South Point v. Ador

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

SOUTH POINT ENERGY CENTER LLC, Plaintiff/Appellant,

v.

ARIZONA DEPARTMENT OF REVENUE, et al., Defendants/Appellees.

No. 1 CA-TX 20-0004
FILED 3-19-2024

Appeal from the Arizona Tax Court
No. TX2013-000522
TX2014-000451
TX2015-000850
TX2016-001228
TX2017-001744
TX2018-000019
TX2019-000086
(Consolidated)

The Honorable Christopher T. Whitten, Judge

AFFIRMED

COUNSEL

Lewis Roca Rothgerber Christie LLP, Phoenix
By Patrick Derdenger, Karen M. Jurichko Lowell
Co-Counsel for Plaintiff/Appellant

Dickinson Wright PLLC, Phoenix
By Bennett Evan Cooper, Vail C. Cloar
Co-Counsel for Plaintiff/Appellant
Gammage & Burnham, P.L.C., Phoenix
By Cameron C. Artigue, Christopher L. Hering
Counsel for Defendants/Appellees Arizona Department of Revenue and Mohave
County

Arizona Attorney General’s Office, Phoenix
By Kimberly J. Cygan
Counsel for Defendant/Appellee Arizona Department of Revenue

Arizona Attorney General’s Office, Phoenix
By Jerry A. Fries
Counsel for Defendant/Appellee Mohave County

Kewenvoyouma Law, PLLC, Tempe
By Verrin T. Kewenvoyouma, Christopher Love
Co-Counsel for Amici Curiae Fort Mojave Indian Tribe, et al.

Jenner and Block, LLP, Washington, D.C.
By Charles W. Galbraith, Pro Hac Vice
Co-Counsel for Amici Curiae Fort Mojave Indian Tribe, et al.

OPINION

Judge Cynthia J. Bailey delivered the opinion of the Court, in which
Presiding Judge Paul J. McMurdie and Judge D. Steven Williams joined.

B A I L E Y, Judge:

¶1 Plaintiff South Point Energy Center, LLC (“South Point”)
appeals the tax court’s summary judgment for the Arizona Department of
Revenue (“ADOR”) and Mohave County (collectively, “the County”).
South Point argues that the tax court erred in concluding that the County’s
valuation and taxation of South Point’s electric power generating plant
(“the Plant”) is not preempted under White Mountain Apache Tribe v. Bracker,
448 U.S. 136 (1980). The issue comes to us on remand from the Arizona
Supreme Court, which directed us to consider whether applying the Bracker
interest-balancing test evidences Congress’s implicit intent to preempt
taxing the Plant—a question previously raised by South Point on appeal but
not decided by this court. See S. Point Energy Ctr. LLC v. Ariz. Dep’t of
Revenue (South Point I), 251 Ariz. 263, 268, ¶ 24 (App. 2021), vacated in part

2
 SOUTH POINT v. ADOR, et al.
Opinion of the Court

and remanded by S. Point Energy Ctr. LLC v. Ariz. Dep’t of Revenue (South Point
II), 253 Ariz. 30, 39, ¶¶ 37–38 (2022). For the following reasons, we affirm
the tax court, which correctly ruled that the Plant is not exempt from the
County’s tax under Bracker.

FACTS AND PROCEDURAL HISTORY1

¶2 In 1999, Calpine Construction Finance Co. (“Calpine”), a non-
Indian-owned entity, leased 320 acres of undeveloped land on a long-term
basis from the Fort Mojave Indian Tribe (“the Tribe”) to build and operate
the Plant on reservation land. Beginning operations in 2001, the Plant is a
“merchant plant” that sells electrical energy to public and private utility
companies for resale to end-users. It does not supply electrical power to
the Tribe or any person or entity on the reservation. The Tribe did not
finance the Plant and does not contribute any operating funds.

¶3 Mohave County then assessed ad valorem property taxes
against the Plant based on valuations determined by ADOR. See former
Ariz. Const. art. 9, § 2(13) (“All property in the state not exempt under the
laws of the United States or under this constitution or exempt by law under
the provisions of this section shall be subject to taxation to be ascertained as
provided by law.”)2; accord Ariz. Rev. Stat. (“A.R.S.”) § 42-11002. ADOR
assessed the value of the Plant itself and the personal property used to
operate the Plant; ADOR did not assess the value of the underlying land.

¶4 Calpine paid the taxes and unsuccessfully sued for a refund,
arguing the Tribe, as lessor, owned all improvements to the leased
property, thereby exempting the Plant from state taxation according to
federal law. See Calpine Constr. Fin. Co. v. Ariz. Dep’t of Revenue, 221 Ariz.
244, 249, ¶ 22 (App. 2009); see also Cass Cnty. v. Leech Lake Band of Chippewa
Indians, 524 U.S. 103, 110 (1998) (“State and local governments may not tax
Indian reservation land ‘absent cession of jurisdiction or other federal

1 The facts set out in this section are largely taken from our supreme court’s

opinion in South Point II. See 253 Ariz. at 31–33, ¶¶ 2–8.

2 In the November 8, 2022 general election, voters approved Proposition 130

to amend the Arizona Constitution with regard to property tax exemption
provisions. Article 9, Section 2, of the Arizona Constitution was amended
effective December 5, 2022, to reflect the results of the election, and Section
2(A) now provides: “All property in this state that is not exempt under the
laws of the United States or under this section is subject to taxation as
provided by law.”

3
 SOUTH POINT v. ADOR, et al.
Opinion of the Court

statutes permitting it.’” (quoting Cnty. of Yakima v. Confederated Tribes &
Bands of Yakima Nation, 502 U.S. 251, 258 (1992))). On appeal, this court
acknowledged the general rule that a lessor owns all real property
improvements made by a lessee, but concluded the parties’ lease varied that
rule by providing that Calpine owned all improvements. Calpine Constr.,
221 Ariz. at 248, ¶¶ 16–17. Consequently, this court affirmed the tax court’s
judgment that Calpine was liable for property taxes based on the value of
the Plant and related personal property. See id. at 246, ¶ 1.

¶5 After a series of transactions involving Calpine and several of
its related entities, the Tribe’s land and the Plant were sublet to South Point,
another Calpine-related entity, with the Tribe’s consent and approval by
the United States Bureau of Indian Affairs (“the BIA”). In 2012, the Tribe
and Calpine’s successor-lessees, which are included in references to “South
Point,” executed an amended lease that remained in place during this
lawsuit. The amended lease provides that no partnership exists between
the Tribe and South Point. The amended lease also reaffirms that the Plant
and “all [i]mprovements and associated materials, supplies, and
equipment” are “owned and controlled” by South Point, and that at the
expiration of the lease, South Point must remove all above-ground real
property improvements and personal property, excepting roads and
foundations.

¶6 The amended lease contemplates that ad valorem property
taxes may be assessed on the Plant. In addition, the amended lease requires
South Point to timely pay all taxes levied by any governmental entity to
prevent the imposition of any liens and to hold the Tribe harmless against
any imposed liens. The BIA approved the amended lease.

¶7 South Point initiated these consolidated lawsuits seeking a
refund of payments for property taxes imposed from 2010 to 2018, to the
extent they were based on valuations of the Plant. See A.R.S. § 42-11005
(authorizing a lawsuit to recover illegally levied, assessed, or collected
taxes). South Point did not challenge the tax assessments based on
ownership of the Plant, as Calpine did in its earlier lawsuit. Instead, South
Point argued that § 5 of the Indian Reorganization Act of 1934 (“the Act”),
see 25 U.S.C. § 5108 (former 25 U.S.C. § 465), expressly preempts states from
imposing property taxes on any real property improvements, regardless of
ownership, located on land held in trust by the federal government to
benefit Indian tribes or individual Indians. Alternatively, South Point
argued that applying the balancing test announced in Bracker demonstrates
Congress’s implicit intent to preempt taxing the Plant.

4
 SOUTH POINT v. ADOR, et al.
Opinion of the Court

¶8 The tax court rejected both of South Point’s arguments and
granted summary judgment for the County. We reversed, concluding § 5
of the Act expressly and categorically exempted permanent improvements
on the Tribe’s land from state taxation regardless of ownership. See South
Point I, 251 Ariz. at 269, ¶ 30. We remanded for the tax court to conduct an
analysis under Whiteco Industries, Inc. v. Commissioner, 65 T.C. 664 (1975),3
to determine which, if any, of the assets making up the Plant constituted
permanent tax-exempt improvements. South Point I, 251 Ariz. at 269, ¶ 30.
We did not apply the Bracker balancing test but directed the tax court to do
so in considering whether property taxes on the Plant’s impermanent assets
were preempted. Id.

¶9 The Arizona Supreme Court granted the County’s petition for
review to decide whether the Act’s § 5 “expressly preempts taxing
permanent improvements constructed on tribal lands acquired under that
section when those improvements are owned by non-Indians.” South Point
II, 253 Ariz. at 33, ¶ 9. The supreme court then vacated a portion of our
opinion, holding that the Act does not expressly preempt Mohave County’s
ad valorem property tax on the Plant. Id. at 31, 39, ¶¶ 1, 37–38. The court
remanded the case to this court, see ARCAP 23(m)(2), to decide the
remaining issue we had not addressed: “whether the tax court correctly
ruled that the Plant is also not impliedly exempt from the County’s tax
under Bracker,” South Point II, 253 Ariz. at 39, ¶ 37.

¶10 On remand, we ordered additional briefing by the parties and
invited other interested parties to file amicus briefs, setting forth their
respective positions on the issue.4 We now address the question presented
to us on remand, and after consideration of Bracker and its progeny, we
affirm the tax court.

DISCUSSION

¶11 “We review the tax court’s entry of summary judgment de
novo, viewing the facts in the light most favorable to South Point as the
nonmoving party.” South Point II, 253 Ariz. at 33, ¶ 10 (citing Dinsmoor v.

3 Whether an asset is a permanent improvement or personal property turns

on the guidelines set out in Whiteco. See 65 T.C. at 672–73. See also PPL Corp.
v. Comm’r, 135 T.C. 176, 193–97 (2010); Trentadue v. Comm’r, 128 T.C. 91, 99–
108 (2007).

4 At oral argument on remand, the parties agreed that we need not remand

for a Whiteco analysis.

5
 SOUTH POINT v. ADOR, et al.
Opinion of the Court

City of Phoenix, 251 Ariz. 370, 373, ¶ 13 (2021)). We will affirm if there is no
genuine issue of material fact and the moving party is entitled to judgment
as a matter of law. Id. (citing Dinsmoor, 251 Ariz. at 373, ¶ 13; Ariz. R. Civ.
P. 56(a)).

¶12 Preemption is a question of law, and we can decide the issue
“based on a de novo Bracker analysis of the record before us.” Seminole Tribe
of Fla. v. Stranburg, 799 F.3d 1324, 1329 (11th Cir. 2015). The burden rests on
South Point, as plaintiff, to prove implied federal preemption of state law.
See Pickerel Lake Outlet Ass’n v. Day Cnty., 953 N.W.2d 82, 92, ¶ 23 (S.D. 2020).

¶13 Our primary goal in interpreting federal statutes is to
determine and give effect to Congress’s intent. See Steven H. v. Ariz. Dep’t
of Econ. Sec., 218 Ariz. 566, 570, ¶ 14 (2008) (citing federal cases). We read
words within the statutory context and aim to bring about the plain, logical
meaning of a statute unless doing so would bring about an absurd result.
See Conroy v. Aniskoff, 507 U.S. 511, 515–16 (1993); Armstrong Paint & Varnish
Works v. Nu-Enamel Corp., 305 U.S. 315, 332–33 (1938); Welch v. Cochise Cnty.
Bd. of Supervisors, 251 Ariz. 519, 523, ¶ 11 (2021). If the language is
ambiguous, we consider secondary interpretive principles, such as an act’s
subject matter, history, and purpose, and the consequences of differing
interpretations. See Conroy, 507 U.S. at 516–18; United States v. Am. Trucking
Ass’ns, 310 U.S. 534, 543–44 (1940); Welch, 251 Ariz. at 523, ¶ 11.

¶14 By statute, the United States Secretary of the Interior can
acquire “any interest in lands, water rights, or surface rights to lands, within
or without existing reservations . . . for the purpose of providing land for
Indians.” 25 U.S.C. § 5108. This statute further provides that “[t]itle to any
lands or rights acquired . . . shall be taken in the name of the United States
in trust for the Indian tribe or individual Indian for which the land is
acquired, and such lands or rights shall be exempt from State and local
taxation.” 25 U.S.C. § 5108.

¶15 In South Point II, our supreme court determined that although
§ 5 of the Act “preempts state and local taxes imposed on land and rights
acquired by the Secretary of the Interior and titled in the name of the United
States in trust for Indian tribes or individual Indians,” “[w]hen that lessee
is a non-Indian, § 5 does not preempt a state or locality from taxing the
improvements.” 253 Ariz. at 39, ¶ 36. Thus, under the facts present here,
no express authorization for preemption exists under § 5 of the Act. But
express authorization is not necessarily required for preemption to apply.
See Bracker, 448 U.S. at 144. “In the absence of express pre-emptive
language, Congress’ intent to pre-empt all state law in a particular area may

6
 SOUTH POINT v. ADOR, et al.
Opinion of the Court

be inferred where the scheme of federal regulation is sufficiently
comprehensive to make reasonable the inference that Congress ‘left no
room’ for supplementary state regulation.” Hillsborough Cnty. v. Automated
Med. Laboratories, Inc., 471 U.S. 707, 713 (1985) (quoting Rice v. Santa Fe
Elevator Corp., 331 U.S. 218, 230 (1947)). We will not, however, lightly
presume that preemption exists. See Washington v. Confederated Tribes of
Colville Indian Rsrv., 447 U.S. 134, 155–56 (1980).

¶16 Bracker imposes a balancing test that applies when “a State
asserts authority over the conduct of non-Indians engaging in activity on
the reservation.” 448 U.S. at 144. To determine whether a state or local tax
on non-Indians doing business on the reservation is preempted, a court
undertakes a “particularized inquiry into the nature of the state, federal,
and tribal interests at stake, an inquiry designed to determine whether, in
the specific context, the exercise of state authority would violate federal
law.” Id. at 145; accord Dep’t of Tax’n & Fin. of N.Y. v. Milhelm Attea & Bros.,
Inc., 512 U.S. 61, 73 (1994) (“Resolution of conflicts of this kind does not
depend on ‘rigid rules’ or on ‘mechanical or absolute conceptions of state
or tribal sovereignty,’ but instead on ‘a particularized inquiry . . . .’”
(quoting Bracker, 448 U.S. at 142, 145)). In balancing these interests, “[t]he
traditional notions of Indian sovereignty provide a crucial ‘backdrop’
against which any assertion of State authority must be assessed,” as does
the fact that “both the tribes and the Federal Government are firmly
committed to the goal of promoting tribal self-government, a goal
embodied in numerous federal statutes.” New Mexico v. Mescalero Apache
Tribe, 462 U.S. 324, 334–35 (1983) (internal citations omitted). If the state
authority “interferes or is incompatible with” federal and tribal interests,
the state authority will be preempted, “unless the State interests at stake are
sufficient to justify the assertion of State authority.” Id. at 334 (citations
omitted).

¶17 In applying Bracker, courts must consider “(1) the extent of the
federal and tribal regulations governing the taxed activity; (2) whether the
‘economic burden’ of the tax falls on the tribe or the non-Indian individual
or entity; and (3) the extent of the state interest in justifying the imposition
of the taxes.” Ute Mountain Ute Tribe v. Rodriguez, 660 F.3d 1177, 1187 (10th
Cir. 2011). A federal statutory scheme, agency regulations, and day-to-day
agency supervision can “inform the federal and tribal interests” and “signal
a federal regulatory scheme that is so pervasive that it preempts the state
tax.” Seminole Tribe, 799 F.3d at 1337 (citing Bracker, 448 U.S. at 145–48).
Further, a tax may be impermissible when “a number of the policies
underlying the federal regulatory scheme are threatened” by its
application, and the taxing authority is “unable to justify the taxes except

7
 SOUTH POINT v. ADOR, et al.
Opinion of the Court

in terms of a generalized interest in raising revenue.” Bracker, 448 U.S. at
151.

¶18 Courts have applied the Bracker interest-balancing test in
several circumstances involving the imposition of state or local taxes on
non-Indians. See, e.g., Yavapai–Prescott Indian Tribe v. Scott, 117 F.3d 1107,
1111–12 (9th Cir. 1997) (ruling against preemption of state transaction
privilege taxes on lodging, food, and beverage sales on tribal land); Gila
River Indian Cmty. v. Waddell, 91 F.3d 1232, 1236, 1239 (9th Cir. 1996)
(allowing transaction privilege taxes on tickets and concessionary items at
a raceway and concert center on tribal land); Salt River Pima–Maricopa Indian
Cmty. v. Arizona, 50 F.3d 734, 736, 738 (9th Cir. 1995) (holding that taxes on
sales to non-Indians by a non-Indian business on Indian land were not
preempted). But see Ramah Navajo Sch. Bd., Inc. v. Bureau of Revenue of N.M.,
458 U.S. 832, 841–43 (1982) (holding that a tax imposed on the gross receipts
that a non-Indian construction company received from a tribal school board
for the construction of a school for Indian children on the reservation was
preempted because the Interior Department had a detailed regulatory plan
for Indian schooling and the State of New Mexico had declined to take any
responsibility for the education of the Indian children).

¶19 None of the aforementioned cases dealt with a property tax
like the one at issue, however. In Seminole Tribe, an Indian tribe sued the
Florida Department of Revenue executive director, challenging the
imposition of a rental tax on rent paid to the tribe by non-Indian lessees for
the use of commercial space at the tribe’s casinos. 799 F.3d at 1326–27. The
11th Circuit Court of Appeals held that the tax was preempted, partly
because it was a tax on “a right in land” rather than a tax on economic
activity or tangible property removed from the land. Id. at 1331–32. In
effect, Seminole Tribe held that the leases were so connected to the land that
their taxation amounted to taxation of the land itself. Id. at 1329, 1331.
Similarly, in Confederated Tribes of Chehalis Reservation v. Thurston County
Board of Equalization, the Ninth Circuit Court of Appeals barred property
taxes on permanent improvements on non-reservation Indian trust lands.
724 F.3d 1153, 1159 (9th Cir. 2013).

¶20 This case is distinguishable from Seminole Tribe and Chehalis.
Here, the amended lease provides that the Plant and related operating
equipment are owned and controlled by South Point, which must remove
all above-ground real property improvements and personal property,
except roads and foundations, at the expiration of the lease. And neither
the land itself nor South Point’s leasehold interest in the land is a factor in
the tax because (1) in determining the tax, ADOR assessed only the value

8
 SOUTH POINT v. ADOR, et al.
Opinion of the Court

of the Plant itself and the personal property used to operate it and did not
assess the value of the underlying land, and (2) the amended lease provides
that no partnership exists between the Tribe and South Point. Since land
owned by the Tribe is exempt from state property taxes, no portion of the
fee interest, including South Point’s leasehold interest, is taxed.

¶21 South Point relies on United States Department of the
Interior/BIA regulations—and specifically 25 C.F.R. § 162.017(a)—as
support for its preemption argument. Recently, the South Dakota Supreme
Court upheld an ad valorem property tax assessed by a local taxing
authority on non-Indian owners of structures and permanent
improvements located on Indian trust land. See Pickerel Lake, 953 N.W.2d at
85, ¶ 1.5 In considering the extent of the regulations governing the taxed
activity, the court rejected reliance on 25 C.F.R. § 162.017(a) as authority for
implied preemption, concluding that “Congress has not authorized the BIA
to preempt the State’s authority to tax structures owned by non-Indians.”
Pickerel Lake, 953 N.W.2d at 92–93, ¶¶ 25–29; see also South Point II, 253 Ariz.
at 39, ¶ 35 (holding that “the regulation itself [25 C.F.R. § 162.017(a)] cannot
preempt the County’s tax” and “we have no need to defer to the
Department of Interior’s interpretation” (citations omitted)). The Pickerel
Lake court further concluded that any preemptive language in the federal
regulations should have no impact on its analysis and found “little evidence
of congressional intent to supersede the State’s authority.” 953 N.W.2d at
93, ¶ 30 (citing Wyeth v. Levine, 555 U.S. 555, 576 (2009)); see also South Point
II, 253 Ariz. at 39, ¶ 35 (“The Department of Interior has taken the position
in other cases that ‘§ 162.017 has no legal effect at all,’ and . . . is ‘agnostic’
on whether any specific state tax is preempted.” (citing Desert Water Agency
v. U.S. Dep’t of the Interior, 849 F.3d 1250, 1254–55 (9th Cir. 2017) (adopting
the view that the phrase “[s]ubject only to applicable Federal law” in the
regulation means subject to a Bracker analysis))).

¶22 The court also reasoned that although the federal government
retains exclusive power to regulate Indian affairs, it “has asserted little to
no regulatory power in the area of state-imposed ad valorem taxes on
structures owned by non-Indians,” and “[i]t is generally within the

5 The court applied what it deemed a “standard preemption analysis”
rather than a Bracker analysis after noting (1) the parties agreed Bracker did
not apply, (2) the Tribe had not intervened, and (3) the record contained no
evidence that (a) tribal interests weighed against the county’s taxation
authority with respect to non-Indian lessees, (b) the county’s separate ad
valorem tax affected the Tribe’s ability to lease the land, or (c) the taxes had
otherwise impacted tribal interests. Pickerel Lake, 953 N.W.2d at 88, ¶ 12.

9
 SOUTH POINT v. ADOR, et al.
Opinion of the Court

province of the State to assess property taxes.” Pickerel Lake, 953 N.W.2d at
94, ¶ 31 (citations omitted). The court noted that courts “presume that
‘Congress does not intend to pre-empt areas of traditional state
regulation,’” and “assume the State retains its historic power to regulate by
imposing state and local taxes.” Id. (citations omitted). Finally, in
concluding that implied preemption did not apply, the Pickerel Lake court
held: “Because there is little or no federal regulatory scheme in place with
respect to property taxes, and because the State’s taxation does not
implicate Indians or their tribes, thereby implicating federal law, the State’s
assessment of nondiscriminatory ad valorem property taxes against
structures owned exclusively by non-Indians [on Indian trust land] is not
[impliedly] preempted by federal law.” Id. at ¶ 32. See also N. Border Pipeline
Co. v. State, 772 P.2d 829, 835 (Mont. 1989) (upholding a state property tax
on a pipeline crossing tribal land); Thomas v. Gay, 169 U.S. 264, 273–74 (1898)
(holding that Oklahoma could tax cattle owned by non-Indian lessees of
Indian land and rejecting the suggestion that the tax constituted a tax on the
land); Utah & N. Ry. Co. v. Fisher, 116 U.S. 28, 29–30, 33 (1885) (upholding a
territorial tax of a section of a non-Indian’s railroad that crossed onto
reservation land, reasoning that the tax did not interfere with tribal
sovereignty).6

¶23 The truisms relied on by the Pickerel Lake court apply here as
well, and South Point points to nothing about the federal regulation of
power plants that is more extensive or intensive when a plant is on tribal
land or how a particularized inquiry into the nature of the federal, tribal,
and state interests at stake leads to the conclusion that the tax is preempted.
See generally Ute Mountain Ute Tribe, 660 F.3d at 1187. As the tax court noted,
the pervasiveness of federal regulation of tribal leases is immaterial because
no aspect of the lease is subject to tax, and federal regulation of power
plants applies to all power plants regardless of their location; thus, if state
or local taxation of power plants on reservations is preempted, state
taxation on every other power plant would also be preempted.

¶24 As for whether the economic burden of the County’s property
tax falls on the non-Indian entity (South Point) or the Tribe, see id., it is clear
the tax is being levied on the Plant and related improvements, all of which
are wholly and separately owned by South Point, and not on the land,
which the Tribe owns, and that no partnership exists between South Point

6 Bracker cited both Thomas and Fisher but did not overrule either case. See
448 U.S. at 142, 145; see also Mashantucket Pequot Tribe v. Town of Ledyard, 722
F.3d 457, 472 (2d Cir. 2013) (concluding that “Thomas [and other pre-Bracker
non-Indian lessee cases] inform[]” but do not forgo a Bracker analysis).

10
 SOUTH POINT v. ADOR, et al.
Opinion of the Court

and the Tribe. Thus, South Point is the actual taxpayer and bears the tax’s
legal incidence. See Circle K Stores, Inc. v. Apache Cnty., 199 Ariz. 402, 407,
¶ 13 (App. 2001). Moreover, the United States Supreme Court has rejected
the argument that when the federal government’s or a tribe’s interest in
economic development on reservations—and the associated profitability
that comes with that interest—might be indirectly affected, that indirect
burden supports granting non-Indian contractors immunity from state or
local taxation:

It is, of course, reasonable to infer that the existence of the
state tax imposes some limit on the profitability of Indian oil
and gas leases—just as it no doubt imposes a limit on the
profitability of off-reservation leasing arrangements—but
that is precisely the same indirect burden that we rejected as
a basis for granting non-Indian contractors an immunity from
state taxation in Helvering v. Mountain Producers Corp., 303 U.S.
376 (1938); Oklahoma Tax Comm’n v. United States, 319 U.S. 598
(1943); Oklahoma Tax Comm’n v. Texas Co., 336 U.S. 342 (1949);
Moe v. Confederated Salish and Kootenai Tribes of Flathead
Reservation, 425 U.S. 463 (1976); and Colville, 447 U.S. at 134.

Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 191 (1989) (citations
cleaned up); accord Waddell, 91 F.3d at 1239 (concluding that indirect
economic effects, including those flowing from double taxation, were
insufficient grounds to preempt a state tax). As the Supreme Court
previously stated in Colville, “We do not believe that principles of federal
Indian law, whether stated in terms of pre-emption, tribal self-government,
or otherwise, authorize Indian tribes thus to market an exemption from
state taxation to persons who would normally do their business elsewhere.”
447 U.S. at 155.

¶25 Moreover, no salient argument exists that should the property
tax not be paid, the State could impose a tax lien on the underlying real
property, thereby damaging the Tribe. We cannot see how a tax lien could
be imposed on land exempt from taxation, and A.R.S. § 42-17153 provides
that “a tax that is levied on real or personal property is a lien on the assessed
property.” (Emphasis added.) Under the amended lease, South Point’s
property never becomes part of the land, so the Tribe’s land is not part of
the assessed property.

¶26 Finally, as to the extent of the state interest in justifying the
imposition of the taxes, see Ute Mountain Ute Tribe, 660 F.3d at 1187, we
conclude that although South Point demands few direct services from the

11
 SOUTH POINT v. ADOR, et al.
Opinion of the Court

state or Mohave County, there has also been no complete declination of
responsibility for services as found to exist in Ramah Navajo School Board, see
458 U.S. at 843–45, cited in Cotton Petroleum, 490 U.S. at 184–87. As the Cotton
Petroleum court recognized, there is no “proportionality requirement”
imposed on the taxing authority, and preemption should occur only when
there has been a “complete abdication or noninvolvement” by the state or
County. 490 U.S. at 185.

¶27 Here, the tax revenue supports local services that help South
Point, its employees, and the Tribe, including “services on the reservation”
and “services off the reservation that benefit the reservation and members
of the Tribe.” See id. at 171 n.7, 185 (relying on the trial court’s factual
findings to distinguish the case from Bracker and Ramah Navajo School
Board). For example, the tax revenue supports the local school districts, and
both tribal-member children and children of South Point non-Indian
employees attend schools in these districts. See N. Border Pipeline, 772 P.2d
at 835 (finding no preemption because “the State’s interest in funding the
school districts involved here and providing local services outweighs the
federal/tribal interests asserted”). Additionally, the tax helps Mohave
County maintain roads that provide important and commonly used access
to the Plant. Revenue from the tax also supports numerous other state and
County services—some of which aid the reservation—including flood
control, law enforcement and emergency planning, local fire districts,
libraries, the County Recorder, and the Arizona Corporation Commission’s
oversight and inspection of the pipelines used to fuel the Plant. A
substantial state interest exists justifying the imposition of the taxes, and
the funding of these numerous services militates against finding an implied
preemption of the County’s tax. Accordingly, application of the interest-
balancing test announced in Bracker does not establish Congress’s implicit
intent to preempt taxing the Plant.

CONCLUSION

¶28 We affirm the tax court, which correctly ruled that the Plant
is not impliedly exempt from the County’s tax under Bracker.

AMY M. WOOD • Clerk of the Court
FILED: AA

12