The United States May Payout $85 Billion in Settlements of Tribal Claims of Mismanagement of Trust Accounting and Natural Resources
A few months ago, a little known settlement took place between the United States and 41 American Indian tribes that alleged the Department of the Interior and the Department of the Treasury had mismanaged monetary assets and natural resources held in trust by the United States for the benefit of the tribes. The $1 billion plus settlement was the result of a protracted, almost two years’, of negotiations between the tribes and the United States that was expedited by President Obama.
The central reason for the U.S. Government’s efforts to resolve this dispute was a communication directly from the lawyers representing many of the tribes to President Obama requesting President Obama and his Administration instruct the United States to engage in expedited settlement discussions in this case. Therefore, in April 2010, Associate Attorney General Tom Perrelli, Assistant Attorney General of the Environment and Natural Resources Division Ignacia Moreno, Interior Department Solicitor Hilary Tompkins and Treasury Department General Counsel George Madison met with attorneys for the tribes, and the parties embarked on a settlement process that the tribes termed the “Settlement Proposal to Obama Administration,” or “SPOA,” which led, in part, to the expedited settlement in April 2012.
The United States foresees the possibility of future substantially similar settlements of substantially similar claims brought by other federally-recognized Indian tribes. ? The Department of the Interior manages almost 56 million acres of trust lands for federally-recognized tribes and more than 100,000 leases on those lands for various uses, including housing, timber harvesting, farming, grazing, oil and gas extraction, business leasing, rights-of-way and easements. Interior also manages about 2,500 tribal trust accounts for more than 250 tribes. The exact number of “federally-recognized tribes” is not known to this author, but at least 250 plus tribes are involved in the potential settlements with the U.S. Government. I think it would be fair to say that this initial settlement may represent 12% of the possible federally-recognized tribes and the grievances are similar in blame and financial losses, the total expedited settlements may reach more than $85 billion in payments to the American Indian tribes.
As to the potential taxation of the Settlement proceeds, generally payments of this nature are subject to income taxation to the ultimate plaintiffs. However, on November 6, 2000, then President William J. Clinton issued Executive Order 13175 which assisted the U.S. Treasury in providing guidance to the federally-recognized tribes that participated in this first settlement that concluded in April 2012. The U.S. Treasury noted the following:
The Internal Revenue Code provides that…gross income means all income from whatever source derived and Congress intended to tax all gains and undeniable accessions to wealth, clearly realized, over which taxpayers have complete dominion. Indians are citizens subject to the payment of income taxes. However, the Per Capita Act provides authority to Indian tribes to make per capita payments to Indians out of tribal trust funds held in trust by the Secretary of the Interior that are to be distributed per capita to members of that tribe may be distributed by the Secretary of the Interior. Then, when merged with the The Indian Tribal Judgment Funds Use or Distribution Act, the funds and all interest and investment income accrued on the funds while held in trust, are not subject to federal income taxes.
Under 25 U.S.C. § 117b(a), per capita payments made from the proceeds of an agreement between the United States and an Indian tribe settling the tribe’s claims that the United States mismanaged monetary assets and natural resources held in trust for the benefit of the tribe by the Secretary of the Interior are excluded from the gross income of the members of the tribe receiving the per capita payments. Per capita payments that exceed the amount of the Tribal Trust case settlement proceeds and that are made from an Indian tribe’s private bank account in which the tribe has deposited the settlement proceeds are included in the gross income of the members of the tribe receiving the per capita payments. For example, if an Indian tribe receives proceeds under a settlement agreement, invests the proceeds in a private bank account that earns interest, and subsequently distributes the entire amount of the bank account as per capita payments, then a member of the tribe excludes from gross income that portion of the member’s per capita payment attributable to the settlement proceeds and must include the remaining portion of the per capita payment in gross income which would be subject to federal taxation.
Had these proceeds of the settlement been deemed taxable to the individuals of the tribe, there would have been an entirely new class of millionaires subject to Federal taxation under the Obama tax plans.
The sum total of the settlements with the 41 tribes is approximately $1.023 billion.
The 41 tribes are listed below:
1. Assiniboine and Sioux Tribes of the Fort Peck Reservation
2. Bad River Band of Lake Superior Chippewa Indians
3. Blackfeet Tribe
4. Bois Forte Band of Chippewa Indians
5. Cachil Dehe Band of Wintun Indians of Colusa Rancheria
6. Coeur d’Alene Tribe
7. Chippewa Cree Tribe of the Rocky Boy’s Reservation
8. Confederated Tribes of the Colville Reservation
9. Confederated Salish and Kootenai Tribes
10. Confederated Tribes of the Siletz Reservation
11. Hualapai Tribe
12. Kaibab Band of Paiute Indians of Arizona
13. Kickapoo Tribe of Kansas
14. Lac du Flambeau Band of Lake Superior Chippewa Indians
15. Leech Lake Band of Ojibwe Indians
16. Makah Tribe of the Makah Reservation
17. Mescalero Apache Nation
18. Minnesota Chippewa Tribe
19. Nez Perce Tribe
20. Nooksack Tribe
21. Northern Cheyenne Tribe
22. Passamaquoddy Tribe of Maine
23. Pawnee Nation
24. Pueblo of Zia
25. Quechan Indian Tribe of the Fort Yuma Reservation
26. Rincon Luiseño Band of Indians
27. Round Valley Tribes
28. Salt River Pima-Maricopa Indian Community
29. Santee Sioux Tribe
30. Shoshone-Bannock Tribes of the Fort Hall Reservation
31. Soboba Band of Luiseño Indians
32. Spirit Lake Dakotah Nation
33. Spokane Tribe
34. Standing Rock Sioux Tribe of the Fort Yates Reservation
35. Swinomish Indian Tribal Community
36. Te-Moak Tribe of Western Shoshone Indians
37. Tohono O’odham Nation
38. Tulalip Tribe
39. Tule River Tribe
40. Ute Mountain Ute Tribe
41. Ute Tribe of the Uintah and Ouray Reservation