Tribal citizen fighting state income tax argues before Oklahoma Supreme Court

OKLAHOMA CITY — The Oklahoma Supreme Court heard oral arguments Wednesday in a case to determine whether a Muscogee Nation tribal citizen living and working in the newly reaffirmed reservation must pay individual income taxes to the state.

Alicia Stroble, a Creek citizen who works for the tribe and lives in Okmulgee, is seeking an exemption to state income taxes. She is appealing a ruling by the Oklahoma Tax Commission that said she didn’t qualify for the exemption.

“This should be a straightforward case,” Michael Parks, Stroble’s attorney, told the court. “Under controlling principles of both state and federal law, Oklahoma has no power to tax the income of Creek citizens who, like Miss Stroble, both reside and earn their income within their nation’s reservation.”

An attorney for the Oklahoma Tax Commission told the court that the state exempts people from state income tax when they live on either formal or informal reservations but that Stroble’s situation doesn’t meet either definition.

Kannon Shanmugam told the court Stroble clearly doesn’t live on an informal reservation, which he described as either land held in trust for a tribe by the U.S. government or owned by the tribe.

Stroble lives on privately owned land, not land owned by a tribe or land held in trust, sometimes referred to as “fee land.”

While she lives in Okmulgee County within the historical boundaries of the Muscogee Nation reservation as reaffirmed by the U.S. Supreme Court’s McGirt ruling, Shanmugam said the state Tax Commission does not recognize it as a formal reservation for tax exemption purposes.

Attorneys for Stroble and the Muscogee Nation countered that her residence is located on a formal reservation and should be granted the exemption.

Riyaz Kanji, an attorney for the Muscogee Nation, told the court that since 1993 the law has been clear that a state can’t tax a tribal member who lives and works within the tribe’s reservation.

Kanji was referring to the U.S. Supreme Court’s 1993 decision in a case involving the Sac and Fox Nation and the Oklahoma Tax Commission.

The ruling said the state can’t tax tribal citizens who live and work within a tribe’s reservation boundaries.

In the past, the rule has applied only to those in situations such as where they live in tribal-owned housing and work for the tribe.

Kanji said the U.S. Supreme Court’s McGirt decision in 2020, which established that the Muscogee Nation reservation had never been disestablished, means Stroble is living within the tribe’s reservation, qualifying her for the tax exemption.

Justice Yvonne Kauger asked Kanji why he believed the McGirt decision applied in Stroble’s civil tax case, since the former was a criminal case based on a section of federal law.

Kanji said the McGirt ruling extends beyond criminal cases and quoted from the McGirt decision itself to back his claim.

“Once you have a reservation, various principles flow from that,” Kanji said.

He answered “yes” when asked by Vice Chief Justice Dustin Rowe whether he thought the favorable ruling for Stroble could be applied to “all of eastern Oklahoma.”

But Kanji said he didn’t believe that McGirt applies to all tax situations.

He said he believes that a tribal citizen would be still required to pay property taxes on privately owned land within the Muscogee Nation reservation.

Kanji said he believes that tribal members living on reservations other than their tribe’s would be required to pay state income taxes, too.

While both sides agreed that a ruling for Stroble would cost the state millions of dollars in income taxes, they disagreed on the impact.

Kanji said the state is in good financial condition, noting that Gov. Kevin Stitt, who has been critical of the McGirt ruling, has called a special session so the state Legislature can address the governor’s proposed tax cuts.

Meanwhile, Shanmugam said the latest numbers from the Tax Commission estimate that a ruling for Stroble would cost the state an estimated $75.3 million per year if it applied to eastern Oklahoma’s traditional Five Tribes: Muscogee, Cherokee, Chickasaw, Choctaw and Seminole.

Since the McGirt ruling, the Tax Commission has fielded 11,855 requests for tax exemptions similar to Stroble’s, Shanmugam said.

He could not provide a figure for how many received the exemption prior to the McGirt ruling. Justice Noma Gurich said it seemed “unusual” to her that the Tax Commission could not provide a figure representing the number of exemptions approved prior to McGirt.

Muscogee Nation Principal Chief David Hill said after the hearing that the issue of the state’s not taxing tribal citizens when they live and work within the reservation has been settled for decades.

“But the state of Oklahoma has chosen to ignore this law,” Hill said. “It should concern every citizen of Oklahoma that the state feels like it can pick and choose when to follow the law.

“Today it is Alicia Stroble. Tomorrow it will be someone else.”

A ruling is not expected for several months.

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