Florida’s Miccosukee Tribe on the Hook for Billion-Dollar Tax Bill

Posted on: June 5, 2018, 04:00h. 

Last updated on: June 5, 2018, 03:41h.

Philip Conneller @casinoorgphilc Read More
Expertise: Gaming Business, Regulation, Tribal Gaming.

The Miccosukee tribe of South Florida could be facing a bill of up to $1 billion from the IRS after a federal appellate judge ruled on Monday that tribal members who receive distributions from Native American casinos are liable to pay federal income tax, in accordance with the Indian Gaming Regulation Act, 1988 (IGRA).

Billy Cypress, former chairman of the Miccosukee tribe, was accused of instructing tribal members to conceal casino disbursements from the IRS to avoid paying federal income tax. (Image: Reuters)

The Miccosukee tribe, which operates Miccosukee Indian Bingo and Gaming in Miami-Dade County, Florida, had argued that disbursements made to its members were tax-exempt under the Tribal General Welfare Exclusion Act (TGWEA).

This is an Obama-era law which established that welfare and social benefit payments made to individuals by tribal governments were not liable to federal taxation.

Evasive Action

But the US Court of Appeals for the Eleventh Circuit upheld a trial judge’s decision that the South Florida tribe can be held liable for failing to withhold and report gaming receipts and disbursements.

The court heard the tribe’s 600-plus members had received between $120,000 and $160,000 annually from gaming revenue and that tribal chairman Billy Cypress “instructed its members … to take active measures to conceal from the IRS their distributions from” casino income to avoid paying federal taxes.

Cypress was chairman between 1995 and 2009 and was reelected in 2016, despite allegations he had stolen millions from the tribe during his first tenure.

The tax case came to light in 2001 when federal authorities learned that tribal member Sally Jim had failed to report $272,000 in disbursements from the tribe.

In the subsequent lawsuit, the Miccosukee intervened on her behalf, at which point the government discovered tax evasion had been systematic among its members.

Casino Payments Are Not Welfare Payments

Tribal governments generally distribute casino revenues to tribal members so they can live on sovereign lands without having to rely solely on federal assistance.

But IGRA asserts that, while casinos themselves are exempt from paying state taxes, tribal members are not immune from federal taxes and the court ruled that TGWEA does not supersede IGRA, nor can disbursements from casinos be said to be “welfare payments.”

“Even if the distribution arguably promotes the welfare of a tribe, the distribution payments cannot qualify as Indian general welfare benefits under the TGWEA because Congress specifically subjected such distributions to federal taxation in IGRA,” the court ruled.

Miramar solo Robert Saunooke, Jim’s attorney, said there would be an appeal to the US Supreme Court.

“The Eleventh Circuit got it wrong,” he said. “Tribes have the right to collect revenues and distribute those revenues as they see fit without being subjected to taxation.”

Rubio Kidnap Claim

The Miccosukee tribe is fiercely independent and quick to assert its sovereign rights. Earlier this year, it seized a newborn baby, Ingrid Johnson, from a hospital in Kendall, South Miami, against the wishes of her parents.

The child’s maternal grandmother, a Miccosukee member, had asked a tribal court for an “emergency order granting temporary custody” because she disapproved of her non-Indian father and was concerned about domestic abuse.

The court later backtracked and returned the infant after it was accused of overstepping its authority. Marco Rubio said the incident amounted to kidnapping.