County Loses Effort to Tax Tribe’s Water Park

     (CN) – A water park that was built on land held in trust for the Chehalis Indian tribe, off its reservation, should not be taxed by state and local governments, the 9th Circuit ruled.
     In 2002, the Confederated Tribes of the Chehalis Reservation bought 43 acres of land off its reservation in western Washington’s Thurston County. Two years later, the tribe asked the U.S. Department of the Interior to buy the land, known as the “Grand Mound Property,” and hold it in trust under section 465 of the federal code for land and water acquisitions.
     Among other things, the code provides a tax exemption for lands being held by the government in trust for native Indian tribes.
     The Chehalis signed an agreement with Great Wolf Resorts in 2005 to form CTGW LLC and to build the Great Wolf Lodge resort and indoor water park on the property. The tribe owns a 51 percent interest in CTGW under the agreement.
     A year later, the tribe and CTGW entered into a lease agreement that gave CTGW the right to use the land for 25 years. CTGW owns all the resort buildings and “trade fixtures” under the agreement until it expires, at which time ownership transfers to the tribe.
     Thurston County began assessing property taxes in 2007, acknowledging the land as tax exempt but not the structures.
     The tribe and CTGW filed a federal complaint, U.S. District Judge Benjamin Settle in Tacoma granted the county summary judgment, holding that “state and local governments are not necessarily prohibited from taxing permanent improvements, like the Great Wolf Lodge, that are owned by non-Indians.”
     A three-judge panel of the 9th Circuit was left on appeal to decide whether state and local taxation under section 465 extends to permanent improvements on such lands.
     The panel Tuesday held the exemption does extend to permanent improvements, citing the U.S. Supreme Court’s 1973 decision Mescalero Apache Tribe v. Jones.
     In that case, the high court “makes it clear that where the U.S. owns land covered by § 465, and holds it in trust for the use of a tribe (regardless of ‘the particular form in which the tribe chooses to conduct its business’), § 465 exempts permanent improvements on that land from state and local taxation,” Judge Sandra Ikuta wrote for the Seattle-based panel.
     Mescalero settles the Chehalis case because the Grand Mound Property at issue is owned by the U.S. and held in trust under § 465.
     “Thus, neither Thurston County nor any other state or local entity can tax the Great Wolf Lodge or other permanent improvements on that land,” Ikuta wrote. “Thurston County’s property taxes on the Grand Mount Property are therefore invalid.”
     The panel, also consisting of Judges Arthur Alarcon and M. Margaret McKeown, reversed summary judgment and remanded the case.

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