State Successfully Taxes Relocated Indian's Retirement Income -- Really?

On August 12, the Eight Circuit Court of Appeals upheld the state of Minnesota's efforts to tax the retirement income of Charles Diver, a Chippewa Indian who was relocated to Ohio in 1960 under the federal relocation program. He worked there as a dockworker until 1998, when he retired and returned home to the Fond du Lac Reservation in Minnesota. As he drew upon his pension for his retirement, Minnesota began to assess him with income taxes. The Eight Circuit reasons: "Minnesota’s act in taxing a Band member’s pension, earned in Ohio, but received on the reservation, did not violate due process as the member’s Minnesota citizenship created a constitutional nexus for the taxation." That, despite Diver's residence on the Fond du lac Reservation, where he is drawing his retirement income.

Yet as Justice Murphy rightfully explains in dissent:

Diver has never earned income while working off the reservation as a citizen of Minnesota. His pension was earned entirely in the state of Ohio, where he lived and worked for thirty years. Minnesota could not have taxed his wages as he received them because the state did not have the required nexus. Now that Diver has retired and returned to the Fond du Lac reservation, tribal sovereignty precludes Minnesota from imposing a tax on a pension earned during thirty years of work in Ohio. Just as Minnesota could not tax Diver's preretirement Ohio wages simply because he now resides on a reservation located in the state, the same is true for the pension tied to those wages.

Minnesota now faces a $1.3 billion budget deficit in the next biennium and like many other states, seeks to balance the state's budget on the backs of Indians. The Eight Circuit case serves to demonstrate how low states will stoop in the process.

Lest there be any doubt, the state tax man cometh to Indian Country. Be prepared.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He can be reached at 206.691.3631 or, or via