AGO Opinion 97030

Immunity from State Taxation of Ho-Chunk, Inc., a For-Profit Corporation Chartered Under the Winnebago Tribe of Nebraska Business Code and Owned by the Winnebago Tribe of Nebraska.
Opinion 97030

DATE: May 21, 1997

SUBJECT: Immunity from State Taxation of Ho-Chunk, Inc., a For-Profit Corporation Chartered Under the Winnebago Tribe of Nebraska Business Code and Owned by the Winnebago Tribe of Nebraska.

REQUESTED BY: M. Berri Balka

State Tax Commissioner

WRITTEN BY: Don Stenberg, Attorney General

L. Jay Bartel, Assistant Attorney General

You have requested our opinion concerning whether a for-profit

corporation created and owned by the Winnebago Indian Tribe of

Nebraska is immune from taxation by the State of Nebraska based on

activities conducted by the corporation both on and off the

Winnebago Tribe's Reservation.


The corporation, Ho-Chunk, Inc., [the "Corporation" or "Ho-

Chunk"], is wholly-owned by the Winnebago Tribe of Nebraska [the

"Tribe"]. The Tribe is a federally-recognized Indian tribe

organized and operating under a Constitution approved by the

Secretary of the Interior pursuant to the Indian Reorganization Act

of 1934, 25 U.S.C. § 476. The Tribe's governing body, as provided

in its Constitution, is its Tribal Council. The Tribal Council

consists of nine members elected by the eligible adult members of

the Tribe. The Tribe occupies reservation land in Nebraska and

Iowa constituting the Winnebago Indian Reservation [the


In September 1994, the Tribal Council authorized the creation

of Ho-Chunk. Specifically, the Tribal Council: (1) adopted the

Winnebago Tribe of Nebraska Business Corporation Code [the "Code"],

providing for the incorporation of business corporations under the

Tribe's law, including corporations wholly-owned by the Tribe; (2)

determined that it was in the best interests of the Tribe to carry

out its economic development activities through a corporation

wholly-owned by the Tribe; and (3) incorporated Ho-Chunk for this

purpose. Ho-Chunk is a resident of and maintains its corporate

headquarters on the Reservation.

Ho-Chunk has nine shares of outstanding stock owned by the

Tribe. Each member of the Tribal Council has the right to one vote

on any Ho-Chunk matter presented for a shareholder vote. All

beneficial interests or rights in Ho-Chunk other than voting rights

are held by and for the Tribe. The Tribal Council has authority to

direct that Ho-Chunk distribute all or any portion of its net

income to the Tribe at any time.

The Board of Directors of Ho-Chunk consists of five members

selected by the Tribal Council, including two members required to

be current members of the Tribal Council, one other tribal member,

and two members experienced in business not required to be members

of the Tribe (but who always have been members of the Tribe). The

directors, who serve for staggered three-year terms, may be removed

by the Tribal Council at any time with or without cause.

In the Code and in the Articles of Incorporation of Ho-Chunk,

the Tribe has sought to confer on Ho-Chunk all of the Tribe's

rights, privileges, and immunities concerning federal, state, or

local taxes, regulations, and jurisdiction, as well as sovereign

immunity from suit, to the same extent that the Tribe would have

such rights, privileges, and immunities, as well as sovereign

immunity from suit, if it engaged in the activities undertaken by



Based on the foregoing, you present two questions for our

consideration. First, you ask whether Ho-Chunk, based on these

facts, should be accorded the same immunity from Nebraska taxation

accorded to the Tribe itself when the Corporation conducts

activities on the reservation. Second, if Ho-Chunk is immune from

Nebraska taxation resulting from its activities on the Reservation,

you ask whether it is also immune from Nebraska taxation based on

its activities conducted in other parts of the state off the



A. Taxation of On-Reservation Activities.

Generally, "[t]he federal purposes implicit in setting aside

Indian country for the residence of a tribe -- self-government and

economic support -- preempt state jurisdiction to tax Indians or

Tribes therein, unless Congress authorizes the tax." F. Cohen,

Handbook of Federal Indian Law , 406 (1982 ed.). "[W]hen a State

attempts to levy a tax directly on an Indian tribe or its members

inside Indian country, rather than on non-Indians, [the Court has]

employed, instead of a balancing inquiry, `a more categorical

approach: `[A]bsent cession of jurisdiction or other federal

statutes permitting it', [the Court has] held, a State is without

power to tax reservation lands and reservation Indians." Oklahoma

Tax Comm'n v. Chickasaw Nation, ___ U.S. ___, ___, 115 S. Ct. 2214,

2220-21 (1005) (quoting County of Yakima v. Confederated Tribes and

Bands of Yakima Nation, 502 U.S. 251, 258, 112 S. Ct. 683, 688

(1992) (citation omitted)). Applying this "categorical approach",

the U. S. Supreme Court has "held unenforceable a number of state

taxes whose legal incidence rested on a tribe or on tribal members

inside Indian country." Oklahoma Tax Comm'n v. Chickasaw Nation,

___ U.S. at ___, 114 S. Ct. at 2220. See, e.g., Bryan v. Itasca

County, 426 U.S. 373 (1976) (personal property tax); McClanahan v.

Arizona State Tax Comm'n, 411 U.S. 164 (1973) (state net income


Consistent with these precedents, the Department has

recognized that Indians residing on Nebraska Indian Reservations,

and Indian Tribes, are immune from various state taxes on

activities or transactions conducted within Reservation lands.

See, e.g., NDOR Information Guide "Nebraska Taxation of Reservation

Indians" (rev. June, 1996); NDOR Rev. Ruling 99-76-4 (Indian

Tribal Council shall receive same state tax treatment as a

Reservation Indian). In the instant case, however, the issue is

the immunity from state taxation of Ho-Chunk, a corporation

chartered under tribal law. The Department has taken the position

that income of a corporation is subject to Nebraska franchise or

income tax, even if the shareholders of the corporation include

reservation Indians. NDOR Rev. Ruling 24-76-3 (Oct. 1, 1976). The

Department's position is based on the generally recognized

principle that a corporation is a legal entity separate and

distinct from its shareholders. Id.

As one leading commentator on Indian law has stated, the

question of "[w]hether a corporation should have the same

jurisdictional status as an Indian under some circumstances has not

been authoritatively determined." F. Cohen, Handbook of Federal

Indian Law, 438 (1982 ed.). Professor Cohen notes that tribal

corporations formed under Section 17 of the Indian Reorganization

Act, and tribal enterprises which are "arms of the tribal

government", have been "treated identically with tribes for

jurisdictional purposes." Id. He suggests that, "[w]hen a tribe

charters a corporation, the status may depend on its ownership and

purposes." Id. While Professor Cohen states it is "uncertain"

whether a tribe may confer its immunity from taxation on a

tribally-chartered corporation, he suggests that, "[i]f the

corporation is tribally owned and is established to carry out a

governmental purpose, the entity would seem little different from

a branch of the tribal government itself." Id. at 439 n.11.

In a prior opinion, we concluded that the tangible personal

property of a tribally-chartered corporation doing business on

reservation or Indian lands was not subject to personal property

taxation. Op. Att'y Gen. No. 111 (July 10, 1985). The corporation

was chartered under the authority of the Corporate Charter,

Constitution, and Bylaws of the Winnebago Tribe of Nebraska. The

President and Chairman of the Board of Directors were enrolled

members of the Tribe, and a majority of the stock of the

corporation was owned by Indians. While we recognized that there

were no definitive cases addressing state or local taxation of

property of tribally-chartered corporations, we concluded that the

property of the corporation located on the reservation was likely

immune from property taxation. We noted the fact that the

corporation was chartered under tribal law, not state law,

"seem[ed] to strengthen the argument for immunity." The opinion

concluded that recognizing immunity was "consistent with the

federal policy of encouraging successful Indian business

enterprises on reservations to foster the tribe's economic

development." Id. at 4.

While there concededly are no cases directly holding that a

tribal corporation such as Ho-Chunk is immune from state taxation

based on activities and transactions occurring in Indian country,

we conclude that, based on the facts presented, the Department

should determine that Ho-Chunk is not subject to taxation by the

State based on its on-reservation activities. We reach this

conclusion for two reasons.

First, we note that, on several occasions, courts have held

that states taxes imposed on non-Indian parties based on dealings

with Indians on reservations were impermissible, even though such

dealings were with tribal enterprises or organizations, not the

tribe itself. See, e.g., Ramah Navajo School Bd., Inc. v. Bureau

of Revenue of New Mexico, 458 U.S. 832 (1982) (State could not

impose gross receipts tax on revenues of non-Indian contractor from

its contract with school board, which constituted a "tribal

organization", to build Indian school on reservation); Central

Machinery Co. v. Arizona State Tax Comm'n, 448 U.S. 160 (1980)

(State gross receipts tax on sale of farm equipment by non-Indian

company on reservation was preempted by federal statute, even

though sale was made to a tribal enterprise rather than the tribe

itself). The Court in Central States, referencing the statement in

Mescalero Apache Tribe v. Jones, 411 U.S. 145, 157 n.13 (1973) that

"the question of tax immunity cannot be made to turn on the

particular form in which the Tribe chooses to conduct its

business", stated it was "irrelevant" that the on-reservation sale

on which the Arizona tax was based "was made to a tribal enterprise

rather than to the Tribe itself." 448 U.S. at 163 n.3). Ho-Chunk,

while apparently organized as a for-profit corporation, is akin to

a tribal organization or enterprise. This conclusion is bolstered

by the following: (1) Ho-Chunk was formed by the Tribal Council

to carry out the Tribe's economic development activities; (2) the

Tribe owns all shares of Ho-Chunk's outstanding stock; (3) all

beneficial interests or rights in Ho-Chunk (other than voting

rights) are held by and for the Tribe; and (4) the Tribal Council

has authority to direct that Ho-Chunk distribute all or any portion

of its net income to the Tribe at any time. Based on the facts

presented to us, the dominant theme and purpose of Ho-Chunk is to

conduct business activities on behalf of and for the benefit of the


Second, we note that the Supreme Court has adopted a

"categorical approach" with respect to state attempts to levy taxes

on Indian tribes or their members inside Indian country, denying

state jurisdiction to impose taxes "`[a]bsent cession of

jurisdiction or other federal statutes permitting it,'. . . ."

County of Yakima v. Confederated Tribes and Bands of Yakima Nation,

502 U.S. at 258 (quoting Mescalero Apache Tribe v. Jones, 411 U.S.

145, 148 (1973). Given the organization, composition, and purpose

of Ho-Chunk, its proclaimed status as an entity formed by the Tribe

to aid the Tribe in carrying out its economic development

activities, and the absence of any federal statute permitting state

taxation of its activities on the Reservation, we conclude that the

"categorical approach" followed by the Court likely would preclude

state taxation of Ho-Chunk's on-reservation activities or


B. Taxation of Off-Reservation Activities.

As to the question of the State's imposition of taxes based on

activities and transactions of Ho-Chunk occurring off the

Reservation, however, we reach a different conclusion. In that

regard, it has been recognized that "[s]tate taxes have. . .been

validly imposed on tribal business activities outside tribal Indian

country absent conflict with a federal law or treaty." F. Cohen,

Handbook of Federal Indian Law, 430 (1982 ed.). In Mescalero

Apache Tribe v. Jones, 411 U.S. 145 (1973), the Court sustained

state jurisdiction to impose a nondiscriminatory gross receipts tax

(based on gross income) of a tribal ski resort located outside the

Tribe's reservation. In an oft-quoted passage from Mescalero, the

Court recognized a distinction between state jurisdiction over

activities of Indian tribes and their members on reservation lands,

and activities conducted outside the reservation:

[I]n the special area of state taxation, absent cession

of jurisdiction or other federal statutes permitting it,

there has been no satisfactory authority for taxing

Indian reservation lands or Indian income from activities

carried on within the boundaries of the reservation,. .

. .

* * *

But tribal activities conducted outside the reservation

present different considerations. . . . Absent express

federal law to the contrary, Indians going beyond

reservation boundaries have generally been held subject

to non-discriminatory state law otherwise applicable to

all citizens of the State.. . . . That principle is as

relevant to a State's tax laws as it is to state criminal

laws, . . . .

Id. at 148-49 (citations omitted) (emphasis added).

Mescalero supports the State's jurisdiction to impose

nondiscriminatory taxes on Ho-Chunk's activities and transactions

conducted off the Reservation. As noted by Professor Cohen, "[t]he

reasoning of the decision seems to apply to other state business

and consumption taxes, such as taxes on employers, sales,

inventory, motor fuels, and the like." F. Cohen, Handbook of

Federal Indian Law, 430. To the extent that Ho-Chunk conducts

business activities outside the Reservation, it is subject to

nondiscriminatory taxes imposed by the State.

Very truly yours,


Attorney General

L. Jay Bartel

Assistant Attorney General