Tuesday, August 23, 2016

Fantasy Sports Bill Proposed for Nevada

By Kate Lowenhar-Fisher, Jennifer Gaynor, Greg Gemignani, and Jeff Silver

On August 23, 2016, the two largest daily fantasy sports (“DFS”) operators, DraftKings and Fan Duel, will be presenting their proposed Nevada daily fantasy sports legislation (the “Proposed Bill”) to the Nevada Gaming Policy Committee in Las Vegas. If enacted, the Proposed Bill would create a new class of licensee for fantasy sports operators offering pay-to-play-and-win contests in Nevada. Like other forms of gaming license, the new Operator of Fantasy Sports (“OFS”) license would be granted by the Nevada Gaming Commission (“Commission”).

Unlike other forms of gaming license, the Commission would (i) be compelled to grant a license to any OFS applicant with a completed application along with a $500 application fee, (ii) be precluded from issuing regulations applicable to contests, contest operations, or betting platforms, (iii) not have discretionary licensing powers related to OFS operations, and (iv) be limited to imposing a maximum $1000 fine for any enforcement or disciplinary action. Additionally, there is no provision in the Proposed Bill for Nevada regulators to investigate OFS applicants, nor is there a requirement that applicants must be found suitable as is required for other gaming licenses granted by the Commission. The license fee for an OFS license is set at $10,000 with no other applicable taxes. Finally, the Proposed Bill would deem fantasy sports to not be a sports pool, a gambling game, or a lottery under Nevada statutes.

The Proposed Bill is a response to an Industry Notice issued by the Nevada State Gaming Control Board that reflected the opinion of the Attorney General of Nevada that DFS was a form of sports pool wagering permitted in Nevada so long as it was offered by a licensed sports pool operator. As a sports wagering product, Nevada regulators believed DFS regulation was permissible despite the general prohibition in the federal Professional and Amateur Sports Protection Act (“PASPA”) on regulating any contest based directly or indirectly on the performance of athletes because Nevada has a broad exemption under PASPA to regulate sports pool activities. Since the two largest DFS operators lacked a sports pool operator’s license, they stopped offering DFS contests to Nevada residents.

If enacted, the Proposed Bill would pave the way for DFS operators to offer DFS contests to Nevada residents. The Proposed Bill does not exempt current gaming licensees from suitability requirements or regulatory requirements regarding suitable operations based on their interaction or involvement with DFS or an OFS licensee. The Proposed Bill is solely a Nevada bill and has no impact on the laws of other states or federal law. Whether current Nevada gaming licensees will participate in interstate DFS or be involved with an OFS licensee involved with interstate DFS is not clear because at least 10 states have Attorney General Opinions identifying DFS as an illegal form of gambling and two federal prosecutors’ offices have confirmed that there are ongoing investigations regarding the legality of DFS in interstate commerce under federal law.

The proposed legislation is one of the topics that will be addressed at the Nevada Gaming Policy Committee’s meeting on August 23, 2016. No action will be taken by the Policy Committee in this meeting regarding the legislation, which is on the agenda only for discussion. The Policy Committee is tasked by Nevada Governor Sandoval with preparing recommendations on issues including daily fantasy sports for consideration by the Commission, the Nevada Gaming Control Board, and the Nevada Legislature.

The full text of the Proposed Bill may be found at: http://gaming.nv.gov/modules/showdocument.aspx?documentid=11359

Thursday, March 24, 2016

Nevada Examines its Regulatory Approach to Daily Fantasy Sports

By Jennifer Gaynor, Greg Gemignani, Kate Lowenhar-Fisher, and Jeff Silver

The nationwide controversy over daily fantasy sports (DFS) and how it is regulated has led Nevada Governor Brian Sandoval to convene the Nevada Gaming Policy Committee for the first time since 2012.

Sandoval wants the Policy Committee to devise recommendations that will “allow Nevada to continue to lead the nation and the world in developing and maintaining the best policies and practices involving the regulation of the gaming industry.” This discussion, which is meant to lead to innovation in how Nevada will deal with the quickly changing world of interactive and skill-based gaming in addition to DFS offerings, is vital to understanding how Nevada can remain the leader in the gaming industry and tap into the huge interest in DFS-style offerings by today’s market.

The state kicked off the nationwide discussion over whether DFS should be regulated as gaming last October, when the Nevada Attorney General’s office issued an opinion that DFS offerings were sports wagering, leading Nevada’s gaming regulators to announce that Nevada gaming licenses would be required for DFS websites to offer their product to Nevada customers. Several other states’ Attorneys General followed suit, forcing the issue to the top of almost every state’s list of hot legal topics.

Sandoval has asked the Policy Committee to “gather information and provide recommendations on what is the best policy for Nevada’s gaming future” as it regards DFS, among other issues. As the world’ gold-standard gaming regulator, Nevada often assumes a leadership role on gaming issues.

The Policy Committee is chaired by Sandoval and includes among its 12 members representatives from Nevada’s gaming regulators (Tony Alamo, Chairman of the Nevada Gaming Commission, and A.G. Burnett, Chairman of the Nevada Gaming Control Board), Nevada legislators, and members of the public and the gaming industry (including Jim Murren, CEO/Board Chairman of MGM, and Keith Smith, President of Boyd Gaming Corporation).

The Committee’s initial meeting on March 7 served mainly as a forum for experts in the gaming industry and leaders of the DFS movement to share relevant research and information. Presenters included Chairmen Alamo and Burnett, representatives of the American Gaming Association (AGA), the Nevada Resort Association (NRA), the Association of Gaming Equipment Manufacturers (AGEM), the CEOs of DraftKings and FanDuel, and academic and legal gaming experts, including Dickinson Wright Attorney Greg Gemignani, who is a long-time professor in gaming law at the UNLV Boyd School of Law.

The DFS discussion dominated the day, and several themes became apparent throughout the meeting. First, almost all agreed that DFS can be “good” – in that it has sparked clear nationwide and even worldwide interest – and that it needs to be incorporated in Nevada in some fashion to allow our gaming industry to remain competitive. Everyone at the hearing also agreed that DFS offerings must be transparent and regulated to protect both consumers and the reputation of the gaming industry.

Where the consensus began to break down was in how such regulation should be structured. Several voiced concerns that Nevada’s regulations need to be adjusted to keep pace with innovation and to allow for a greater number of content providers to contribute. Others noted that the black market for sports wagering far outpaces the legal market and put forth an argument that can be summed up as “citizens are going to find a way to wager on sports, illegally or legally, so we may as well craft regulations to protect them when they do so.”

Nevada’s gaming licensees’ concerns centered on concepts of fairness. In particular, licensees want the opportunity to take part in the booming DFS industry but are concerned that even if DFS offerings were to be legalized in some form in Nevada, they could still put their gaming licenses in jeopardy by partnering with DFS companies if the DFS offerings violate federal law or the laws of other states where they are being offered.

The DFS operators, while agreeing that they are open to some form of regulation, argued that what they offer is not well suited to what they termed Nevada’s “onerous” regulations for gaming licensees. They are requesting Nevada to create a “new box” for DFS offerings to be regulated.

The Committee determined that it will meet three more times during 2016: in May to discuss interactive and skill gaming issues, in August to focus on DFS, and then again in the fall to deliberate and craft its findings and recommendations. These recommendations will be delivered to the Governor, the Nevada Gaming Commission, and the Nevada Gaming Control Board just in time to craft legislation for the 2017 Nevada Legislature to consider.

To read the complete article, please click here.

Tuesday, January 5, 2016

Alaska Presses D.C. Court of Appeals to Reject Trust Acquisitions in Alaska

By Patrick Sullivan

The question of whether Alaska Natives may place land in the same federal trust status as Indian tribes in the lower 48 states was widely thought to have been resolved but is now before the Court of Appeals for the District of Columbia Circuit. The issue in Alaska v. Akiachak Native Community, et al. is whether the Alaska Native Claims Settlement Act (“ANCSA”), signed into law by President Richard M. Nixon in 1971, withdrew the Secretary of the Interior’s authority to place Alaskan land in trust under Section 5 of the Indian Reorganization Act of 1934 (“IRA”).

The Secretary of the Interior has had the authority to place land into federal trust status for Indians since 1934 and to proclaim those lands to be Indian reservations. Subsequent amendments made the IRA applicable to Alaskan lands, and the Secretary proceeded to accept Alaskan land in trust and create several reservations there. Alaskan land was also held by Alaska Natives in allotment status and in reservations expressly created by Congress, including the Annette Island Reserve, which was set aside by Congress in the Act of March 3, 1891.

The 1968 discovery of enormous oil reserves in Alaska’s Prudhoe Bay and the demand for a pipeline across the state to deliver that oil to the U.S. market required the settlement of pending Alaska Native land claims along the route. To settle those claims, Congress passed ANCSA in 1971. ANCSA was the product of a negotiated settlement between the federal government, the State of Alaska, and the Alaska Federation of Natives (“AFN”), an umbrella group representing the Alaska tribes. AFN had made clear that it was not interested in the traditional Indian reservation model adopted in the lower 48 states. The legislation created a new model adopted for settling native land claims throughout Alaska without creating new Indian reservations. ANCSA expressly extinguished all claims of aboriginal title in Alaska, aboriginal hunting and fishing claims, and any “claims against the United States, the State, and all other persons that are based on…any statute or treaty of the United States relating to Native use and occupancy.”

ANCSA dissolved the existing allotments and all but one of the reservations, compensated Alaska Natives with $962.5 million in state and federal funds, and conveyed 44 million acres of Alaskan land to “Alaska Native Corporations” (“ANCs”). Alaska Natives became shareholders in the ANCs instead of receiving money and land directly. Many of the ANCs continue to generate substantial dividends and employment opportunities for their shareholders.

In 1978, Associate Solicitor-Indian Affairs Thomas Fredericks issued an opinion declaring that acceptance of trust land in Alaska would be an abuse of secretarial discretion, and in 1980, the Department promulgated the regulation known as the “Alaska Exception.” That regulation provided that the Department’s land-to-trust regulations “do not cover the acquisition of land in trust status in the State of Alaska, except acquisitions for the Metlakatla Indian Community of the Annette Island Reserve or its members.”

Akiachak Lawsuit and Department of the Interior’s Reversal

In 2007, a group of Alaska tribes including the Akiachak Native Community sued the Secretary and Department of the Interior in the federal D.C. District Court arguing that the Alaska Exception illegally discriminated against Alaska Natives by prohibiting them from placing land in trust status. In March 2013, following years of litigation, the District Court agreed with the Tribes and held the Alaska Exception to be void and unenforceable because it violated a law prohibiting regulations that diminish the privileges available to Alaska Natives relative to the privileges available to all other federally recognized tribes.

In December 2014, Assistant Secretary Kevin Washburn formally revoked the Alaska Exception. Washburn’s statement accompanying the revocation declared that ANCSA did not prohibit trust land acquisitions in Alaska under the IRA and that “the shocking and dire state of public safety” in Alaska Native communities could be improved by allowing land to be placed in trust status, thereby allowing Alaska Natives the opportunity to exercise criminal jurisdiction over those lands. The revocation was not legally challenged and became effective on January 22, 2015.

Alaska’s Appeal

Despite the legal finalization of the Secretary’s revocation of the Alaska Exception, the State appealed the District Court’s decision and asked for a declaration that ANCSA prohibits the creation of new trust land and Indian Country in Alaska. The Alaska Native parties and the Secretary have moved to dismiss the State’s appeal on the basis that ANCSA never repealed the Secretary’s IRA authority to place Alaskan land in trust and that the Bureau of Indian Affairs’ repeal of the Alaska Exception rendered the controversy moot.

In its appeal, the State characterized the revocation of the Alaska Exception as nothing more than an “administrative end-run around ANCSA, facilitating the re-creation of trust land in Alaska after Congress expressly revoked it.” The State further argued that Congress never granted the Secretary the authority to reverse the deal struck between the State and the Tribes through ANCSA.

Implications of the D.C. Circuit Decision

The pending decision may have far-reaching consequences in Indian Country and may fundamentally alter the rights of Alaska Natives. In its 1998 Alaska v. Native Village of Venetie Tribal Government decision, the United States Supreme Court struck down a tribal tax imposed on non-tribal members contracted to build a school on land owned by the Native Village of Venetie, a former reservation which has been dissolved through ANCSA. The Court held that, because the Village was not “Indian Country,” the Tribe could not impose any tax on the land.

Should the D.C. Circuit affirm the District Court and open Alaskan lands to trust status, key issues ostensibly decided in the Venetie case would be reopened, resulting in a likely contentious struggle between the State of Alaska and its large population of Alaska Natives to define the jurisdictional boundaries and taxability of those lands, as well as rights to conduct gaming and regulate natural resources development. Such an outcome would almost certainly prompt the State to propose federal legislation preventing the Department from accepting Alaskan land in trust. With those issues at stake, the D.C. Circuit’s resolution of the case is being closely watched by Alaska Native communities and their neighbors alike.

Tuesday, December 22, 2015

Texas Continues to Wage War Against Indian Gaming

By Dennis J. Whittlesey

Texas Attorney General Kenneth Paxton appears to not like Indian gaming. Two of the state’s three federally recognized tribes have been pursuing gaming opportunities for years, but the Attorney General’s opposition continues even in the face of a recent federal decision supporting their rights to conduct gaming.

In the way of background, it is worth revisiting the current situation. For starters, it is important to understand two things: (1) the three tribes do not share equal legal status and (2) earlier this year, the Texas Legislature ostensibly proposed to “level the playing field” so that all three would have an equal gaming opportunity. The key word is “ostensibly.”

The three tribes are (1) the Texas Band of Kickapoo Indians in Eagle Pass, which is 143 miles southwest of San Antonio on the Rio Grande River and far from the Gulf Coast, (2) the Ysleta del Sur Pueblo Tribe – also known as the Texas Tigua Tribe – located near El Paso, which also is far from the Gulf Coast, and (3) the Alabama-Coushatta Tribe of Livingston, 74 miles north of Houston and 76 miles northwest of Beaumont, and clearly much closer to the Gulf Coast and the hundreds of thousands of tourists annually traveling to the Gulf. Each of these tribes was recognized by a special Act of Congress.

The Kickapoo Tribe was recognized by Congress through the Act of January 8, 1983, a federal law which imposed no restrictions on the Tribe’s right to conduct gaming. The Alabama-Coushatta Tribe and Texas Tigua Tribe were recognized through the Act of August 18, 1987, which restricted any tribal gaming to gaming activities that are lawful under Texas state law. The distinction between the Kickapoo Tribe gaming opportunity and that available to the Alabama-Coushatta Tribe and Texas Tigua Tribe has become a legal battleground, and the Attorney General is leading the opposition to any new gaming development by the Texas Tigua Tribe.

Texas law has never specifically authorized gaming and, accordingly, the Texas Tigua Tribe has not been able to conduct gaming because of the language in the Tribe’s 1987 Restoration Act requiring state laws specifically authorizing gaming.

The Texas Tigua Tribe’s efforts to secure gaming are summarized in the following timeline:

  • 1987: The United States Supreme Court rules in California v. Cabazon Band of Mission Indians that Indian tribes have rights to conduct gaming that is not prohibited by state criminal laws so long as the gaming activity occurs on tribal lands.
  • 1988: Congress passes the Indian Gaming Regulatory Act (“IGRA”), which permits casinos on reservations.
  • 1990: Tribes in other states begin opening casinos.
  • 1991: Texas voters approve a state lottery.
  • 1993: Texas Tigua Tribe wins federal court permission to open a casino. Speaking Rock Casino opens.
  • 1998: Texas Gov. George W. Bush asks Texas Attorney General to close the casino.
  • 1999: Texas Attorney General files suit against the Texas Tigua Tribe.
  • 2002: Federal court rules against the Texas Tigua Tribe. Speaking Rock Casino closes February 12.

The Texas Tigua Tribe gaming issue has been in the courts continuously since 2002, and the Tribe’s attempts to secure gaming approval have been successfully resisted by the State in a number of federal court rulings.

In the meantime, the Alabama-Coushatta Tribe has been in the same state of “gaming limbo” since it also was recognized by the 1987 Restoration Act and is subject to the same “lawful under Texas law” gaming limitation used to oppose the Texas Tigua Tribe’s efforts. However, the landscape changed in late October with the publication of a decision by the Department of the Interior and the National Indian Gaming Commission that both tribes have a legal right under federal law to operate Class II gaming facilities on tribal lands. IGRA established classes of gaming that tribes can conduct on Indian lands. Class II gaming is defined as bingo, as well as pull-tabs, lotto, punch boards, tip jars, instant bingo, and other games similar to bingo.

While the October decision has been hailed as a major turn in the Tribes’ favor, the Attorney General sees it as a continuum of tribal efforts to conduct illegal gaming. This position was stated in a recent court filing in response to a request for comments from the federal court in which the Texas Tigua Tribe legal battles have been waged. The Texas Tigua Tribe did submit two documents in support of the proposed gaming, and the federal government declined the court’s invitation to submit an amicus curiae brief. The Texas Attorney General continued his strong opposition to the decision.

The battle lines have been drawn for a number of years, as shown by the Texas Tigua Tribe timeline. In light of the statutory restriction in the 1987 Restoration Act, the Tribes continue to face a difficult fight. However, the federal decision is a new tool in the Texas Tigua Tribe’s legal arsenal despite the federal government’s reluctance to defend it at this time. Nonetheless, there is a legal precedent for the tribal position in the language of the Cabazon decision (allowing tribal gaming that is not prohibited by state law). The obstacle confronting the tribe is reconciling the Restoration Act’s language with the Supreme Court ruling.

Tuesday, December 15, 2015

Nevada’s Live Entertainment Tax for Events on Gaming Properties Takes Final Form

By Jennifer Gaynor, Greg Gemignani, Kate Lowenhar-Fisher, and Jeff Silver

The Nevada Gaming Control Board (Board) has finalized its changes to the state’s Live Entertainment Tax (LET) assessed on gaming licensees, as mandated by the Nevada Legislature. With the adopted final draft, the Board resolved some contentious issues.

In many ways, this new LET is simpler. Under the new LET structure, all live entertainment events for which there is an admission charge are taxed uniformly at a flat rate of 9 percent of the admission charge to a venue where live entertainment is provided. The tax is no longer imposed on amounts paid for food, refreshments, or merchandise sold at the venue (unless the purchase of such items is required as part of the price of admission), is not imposed on amounts paid for access to tables, seats, lounge chairs, or particular areas of a venue, and is not imposed on the value of admissions provided to a patron on a complimentary basis. The new LET applies to outdoor entertainment events (which were formerly exempted), nonprofits that sell more than 7,500 tickets to an event, and legal escort services (a new LET category).

The other exemptions found in the old LET remain largely the same and include professional sports events if one of the teams playing is domiciled in Nevada, Nevada college sports events, other school events if only the students and teachers provide the entertainment, boxing events, events at facilities with an occupancy of 200 or fewer persons, and entertainment at trade shows, in shopping malls, at organizations’ private dinners or meetings, and roving musicians.

Some issues, however, required additional discussion and clarification following the initial Board draft. The Board has addressed these in the final draft. One issue, for example, was a question on how the LET will apply to luxury suites, boxes, or similar products for venues with less than a 7,500-person occupancy. The new LET does not include license or rental fees for luxury suites, boxes, or similar products at facilities with a maximum occupancy of at least 7,500 persons; however, the LET must be paid for such license or rental fees for venues with less than a 7,500-person occupancy. The question was raised by a taxpayer whether for these smaller venues they should continue to use “historical practices” to calculate that admission charge – which they submitted should be the number of luxury boxes divided by the ticket price times the number of live events. In the final draft, the Board has provided for flexibility to consider such alternative methods of calculating the LET by adding in a new subsection that provides that taxpayers may submit a written request to the Chairman to obtain approval to use an alternative method of calculating the tax under this section.

Another issue concerned events where admissions may be charged on an ongoing basis but entertainment is provided for only a portion of the time. The Board addressed these concerns by allowing venues to dispute how the LET is applied to their event based on the timing of when the admissions were paid and when the event begins and concludes by submitting a written request to the Chairman to obtain approval to use an alternative method to determine which admission charges are subject to the tax.

Another key issue the Board resolved is which associated fees or “service charges” are to be included in the LET. As noted in our last article on this subject, the traditional payment of credit card or debit card fees to a financial institution that are unreturned to the venue remain clearly exempt under the revised law. This debate centered on the definition of the term “service charge” and what additional “service charges” should be included in the tax – and specifically whether Ticketmaster fees and other similar charges by third parties who sell and issue tickets would be included in the LET.

Taxpayers argued that service charges by Ticketmaster or other third parties should be treated like credit/debit card fees and not taxed as part of the LET when that service charge is not remitted to the venue. They also argued that charges for additional services or amenities, such as special event parking or shuttles to the venue, should not be included in the LET as long as those charges and services are optional and not required for admission to the venue.

The Board addressed these concerns by clarifying that “service charges” are to be included in the LET. This debate centered on the definition of the term “service charge” and what additional “service charges” should be included in the tax – and specifically whether Ticketmaster fees and other similar charges by third parties who sell and issue tickets would be included in the LET.

Taxpayers argued that service charges by Ticketmaster or other third parties should be treated like credit/debit card fees and not taxed as part of the LET when that service charge is not remitted to the venue. They also argued that charges for additional services or amenities, such as special event parking or shuttles to the venue, should not be included in the LET as long as those charges and services are optional and not required for admission to the venue.

The Board addressed these concerns by clarifying that a “service charge or any other fee or charge” means “an amount imposed and received by, or on behalf of, a taxpayer or operator for which the patron could not obtain admission to the facility without its payment.” Second, they introduced two new definitions – for “ticket broker” and “ticket service provider” – and provide that a “service charge” does not include “an amount imposed and retained by a ticket broker or a ticket service provider.”

One last concern that the Board clarified is the definition of “performance.” This has always been a subjective definition, to which the Board has attempted to add clarity. One way the Board has done this is to specifically define disc jockey performances and provide that they are “performances” under the LET, whether or not the DJ vocally addresses the crowd. The amended regulation also updates the definition of “performance” which is the presentation of an activity as set forth in NRS 368A.090(2)(a) that is the “primary reason” for which a patron or patrons paid an admission charge to access the facility. In considering whether the activity was the “primary reason” for the payment of admission, the Board has two factors they may consider:

  1. Whether the live entertainment activity is advertised, promoted, or otherwise marketed; and/or
  2. Whether the live entertainment activity garners the predominant attention of a patron or patrons at a facility.

If a potential taxpayer has any questions on whether the LET will be applicable to their event or how it should be calculated, the taxpayer may request an advisory opinion from the Board. The Board may publish some of these advisory opinions if they find they respond to general questions and can assist a number of taxpayers. Such publication would be made in a way as to not disclose the identity of the taxpayer who requested the opinion.

These new regulations are not in effect. Note that for non-gaming licensees there are parallel regulations to implement SB267 that are being worked on by the Nevada Department of Taxation.

Tuesday, December 1, 2015

Landlords, Beware! Medical Marijuana and Gaming: How Close is Too Close?

By Kate Lowenhar-Fisher, Jennifer Gaynor, Greg Gemignani, and Jeff Silver

On June 12, 2013, Nevada became the 14th state to legalize medical marijuana businesses. Suddenly, the country’s oldest gaming jurisdiction was grappling with a new regulated business – one that is legal under state law and illegal under federal law.

Nevada State Gaming Control Board Member Terry Johnson responded in May 2014, issuing a Notice to Licensees declaring that “…the Board does not believe investment or any other involvement in a medical marijuana facility or establishment by a person who has received a gaming approval or has applied for a gaming approval is consistent with the effective regulation of gaming.” The notice went on to illuminate the Board’s view that “any such investment or involvement by gaming licensees or applicants would tend to reflect discredit upon gaming in the State of Nevada.”

During its July 2014 hearing, the Board went further and made it clear that a person could not be in the gaming business if he or her spouse was in the medical marijuana business. In the Board’s view, there must be strict separation between the gaming and medical marijuana businesses.

Recently, the Board and Nevada Gaming Commission appear to have again expanded their view of relationships that could violate the “strict separation” requirement. During the August 2015 Commission hearing, Johnson stated “[w]hile the [May 2014] industry notice did talk about and may have been specifically addressed to gaming licensees and applicants, it should go without saying…that that obviously includes persons such as landlords too that might be involved in the gaming context and concurrently in the medical marijuana context.” Nevada Gaming Commission chairman Tony Alamo responded that he “totally agree[d].”

Now it appears to be more likely that landlords in the medical marijuana business who lease property to Nevada gaming licensees are going to be called forward by the Board for a finding of suitability, and Nevada gaming licensees who lease property to medical marijuana facilities may find themselves facing disciplinary action by the Board.

The Nevada gaming regulators are sending a clear message to landlords: proceed with caution.

Tuesday, November 17, 2015

Sen. Barrasso Introduces Carcieri Compromise Bill

By Patrick Sullivan

More than six years after the U.S. Supreme Court’s decision in Carcieri v. Salazar, Sen. John Barrasso (R-Wyoming), the chairman of the Senate Committee on Indian Affairs, has introduced the “Interior Improvement Act” to fix the loophole created by the decision that denied some tribes rights under the Indian Reorganization Act of 1934 (IRA). The bill is not, however, the “clean” Carcieri fix that Indian Country had been seeking.

In 2009, the Carcieri court ruled that the IRA, which delegated authority to the Secretary of the Interior to place land in trust status for Indian tribes, applied only to tribes “under Federal jurisdiction” on the date of the IRA’s enactment. Under the IRA, land is to be placed into trust status only for “the purpose of providing land for Indians.” The act defined “Indian” to mean “all persons of Indian descent who are members of any recognized Indian tribe now under Federal jurisdiction.” The court held that any tribe not “under Federal jurisdiction” as of that date is ineligible to place land in trust.

Carcieri compelled the Secretary to conduct a deep inquiry into whether applicant tribes were “under Federal jurisdiction” in 1934 in anticipation of legal challenges to politically sensitive trust acquisitions, particularly those made for gaming purposes. But proving the requisite relationship between the federal government and the tribes is very difficult, as many tribes lack documentation of that relationship – largely due to the anti-tribal “allotment” policies that preceded the IRA’s enactment in 1934 and the termination policies that followed it in the 1950s.

After the Carcieri decision, tribes immediately pushed for a “clean” legislative fix from Congress – a bare amendment clarifying Interior’s authority to place in trust for all recognized tribes without limitation and retroactively affirming previous trust decisions. Opponents of off-reservation gaming, however, saw an opportunity to increase the input of local governments in trust acquisitions and even to seek a veto over federal trust acquisitions. Opposition from Indian tribes to a local veto has precluded a legislative fix repairing the damage done by the decision.

Barrasso’s bill affirms the Department’s past and present ability to accept land in trust for all federally recognized Indian tribes but, if passed, would not give local governments the veto power they sought. Instead, it would impose a new process on the Secretary in considering trust applications that increases the input sought from, and consideration given to, local governments affected by trust acquisitions.

First, the bill would require the Secretary to notify contiguous jurisdictions within 30 days of receiving an application to place land in trust and to make the tribal application publicly available on the Department of the Interior website. Those jurisdictions would have 30 days to provide comments. The Department’s current regulations already require notice and comment from the governments exercising jurisdiction over the trust acquisition, so this is a minor change.

Of much greater impact is the bill’s requirement that the Secretary give preferential treatment to those trust applications in which the tribe has entered into a “cooperative agreement” with local governments, defined in the bill as “contiguous jurisdictions.” Those applications would be expedited with a 30-day timeline for a decision approving or denying the application, or 60 days after the completion of NEPA review. This would be a drastic improvement over the current wait time, which can extend to months or even years. Relieving the Department of the requirement to conduct a Carcieri review would save considerable manpower. Those applications without cooperative agreements would still be eligible for approval but would not be expedited.

Many tribal applicants already enter intergovernmental agreements with local governments to mitigate the impacts of tribal development on trust land and pay for county-provided services that would ordinarily be paid for through property taxes, and it is now common for tribal-state Class III gaming compacts to include a requirement that tribes enter such agreements. Under Barrasso’s bill, provisions in cooperative agreements are undefined – the agreements “may include terms relating to mitigation, changes in land use, dispute resolution, fees, and other terms determined by the parties to be appropriate.” Some local jurisdictions likely will read those terms in the broadest sense possible and require the payment of “fees” as consideration for execution of a cooperative agreement.

If the tribe determined the demands of local governments to be too onerous, it would be free to submit an application without a cooperative agreement. In such cases, the Secretary, in approving an application, would be required to independently conduct a “determination of mitigation” that would consider anticipated economic impacts on contiguous jurisdictions, mitigation, and whether the local jurisdictions worked in good faith to reach a cooperative agreement.

The proposed legislation expressly provides for judicial review of final trust decisions. That judicial review is a certainty, because, while the bill does not expressly limit the Secretary’s discretion to place land in trust, it introduces numerous and ambiguous new factors that the Secretary would be required to consider in processing trust applications. Ambiguity invites litigation, and the bill would likely trade Carcieri-based legal challenges to trust acceptances for lawsuits alleging the Secretary’s failure to adequately consider these new factors.