Appeals Court Dismisses DNR Lawsuit to Collect Timber Tax from LCO Tribe

Thursday, December 21, 2017 | by Joe Morey |

On Dec. 19, 2017, a three-judge panel for the District III Appeals Court in Wisconsin affirmed the ruling of Sawyer County Circuit Court Judge John Yackel dismissing a lawsuit filed by the Wisconsin Department of Natural Resources (DNR) against the Lac Courte Oreilles Tribe and Timber and Wood Products Located in Sawyer County, 2017AP181.

The Appeals court concluded that sovereign immunity barred the claims the DNR made against the tribe that the tribe owed the DNR a “severance tax” on land it bought in the early 1990’s that fell under the Forest Croplands program.

Wisconsin’s Forest Croplands Law was enacted in 1927 to encourage sustainable timber growth. Those who enrolled their land in the program agreed to use sound forestry practices to grow timber while keeping it publicly open for fishing and hunting, according to an article on

“In exchange, the land is exempt from real estate property taxes,” the article further states. “However, other taxes apply, including an annual ‘acreage’ tax of 10 cents per acre, a ‘withdrawal’ tax if the land is delisted, a ‘severance’ tax when wood products are harvested, and a ‘termination severance tax’ on timber ready for harvest if the land is not re-enrolled when the 50-year contract expires.”

The property in this case was purchased by the tribe, but the previous owners, Owens-Illinois Glass Company, purchased it on October 8, 1962, and filed a petition to enroll it in the Forest Croplands program. The petition was approved and the contract became effective on January 1, 1963.

According to the papers in the lawsuit, On October 15, 1992, and May 24, 1993, two “Transfer of Ownership—Forest Crop Law” forms were executed regarding the property, listing the tribe as grantee and both forms were signed by a tribal representative.

Both forms stated the tribe accepted the transfer of the Forest Crop Law and intended to continue to practice forestry on the land, and the tribe agreed to comply with the contract.

According to the DNR, the Real Estate is “situated within the boundaries of the Tribe’s reservation” but is “not held in trust or restricted status by the United States for the benefit of the Tribe, a member of the Tribe, or a tribal corporation, and it is not subject to federal restrictions against alienation or encumbrance of Indian lands.” The Tribe does not dispute these assertions, the lawsuit stated.

The DNR gave notice to the tribe in April of 2011 that the current contract would expire on Dec. 31, 2012, the fifty-year time period of the Forest Croplands contract. The DNR notice said the tribe had two options, to either enroll in the Managed Forest program or to allow the property to expire from the program, and if they chose to let it expire, the property would be put on the general tax rolls. In addition, the tribe would have to pay a termination tax based on the standing timber multiplied by 10% of the average timber in the area.

The tribe didn’t respond, an according to the lawsuit, the DNR hired a private forestry services company to conduct a volume estimate of the standing timber which they would base the “termination severance tax” upon. That amount was $74,819.74.

In November of 2012, the DNR sent the tribe an invoice for the amount, which they said was due by May 31, 2013. According to the lawsuit, the Tribe did not pay the termination tax. In October 2013, the DNR notified the Tribe that the April 2013 invoice was past due. The DNR sent the Tribe a revised invoice in the amount of $85,931.44—comprised of the termination tax, a ten percent penalty for non-payment, and interest calculated at a rate of one percent per month. Once again, the Tribe failed to pay.

In November 2015, the DNR filed a lawsuit naming as defendants both the Tribe and the “Timber and Wood Products” located on the property. The tribe moved to dismiss the lawsuit asserting its sovereign immunity barred the DNR’s claims.

“In response, the DNR argued the Tribe had waived its sovereign immunity by executing transfer of ownership forms indicating the Tribe agreed ‘to comply with the terms of the Forest Crop Law and the contract applicable to the said lands.’ In the alternative, the DNR argued that, even if the Tribe’s sovereign immunity barred the DNR from asserting in personam claims against the Tribe, it did not bar the DNR’s in rem claim seeking possession of the timber and wood products located on the Real Estate,” the lawsuit said.

Judge Yackel rejected both of these arguments and issued a written decision and order dismissing the DNR’s claims.

In the appeal discussion, the court cited a main point, “The United States Supreme Court has explained that Indian tribes are ‘domestic dependent nations’ that exercise ‘inherent sovereign authority.’ Michigan v. Bay Mills Indian Cmty., 134 S. Ct. 2024, 2030 (2014) (quoting Oklahoma Tax Comm’n v. Citizen Band Potawatomi Tribe of Okla., 498 U.S. 505, 509 (1991) (Potawatomi)). Although tribes are ‘subject to plenary control by Congress … they remain ‘separate sovereigns pre-existing the constitution.’ Id. (quoting Santa Clara Pueblo v. Martinez, 436 U.S. 49, 56 (1978)). As such, absent congressional action to the contrary, Indian tribes retain ‘their historic sovereign authority.’ Id. One of the core aspects of that authority is the “common law immunity from suit traditionally enjoyed by sovereign powers.’ Id. (quoting Santa Clara Pueblo, 436 U.S. at 58). ‘Suits against Indian tribes are thus barred by sovereign immunity absent a clear waiver by the tribe or congressional abrogation.’ Potawatomi, 498 U.S. at 509.

“Courts throughout the country have repeatedly held that a tribe’s mere agreement to comply with a particular law does not amount to an unequivocal waiver of the tribe’s sovereign immunity,” wrote Judge Lisa Stark.

The appeals court also rejected the DNR’s argument that this case is different because the Forest Croplands Law contains provisions on enforcement, including a provision that says landowners are personally liable for severance taxes.

Judge Stark said while the statute makes the tribe liable for the payment of the severance tax, “It does not state that the landowner consents to be sued in order to enforce any lien on personal liability.”

The article stated the following in regards to the Appeals Court rejecting the In Rem claim made by the DNR on the timber and wood products on the property;

“Even if sovereign immunity blocks in personam claims against the Tribe, the DNR argued, it could still attach in rem claims against the timber and wood products at issue because the law allows a lien against that property to satisfy a tax debt.

“The panel disagreed. ‘[T]he Tribe cites state and federal cases that have rejected the DNR’s position and instead held that sovereign immunity bars in rem actions pertaining to a tribe’s property,’ Judge Stark wrote. ‘We find these cases cited by the Tribe more persuasive than those cited by the DNR.’

“A lien does not attach without an underlying debt, the panel noted, rejecting the DNR’s claim that it had a pre-existing interest in the timber and wood products, an interest that was triggered when the Tribe’s predecessor enlisted the land in the state law program.

“’[A]ny lien the DNR acquired did not predate the Tribe’s ownership of the timber, and enforcement of the lien would necessarily invade the Tribe’s possession of its own property, a result contrary to United States Supreme Court precedent,’ Stark wrote.”

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