As the law now stands, it is the conclusion of the Department that section 3 of the act of June 9, 1916, is clearly irreconcilable and in conflict with section 1 of the act of August 28, 1937, and the mineral land laws are no longer applicable to the lands classified under that section; that if, perchance, certain lands classified as more valuable for agriculture than for timber under section 3 of said act are in fact more valuable for mineral than for agriculture, and not subject to disposition as provided for in that section, such lands are subject to location, entry and purchase under the mining laws in accordance with section 3 of the act of June 9, 1916. OSCAR L. CHAPMAN, APPLICATION OF FEDERAL LICENSE TAXES TO NATIVE Opinion, August 27, 1941 FEDERAL LICENSE TAXES ON OCCUPATIONS IN ALASKA-APPLICATION TO NATIVE CORPORATIONS-ALASKA INDIAN REORGANIZATION ACT-TERRITORIAL LICENSE TAXES. Native corporations organized under the Alaska Indian Reorganization Act which undertake to engage in occupations made subject to license tax by Congress, which license taxes appear as sections 259 and 2569 of the 1913 Compiled Laws of Alaska, are subject to such license taxes, but no liability is recognized by this opinion for such additional license taxes as may be imposed by the Territory of Alaska. FLANERY, Acting Solicitor: My opinion has been requested by the Indian Office on the question whether native corporations in Alaska organized pursuant to the Indian Reorganization Act of June 18, 1934 (48 Stat. 984), as extended to the Territory of Alaska by the act of May 1, 1936 (49 Stat. 1250), are subject to the license taxes called for by sections 259 and 2569 of the Compiled Laws of Alaska. These section numbers are those used in the 1913 compilation. The sections appear in the 1933 Compiled Laws of Alaska as sections 180 and 176, respectively. The facts concerning the enactment of these laws and their purpose and scope are of paramount importance to the determination of the question presented. Both the laws are acts of Congress enacted before the legislature of the Territory was created by the Organic Act of August 24, 1912 (37 Stat. 512). Section 2569 is the earlier law, being contained in section 460 of the act of March 3, 1899 (30 Stat. 1253). This statute, covering nearly 100 pages, was an act to define and punish crimes in the district of Alaska and to provide a code of criminal procedure. Section 460 provided that any person or per August 27, 1941 sons, corporation or company seeking to undertake any of the 40-odd enumerated businesses must obtain a license from the district court. Failure to obtain a license was made a misdemeanor subject to fine and imprisonment. Section 460 was amended in the act of June 6, 1900 (31 Stat. 324), being an act to create Alaska as a civil and judicial district. There was no change in that part of the section which levied a license tax upon the occupation of salmon canning. The proceeds from these licenses were to be accounted for to the United States Treasury and divided between the expenses of the district courts and the schools in Alaska. Subsequent modifications provided that all the proceeds from licenses in incorporated towns were to be turned back to the towns for school and other public purposes and half of all the proceeds from licenses outside incorporated towns were to be designated by the United States Treasury for use by the Secretary of the Interior for school purposes. The remaining one-half apparently continued to be used for court purposes. Section 259 was enacted as section 1 of the act of June 26, 1906 (34 Stat. 478), and is now codified as section 230 of title 48 of the United States Code. The section provides for a license tax on canning fish to be applied in lieu of all other taxes. It exempts only private salmon hatcheries to the extent that such hatcheries liberate salmon fry. Payment and collection of the taxes are to be made as provided for taxes collected under section 2569. The section was part of a comprehensive statute for the regulation of fishing in Alaska which appears in sections 221 to 247 of title 48 of the Code. Sections 2569 and 259 have been the subject of various judicial opinions which have formulated certain relevant conclusions respecting these sections. Section 2569 was held to be a revenue measure adopted by Congress as a means of obtaining funds from Alaska for the administration by the Federal Government of the civil government in Alaska by a method appropriate to the peculiar conditions existing there at that time. There was no general taxation system in the district of Alaska. Binns v. United States, 194 U. S. 486 (1904); In re C. E. Wynn-Johnson, 1 Alaska 630 (1902), aff'd 194 U. S. 496 (1904). Section 259 was held to have superseded so much of section 2569 as related to licenses for the operation of fish canneries. This section also was found to be a revenue measure although appearing as part of regulatory laws on fishing. It was further held that the legislature of the Territory after the enactment of the organic act was privileged to supplement the taxes levied by Congress by imposing additional license taxes for the operation of fish canneries, so long as such additional taxes were not so unreasonable as to deny the privilege of carrying on the occupations licensed by Congress. Alaska Fish Salt ing & By-Products Co. v. Smith, 255 U. S. 44 (1921); Alaska Pacific Fisheries v. Territory of Alaska, 236 Fed. 52 (C. C. A. 9, 1916), cert. den. 242 U. S. 648; Auk Bay Salmon Canning Co. v. United States, 300 Fed. 907 (C. C. A. 9, 1924): Freeman v. Smith, 62 F. (2d) 291 (C. C. A. 9, 1932). In view of the fact that these license tax laws were enacted by Congress thirty years before the passage of the Indian Reorganization Act and its extension to Alaska, there is no occasion for speculation as to the application of these tax laws intended by Congress to the Indian corporations. It is possible, however, to determine whether the tax laws applied to the natives and their associations at the time the laws were passed and whether Congress intended to exempt native corporations from these Federal taxes through authorizing their organization under the Indian Reorganization Act. The 1899, 1900 and 1906 statutes were broad enough to include enterprises engaged in by any person. As pointed out in the case of United States v. Schmidt, 5 Alaska 675 (1917), the license tax is one placed upon occupations and not upon any class of persons. There is no doubt that the rest of the criminal code established in the 1899 act and of the fishing regulations in the 1906 act applied equally to natives as to other persons in Alaska. Only one distinction is made in the criminal code between natives and other persons and that was with respect to the sale of liquor (secs. 464 and 466). The 1900 act singled out the natives only to provide for protection of the lands in their occupancy. The presence of the distinctions in these particulars indicates that Congress had the natives in mind and intended the other provisions to apply to them. The proceeds from the license taxes were as much for the benefit of the Indians as other persons, particularly with respect to the funds set aside for the use of the Secretary of the Interior for school purposes, since the Secretary of the Interior was charged with the duty of providing schools for the natives (Handbook of Federal Indian Law, ch. 27, pp. 24-27).* The Clerk of the United States District Court at Juneau reported in a letter of June 1, 1938. that the Indian community of Hydaburg, being an incorporated town, received regularly all license taxes obtained within the town. The question is, therefore, whether the organization of groups of Indians having a common bond of occupation or association or residence and their incorporation by a Federal charter under the Alaska Indian Reorganization Act ipso facto exempts them from these Federal license taxes which otherwise apply to them. It is my opinion that such organization and incorporation do not exempt them from the application of Federal laws or the obligation of Federal occupation taxes. The Federal charters authorize these corporations to engage *Ch. 21, pp. 406-407, of the 1942 edition. [Editor.] August 27, 1941 in any enterprise for their economic welfare, but only such enterprises as are not inconsistent with law, and subject to any restrictions in the Constitution and laws of the United States. The fact that most enterprises engaged in by these corporations are and will be supervised and financed through the Indian Office does not change their legal status. There is no general exemption of Federal instrumentalities from taxation or regulation by the Federal Government. The Federal instrumentality doctrine applies to protect such instrumentalities from burdens imposed by State and territorial laws. Thus in the case of Territory of Alaska v. Annette Islands Packing Co., 289 Fed. 671 (C. C. A. 9, 1923), cert. den. 263 U. S. 708, the occupation tax levied by the Territory by virtue of its power under the organic act to impose additional license taxes to those provided by Federal law was held not to apply to a cannery operating under a lease with the Secretary of the Interior within the Annette Islands Indian Reserve, because such a cannery was a Federal instrumentality. There is a general principle that the sovereign does not tax its own property. However, this principle is not involved in the question whether a Federal corporation is subject to Federal occupation taxes. If a Federal instrumentality is exempt from Federal taxes, it must be found in the language or the intent of the particular statutes involved. On this question it would be helpful to compare the decisions of the Solicitor respecting the application of other Federal tax laws to Indian corporations. In the memorandum to the Commissioner of May 1, 1941, it was held that tribal enterprises on the Navajo Reservation were subject to the Federal social security taxes because of the removal of the exemption from such taxes of Federal instrumentalities, excepting Federal instrumentalities wholly owned by the Federal Government or exempted from taxation by other law. The same conclusion was reached with respect to the application of such taxes to Eskimo cooperative stores in Alaska, in a memorandum to the Commissioner of June 10, 1940. Before the social security law was changed and while that law exempted all Federal instrumentalities, it was held in an opinion of June 30, 1937 (M. 29156), that the taxes did not apply to tribal enterprises operating under Indian relief and rehabilitation grants. In the opinion of May 31, 1940 (57 I. D. 129), supra, it was held that the Menominee Indian mills were not liable for Federal sales taxes on gasoline purchased for the use of the mill. The chief reason for the exemption was that the Federal law exempted gas purchased for the use of the United States and the operations of the mills were considered to be operations of the United States in this respect. This opinion does, however, argue that the Department should hesitate to recognize Federal revenue, as distinguished from regulatory, laws as applying to Indian enter prises. Such hesitancy, however, is less well founded in the case of native enterprises in Alaska, since the natives have historically been governed by the general laws applying to all persons in Alaska. The recent exemption by Congress of natives and permanent white residents from certain fishing restrictions (48 U. S. C. A. secs. 232, 233) indicates that Congress specifically exempts the natives when such exemption is intended. My conclusion is that when native corporations organized under the Alaska Indian Reorganization Act undertake to engage in the occupation of fish canning or any of the other occupations specified by the Federal license law they are subject to the Federal license taxes. Nothing in this conclusion, however, should be taken to recognize the liability of such corporations for such additional license taxes as may be imposed by the Territory of Alaska. Approved: OSCAR L. CHAPMAN, Assistant Secretary. THE TEXAS COMPANY Decided September 26, 1941 OIL AND GAS-LEASE TERMS PAYMENT OF ADVANCE ROYALTIES INTERPRETATION IN THE LIGHT OF APPLICABLE REGULATIONS. Statutes and regulations affecting leases issued by the Department must be considered as part of the lease terms irrespective of whether or not they are set forth in the lease. Consequently, where an oil and gas lease does not specifically cover the status of advance royalties after production is obtained, the lease may be interpreted in the light of the applicable regulations and the prior administrative practice prevalent when the lease was issued. An oil and gas lease on restricted Indian lands did not specifically state that advance royalties were payable after production commenced, but the applicable regulations and the administrative interpretation which had been accorded to the lease terms prior to the issuance of the particular lease clearly indicated that advance royalties were payable even after production commenced. Held, that subsisting explanatory regulations and administrative practice support a holding that under the particular lease advance royalties are required after production commences. CHAPMAN, Assistant Secretary: The Texas Company has appealed from a demand by the oil and gas supervisor for payment of $211.94 as advance royalty on oil and gas lease 1-5-Ind-4901, Cut Bank Oil Field, Montana, involving restricted allotted Indian lands. The first production of oil and gas from the leased land was had in April 1934 and a small volume of petroleum was produced until September 1938, at which time all production operations were suspended. The advance royalty demanded is for the lease years 1935 |