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Fishing Tribe Versus the Taxman

April 14, 1986

BELLINGHAM, Wash. (AP) _ The walls of the room at the end of the hall are plastered with strategic wallpaper, lists in red and blue that outline battle plans to save Lummi Indian livelihood.

″This is our war room,″ tribe secretary Sam Cagey said, leaning back in his chair at the Lummi tribal center. Around him are file cabinets, a telephone, a personal computer - the weapons of an Indian campaign of the ’80s, being waged by a Puget Sound fishing tribe against a most formidable foe, the Internal Revenue Service.

The trappings are modern in the extreme, but at the heart of the dispute is a 131-year-old agreement between the Lummis and the government and a way of life that is centuries older than that.

The IRS says the tribe’s fishermen must pay federal income tax on commercial salmon sales, as do others who fish the waters of the Pacific Northwest. The Lummis argue that their catch is a reservation resource protected and exempt from taxation by treaty and by years of case law.

Indian leaders from Florida to California are worriedly watching the case, concerned the IRS is seeking a precedent that might ultimately allow it to cast for far bigger fish: treaty-protected resources such as coal, oil, gas and uranium worth millions in tax revenues.

″This is just one step in the door,″ said Jewell James, coordinator of the Lummi Treaty Protection Council. ″If they can show they can tax this resource, then they can turn around and use the same language against other tribes.″

When the Treaty of Point Elliott was signed in 1855, the Lummi Indians caught salmon in nets of twine fashioned from the nettles that grow on the San Juan Islands, about 90 miles north of Seattle. The Lummis were the islands’ first inhabitants, and their lands stretched to Mount Baker, 40 miles to the east.

Today they fish with 1,800-foot-long synthetic nets, their reservation consists of 17,000 acres of mainland and tidelands, and Baker’s snow-capped peak is a stunning vision in the distance. But their 3,000-member tribe, whose 1,000 registered fishermen make it the largest of the region’s 20 small fishing tribes, still depends on the salmon for its livelihood.

″A lot of us are in the same position,″ said David Jefferson, a 43-year- old Lummi gill netter whose boat, named the Nita J. for his wife, bobs at a Bellingham dock, awaiting the start of the season in July. ″We put all the hopes for the future into this fishing business. Now, if we get out from under the bills we have to pay, we’re looking at the IRS. It’s kind of late in my life to start looking for a new way to support my family.″

The reservation’s 85 percent unemployment rate drops to 40 percent in salmon season. ″We’ve always been fishermen, born and raised on vessels,″ James said. ″The way individuals here see it, they stand to lose everything they own by paying back taxes to the government.″

The case, first brought in 1982, has split the government, with the Justice Department, which normally represents Indians in court, backing the IRS as having the ″sounder view of the law″ and the Interior Department supporting the Lummis. The disagreement has forced tribal leaders to hire private attorneys, with Interior footing the bill.

″Our position is and always has been that the tribes should not be taxed on the proceeds of their fishing out there,″ said Carl Shaw, spokesman for the Interior Department’s Bureau of Indian Affairs. ″We think they have a good case.″

The IRS argues that the Lummis must pay because the treaty fails to spell out an exemption.

″Our interpretation of the law is that unless income from the sale of treaty fish is specifically excluded from tax in a treaty, we consider it to be taxable income,″ said Pat Leigh-Sikora, spokeswoman for the Internal Revenue Service in Seattle. ″We are simply going about the business of administering the tax code.″

In the past, the courts have consistently rebuffed efforts to tax reservation-derived resources, saying the treaties should be interpreted today as they were by the Indians who signed them more than a century ago.

″We see this as a fight about what the treaty with the Indians means,″ said attorney Dan Raas, who is representing more than 60 Lummis. ″It was signed well before we even had a federal income tax, well before anyone thought income was taxable.″

Without figuring exemptions or deductions, the IRS came up with a tax bill of about $300,000 for the first 16 individuals scheduled for trial in U.S. Tax Court in Seattle next month, Raas said.

Once their taxes are figured properly, most would end up owing little or nothing, Raas said. Although the Lummis gross about $11 million a year from salmon and steelhead trout sales, most of the fishermen net about $5,600 to $10,000 for a season.

″It’s our estimate that the yearly tax take from all 3,000 western Washington tribal fishermen would be less than $100,000. It’s a money-losing proposition for the government,″ said Raas, explaining that the cost of IRS staff time required ″to chase this 100 grand would be substantially more″ than the money owed.

But that might not be the case if the IRS decided to take on tribes with far more to lose, a prospect that worries the Council of Energy Resource Tribes. The council’s 41 tribes, concentrated in the mountain states, pump about 365,000 barrels of oil a day, own deposits of about 30 billion tons of coal and hold half the nation’s privately owned uranium, said executive director David Lester in Denver.

″It is well-known that many of the case precedents are set with tribes that are small and then are applied to larger tribes that would have been in a better position to defend themselves to begin with,″ he said. ″When one falls, other pieces fall, too.″

The Lummis are determined to stand their ground, even if that means giving in for the moment.

In a similar case brought against a Bay Mills Chippewa in northern Michigan, the disputed tax was paid, permitting an appeal in U.S. Claims Court or U.S. District Court, either of which has more expertise in treaty issues than the U.S. Tax Court, said Jerilyn DeCoteau, an attorney with the Native American Rights Fund in Boulder, Colo.

DeCoteau said Washington tribes had received generally unfavorable judgments in the tax court. The Lummi leadership wants to follow the Chippewa course, but they don’t yet have the money to pay the IRS bill.

James said the Justice Department, wary of possible physical confrontations between Indians and government agents sent in to repossess property, had recently sent a representative to talk to the Lummis.

He said two other tribes, the Quinault and the Nez Perce, have promised to send in people on buses if necessary to occupy the reservation.

″We’re just trying to stop them from terrorizing our individual tribal members until we can get it into U.S. District Court,″ James said. ″There’s no way the tribal leadership will back out. They view it as the government just taking what little we have.″


EDITOR’S NOTE - Lisa Levitt Ryckman is the AP Northwest regional correspondent, based in Seattle.

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