Some Oklahomans seek tax exemptions in light of McGirt decision
Some Oklahoma taxpayers are seeking tax exemptions in light of the landmark U.S. Supreme Court decision that said the Muscogee (Creek) Nation's reservation was never disestablished.
Several taxpayers have filed protests with the Oklahoma Tax Commission seeking to be exempted from having to pay certain taxes, top agency officials told The Oklahoman.
The state is unable to tax income earned by tribal citizens who live and work on their tribe’s land. In addition, tribal and non-tribal businesses in Indian Country are not required to collect sales taxes on purchases made by tribal members.
While that rule has always applied, the court’s decision in McGirt v. Oklahoma confirmed far more Oklahoma land is reservation land than previously thought.
How the McGirt ruling could affect Oklahoma taxes
That has some accountants, tax lawyers and everyday taxpayers wondering if the decision changes how Oklahomans file their taxes.
“There are protests from taxpayers who believe (McGirt) should be expanded into civil matters, and taxation specifically,” said Tax Commission Executive Director Jay Doyle.
Although there has been widespread speculation about the far-reaching effects of the McGirt decision, so far the effects are limited to criminal justice matters. The decision hasn’t been expanded into civil matters.
In October, the Tax Commission, upon request from the administration of Gov. Kevin Stitt to estimate the possible effects of the McGirt decision, reported the court ruling could have a ripple effect on state income and sales and use tax collections. The Tax Commission estimated the McGirt decision could reduce the amount of taxes collected if more tribal members living on reservation land claimed exemptions.
However, that would only occur if the McGirt decision is expanded to civil matters. If that happens, many tribal experts expect the tribes would be able to compact with the state on taxation issues.
Historically, the state and the tribes have worked together to craft compacts on a number of issues, including motor fuel taxes, cigarette and tobacco taxes and hunting and fishing licenses.
Oklahoma tax officials weigh in
In the meantime, the Tax Commission has advised the McGirt decision has not been expanded to affect matters of taxation.
“As you are probably aware, the McGirt Court limited its holding to criminal matters under the Major Crimes Act only. At this time, the McGirt decision has not been expanded to apply to any civil matters, including taxation," General Counsel Elizabeth Field wrote in a letter to a member of the Oklahoma Society of Certified Public Accountants.
Field said she thinks fewer than 10 protests have been filed.
She declined to elaborate on the details of the protests, but said she thinks all are from tribal members.
There’s no immediate timeline for the pending protests to be resolved. After the Tax Commission denies a tax refund or an adjustment, the taxpayer has 60 days to file a written protest.
From there, the protest can go before an administrative law judge and then before the Oklahoma Tax Commission. If unsatisfied with the decision, the taxpayer can appeal to a district court or the Oklahoma Supreme Court.
If an exemption is granted, some individuals may be able to request a refund for income taxes assessed in the past three years.
Gov. Stitt's McGirt rhetoric
In a recent visit to Enid, Stitt said the Oklahoma Tax Commission has 3,000 protests from Native Americans in Eastern Oklahoma who are seeking to be exempt from paying state income tax in light of the McGirt decision, according to the Enid News and Eagle.
However, Tax Commission officials say that's not the case. Doyle said that 3,000 figure is the number of Native Americans that have sought a tax exemption because they say they live and work on tribal land. So, that number includes tribal citizens who, for years, have claimed such an exemption.
"Those are definitely not protests at this point, those are just those that are filing," Doyle said.
In his State of the State speech this year, Stitt called the McGirt decision the most pressing issue facing the state. He said the ruling raises many unanswered decisions, including those related to taxation.
In the McGirt decision, the Supreme Court ruled convicted child rapist Jimcy McGirt, who is Native American, was improperly tried in state court when his crimes were committed on the Creek reservation, which was never disestablished.
Federal law states that the federal government, as opposed to the state, prosecutes major crimes involving tribal members committed on reservation land.
Since the high court's ruling, the Oklahoma Criminal Court of Appeals ruled that similar to Creek Nation, the Chickasaw, Choctaw, Cherokee and Seminole reservations were never disestablished.
Tax protests have also cropped up on the local level. Citing the McGirt decision, the owner of a Broken Arrow power plant is challenging an increase in its personal property tax valuation from the Wagoner County Assessor Office, The Tulsa World previously reported.