filed: December 6, 1993; As Corrected December 8, 1993.
On Appeal from the Decision of the United States Tax Court. United States Tax Court No. 89-05750
Before: Stapleton, Roth and Lewis, Circuit Judges.
This appeal arises from the United States Tax Court's determination that appellants, Glenny and Carol Lazore, were not exempt from paying federal income taxes and that they were subject to both late filing and negligence penalties on the basis of their unexcused two-week delay in filing their return. On December 23, 1988, the Commissioner of the Internal Revenue Service sent the Lazores a notice of deficiency concerning their 1986 taxable year. The notice alleged a deficiency in the amount of $8549.00 and claimed additions in the amounts of $124.11 for late filing and $427.45 for negligence. On March 22, 1989, the Lazores filed a petition with the Tax Court contesting the Commissioner's deficiency determination. They filed an amended petition on June 16, 1989, in which they claimed that, as Mohawk Indians, they were exempt from federal income tax under various treaties between the Six Nations Confederacy and the United States. As noted above, the Tax Court, following a trial, found that the Lazores were not exempt from taxation and upheld the late filing and negligence penalties. On August 17, 1992, the Lazores moved the Tax Court to revise its decision so as to delete the determination that additions to tax are due based on negligence. The Tax Court denied this motion, and the Lazores filed their notice of appeal on December 2, 1992.
Because we believe that the Tax Court correctly determined that the treaties relied upon by the Lazores do not support their claim of an exemption from the federal income tax, we will affirm its decision to that extent. We believe, however, that the Tax Court incorrectly applied the negligence penalty, and we will therefore reverse its determination that the Lazores are subject to the addition to tax for negligence.
Appellants Glenny and Carol Lazore are residents of the St. Regis Mohawk Indian Reservation, located within the State of New York. The Mohawk Nation, along with the Oneida, the Seneca, the Onondaga, the Cayuga and the Tuscarora Nations, is part of the Six Nations Confederacy. The Six Nations are also known as the Iroquois or Haudenosaunee ("the People of the Long House"). We shall refer to them as the Haudenosaunee. The Haudenosaunee Nation exists within the territorial limits of the United States, but in many ways functions as a separate government. It has its own governing bodies, known as the Grand Council and the Council of Chiefs, and issues passports which are recognized by the United States and other nations. The Haudenosaunee may travel freely between the United States and Canada on identification cards issued by the Haudenosaunee Nation. Both Mr. and Ms. Lazore consider themselves to be citizens of the Mohawk Nation and not citizens of the United States.
Appellants are husband and wife; they filed their joint 1986 federal income tax return on May 1, 1987. During 1986, Mr. Lazore worked for the Reynolds Metals Company in New York State as a plant mechanic and received compensation in the amount of $30,332.31. Ms. Lazore worked for the Mohawk Indian Housing Corporation as its executive director and received compensation in the amount of $18,427.20. Appellants reported these amounts as income on their tax return along with $31.03 of interest income. However, they reported no taxable income and no tax. They attached an affidavit to their return in which they declared that they were exempt from tax based on the 1794 Treaty of Canandaigua, the Jay Treaty, the Treaty of Ghent, and the U.S. Constitution.
The United States Tax Court had subject matter jurisdiction of this case under I.R.C. §§ 6213(a), 6214(a), and 7442. This court has jurisdiction over appeals from the Tax Court under I.R.C. § 7482(a), and venue pursuant to I.R.C. § 7482(b), since the parties by stipulation have designated this court to review the Tax Court's decision. The notice of appeal was timely filed under I.R.C. §§ 7483, 7502(a)(1), and Fed. R. App. P. 13. Because all issues considered in this case are matters of law, this court has plenary review.
The Supreme Court in 1886 stated: "the relation of the Indian tribes living within the borders of the United States, both before and since the Revolution, to the people of the United States has always been an anomalous one and of a complex character." United States v. Kagama, 118 U.S. 375, 381, 6 S. Ct. 1109, 1112, 30 L. Ed. 228 (1886). That statement applies with equal force to the more specific questions of the scope and interpretation of treaties between the various Indian nations and the United States. The legal status of these treaties has evolved over the last 150 years. In 1832 the Supreme Court noted:
The words "treaty" and "nation," are words of our own language, selected in our diplomatic and legislative proceedings, by ourselves, having each a definite and well-understood meaning. We have applied them to Indians, as we have applied them to the other nations of the earth; they are applied to all in the same sense.
Worcester v. Georgia, 31 U.S. 515, 559-60, 8 L. Ed. 483 (1832). Forty years later, in Holden v. Joy, 84 U.S. 211, 242-43, 21 L. Ed. 523 (1872), the Court reaffirmed the notion that treaties with Indian nations are to be treated the same as treaties with other nations, despite the unique status occupied by Indian nations vis-a-vis the United States. Yet in 1912 the Court stated that Indian tribes "have been regarded as dependent nations, and treaties with them have been looked upon not as contracts, but as public laws which could be abrogated at the will of the United States." Choate v. Trapp, 224 U.S. 665, 671, 32 S. Ct. 565, 567, 56 L. Ed. 941 (1912). In addition to adopting a conception of these treaties distinct from that of treaties with separate nations, the Court over this period fashioned a special set of rules to be used in interpreting these treaties. These rules, which will be discussed in greater detail below, stem largely from the unique nature of the relationship between the Indian nations and the United States.
The notion that Congress has the power to unilaterally abrogate provisions of treaties with Indians is firmly established. See Rosebud Sioux Tribe v. Kneip, 430 U.S. 584, 587-88, 97 S. Ct. 1361, 1363-64, 51 L. Ed. 2d 660 (1977); Lone Wolf v. Hitchcock, 187 U.S. 553, 23 S. Ct. 216, 47 L. Ed. 299 (1903). Consistent with this power, Congress has repeatedly asserted its legislative jurisdiction over Indians without regard to whether any treaty provisions concerned the subject of the law. Beginning with the Seven Major Crimes Act of 1885, for example, and continuing through 1988, Congress has removed major criminal jurisdiction from all Indian tribes. See, e.g., Ch. 341, § 9, 23 Stat. 385; 18 U.S.C. §§ 1153 (enacted in 1948, and amended in 1949, 1966, 1968, 1976, 1984, 1986, and 1988) and 3241 (enacted in 1948 and amended in 1966 and 1976); United States v. Walkingeagle, 974 F.2d 551 (4th Cir. 1992), cert. denied, 113 S. Ct. 1818, 123 L. Ed. 2d 449 (1993). Similarly, the Indian Civil Rights Act of 1968, 82 Stat. 77, 25 U.S.C. §§ 1301-41, specifies the maximum penalties which tribal courts may impose upon convicted defendants, 25 U.S.C. § 1302(7), and sets out a list of rights--including six-person juries and review of tribal court detention orders by federal District Courts through issuance of writs of habeas corpus--that must be provided to participants in tribal criminal proceedings, 25 U.S.C. §§ 1302, 1303. Congress has also legislated frequently with respect to the right of all Indians within the United States to alienate reservation lands by lease or transfer. See, e.g., Indian Intercourse Act of July 22, 1790, 1 Stat. 137; Indian Intercourse Act of March 1, 1793, 1 Stat. 469, 472; Act of February 28, 1891, § 3, 25 U.S.C. § 397; Act of June 18, 1934; 25 U.S.C. § 451 et seq.
Related to the power to abrogate treaty provisions is the Supreme Court's holding that "a general statute applying to all persons includes Indians and their property interests." Federal Power Comm'n v. Tuscarora Indian Nation, 362 U.S. 99, 116, 80 S. Ct. 543, 553, 4 L. Ed. 2d 584 (1960). Thus, for example, Congress has successfully asserted the power to draft Indians. See, e.g., United States v. Cook, 505 F.2d 1124, 1125 n.1 (2d Cir. 1974); Ex parte Green, 123 ...