[Federal Register Volume 81, Number 50 (Tuesday, March 15, 2016)]
[Pages 13817-13818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-05807]



Bureau of Indian Affairs

[167 A2100DD/AAKC001030/A0A501010.999900]

HEARTH Act Approval of Shakopee Mdewakanton Sioux Community 

AGENCY: Bureau of Indian Affairs, Interior.

ACTION: Notice.


SUMMARY: On March 3, 2016, the Bureau of Indian Affairs (BIA) approved 
the Shakopee Mdewakanton Sioux Community leasing regulations under the 
HEARTH Act. With this approval, the Tribe is authorized to enter into 
the following type of leases without BIA approval: Business site 

FOR FURTHER INFORMATION CONTACT: Sharlene Round Face, Bureau of Indian 
Affairs, Division of Real Estate Services, MS-4642-MIB, 1849 C Street 
NW., Washington, DC 20240, at (202) 208-3615.


I. Summary of the HEARTH Act

    The HEARTH (Helping Expedite and Advance Responsible Tribal 
Homeownership) Act of 2012 (the Act) makes a voluntary, alternative 
land leasing process available to Tribes, by amending the Indian Long-
Term Leasing Act of 1955, 25 U.S.C. 415. The Act authorizes Tribes to 
negotiate and enter into agricultural and business leases of Tribal 
trust lands with a primary term of 25 years, and up to two renewal 
terms of 25 years each, without the approval of the Secretary of the 
Interior. The Act also authorizes Tribes to enter into leases for 
residential, recreational, religious, or educational purposes for a 
primary term of up to 75 years without the approval of the Secretary. 
Participating Tribes develop Tribal leasing regulations, including an 
environmental review process, and then must obtain the Secretary's 
approval of those regulations prior to entering into leases. The Act 
requires the Secretary to approve Tribal regulations if the Tribal 
regulations are consistent with the Department of the Interior's (the 
Department) leasing regulations at 25 CFR part 162 and provide for an 
environmental review process that meets requirements set forth in the 
Act. This notice announces that the Secretary, through the Assistant 
Secretary--Indian Affairs, has approved the Tribal regulations for the 
Shakopee Mdewakanton Sioux Community.

II. Federal Preemption of State and Local Taxes

    The Department's regulations governing the surface leasing of trust 
and restricted Indian lands specify that, subject to applicable Federal 
law, permanent improvements on leased land, leasehold or possessory 
interests, and activities under the lease are not subject to State and 
local taxation and may be subject to taxation by the Indian Tribe with 
jurisdiction. See 25 CFR 162.017. As explained further in the preamble 
to the final regulations, the Federal government has a strong interest 
in promoting economic development, self-determination, and Tribal 
sovereignty. 77 FR 72440 at 72447-48 (December 5, 2012). The principles 
supporting the Federal preemption of State law in the field of Indian 
leasing and the taxation of lease-related interests and activities 
applies with equal force to leases entered into under Tribal leasing 
regulations approved by the Federal government pursuant to the HEARTH 
    Section 5 of the Indian Reorganization Act, 25 U.S.C. 465, preempts 
State and local taxation of permanent improvements on trust land. 
Confederated Tribes of the Chehalis Reservation v. Thurston County, 724 
F.3d 1153, 1157 (9th Cir. 2013) (citing Mescalero Apache Tribe v. 
Jones, 411 U.S. 145 (1973)). Similarly, section 465 preempts State 
taxation of rent payments by a lessee for leased trust lands, because 
``tax on the payment of rent is indistinguishable from an impermissible 
tax on the land.'' See Seminole Tribe of Florida v. Stranburg, No. 14-
14524, *13-*17, n.8 (11th Cir. 2015). In addition, as explained in the 
preamble to the revised leasing regulations at 25 CFR part 162, Federal 
courts have applied a balancing test to determine whether State and 
local taxation of non-Indians on the reservation is preempted. White 
Mountain Apache Tribe v. Bracker, 448 U.S. 136, 143 (1980). The Bracker 
balancing test, which is conducted against a backdrop of ``traditional 
notions of Indian self-government,'' requires a particularized 
examination of the relevant State, Federal, and Tribal interests. We 
hereby adopt the Bracker analysis from the preamble to the surface 
leasing regulations, 77 FR at 72447-48, as supplemented by the analysis 
    The strong Federal and Tribal interests against State and local 
taxation of improvements, leaseholds, and activities on land leased 
under the Department's leasing regulations apply equally to 
improvements, leaseholds, and activities on land leased pursuant to 
Tribal leasing regulations approved under the HEARTH Act. Congress's 
overarching intent was to ``allow Tribes to exercise greater control 
over their own land, support self-determination, and eliminate 
bureaucratic delays that stand in the way of homeownership and economic 
development in Tribal communities.'' 158 Cong. Rec. H. 2682 (May 15, 
2012). The HEARTH Act was intended to afford Tribes ``flexibility to 
adapt lease terms to suit [their] business and cultural needs'' and to 
``enable [Tribes] to approve leases quickly and efficiently.'' Id. at 
    Assessment of State and local taxes would obstruct these express 
Federal policies supporting Tribal economic development and self-
determination, and also threaten substantial Tribal interests in 
effective Tribal government, economic self-sufficiency, and territorial 
autonomy. See Michigan v. Bay Mills Indian Community, 134 S. Ct. 2024, 
2043 (2014) (Sotomayor, J., concurring) (determining that ``[a] key 
goal of the Federal Government is to render Tribes more self-
sufficient, and better positioned to fund their own sovereign 
functions, rather than relying on Federal funding''). The additional 
costs of State and local taxation have a chilling effect on potential 
lessees, as well as on a Tribe that, as a result, might refrain from 
exercising its own sovereign right to impose a Tribal tax to support 
its infrastructure needs. See id. at 2043-44 (finding that State and 
local taxes greatly discourage Tribes from raising tax revenue from the 
same sources because the imposition of double taxation would impede 
Tribal economic growth).
    Just like BIA's surface leasing regulations, Tribal regulations 
under the HEARTH Act pervasively cover all aspects of leasing. See 
Guidance for the Approval of Tribal Leasing Regulations under the 
HEARTH Act, NPM-TRUS-29 (effective Jan. 16, 2013) (providing guidance 
on Federal review process to ensure consistency of proposed Tribal 
regulations with part 162 regulations and listing required Tribal 

[[Page 13818]]

provisions). Furthermore, the Federal government remains involved in 
the Tribal land leasing process by approving the Tribal leasing 
regulations in the first instance and providing technical assistance, 
upon request by a Tribe, for the development of an environmental review 
process. The Secretary also retains authority to take any necessary 
actions to remedy violations of a lease or of the Tribal regulations, 
including terminating the lease or rescinding approval of the Tribal 
regulations and reassuming lease approval responsibilities. Moreover, 
the Secretary continues to review, approve, and monitor individual 
Indian land leases and other types of leases not covered under the 
Tribal regulations according to the part 162 regulations.
    Accordingly, the Federal and Tribal interests weigh heavily in 
favor of preemption of State and local taxes on lease-related 
activities and interests, regardless of whether the lease is governed 
by Tribal leasing regulations or part 162. Improvements, activities, 
and leasehold or possessory interests may be subject to taxation by the 
Shakopee Mdewakanton Sioux Community.

    Dated: March 3, 2016.
Lawrence S. Roberts,
Assistant Secretary--Indian Affairs.
[FR Doc. 2016-05807 Filed 3-14-16; 8:45 am]