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Oklahoma Supreme Court hears arguments in Muscogee citizen’s tax case

Carmen Forman
Oklahoma Voice

The state’s high court on Wednesday heard oral arguments in a case that could exempt more tribal citizens from state income taxes due to the U.S. Supreme Court’s McGirt ruling.

Attorneys for Muscogee (Creek) Nation citizen Alicia Stroble attempted to convince the Oklahoma Supreme Court that she should be exempt from paying state income taxes because she lives and works within her tribe’s reservation, which the nation’s high court decided in 2020 was never disestablished.

Tribal citizens who live and work within their tribe’s reservation have long been exempt from state income taxes. But the McGirt ruling, which found that much of eastern Oklahoma remains reservation land, affirmed the expanded boundaries of at least eight tribes, potentially allowing more tribal citizens to claim tax exemptions.

In the wake of the McGirt ruling, hundreds of tribal citizens have filed tax protests with the Oklahoma Tax Commission.

Stroble’s case could set a precedent for how the state handles those protests. And the court’s ruling could determine whether the McGirt decision applies to civil issues or remains limited to tribal jurisdiction over major crimes.

Riyaz Kanji, who represented the Muscogee Nation during Wednesday’s hearing, argued Stroble is exempt from state income taxes because the McGirt decision established the tribe’s 3 million acre reservation was never disestablished.

A Muscogee Nation employee, Stroble sought income tax exemptions for the 2017-2019 tax years following the McGirt decision.

In 2022, an administrative law judge found that Stroble lived within the Muscogee reservation during the years in question and qualified for a tribal exemption to state income taxes. The Oklahoma Tax Commission later reversed that decision, which spurred Stroble’s appeal before the Supreme Court.

In legal filings, the Tax Commission argued the McGirt decision does not apply to civil matters.

The Supreme Court justices peppered attorneys for the Muscogee Nation and the Tax Commission with questions throughout the hearing that lasted nearly two hours.

At one point, Justice Yvonne Kauger pointedly asked Kanji why he thought the McGirt decision, which applied to a criminal case, applies to civil issues such as taxation. She also questioned whether the court ruling in Stroble’s favor could open the door for McGirt to apply to other civil matters such as zoning and municipal regulations.

If so, that could create a patchwork of jurisdictional issues in which two neighbors living in Indian Country could be told to abide by different rules, she said.

Kannon Shanmugam, an attorney hired by the Tax Commission, said Stroble did not qualify for the tax exemption because of where she lives.

The two sides argued about the definition of “Indian Country,” which is how the Tax Commission refers to the area in which tribal citizens must reside to qualify for income tax exemptions.

Justice James Winchester asked whether the court ruling in Stroble’s favor could impact local property and sales tax collections. Kanji said McGirt could conceivably be applied to sales tax collections on reservations but not property taxes.

The attorneys also talked about the potential financial impact to the state if the court ruled in Stroble’s favor. The Tax Commission estimates if the McGirt ruling were applied to income taxes the state would lose about $22 million in annual tax collections from the Muscogee Nation and $75 million a year total from Oklahoma’s Five Tribes, which includes the Muscogee, Cherokee, Chickasaw, Choctaw and Seminole Nations.

Some of the justices noted the court is tasked with addressing legal questions, not delving into policy matters that could impact state finances.

Justice Dustin Rowe said he envisions the question on tribal taxation working its way through the court system until the U.S. Supreme Court gets the final say.

After the hearing, Muscogee Nation Principal Chief David Hill said laws relating to the taxation of tribal citizens living and working on their tribal land has been settled law for decades.

“The state of Oklahoma has chosen to ignore these laws,” he said. “It should concern every citizen of Oklahoma that the state feels like it can pick and choose when to follow the law. Today it’s Alicia Stroble. Tomorrow it will be someone else if the state is not held accountable.

Gov. Kevin Stitt has cited the Stroble case as an example of the “chaos” created by the McGirt ruling.

Many of the state’s tribal leaders have rejected Stitt’s criticisms and hailed the ruling as a win for tribal sovereignty.

“I’m the governor of all 4 million Oklahomans, tribal and non-tribal alike, and my goal is to ensure fairness across the board,” Stitt said Wednesday in a video posted on social media after the hearing.

There is no timeline on when the Supreme Court could rule in the case.

Oklahoma Voice is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Oklahoma Voice maintains editorial independence.

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