Oklahoma Supreme Court Agrees to Hear Tax Dispute on Indian Lands, Won’t Hear Governor’s Challenge to Legislature’s Ability to Extend Tribal Compacts

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By Darren Thompson

October 20, 2023

On Thursday, Oklahoma’s Supreme Court agreed to hear oral arguments in a tax case that challenges whether tribal citizens must pay state taxes on reestablished tribal lands. 

Arguments for Alicia Stroble v. Oklahoma Tax Commission are set for January 17, 2024, and there is intense interest on the issue, as Oklahoma’s highest court will hear if the state can tax tribal citizens who live and work in Indian Country.

The case challenges whether or not Stroble, a Muscogee Nation tribal citizen, must pay state income taxes to Oklahoma, when she works for her tribe and lives on the Muscogee Creek Nation lands re established after the 2010 McGirt v. Oklahoma Supreme Court ruling. The ruling recognized that the Muscogee reservation still exists and Oklahoma’s criminal. With the decision civil jurisdiction on tribal lands has shifted. 

Oklahoma Governor Kevin Stitt, an enrolled Cherokee Nation of Oklahoma citizen, has challenged the case saying that if the court sides with Stroble it will overwhelm the state with tax waiver requests from tribal citizens after the 2020 McGirt ruling. The Oklahoma Tax Commission denied Stroble’s tribal income exemptions in 2017, 2018, and 2019 and used Gov. Stitt’s instructions to state agencies that the McGirt ruling only applied to matters of criminal jurisdiction, and not civil. The Muscogee (Creek) Nation and the Seminole Nation of Oklahoma argue that the U.S. Supreme Court decision in McGirt v. Oklahoma applies beyond criminal jurisdiction and to elements of civil law. They say that the McGirt decision applies to state taxation matters.

Since the McGirt ruling, tribal citizens from Muscogee, Cherokee, Chickasaw, Choctaw, Seminole, Quapaw, Ottawa, and Peoria nations say that their reservations are now Indian Country and exempt from paying state income tax. Tribal and non-tribal businesses operating in Indian Country are not required to collect sales taxes on purchases made by tribal members.

Stitt has tried to prevent all eight Indian reservations from tax exemptions. 

Last month, Stitt asked the state legislature to pass a trigger law that would eliminate state income tax for everyone if the supreme court ruled in favor of Stroble. The effort wasn't taken seriously and no official action has been taken.

Earlier this week, the Oklahoma Supreme Court refused to hear a case brought on by the Oklahoma Council of Public Affairs (OCPA) challenging tribal compacts. The OCPA challenged House Speaker Charles McCall and Senate President Pro Tem Greg Treat, and whether or not they violated state law when they voted to extend tribal tobacco compacts. 

Gov. Stitt also filed suit against McCall and Treat, alleging that only he has the authority to negotiate compacts with Indian tribes, and not lawmakers. The Oklahoma Supreme Court scheduled oral arguments for Stitt's case against the lawmakers for December 7, 2023.

Earlier this summer, in July, Oklahoma Attorney General Gentner Drummond sent a letter to Gov. Stitt, saying he would take over compact negotiations with Oklahoma’s tribal nations. In his letter, Drummond wrote, “Oklahoma's relationship with our tribal partners has suffered greatly as a result of your divisive rhetoric and refusal to follow the law. The citizens you were elected to serve are the ones who suffer from this irresponsible approach.”

In his response to Drummond’s attempt to take over negotiations, Stitt maitained the attorney general doesn't have authority to take over lawsuit or compact negotiations with tribal governments. Compacts with tribes determine the payments tribal nations make to the state from Indian gaming operations in Oklahoma.

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