Kerr-McGee Corp. v. Navajo Tribe of Indians
Headline: Court upholds Navajo Nation’s power to tax business operations and leasehold interests without prior Interior Department approval, allowing tribes to collect taxes from non‑Indian companies on reservation lands.
Holding: The Court held that the Navajo Tribe may impose and enforce its business and possessory-interest taxes on tribal lands without prior approval from the Secretary of the Interior because no federal law requires such approval.
- Allows tribes to tax non-Indian businesses operating on reservation land.
- Lets Navajo collect possessory-interest (3%) and business-activity (5%) taxes on reservation activity.
- Reduces need for Interior Department approval of tribal tax laws.
Summary
Background
In 1978 the Navajo Tribal Council passed two taxes: a 3% Possessory Interest Tax on the value of leasehold interests and a 5% Business Activity Tax on receipts from goods produced or services sold within the Navajo Nation. The laws apply to both Navajo and non-Indian businesses and provide appeals inside the tribal court system. A large mineral lessee on the reservation sued before any taxes were collected, arguing the Tribe needed approval from the Secretary of the Interior; a federal district court blocked the taxes, but the Ninth Circuit reversed and the Supreme Court agreed to review the question.
Reasoning
The central question was whether Congress has required that the Secretary of the Interior approve tribal tax laws before they take effect. The Court explained that tribes have an inherent power to tax as part of self-government and surveyed several federal statutes. It found nothing in the Indian Reorganization Act or the Indian Mineral Leasing Act that mandates Secretarial approval of tribal taxes. The Secretary’s choice not to review such taxes, and the lack of a clear congressional command, meant the Court would not impose a supervisory duty on the Interior Department. The Court therefore affirmed the Ninth Circuit: the Navajo Tribe may enact and enforce its taxes without prior Secretary approval.
Real world impact
The decision lets the Navajo Nation and similar tribes collect taxes on economic activity on reservation lands, including from non‑Indian businesses and mineral lessees. It reinforces tribal fiscal independence and reduces the need for Interior Department sign‑off before tribal taxes take effect.
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