## Facts

- Glenny A. Lazore and Carol L. Lazore were members of the Mohawk Nation, one of the Six Nations (Haudenosaunee) Confederacy, and lived on the St. Regis Mohawk Indian Reservation in New York.
- The Haudenosaunee relied on treaties with the United States, including the 1794 Treaty of Canandaigua, which guaranteed the Six Nations the “free use and enjoyment” of their lands and reflected a government-to-government relationship that predated the modern federal income tax.
- For the 1986 tax year, Glenny worked as a mechanic for a private metal company, and Carol worked for the Mohawk Nation.
- The Lazores filed their 1986 federal income tax return about two weeks after the due date.
- On their return, they reported their wage income but treated it as nontaxable, claiming they were exempt from federal income tax as Mohawk/Haudenosaunee citizens based on the Treaty of Canandaigua and other treaties with the Six Nations.
- On December 23, 1988, the Commissioner of Internal Revenue issued a notice of deficiency for 1986 asserting an $8,549 deficiency and additions to tax of $124.11 for late filing and $427.45 for negligence.
- The Lazores petitioned the United States Tax Court, arguing that the treaties barred federal income taxation of their wages; at trial they offered substantial historical evidence about Haudenosaunee understandings of the treaty relationship and their status as a separate nation.
- The Tax Court held that the Lazores were not exempt from federal income tax and sustained both the late-filing and negligence additions to tax.
- The Lazores moved in the Tax Court to remove the negligence addition; the motion was denied, and they appealed to the United States Court of Appeals for the Third Circuit.

## Issues

1. Whether the Treaty of Canandaigua and related treaties between the United States and the Six Nations provided a basis to exempt the Lazores from federal income taxation on their 1986 wages.
2. Whether the Lazores were liable for an addition to tax for late filing under 26 U.S.C. § 6651(a)(1) based on their unexcused two-week delay.
3. Whether the Lazores were liable for an addition to tax for negligence under 26 U.S.C. § 6653(a) when they reported the income but claimed a treaty-based exemption in good faith.

## Decision

- The Third Circuit affirmed the Tax Court’s determination that the Lazores were subject to federal income tax and that the treaties cited did not establish an exemption from tax on their wages.
- The Third Circuit left in place the addition to tax for late filing under § 6651(a)(1), agreeing with the Tax Court’s conclusion that the delay was unexcused.
- The Third Circuit reversed the negligence addition to tax under § 6653(a), holding the Tax Court erred in treating the Lazores’ good-faith, legally serious treaty claim as negligent conduct.
- The case was affirmed in part and reversed in part, with remand for adjustment consistent with reversal of the negligence addition.

## Legal Principles

- A treaty-based exemption from federal income tax must have a textual basis in the treaty; broad treaty language about land rights, autonomy, or self-government does not by itself create an income-tax exemption for individual tribal members.
- Indian treaties are construed liberally in favor of Indians and ambiguities are resolved to their benefit, but courts do not create a tax exemption where the treaty text does not support one.
- Federal income tax applies to “all income from whatever source derived” unless a specific statutory or treaty exemption applies; reservation residence or tribal membership alone does not supply an exemption.
- An addition to tax for late filing under 26 U.S.C. § 6651(a)(1) applies unless the taxpayer shows reasonable cause for failing to file on time.
- For negligence additions under 26 U.S.C. § 6653(a), negligence involves a lack of due care or failure to act as a reasonable person would under the circumstances; a taxpayer’s unsuccessful position can avoid the negligence penalty when it reflects a sincere, good-faith effort on a difficult legal question rather than careless disregard of rules.

## Conclusion

The Third Circuit held that the Treaty of Canandaigua and other Six Nations treaties did not exempt Mohawk taxpayers living on the St. Regis Reservation from federal income tax on 1986 wages, affirmed the late-filing addition for an unexcused two-week delay, and reversed the negligence addition because the Lazores pursued a serious, good-faith treaty claim that did not amount to negligent conduct.


Lazore v. Commissioner of Internal Revenue, 11 F.3d 1180 (1993)