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AGO 1954 No. 341 - November 09, 1954
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Don Eastvold | 1953-1956 | Attorney General of Washington


Where land allotted to the individual Indian in fee is conveyed by a deed which names the Indian, as grantor, with the approval of the Department of Interior, Bureau of Indian Affairs, the sale is by the individual Indian and subject to the real estate excise tax.

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                                                                November 9, 1954

Honorable Arnold R. Zempel
Prosecuting Attorney
Snohomish County Court House
Everett, Washington                                                                                                              Cite as:  AGO 53-55 No. 341

Dear Sir:

            We have your letter of October 8, 1954, in which you ask the following question:

            Does the Washington state excise tax on the sale of real property apply to a sale of allotted Indian lands with the approval of the United States government?

            It is our opinion that where land allotted to the individual Indian in fee is conveyed by a deed which names the Indian, as grantor, with the approval of the Department of Interior, Bureau of Indian Affairs, the sale is by the individual Indian and subject to the real estate excise tax.


            Certain Indian fee owners, with the approval of the Department of Interior, Bureau of Indian Affairs, are making extensive sales of Indian lands throughout the State of Washington.  RCW 28.45.010 (1953 Supp.) indicates that a sale by the United States is not subject to real estate excise tax.  Thus, if the sales are sales by the United States, as such, no tax may be imposed.  The precise issue,  [[Orig. Op. Page 2]] therefore, is whether a sale by the Indian with the approval of the United States Department of Interior, is a sale by the United States or whether it is a sale by the Indian as an individual.

            As a general rule the fee to Indian lands is in the United States government, the Indians having at most only a right of occupancy.  42 C.J.S. 688, sec. 28.

            U. S. v. Moore, (Wash.) 161 Fed. 513, 88 C.C.A. 455.  This rule apparently applies only to unallotted lands occupied by the Indian tribes, such as on a reservation.  Thus a sale of unallotted land designated as an Indian reservation, would be a sale by the United States and not taxable by the state.

            The General Allotment Act of 1887 made possible the division of tribal lands in severalty to individual Indians.  This act gave the President authority to allot to the individual Indians plots of land, and gave the Secretary of the Interior the power to issue patents in the name of the allottee.  The patent declared that the United States will hold the land for twenty-five years in trust for the Indians, and upon expiration of the term the United States will convey the fee to the said Indians individually.  During the term of the "trust" the courts have uniformly held that the corpus or land is a federal instrumentality and not subject to state taxation.  The United States Supreme Court so held in United States v. Rickert, 188 U.S. 432 (1903) at page 439, by quoting a statement of the Attorney General:

            "It was therefore well said by the Attorney General of the United States, in an opinion delivered in 1888, 'that the allotment lands provided for in the Act of 1887 are exempt from state or territorial taxation upon the ground above stated, * * * namely, that the lands covered by the act are held by the United States for the period of twenty-five years in trust for the Indians, such trust being an agency for the exercise of a Federal power, and therefore outside the province of state or territorial authority.  19 Op. Atty. Gen. 161, 169.'"

            In 1906, Act of May 8, 1906, 34 Stat. 182, Congress empowered the Secretary of the Interior, before the expiration of the twenty-five year trust period, to  [[Orig. Op. Page 3]] issue patent in fee "whenever he shall be satisfied that any Indian allottee is competent and capable of managing his or her affairs * * *."

            In 1917 a policy of "great liberalism" led to whole sale patenting in fee whether the allottee desired the patent or not.  This trend was reversed in 1921, and recent years have witnessed the cancellation of such patents and suits seeking to recover taxes paid to the state by the allottee.  InUnited States v. Nez Perce County, Idaho, 95 F. (2d) 232 (C.C.A. 9, 1938), at page 235 the court citing a long line of authorities said:

            "* * * The Allotment Act, as well as the trust patent, by plain implication granted the Indian immunity from taxation during the trust period or any extension of it, and he had the right finally to receive his lands 'free of all charge or incumbrance whatsoever.'  The authorities are uniform to the effect that this right of exemption is a vested right, as much a part of the grant as the land itself, and the Indian may not be deprived of it by the unwanted issuance to him of a fee patent prior to the end of the trust period.  * * *"

            Therefore, it would appear that the allottee under the Federal allotment act, during the period of trust, obtains a vested right to tax exemption which cannot be taken from him without his consent.  United States v. Ferry County, Washington, 24 F.Supp. 399.  (D.C. E.D. Wash. 1938);Frazee v. Spokane County, 29 Wash. 278, 69 Pac. 779 (1902).  Should he, on the other hand, apply for the issuance of a fee patent and be accorded one pursuant to law, there is no apparent reason why his lands would not thereby become subject to state taxation.

            Cohen, Handbook of Federal Indian Law (U.S. Government Printing Office, 1945) at page 258, summarizes the problem very well when he says:

            "With the growth of the practice of allotting tribal lands in severalty the question of their exemption from state taxation became of increasing importance.  We find the courts holding uniformly that restricted lands within an Indian reservation remain exempt from taxation.  The extent, however, of their immunity from taxation is dependent in each case  [[Orig. Op. Page 4]] upon the statute under which the allotment is made.  Conversely, land held by individual Indians outside an Indian reservation is exempt only to the extent that it is declared exempt by statute or state constitution or is recognized by the court as a federal instrumentality."

            The statute applying to patents on Indian land in Washington, 25 U.S.C.A. sec. 351, page 286, provides as follows:

            "Patents with restrictions for lots in villages in Washington.  The Secretary of the Interior is authorized, whenever in his opinion it shall be conducive to the best welfare and interest of the Indians living within any Indian village on any of the Indian reservations in the State of Washington, to issue a patent to each of said Indians for the village or town lot occupied by him,which patent shall contain restrictions against the alienation of the lot described therein to persons other than members of the tribe, except on approval of the Secretary of the Interior; * * *" (Emphasis supplied)

            The restrictions on alienation, as underlined in the statute, make it necessary for the United States to at least supervise and possibly execute the deeds of Indian land to persons other than members of the tribe.  It is necessary then to actually trace the title on each piece of property so sold to determine whether (1) it is unallotted land belonging to the United States as fee owner of Indian lands, or (2) land held in trust by the United States for individual Indians, or (3) land upon which patents have been issued to the individual Indian.  In the latter case the Indian is the fee owner with restrictions in the deed on alienation to persons other than Indians without approval of the Department of Interior.  Such restrictions are for the protection of the Indian against possibly improvident business dealings and does not change the character of the sale.  Therefore, only in the latter instance could a real estate sales excise tax be levied on the sale.

            The Enabling Act for the State of Washington, 25 Stat. 676, sec. 4, part 2, relating to Indian lands, provides in part that:

             [[Orig. Op. Page 5]]

            "* * * Indian lands shall remain under the absolute jurisdiction and control of the congress of the United States; * * * that no taxes shall be imposed by the states on lands or property therein belonging to or which may hereafter be purchased by the United States or reserved for its use.  But nothing herein, or in the ordinances herein provided for, shall preclude the said states from taxing as other lands are taxed any lands owned or held by any Indian who has severed his tribal relations, and has obtained from the United States or from any person a title thereto by patent or other grant, save and except such lands as have been or may be granted to any Indian or Indians under any act of congress containing a provision exempting the lands thus granted from taxation; but said ordinances shall provide that all such lands shall be exempt from taxation by said states so long and to such extent as such act of congress may prescribe."  (Emphasis supplied)

            The often quoted rule, "taxation is the rule, exemption is the exception," seems applicable here.  In absence of a specific exception in the Washington and Federal statutes, sales of allotted Indian lands by deeds which recite that an Indian is the grantor are sales by the individual Indian and not the United States, and are subject to real estate excise tax.  This rule will apply even though the conveyance is subject to the approval of the Department of the Interior.

Very truly yours,

Attorney General

Assistant Attorney General

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