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.

Tuesday, November 10, 2015

Is There a New War on Indian Country?

By Dennis J. Whittlesey

Over the past week, two proposals have surfaced that could have profound impacts on Indian Country, and they likely would not be for the better.

The first proposal surfaced on October 20 when a Utah congressman introduced legislation to terminate all Interior Department jurisdiction over federal recognition of Indian tribes. The second came a day later when a major candidate for President announced that he wants to relocate the Department of the Interior out of Washington, insuring isolation from both other government agencies and Congress.

Either of these proposals alone should be cause for concern for anyone involved in Indian affairs. Taken together, there should be cause for alarm.

The first event was the introduction of legislation known as the “Tribal Recognition Act,” introduced by Rep. Rob Bishop (R-Utah), who just happens to be Chairman of the House Natural Resources Committee, which has jurisdiction over Indian affairs. The essential element of H.R. 3764 is that Congress would strip the Department of the Interior and the Bureau of Indian Affairs of the ability to recognize Indian tribes. Instead, the only entity that would be able to confer recognition status would be Congress itself.

At this time, Congress already has the power to recognize tribes by virtue of its plenary power over Indian affairs found in the so-called “Indian Commerce Clause” of the United States Constitution. But the Interior Secretary also has tribal recognition authority pursuant to the Indian Reorganization Act of 1934, and in some cases the federal courts can do the same.

The Secretary’s recognition power is exercised through an administrative process within the Interior Department’s Office of Federal Acknowledgement. While the process has been criticized as being unduly cumbersome and time-consuming, the fact remains that a number of tribes have won administrative recognition after demonstrating that they satisfy a multitude of requirements, including continuous tribal existence over an identified period of time. The process is far from perfect and may not always seem fair, but it is designed to assist the Secretary in reaching a reasoned decision as to the applicant tribe’s qualification to be federally recognized.

The legislation ostensibly preserves that administrative process as a vehicle for the Secretary to reach a recommendation for legislative recognition, but Congress would be free to ignore it. Indeed, the actual decisions would be made by Congress without regard to merit. And Congress, lest we forget, is a political body.

The second proposal was made by former Florida Governor Jeb Bush as part of his “Western Land and Resource Management Plan.” His stated rationale was to address the concerns of residents of the Western United States, who “feel the impact of federal decision-making more acutely than those in the rest of the nation.” He added, “Of the 635 million acres owned and managed by the federal government, 582 million acres – 90 percent – are in the West, including Alaska.”

As for the potential location for the Department, the statement highlighted Denver, Salt Lake City, and Reno.

Bush’s official statement did not mention the fact that the overwhelming majority of Bureau of Indian Affairs and Office of Special Trustee employees already are in the West and located in or near Indian Country. And it made no attempt to explain how or why Indian Country would be better served by moving the entire Department of the Interior out of Washington, D.C., or how it would improve the effectiveness of the Department’s senior officials.

At this time, there is little prospect that either of these proposals will become reality, since there is no sign of support from within the current administration. However, the fact that they have even been discussed at such a significant level should be of concern throughout Indian Country.

Tuesday, October 27, 2015

Nevada Gaming Control Board: Daily Fantasy Sports is Gambling

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

On October 15, 2015, Chairman A.G. Burnett of the Nevada State Gaming Control Board published an Industry Notice declaring daily fantasy sports (“DFS”) to be gambling under Nevada law. Therefore, only parties who have been issued a license by the Nevada Gaming Commission to operate a sports pool may offer DFS in Nevada. Offering DFS without the proper license is illegal in Nevada, and all unlicensed DFS activities in the state must cease immediately.

Chairman A.G. Burnett also cautioned Nevada licensed sports pools to “exercise discretion in participating in business associations” with unlicensed DFS operators.

Tuesday, October 6, 2015

Enterprise Rancheria Ready to Construct Class II Casino

By Patrick Sullivan

California’s Estom Ymeka Maidu Tribe, also known as Enterprise Rancheria, has said it will begin construction of a scaled-down Class II gaming facility in Yuba County, instead of the Class III facility that has been opposed by neighboring Indian tribes, beset by litigation and stalled in the state legislature. The 105,750-square-foot facility will be roughly one-third the size of the formerly planned 318,000-square-foot Class III casino. The Tribe has announced that it has secured financing for the scaled-down project and is ready to break ground.

Enterprise Rancheria is located in Oroville in Butte County but selected the Yuba County site due to Butte County’s saturated casino market. The Tribe’s application to place the land in federal trust status for gaming cited its historical occupation of an area including both Butte and Yuba Counties. The Tribe gained the support of the City of Marysville and Yuba County for its application with promises of revenue sharing in intergovernmental agreements executed in 2002 and 2005, respectively.

Recent California Class III gaming compacts require tribes to enter into local agreements to mitigate impacts, but tribes are under no obligation to enter such agreements for Class II facilities, which do not require a compact. Accordingly, the enforceability of those revenue-sharing agreements depends on whether they can be interpreted to apply to Class II gaming facilities. Because the language negotiated in those agreements is not expressly limited to Class III gaming, the Tribe likely will be obliged to honor the agreements for its scaled-down casino. The Yuba County agreement calls for payments ranging from an initial $800,000 to $5 million at the fifth year of operation.

The Tribe had passed a major milestone on September 1, 2011, when the Interior Secretary determined that the Enterprise land was eligible for gaming as an “off-reservation” gaming facility, also known as a “two-part” determination pursuant to the Indian Gaming Regulatory Act of 1988 (“IGRA”). That determination required the Interior Secretary to determine that (1) the gaming establishment would be in the best interests of the Tribe and its citizens, and (2) gaming on the newly acquired lands would not be detrimental to the surrounding community. IGRA also requires the governor of the state in which the gaming will occur to concur in the Interior Secretary’s determination. California Governor Jerry Brown concurred in the Secretary’s determination, and the land was placed in trust status for gaming on November 21, 2012.

At that point, the Tribe was authorized to conduct Class II gaming on the land, but Class III gaming would require a Class III gaming compact ratified by the California legislature and approved by the Interior Secretary, Governor Brown executed a compact with the tribe in August 2012, but the California legislature never acted to ratify it. The Enterprise ratification process was caught up in the referendum rejecting compacts for the North Fork and Wiyot Tribes sponsored by Stand Up for California!, a gaming watchdog group opposed to what it calls “reservation shopping” by California Indian tribes in general and to off-reservation gaming in particular.

Enterprise’s Class III plan faced its own opposition from anti-casino groups and neighboring Indian tribes that already offer Class III gaming in nearby casinos. The United Auburn Indian Community operates the Thunder Valley casino and the Cachil Dehe Band of Wintun Indians of the Colusa Indian Community (“Colusa”) operates the Colusa Casino Resort 39 miles from the Enterprise site. Along with a group calling itself “Citizens for a Better Way,” those Tribes sued the Department of the Interior for its 2012 decision to accept the casino site into trust for gaming purposes, complaining that the Department’s process failed to consult neighboring tribes, violated the National Environmental Policy Act (“NEPA”) and would injure the plaintiffs by “cannibalizing” the local gaming market.

In August 2014, in response to the California legislature’s failure to ratify its compact, Enterprise filed a federal lawsuit against the State for failure to negotiate in good faith as required by IGRA. North Fork Rancheria filed a similar action in March of this year. California’s laws enabling Indian gaming expressly waive the State’s Eleventh Amendment immunity to tribal suits for failure to negotiate compacts pursuant to IGRA, so those suits will go forward.

The 2002 agreement with the City of Marysville provided for a payment of $100,000 upon the land being accepted into trust. Marysville claims the Tribe now owes it that payment despite the ongoing litigation challenging the trust acceptance. The Tribe has not made any payments, but has said it intends to honor its commitments to the City and County. Meanwhile, both the Citizens for a Better Way, et al., lawsuit and the Enterprise lawsuit against the State are pending in federal court.

Disclosure: Dickinson Wright represents Butte County in gaming matters.

Tuesday, September 15, 2015

Uncommon Definitions of Common Gaming Terms – A Field Guide for Non-Nevada Gaming Practitioners in Nevada

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

Those not intimately familiar with Nevada gaming law are often confused about how certain terms, namely “mobile gaming,” “interactive gaming” and “sports account wagering,” are used in Nevada. Here is a guide to Nevada’s gaming terminology:

Interactive Gaming

In 2001, Nevada embarked on statutory changes to permit online, mobile and off-premises gaming for gambling activities other than sports wagering. At that time, some countries permitted broad-based computer gaming over the Internet, others permitted gaming over cable TV networks and still others permitted cellular phone wagering on games through proprietary networks. Nevada coined the term “interactive gaming” to capture and regulate such gaming over the Internet, private wireless networks, private wired networks and geographically dispersed gaming, and the Nevada Legislature enacted a regime to permit the Nevada Gaming Commission (“Commission”) to issue “interactive operators” licenses and “interactive manufacturers” licenses.

The 2001 licensing regime reflected the common terrestrial gaming arrangement where casino operators offered gaming services while manufacturers were licensed for manufacturing and distributing devices. Eligibility for an interactive gaming operator license was limited to those with significant terrestrial gaming operations in Nevada. The legislation contained a requirement for the Commission to determine whether issuing such licenses would be compliant with federal and state law. Because the U.S. Department of Justice (“DOJ”) issued a letter in early 2002 indicating that it believed, without any analysis in the letter in early 2002 indicating that it believed, without any analysis in the letter, that issuing interactive gaming licenses would violate the Federal Wire Act, among other federal laws, efforts to implement licensing of interactive gaming in Nevada ground to a halt.

In 2011, the DOJ changed its opinion of the Federal Wire Act, and Nevada recommended its efforts in this area, with a few updates the 2011 Nevada legislature altered the 2001 interactive gaming statutes to add an “interactive service provider” class of license and to compel the Commission to enact regulations for licensing online/interactive poker.

Mobile Gaming

In 2005, while interactive gaming licensing was still dormant, the Nevada legislature authorized licensing for gaming through mobile devices within certain areas of a casino premises. Therefore, in Nevada, “mobile gaming” refers to the use of non-fixed devices to play gambling games within a casino premises.

Because mobile gaming in Nevada is on-premises casino gaming, mobile devices or connections are treated like slot machines and are subject to slot machines taxes and fees. Likewise, a nonrestricted gaming license is required to manufacture, distribute and operate a mobile gaming system in Nevada.

Sports Account Wagering

Recent technological advances in sports account wagering often are confused with mobile or interactive gaming. Sports account wagering is a separate and distinct class of gaming. The definitions of interactive and mobile gaming in Nevada exclude sports wagering because these forms of licensed gambling are limited to “gambling games.”

The confusion occurs because sports bettors in Nevada have the option to place sports wagers on smart phones, tablets and computers within the state boundaries of Nevada. However, this form of wagering is merely remote account wagering, which Nevada has permitted since the 1970s, via a new technology. In the 1970s, remote account wagering was accomplished through phone calls and pagers to verify the location of patrons. In the 1980s and 1990s, stationary kiosks with modems were introduced to make remote account wagering easier and player geo-location easier. In the early 2000s, Station Casinos pioneered a broadband computer-based product for users of the Cox cable Internet system. Again, the Station Casinos system was merely a new technology to enhance account-based remote sports wagering. More recently, the evolution has continued to permit smartphones and tablets to be used to access remote sports wagering accounts when the patron can be confirmed to be in Nevada through the GPS data of the device and the geo-location data of the cell towers used by the device. Each use of new technology, however, is still governed by remote account wagering rules that Nevada has had in place for many decades.

With luck, this guide helps to clear some of the semantic confusion created by Nevada’s Wild West individualism.

Tuesday, August 25, 2015

Updates to Nevada’s Live Entertainment Tax – Part 3

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

This is the final post in a series of blog posts about changes to Nevada’s Live Entertainment Tax.

“Service Charges”

Perhaps the biggest area of remaining debate is whether or not associated fees or “service charges” are to be included in the LET. 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.

There is lively debate, however, on the definition of the term “service charge” and what additional “service charges” should and should not be included in the tax.

Senator Lipparelli, who sponsored the LET legislation (Senate Bill 266) in the Nevada Legislature, specifically stated in his testimony on April 7, 2015, in the Senate Committee on Revenue and Economic Development, that SB266 would add clarity to the “service charge” issue and that “service charges associated with the issuance of the ticket – to the extent that you hire someone to issue the tickets – have to be true charges paid out and not returned in any fashion.” This language suggest that Ticketmaster fees and other similar charges by third parties who sell and issue tickets would not be included in the LET, so long as the third-party vendor does not remit these charges back to the venue.

The current Board draft regulations, however, do not adopt the language that was suggested to clarify this issue in SB266. Instead, the draft continues to have language that may be unclear and, in fact, deletes the “service charge” exception to the LET that had previously been found in NRS 368A.

In the Board’s LET workshop on July 23, it was clear that there is ongoing disagreement on what should and should not be included in the LET as a “service charge.” Taxpayers argued that service charges by Ticketmaster or other third parties should be 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, so long as those charges and services are optional and not required for admission to the venue.

The Board responded that “if the legislature wanted to keep the status quo [of not including such service charges in the LET], why would they delete the service charge exception?” They also commented that they do not want to risk operators “saying that the ticket price is $50 but $48 of this is for parking and only $2 is for admission.”

Several taxpayers objected to this and are submitting comments and proposals to amend the language to make it clear that what is being taxed is the admission to the facility, which should not include charges for other purposes, such as convenience fees for purchasing tickets online or having them shipped to the customer.

At this time, there is not another public LET workshop scheduled. The stated goal of the Board is to revise the regulations based on the hearings and any additional written comments they have received and to provide the revised draft for review by the Nevada Gaming Commission and then the Nevada Legislative Counsel Bureau, with the intent to have the new regulations promulgated by October 1, 2015.

The new law makes it clear that noncompliance with the collection and payment of the LET can be considered by the Board to be an unsuitable method of operation by a gaming licensee. The new law also provides for taxpayers to request an advisory opinion from the Board concerning matters relating to the LET.

The effective date of the law is October 1, 2015. The Board recently published a notice to explain how this will affect LET payments. This notice provides that if a taxpayer reports admission ticket sales on an accrual basis (i.e., advanced admission sales are reported in the month of the show/event rather than the month the sales occurred), it must report these sales on its September 2015 tax return or on an earlier month’s tax return. All admission charges reported beginning October 1, 2015, will be subject to the new 9% tax rate.

Thursday, August 20, 2015

Updates to Nevada’s Live Entertainment Tax – Part 2

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

This is the second post in a series of blog posts about changes to Nevada’s Live Entertainment Tax.

Exceptions and Exemptions

The new LET includes some new exceptions as well. 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, e.g., a 2-drink minimum). The tax is also not imposed on amounts paid for access to tables, seats, lounge chairs, or particular areas near a swimming pool (i.e., the LET applies to the cover charge to enter a day club, but not to any extra amount the patron pays to rent a cabana or a lounge chair once inside). The value of admission provided to a patron on a complimentary basis is also excluded from the tax, unless the complimentary admission is associated with a separate purchase that is required for the patron to have access to the facility.

The new LET also 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. Instead, if the license or rental fee includes the admission of a certain number of patrons to a facility where a live entertainment event is provided, the admission charge is an amount equal to the lowest priced admission charge for the live entertainment event multiplied by the number of admissions to the live entertainment event included in the license or rental fee regardless of the number of admissions actually used. For purposes of this calculation, the “lowest priced” admission must be legitimately available for sale to the public.

For venues with less than 7,500-person occupancy, however, the LET must be paid for such license or rental fees. One taxpayer suggested in the Board’s July 23 public workshop on the new LET regulations that, 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. This would produce a similar result as seen for venues with greater than 7,500 seats. Hopefully this issue will be clarified in the final regulations.

Other special exemptions:

  • Charitable live entertainment activities where fewer than 7,500 tickets are sold are exempt.
  • Venues with fewer than 200 seats remain exempt from the LET.
  • NASCAR events will be exempt if they give Nevada a second race weekend.
  • Professional sports will be exempt if one of the teams playing in the contest is domiciled in Nevada.
  • Combat sports are exempt from the LET, but are subject to the levies imposed by other sections of the law that have oversight by the Nevada Athletic Commission.
  • Collegiate sports involving Nevada’s schools are exempt, with the exception of the Silver Bowl, which would not be exempted.