme Court reasoned that the federal set-aside requirement had not been satisfied because the land, although at one time constituting a reservation, had been transferred by the federal government to "private, state-chartered Native corporations, without any restraints on alienation or significant use restrictions ..." Id.

As to the superintendence requirement, the Supreme Court found that federal protection of the Tribe's land was limited merely to "a statutory declaration that the land is exempt from adverse possession claims, real property taxes, and certain judgments as long as it has not been sold, leased, or developed." Id., at 533. Such minimal protections, the Supreme Court held, do not amount to the type of active control necessary to satisfy the superintendence requirement.

The subject land is not a dependent Indian community pursuant to § 1151(b) because it has not been set aside by the federal government for the use of the Indians as Indian land, and further it does not satisfy the superintendence requirement stated in Native Village. "[T]he federal superintendence requirement guarantees that the Indian community is sufficiently 'dependent' on the Federal Government that the Federal Government and the Indians involved, rather than the States, are to exercise primary jurisdiction over the land in question." Alaska v. Native Village of Venetie, supra, 522 U.S. at 531. Although the Tribe in this case had the option to transfer 59 Coachman Pike at any time to be held in trust by the United States during the years in question, the federal government, during the period in issue, did not exercise the type of active control referred to in Native Village. See also State v. Dick, 127 N.M. 382, 387, 981 P.2d 796 (1999). (The court found that the state did not have jurisdiction to prosecute the case against the defendant because the incident took place on land which was occupied by a dependent Indian community, defining dependent Indian community using the analysis set out in the Venetie case. The court in Dick considered that the land used for school purposes under the control of the Bureau of Indian Affairs met the requirements of federal superintendence.)

The plaintiff resided at the 59 Coachman Pike property from November 1, 1993 through September 1, 1998, and thereafter at the 1004 Shewville Road property from October 1, 1998 through December 31, 1998. We have previously noted that 59 Coachman Pike was conveyed to the United States in trust for the Tribe on August 25, 1998. From our resolution of the issue of whether 59 Coachman Pike was located in "Indian country," we conclude that 59 Coachman Pike was not located in "Indian country" during the period of November 1, 1993 though August 25, 1998, and therefore, the income earned by the plaintiff during that period of time was not exempt from state income taxes levied against her. The plaintiff acknowledges that 1004 Shewville Road was located outside of the "settlement area" and that it was purchased by the Tribe with private funds, not the funds designated as "settlement funds." (See ¶¶ 10, 11 and 12 of Stipulation of Facts dated June 20, 2003.) Since the Shewville Road property was outside the "settlement area" and not conveyed to the United States in trust for the Tribe, it does not meet the test we have previously discussed, and therefore, it cannot be considered "Indian country" for the purpose of providing an exemption to the plaintiff from the payment of state income taxes during her period of residency at this property.

*6 Accordingly, we find that the plaintiff's residency at 59 Coachman Pike from the period of the taxable years of 1996, 1997 and that portion of 1998 prior to the August 25, 1998 conveyance to the federal government did not provide an exemption to her from the payment of state income taxes. We also find that the plaintiff's residency in 1004 Shewville Road during the tax year of 1998 did not provide an exemption to her from the payment of the state income tax during the period October 1, 1998 though December 31, 1998.

Judgment may enter in favor of the Commissioner without costs to either party.

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