Facts
- Rosalind McClanahan, an enrolled member of the Navajo Nation, lived on the Navajo Reservation in Arizona.
- She alleged that all income she earned in 1967 was derived from sources within the reservation.
- Under Arizona’s income tax scheme, her employer withheld $16.20 from her wages to satisfy asserted state income tax liability.
- McClanahan protested the tax and sought a refund; after the State took no action, she filed a class action seeking a refund and declaratory relief that the tax was unlawful as applied to reservation Indians.
- The case addressed only tribal members residing on the reservation whose income was wholly derived from reservation sources.
Issues
- Whether Arizona has jurisdiction to impose its personal income tax on the on-reservation income of a Navajo member who resides on the reservation and earns income wholly from reservation sources.
Decision
- The Supreme Court reversed the state court judgment and held that Arizona lacked jurisdiction to impose the tax in these circumstances.
- The Court concluded that the governing treaty and federal statutes reserved the relevant authority to the Federal Government and the Navajo Nation, barring state taxation of such income.
- The Court rejected reliance on generally applicable federal statutes authorizing state taxation in federal areas (including the Buck Act) as insufficient to supply the clear congressional authorization required to permit the tax.
Legal Principles
- State taxation of tribal members in Indian country is barred absent clear congressional authorization, particularly where the tax would intrude on matters committed by treaty and federal law to tribal self-government and federal control.
- Treaties and federal statutes affecting Indians are interpreted against the historical understanding of reservations as distinct political communities generally exempt from state authority; ambiguities are resolved in favor of tribal interests.
- General federal authorizations for state taxation in federal enclaves do not displace more specific treaty-based and statutory limitations governing state authority in Indian country.
- A state may not impose a personal income tax on a reservation Indian who resides on the reservation when the income taxed is wholly derived from reservation sources.
Conclusion
Arizona could not apply its personal income tax to a Navajo member living on the Navajo Reservation when her income was earned entirely from reservation sources, because treaty and federal statutory protections foreclosed state jurisdiction absent a clear congressional grant.