Florida Tribal Casino Revenues Subject to Federal Taxes, 11th Circuit Says

A federal appeals court ruled on Monday that the federal government can collect taxes from Native American tribal casinos, and from tribal members who receive disbursements from those casinos.

In a published decision, the U.S. Court of Appeals for the Eleventh Circuit affirmed a trial judge’s decision holding that a South Florida tribe can be held liable for failing to withhold and report gaming receipts and disbursements, as could one of its members who failed to pay taxes on disbursements she received on behalf of herself and her family.

“When an Indian tribe decides to distribute the revenue from gaming activities … the distributions are subject to federal taxes,” wrote Eleventh Circuit Judge Gerald Tjoflat.

Circuit Judge Adalberto Jordan and Judge John Steele of the U.S. District Court for the Middle District of Florida, sitting by designation, joined in the decision.

The ruling affirms a decision by U.S. District Judge Cecilia Altonaga, sitting in Miami, that defendant Sally Jim and the Miccosukee Tribe of Indians of Florida can be held liable for unpaid taxes.

The decision involves a dispute that dates back to 2001, when the federal government learned that Jim failed to report or pay taxes on $272,000 in disbursements she received from the tribe, which runs Miccosukee Indian Bingo and Gaming on the western outskirts of Miami, the court said.

The tribe intervened on Jim’s behalf, and the government then learned that the tribe had earned more than $32 million from its casino, and had failed to withhold any taxes, according to the court.

Tribes that operate casinos generally distribute revenues to members so that the members can live on tribal lands without having to rely solely on government assistance. The government argued that taxes were due under the 1988 Indian Gaming Revenue Act, which was enacted “to protect the Indian gaming industry from corruption and to provide for extensive federal oversight,” the court said.

In response, Jim and the tribe argued that the IGRA was superseded by the Tribal General Welfare Exclusion Act, which generally precludes taxation of tribal revenues.

Both Altonaga and the appeals court agreed with the government, saying that the TGWEA was not meant to override the IGRA.

“[P]er capita distribution of gaming revenue remains taxable income, even if the distribution arguably promotes the welfare of a tribe,” Tjoflat said. “The distribution payments cannot qualify as Indian general welfare benefits under the TGWEA because Congress specifically subjected such distributions to federal taxation in IGRA.”

The tribe opened its casino in 1984, and also collects revenue from oil and gas leases, the appeals court said.

Jim’s attorney, Miramar solo Robert Saunooke, said he plans to appeal to the U.S. Supreme Court.

“The Eleventh Circuit got it wrong,” he said. “Tribes have the right to collect revenues and distribute those revenues as they see fit without being subjected to taxation.”

The tribe’s attorney, George Abney of Atlanta’s Alston & Bird, declined to comment Monday since he had not yet consulted with tribal officials.

The U.S. Department of Justice did not respond to a request for comment.