TAXATION ‑- CONTRACT VENDEES INTEREST ‑- IN STANDING TIMBER ON INDIAN LANDS ‑- VALUATION.
The interest of private contract vendees in standing timber situated upon tribal and allotted lands within the Colville Indian Reservation is taxable by Okanogan County as personal property.
The value for tax purposes of the vendees' interest in said executory contracts may be determined by reference to Property Tax Bulletin No. 175.
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April 30, 1953
Honorable John N. Leavitt
Okanogan County Prosecuting Attorney
Okanogan, Washington Cite as: AGO 53-55 No. 29
You request our opinion upon the following:
(1) "May private [contract vendees] interests in standing timber situated upon tribal and allotted lands within the Colville Indian Reservation be made a proper subject of [property] taxation by Okanogan County?"
(2) "If the answer to the foregoing is in the affirmative, upon what basis should such interests be assessed and taxed where the contract is for the sale of a specified total footage, but stipulates a specified term of years for removal, with fixed minimums and maximums which may be cut and removed during any year throughout the contract?"
We conclude that the interest of the contract vendees is taxable by Okanogan County as personal property.
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According to your inquiry, the foregoing questions have their foundation in the practice of certain logging and sawmill operators purchasing standing timber from the Bureau of Indian Affairs, United States Department of the Interior, with the right to cut and remove such standing timber from both tribal and allotted Indian lands within the Colville Indian Reservation. In the case of tribal lands, the contracts are executed by the United States through an authorized Indian Affairs Officer, and in the case of allotted lands, the contracts are executed by the allottee, subject to approval by the Bureau of Indian Affairs. In either case, the contracts are of a standard form, and provide for advance payments by the purchasers to cover the stumpage value of timber cut and not paid for. In addition, both contracts are subject to the provisions of the General Timber Sales Regulations issued by the U.S. Department of the Interior. Under paragraph 6 of said Regulations, title to the timber covered by the contracts does not pass to the purchasers until it is paid for.
With reference to the first question set forth above, it is axiomatic that the state (county) has no power to tax the vendees' interest in said timber unless it has jurisdiction.
An examination of the treaties between the United States and the Colville Indians discloses that there is no reservation of jurisdiction by the United States over these Indian lands. Likewise, a perusal of the Act of Congress establishing the Territory of Washington, approved March 2, 1853 (10 Stat. 172), discloses no provision for the exclusion from the Territory of any Indian Reservations thereafter established.
The states of Washington, Montana, North and South Dakota were admitted into the Union by the same Enabling Act approved February 22, 1889 (25 Stat. 676). This Act does not provide for the exclusion from the Territory to be embraced within the new states of Indian Reservations, but it does require that the constitutional conventions of each state provide:
"That the people inhabiting said proposed States do agree and declare that they forever disclaim all right and title to the unappropriated public lands lying within the boundaries thereof, and to all lands lying within [[Orig. Op. Page 3]] said limits owned or held by any Indian or Indian tribes; and that until the title thereto shall have been extinguished by the United States, the same shall be and remain subject to the disposition of the United States, and said Indian lands shall remain under the absolute jurisdiction and control of the Congress of the United States; * * *."
The foregoing provision is contained in Art. XXVI, § 2 of our State Constitution. From a casual reading of § 2, it would appear that the state has granted exclusive jurisdiction of Indian lands to the United States for all purposes. This, however, is not the case. The language used in the Enabling Act and § 2, Art. XXVI of our State Constitution does not signify a retention of jurisdiction in the United States over matters involving nonIndians. Likewise, it contains no provision against taxing non-Indians subject to the state's jurisdiction, even though such non-Indians are doing business within an Indian Reservation.
In referring to the above quoted excerpt from the Enabling Act, (the Enabling Act of Montana being the same as that of Washington) the Supreme Court in the case of Draper v. United States, 164 U.S. 240 (1896), in deciding that the Montana Courts had exclusive jurisdiction of the trial of an offense committed on an Indian Reservation by a non-Indian upon a non-Indian, at page 244, et seq., had this to say:
"As equality of statehood is the rule, the words relied on here to create an exception cannot be construed as doing so, if, by any reasonable meaning, they can be otherwise treated. The mere reservation of jurisdiction and control by the United States of 'Indian lands'does not of necessity signify a retention of jurisdictionin the United States to punish all offenses committedon such lands by others than Indians or againstIndians." (Emphasis supplied)
Thus, the mere fact that the locus of an event is on an Indian Reservation does not prevent the exercise of state jurisdiction where the parties involved are not Indians and the subject matter of the transaction is not of federal concern. See also Donnelly v. United States, 228 U.S. 243 (1912); United States v. McBratney, 104 U.S. 621 (1881); State v. Williams, 13 Wash. 335 (1895); State v. Howard, 33 Wash. 250 (1903); State v. Lindsey, 133 Wash. 140 (1925).
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The same reasoning can be applied to the taxing power of the states. A leading Washington case on this subject is Neah Bay Fish Co. v. Krummel, 3 Wn. (2d) 570 (1940). In a well-written opinion our court held that the state has jurisdiction to impose business and sales taxes upon persons, other than Indians, doing business within an Indian Reservation. Of course, lands which are occupied by a tribe of Indians have always been regarded as not within the jurisdiction of the state for purposes of property taxation. United States v. Rickert, 188 U.S. 432 (1903). On the other hand, personalty owned by non-Indians but held on an Indian Reservation is subject to state taxation. Thomas v. Gay, 169 U.S. 264 (1898); Wagoner v. Evans, 170 U.S. 588 (1898); Catholic Missions v. Missoula County, 200 U.S. 118 (1906); Cohen, Handbook of Federal Indian Law 1945, p. 262.
Amendment 19 of our State Constitution reads as follows:
"The United States and its agencies and instrumentalities, and their property, may be taxed under any of the tax laws of this state, whenever and in such manner as such taxation may be authorized or permitted under the laws of the United States, notwithstanding anything to the contrary in the Constitution of this state."
We therefore conclude that the State of Washington has jurisdiction with respect to the affairs of non-Indians upon the Colville Indian Reservation. See also our opinion to the Snohomish County Prosecuting Attorney of September 27, 1951 [[Opinion No. 51-53-137]].
C. Implied Constitutional Immunity
Closely allied to the question of jurisdiction discussed above is the applicability of the doctrine of implied constitutional immunity. Thus, where property belonging to the United States or an instrumentality thereof has been sold under executory contract, a question whether such property, or any interest therein, is taxable by a state or one of its political subdivisions may depend upon the applicability to the situation in question of the broad doctrine commonly known as a rule of implied constitutional immunity‑-that a state may not subject to taxation the property of the Federal Government, or the means, instrumentalities, and agencies thereof which it employs to carry out its proper functions, unless Congress expressly confers on the states the right to impose such taxes. The courts have had considerable difficulty in dealing with this matter. Supporting the rule that a tax against the vendees' [[Orig. Op. Page 5]] interest under executory contracts of sale of property purchased from the Federal Government is not invalid as violative of the rule of implied constitutional immunity is the case of Port Angeles W.R. Co. v. Clallam County, 36 F. (2d) 956 (1930), (affirmed in 44 F. (2d) 28 (1930) writ of certiorari denied in 283 U.S. 848 (1931)). See also S.R.A. v. Minnesota, 327 U.S. 558 (1946) A.L.R. 610.
D. Local Considerations
The next facet of this problem concerns whether or not the contract vendees' interest in the standing timber is subject to tax by Okanogan County under the laws of this state. We are here concerned not with the timber itself but with the vendees' interest in these contracts. In referring to property subject to taxation, RCW 84.40.010, provides, in part, as follows:
"All property now existing, or that is hereafter created or brought into this state, shall be subject to assessment and taxation for state, county and other taxing district purposes, * * *." (Emphasis supplied)
And Amendment 14 to our State Constitution, in defining the word "property" as it pertains to taxation, states that:
"* * * The word 'property' as used herein shall mean and include everything, whether tangible or intangible, subject to ownership. * * *"
That the interest of vendees in property sold under executory contract is a species of property is well settled. Contract rights are taxable as property, provided they have value. Cooley on Taxation (4th Ed.), § 575, p. 1247. This was recognized in Port Angeles W. R. Co. v. Clallam County, 20 F. (2d) 202 (1927). In discussing this principle, our court in Washington Iron Works v. King County, 20 Wash. 150 (1898), at page 153, stated:
"The term 'property,' as applied to land, comprehends every species of title, inchoate or complete. It is sufficient to embrace those rights which are executory as well as those which are executed. Soulard v. United States, 4 Pet. 511; Puget Sound Agricultural Co. v. Pierce County, 1 Wash. T. 159 [[1 Wash. Terr. 156]]. The taxing power reaches everything within the state which can be denominated property."
It has also been held that while the state may require that the interest of its vendee under a contract for the sale of state lands may be taxed, it could not authorize taxation of such interest as real property. Connor v. Spokane County, 96 Wash. 8 (1917). Also, the language of RCW 84.36.070 does not include interests in executory contracts as being exempt from ad valorem taxation.
We therefore conclude that the vendees' interest in these executory contracts are taxable by Okanogan County as personal property.
In connection with the valuation of the executory contracts in question, your attention is directed to Property Tax Bulletin No. 175, a copy of which is enclosed herewith. That bulletin is concerned with the valuation of leasehold interests for tax purposes. The views expressed therein likewise apply to executory contracts.
Very truly yours,
CARL L. LOY
Assistant Attorney General