June 17, 2009 – The Wisconsin Supreme Court held an Indian tribe is not entitled to a partial refund of the state tax on cigarette sales occurring in 2003 and 2004 on its land on the east side of Madison in Dane County.

Under Wis. Stat. Sec. 139.323, the Wisconsin Department of Revenue (DOR) refunds 70 percent of the state excise tax on cigarettes that an Indian tribe collects for the state on its reservation or trust lands, provided that the land in question “was designated a reservation or trust land on or before Jan. 1, 1983.”

In Ho-Chunk Nation v. Wisconsin Department of Revenue, 2009 WI 48, the court agreed with the DOR that the five-acre DeJope trust land was not “designated” until completion of the formal transfer of the land from the tribe to the federal government on Jan. 31, 1983. Writing in dissent, Justice David Prosser said the majority had given a meaning to “designated” that failed to account for the statute’s legislative history.

Majority’s statutory interpretation

Justice N. Patrick Crooks, writing for the majority, set out a timeline for the DeJope trust land.

The Bureau of Indian Affairs (BIA) in Washington, D.C. sent an Aug. 20, 1982 memo to the BIA office in Minneapolis authorizing officials there to accept conveyance of the DeJope land in trust pursuant to federal regulations.  On Oct. 29, 1982, title to the DeJope property passed to the Ho-Chunk Nation. The Minneapolis BIA area director then signed the deed to accept conveyance on Jan. 31, 1983.

Until the federal government formally accepted the land into trust on Jan. 31, it was not “designated” as a reservation or land trust, the DOR argued. For its part, the nation said the ordinary meaning of “designated” is “set apart for a purpose or duty,” which occurred with the Aug. 20 memo.

Despite these dueling definitions, Crooks said “designated” is not ambiguous because its meaning is clear from the context of the statute. “[T]he fact that the word ‘tip’ has multiple meanings does not render the sentence ‘police received a tip’ ambiguous,” Crooks explained.

Dissecting the statutory language, Crooks said sec. 139.323 stipulates that land “was designated” a reservation or trust lands before the specified date of Jan. 1, 1983. Based on the passive construction of “was designated,” Crooks continued, the statute “cannot reasonably be read as meaning ‘set aside for future approval’ with regard to trust lands.” Crooks found no contradictory federal law giving official status to a parcel of land that merely received preliminary approval for reservation lands, either.

Crooks further explained that “designated” is best understood as referring to a completed process because the procedure of turning property into a reservation or trust land is complicated and could collapse with discovery of a lien or other such problem.

Consequently, the DeJope property could not be “designated” based on the Aug. 20 memo, Crooks reasoned.

History of the statute

Prosser accused the majority of an ahistoric statutory interpretation that ignored the legislative developments behind sec. 139.323.

In 1979, Prosser recounted, the Wisconsin Attorney General declared that the state’s occupational tax on the sale of cigarettes did not apply to Indian tribes selling cigarettes on reservations, putting non-Indian merchants at a competitive disadvantage. When the state noticed a loss of cigarette tax revenue, the Legislature in 1981 looked to reach the Indian cigarette sales to nontribal purchasers with an excise tax.

After Gov. Lee Sherman Dreyfus vetoed the Legislature’s efforts in 1982, the DOR negotiated with Wisconsin’s 11 Indian tribes and bands to reach a deal that eventually found its way into sec. 139.323.

Prosser said that the entire time lawmakers worked on sec. 139.323 during the 1983 legislative session, the federal government already held title to the DeJope property. Prosser said that legislators had to have known of the DeJope property and they did not intend to disqualify it when they inserted the Jan. 1, 1983 cutoff date.

“It is implausible that key leaders in the legislature, the executive branch, and among the tribes deliberately excluded from cigarette tax refund eligibility five acres of property that had been owned by the Ho-Chunk Nation since Oct. 29, 1982, and had been officially in trust since Jan. 31, 1983, before the legislation was passed,” Prosser wrote.

“To accept the majority opinion requires us to believe that in 1983, all relevant decision makers, except the Ho-Chunk, knowingly and deliberately excluded the DeJope property – even though it already had trust status – without any documentation of such intentional discrimination,” Prosser continued.

Crooks acknowledged the point, but rebutted that there was no documentation of legislative intent to include the DeJope property, either.

“The legislature was free (and of course remains free) to take a different approach – a simple edit would suffice to broaden the scope of this statute in such a way that the DeJope Property would not clearly be excluded (e.g., to change the Jan. 1, 1983, cut-off date to coincide with the effective date of the statute or to set a later cut-off date),” Crooks wrote.

In a portion of the dissent joined by Justice Ann Walsh Bradley and Chief Justice Shirley Abrahamson, Prosser asserted that “designated” is an ambiguous term given its different and equally valid meanings. Prosser criticized the majority opinion for using “designated” “as though the word identified the critical decision point in a formal process” when other portions of the statute do not suggest as much.

Prosser argued that the Legislature grappled with the attorney general’s opinion that only spoke to “all lands” held by Indians without regard to its particular ownership status – “reservation” or “trust land.” Accordingly, Prosser said, “Wis. Stat. Sec. 139.323 authorizes a 70 percent refund of excise taxes on cigarettes sold on land within the boundaries of an Indian reservation, even though the land is not ‘held in trust by the U.S. government for the benefit of a tribe or member of a tribe.’”

With this broader statutory meaning of Indian lands, Prosser said that “the word ‘designated’ is either superfluous or it conveys a different meaning.”