T.C. Memo. 2004-278
UNITED STATES TAX COURT
FREDRIC ARLAN DUBRAY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7547-02. Filed December 13, 2004.
Fredric Arlan DuBray, pro se.
Shelley T. Van Doran, for respondent.
MEMORANDUM OPINION
GOEKE, Judge: Respondent determined deficiencies in
petitioner’s income taxes of $5,050, $6,250, and $5,959 for the
taxable years 1997, 1998, and 1999, respectively. After
concessions, the remaining issue for decision is whether
petitioner’s wage income from Pte Hca Ka, Inc. (the corporation),
is exempt from taxation pursuant to the Treaty With the Sioux,
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which is sometimes called the Fort Laramie Treaty of 1868 (the
treaty).1 We hold this wage income is not tax exempt.
All Rule references are to the Tax Court Rules of Practice
and Procedure.
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference.
Background
When the petition was filed, petitioner resided in Mobridge,
South Dakota. Petitioner did not file Federal income tax returns
for the years in issue.
Petitioner is an enrolled2 member of the Cheyenne River
Tribe of Sioux Indians (the Cheyenne River Sioux). The Cheyenne
River Sioux have a designated reservation which is part of the
treaty land.3
1
The treaty is known as the Treaty With the Sioux-–Brule,
Oglala, Miniconjou, Yanktonai, Hunkpapa, Blackfeet, Cuthead, Two
Kettle, Sans Arcs, and Santee–-and Arapaho, Apr. 29, 1868, 15
Stat. 635. Among the many signatories of this historic treaty
were Gen. William T. Sherman and the great chiefs Sitting Bull
and Red Cloud.
2
The term “enrolled” means that petitioner is listed on the
tribal roll as a member of the Cheyenne River Tribe of Sioux
Indians.
3
By Act of Mar. 2, 1889, ch. 405, 25 Stat. 888, Congress
created the Cheyenne River Reservation on part of the Great Sioux
Reservation land.
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During the years at issue, petitioner was employed by the
corporation. The corporation was owned and operated by the
Cheyenne River Sioux for purposes of restoring buffalo to tribal
lands. The corporation raised buffalo on tribal land, and the
buffalo were used for various purposes, including slaughter for
tribal and public consumption and sale, and for use in tribal
ceremonial events. Petitioner’s position with the corporation
was director of the buffalo restoration project.
During the years at issue, the corporation paid petitioner
wages for his services as director and reported those wages to
respondent and petitioner via Forms W-2, Wage and Tax Statement.
The corporation deducted withholding tax, FICA tax, and medicare
from petitioner’s wages, and those deductions were also reported
on the Forms W-2. The wages paid by the corporation were
$33,860, $37,105, and $37,600 for 1997, 1998, and 1999,
respectively.
The source of the wages paid petitioner by the corporation
is not clearly described in the record, but the wages are not
exclusively from revenue related to the buffalo restoration
project.
Petitioner also received various other items of income he
concedes are taxable to him during the years at issue and are no
longer in dispute.
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On January 10, 2002, respondent mailed to petitioner a
notice of deficiency for the years at issue. Petitioner timely
filed a petition in this Court seeking a redetermination.
Discussion
Petitioner argues that his wage income earned as an employee
of the corporation is not subject to Federal income tax as a
result of certain provisions of the treaty. Specifically,
petitioner relies upon a phrase in article 2 of the treaty which
modifies the description of the treaty lands as “set apart for
the absolute and undisturbed use and occupation of the Indians
herein named”.4 It is uncertain whether this provision was
intended to exempt the Cheyenne River Sioux Tribe itself from
Federal taxation of its income related to the buffalo restoration
project, but petitioner’s position is weakened by a more basic
point. The caselaw has well established that income earned by an
individual member of a tribe from working for the tribe or for a
corporation on unallotted tribal land is not exempt even if the
income derived by the tribe from the land would be exempt in the
hands of the tribe itself. See, e.g., Holt v. Commissioner, 364
F.2d 38, 41 (8th Cir. 1966) (involving a lease of unallotted
land), affg. 44 T.C. 686 (1965). The position of this Court in
4
Petitioner must show in this regard that the income in
question is specifically entitled to an exemption from taxation
by treaty or Act of Congress. Squire v. Capoeman, 351 U.S. 1, 6
(1956); LaFontaine v. Commissioner, 533 F.2d 382, 382 (8th Cir.
1976), affg. T.C. Memo. 1975-165.
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this regard was well explained in Jourdain v. Commissioner, 71
T.C. 980, 989 (1979), affd. per curiam 617 F.2d 507 (8th Cir.
1980), which states:
Petitioner’s salary did not represent his pro rata
share of tribal income. Rather, his wages were solely
for his benefit, obtained through his labor, and we do
not believe, therefore, that his wages were directly
derived from the land. Nonetheless, petitioner argues
that his management of tribal land is a necessary part
of deriving (tax exempt) income from the land, and that
to tax his income from management of the land is to
thereby indirectly tax the land itself. However, it
does not follow that income received by an employee as
compensation for services rendered the tribe is tax
exempt because the income earned by the tribe through
(in part) his services is tax exempt. * * *
In Jourdain, as support for this position, we cited Fry v. United
States, 557 F.2d 646 (9th Cir. 1977), and Walker v. Commissioner,
326 F.2d 261 (9th Cir. 1964), revg. in pertinent part 37 T.C. 962
(1962). In Walker, the Court of Appeals stated:
Walker earned the income as an employee of the Gila
River Pima-Maricopa Indian Community by performing the
duties of elected Treasurer as prescribed by the
Community charter and By-laws. If, under the law, the
income of an organization is exempt from taxation, it
does not follow that the income received by an employee
as compensation for service rendered to such
organization is also exempt from taxation. * * * [Id.
at 264.]
Given this precedent, petitioner’s wage income is not tax exempt.
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We have reviewed petitioner’s other arguments and find them
without merit. In light of the above and the other concessions
made by petitioner,
Decision will be entered
under Rule 155.