United States District Court, W.D. New York
Fredrick Perkins and Alice J. Perkins, Plaintiffs,
United States of America, Defendant.
REPORT AND RECOMMENDATION
Honorable Hugh B. Scott United States Magistrate Judge
Fredrick Perkins (“Fredrick”) and Alice Perkins
(“Alice”) live on the Allegany Territory of the
Seneca Nation of Indians (“Seneca Nation”), a
member of the Haudenosaunee (or Iroquois) Confederacy. Alice
has a possessory interest in some land on the Allegany
Territory; part of her interest comes by deed and part of it
comes by lease. Alice had obtained permission from the Seneca
Nation to mine gravel from her deeded or leased land in 2008
and 2009; she sold the resulting gravel in those years and in
2010. When plaintiffs filed their income-tax return for 2010,
they included $6, 113 of income from gravel sales but listed
it as tax-exempt. The Internal Revenue Service
(“IRS”) issued a tax deficiency in the amount of
the gravel income plus interest and penalties.
paid off the deficiency to eliminate it but now have filed
suit to obtain a refund of what they paid. Plaintiffs believe
that their income from gravel sales in 2010 was exempt from
income tax under certain Indian treaties that protect Seneca
Nation land and activities connected directly to it.
Defendant the United States of America has filed a motion to
dismiss plaintiffs' amended complaint under Rule 12(b)(6)
of the Federal Rules of Civil Procedure (“FRCP”).
(Dkt. No. 9.) In short, defendant maintains that the Indian
treaties in question either lack the language needed to
create an exemption from income tax or contain language that
applies only to real property taxes.
Hon. Lawrence J. Vilardo has referred this case to this Court
under 28 U.S.C. § 636(b). (Dkt. No. 10.) The Court has
deemed the pending motion submitted on papers under FRCP
78(b). For the reasons below, the Court respectfully
recommends granting the motion in part with respect to one of
the treaties but denying the motion with respect to the other
case concerns allegations that defendant improperly assessed
income tax for gravel that Alice mined from Seneca land in
2008 and 2009. Alice is an enrolled member of the Seneca
Nation and lives with Fredrick on the Seneca Nation Allegany
Territory. At an unspecified time, Alice obtained permission
from the Seneca Nation to extract or to mine gravel from
certain land on the Allegany Territory during the years 2008
and 2009. Alice holds a restricted deed for some of the land
in question and a lease for the remainder. Alice mined gravel
until about June 22, 2009 but had built up a stockpile that
she continued to sell after that date. Alice sold gravel
until 2010. The record does not state how much gravel Alice
mined, to whom she sold it, or whether she sold it personally
or through some kind of commercial entity. The record also is
not quite clear exactly what gross income or net income
plaintiffs obtained through Alice's mining operations.
The parties do agree, though, that plaintiffs reported $6,
113 of exempt income when they filed their 2010 tax return.
The exempt income came from Alice's mining operations.
Plaintiffs consider the income exempt because it derived
directly from Seneca land protected by certain treaties that
the Court will discuss below.
exempt income reported on plaintiffs' 2010 tax return is
the heart of plaintiffs' case and defendant's pending
motion. The IRS issued plaintiffs a tax deficiency for 2010
in the amount of $9, 863.68. (Dkt. No. 7 at 14.) The
deficiency comprised the income that plaintiffs claimed as
exempt plus interest and penalties. Plaintiffs paid the tax
to eliminate the deficiency but then filed a claim for a
refund. (Dkt. No. 7 at 10-12.) The IRS has not responded to
plaintiffs' claim for a refund.
began this case by filing their original complaint on June
16, 2016 (Dkt. No. 1) and their amended complaint on
September 9, 2016 (Dkt. No. 7). Simply put, plaintiffs seek a
refund in the amount of $9, 863.68, plus interest and costs.
Plaintiffs assert that two treaties between the United States
and the Seneca Nation make the income in question exempt.
Plaintiffs have not numbered or labeled any distinct claims
within the amended complaint, but the Court will treat the
alleged violation of each treaty as a separate claim or cause
of action for a refund. Plaintiffs claim exemption from
income tax under the Treaty with the Six Nations of 1794 (the
“Canandaigua Treaty”) and the Treaty with the
Seneca of 1842 (the “1842 Treaty”). Plaintiffs cite
the following passage from the Canandaigua Treaty as support
for their claim to a refund:
Now, the United States acknowledge all the land within the
aforementioned boundaries, to be the property of the Seneka
Nation; and the United States will never claim the same, nor
disturb the Seneka Nation, nor any of the Six Nations, or of
their Indian friends residing thereon and united with them,
in the free use and enjoyment thereof: but it shall remain
theirs, until they choose to sell the same, to the people of
the United States, who have the right to purchase.
7 Stat. 44, 45, Art. III. According to plaintiffs,
“[t]axation of land or income derived from the land on
the Seneca Nation territories would have been viewed as a
burden placed on the Seneca people disturbing their free use
and enjoyment of such lands.” (Dkt. No. 7 at 3.)
Plaintiffs additionally cite the following passage from the
The parties to this compact mutually agree to solicit the
influence of the Government of the United States to protect
such of the lands of the Senecas within the State of New
York, as may from time to time remain in their possession
from all taxes, and assessments for roads, highways, or any
other purpose until such lands shall be sold and conveyed by
the said Indians, and the possession thereof shall be
relinquished by them.
7 Stat. 586, 590, Art. 9. “This 1842 treaty is further
evidence the United States never contemplated the taxation of
land for any purpose.” (Dkt. No. 7 at 3.)
filed the pending motion on September 14, 2016. (Dkt. No.
Defendant argues that the Canandaigua Treaty contains no
language specific enough to taxation to be construed as a
prohibition on income tax assessments. The closest that the
Canandaigua Treaty comes to addressing taxation, according to
defendant, is the phrase “free use and
enjoyment.” Defendant argues that this phrase is too
vague to be considered an exemption from income tax and would
create a policy where none currently exists. Defendant
acknowledges that the 1842 Treaty makes an explicit reference
to taxes but cites to case law interpreting the reference to
refer only to property taxes. Defendant also makes an
argument that plaintiffs cannot find relief under criteria
for exemptions ...