PS 01425.055 Wisconsin
A. PS 00-264 Propriety of Considering HoChunk Tribe Per Capita Distributions of Gambling Casino Revenues in Determining Eligibility for SSI
DATE: April 15, 1996
Profits from the HoChunk Casino in Wisconsin that are distributed per capita to members of the HoChunk Tribe of Native Americans are considered income when determining SSI eligibility. Funds held in trust by the Secretary of the Interior for an Indian tribe and distributed per capita to members of that tribe are excluded from SSI income. Because the Secretary of the Interior does not hold in trust for the HoChunk Tribe the profits of the HoChunk Casino, the income is counted when determining SSI eligibility.
Members of the HoChunk Tribe of Native Americans/ (Tribe) receive per capita distributions of revenue produced by gambling casinos that the Tribe owns and operates. You have asked our opinion whether these distributions are properly considered income when determining Tribe members' eligibility for Supplemental Security Income (SSI) benefits. For the reasons set out below, our opinion is that these distributions of gambling casino revenues are properly considered in determining the SSI eligibility.
We understand the facts as follows: The Tribe owns and operates the HoChunk Casino at Lake Delton, Wisconsin on land held by the federal government in trust for the Tribe. The Tribe has distributed on a per capita basis a portion of the casino profits to individual members of the Tribe. Adjudicators at the initial and reconsideration level considered those payments as income when they determined that Tribe members exceeded SSI income eligibility levels during specified months, and consequently were overpaid benefits. This determination was consistent with POMS SI 00830.830C3, which refers to tribally managed gaming revenues as funds not held in trust by the Secretary of the Interior. This position is disputed by some SSI beneficiaries who are members of the Tribe and recipients of the per capita casino revenue distributions (hereinafter the "recipients"). They cite 25 U.S.C. §§ 117a, 117b, and 1407 as prohibiting adjudicators from considering per capita payments from gaming revenue of $2,000 or less per year, in determining their eligibility for SSI.
Federal statutes originally provided that only the Secretary of the Interior (Secretary), and federal officials officially designated by the Secretary, were authorized to make per capita distributions of trust property to tribal members. Public Law 98-64 instituted a change in that policy, allowing tribes to make per capita payments directly to tribal members. Those provisions are codified at 25 U.S.C.A. §§ 117a and 117b, which provide in relevant part:
§ 117a. Per capita distribution of funds to tribe members
Funds which are held in trust by the Secretary of the Interior (hereinafter referred to as the "Secretary") for an Indian tribe and which are to be distributed per capita to members of that tribe may be so distributed by either the Secretary or, at the request of the governing body of the tribe and subject to the approval of the Secretary, the tribe....
§ 117b. Distribution of funds
(a) Previous contractual obligations
Funds distributed under sections 117a to 117c of this title shall not be liable for the payment of previously contracted obligations except as may be provided by the governing body of the tribe and distributions of such funds shall be subject to the provisions of section 7 of the Act of October 19, 1973 (87 Stat. 466), as amended [25 U.S.C.A. § 1407].
The "Act of October 19, 1973 (87 Stat. 466)" is Public Law 93-134, which is codified in chapter 16 of Title 25 of the U.S. Code, and appears at 25 U.S.C.A. § 1401 et seq. The short title of chapter 16 is the "Indian Tribal Judgment Funds Use or Distribution Act." Section 7 of the Indian Tribal Judgment Funds Use or Distribution Act (hereafter Judgment Funds Distribution Act), 25 U.S.C.A. § 1407, governs the exclusion of per capita distributions of tribal judgment funds as income or resources under Federal or federally assisted programs. Specifically, this section provides:
§ 1407. Tax exemption; resources exemption limitation
None of the funds which -- (1) are distributed per capita or held in trust pursuant to a plan approved under the provisions of this chapter, or (2) on January 12, 1983, are to be distributed per capita or are held in trust pursuant to a plan approved by the Congress prior to January 12, 1983, or (3) were distributed pursuant to a plan approved by Congress after December 31, 1981 but prior to January 12, 1983, and any purchases made with such funds, including all interest and investment income accrued thereon while such funds are so held in trust, shall be subject to Federal or State income taxes, nor shall such funds nor their availability be considered as income or resources nor otherwise utilized as the basis for denying or reducing the financial assistance or other benefits to which such household or member would otherwise be entitled under the Social Security Act [42 U.S.C.A. § 301 et seq.] or, except for per capita shares in excess of $2,000, any Federal or federally assisted program.
25 U.S.C. § 1407 (emphasis added).
20 C.F.R. § 416.1124 provides that "[s]ome Federal laws other than the Social Security Act provide that we cannot count some of your unearned income for SSI purposes. We list the laws and the exclusions in the appendix to this subpart which we update periodically." 20 C.F.R. Part 416, Subpart K, Appendix at IV(h) provides, in relevant part, that "[a]ll funds held in trust by the Secretary of the Interior for an Indian tribe and distributed per capita to a member of that tribe are excluded from income under Public Law 98-64 (25 U.S.C. 117b)."
Under the recipients' theory, profits from the HoChunk Casino are "funds which are held in trust by the Secretary of the Interior for an Indian tribe" in accordance with 25 U.S.C.A. § 117a. Section 117b provides that the distribution of the funds described in section 117a shall be subject to the provisions of 25 U.S.C.A. § 1407. They assert that section 1407 applies to the per capita distributions of HoChunk Casino profits they received, and precludes consideration of the first $2,000 in per capita distributions in determining their eligibility for SSI. We believe the recipients' argument is erroneous.
Recipients have cited no authorizing document, such as a statute, regulation, or treaty, that empowers the Secretary to hold tribal gaming revenues in trust for an Indian tribe. The Secretary does not cooperate with the Secretary of the Treasury to invest HoChunk Casino profits, as 25 U.S.C.A. § 161a(a) would require him to do if the Secretary in fact held the profits in trust for the Tribe. We contacted officials with the Bureau of Indian Affairs who confirmed that Tribal gaming revenues are never deposited into a trust account controlled by the Secretary or any other Federal officer, and that other than requiring the Tribe to submit and to adhere to a Per Capita Revenue Sharing Plan, the Secretary does not control the per capita distribution of those revenues to individual members of the Tribe.
Despite the fact that the Secretary never actually "holds in trust" any of the HoChunk Casino profits, the recipients argue that an implied trust is created by the Secretary's role in regulating Indian gaming, together with the Secretary's general fiduciary obligations to Indian tribes. We believe the recipients' arguments are not well supported.
The Department of the Interior was granted authority to regulate Indian gaming under the Indian Gaming Regulatory Act (IGRA), Public Law 100-497, October 17, 1988, 102 Stat 2467 (codified at 25 U.S.C.A. § 2701 et seq.). The Tenth Circuit Court of Appeals included a concise, thorough overview of IGRA in its decision in Ponca Tribe of Oklahoma v. State of Oklahoma, 37 F.3d 1422 (10th Cir. 1994):
In response to the proliferation of Indian gaming operations in the early 1980s, Congress enacted IGRA in 1988 to establish a comprehensive regulatory framework for gaming activities on Indian lands. IGRA seeks to balance the interests of tribal governments, the states, and the federal government. First, IGRA aims "to provide a statutory basis for the operation of gaming by Indian tribes as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments." 25 U.S.C. § 2702(1). Concurrently, the statute contemplates a regulatory and supervisory role for the states and the federal government to prevent the infiltration of "organized crime and other corrupting influences." 25 U.S.C. § 2702(2). See S.Rep. No. 446, 100th Cong., 2d Sess. 1-3 (1988), reprinted in 1988 U.S.C.C.A.N. 3071, 3071-73.
IGRA creates a three-tiered classification of gaming operations and provides varying degrees of federal, state, and tribal regulation over each class. Class I gaming, over which Indian tribes exercise exclusive regulatory control, consists of social games for minimal prizes or as part of tribal ceremonies or celebrations. 25 U.S.C. §§ 2703(6) & 2710(a)(1). Class II gaming includes "bingo...pull tabs, lotto, punch boards, tip jars, instant bingo, and other games similar to bingo" and non-banking card games. 25 U.S.C. § 2703(7). [footnote omitted] Indian tribes may only engage in, license, and regulate Class II gaming if the state in which the gaming is located permits such forms of gaming. 25 U.S.C. § 2710(b)(1). So long as the state permits such gaming, the Indian tribes maintain regulatory jurisdiction over Class II gaming subject to the supervision of the National Indian Gaming Commission (an entity within the department of the Interior). 25 U.S.C. §§ 2710(a)(2) & 2704(a).
Class III gaming includes all forms of gaming not named in Classes I and II (e.g. banking card games, slot machines, casinos, horse and dog racing, and jai-alai). 25 U.S.C. § 2703(8); S.Rep. No. 446, 100th Cong., 2d Sess. 7 (1988), reprinted in 1988 U.S.C.C.A.N. 3071, 3077. Pursuant to § 2710(d)(1), Class III gaming activities are lawful on Indian lands only if the gaming is: (1) authorized by a tribal ordinance approved by the tribe's Chairman; (2) located in a state that permits such gaming; and (3) conducted in conformance with a compact between the Indian tribe and the state.
37 F.3d at 1425.
The HoChunk Casino engages in Class III gaming pursuant to a compact between the Tribe and the State of Wisconsin./ In accordance with 25 U.S.C.A. §§ 2710(b)(3) and 2710(d)(2)(A), the Tribe must satisfy certain requirements in making per capita distributions of net revenues from Indian gaming activities.
(3) Net revenues from any class II [or III] gaming activities conducted or licensed by any Indian tribe may be used to make per capita payments to members of the Indian tribe only if --
(A) the Indian tribe has prepared a plan to allocate revenues to uses authorized by paragraph (2)(B) [i.e., to fund tribal government operations or programs; to provide for the general welfare of the Indian tribe and its members; to promote tribal economic development; to donate to charitable organizations; or to help fund operations of local government agencies];
(B) the plan is approved by the Secretary as adequate, particularly with respect to uses described in clause (i) or (iii) of paragraph (2)(B) [i.e., to fund tribal government operations or programs, or to promote tribal economic development];
(C) the interests of minors and other legally incompetent persons who are entitled to receive any of the per capita payments are protected and preserved and the per capita payments are disbursed to the parents or legal guardian of such minors or legal incompetents in such amounts as may be necessary for the health, education, or welfare, of the minor or other legally incompetent person under a plan approved by the Secretary and the governing body of the Indian tribe; and
(D) the per capita payments are subject to Federal taxation and tribes notify members of such tax liability when payments are made.
25 U.S.C.A. § 2710(b)(3).
We contacted officials within the Bureau of Indian Affairs who confirmed that the Secretary has approved the Per Capital Revenue Sharing Plan submitted by the HoChunk tribe in accordance with 25 U.S.C.A. §§ 2710(b)(3) and 2710(d)(2)(A).
The recipients argue that the IGRA grants to the Secretary a degree of oversight of Indian gaming, and particularly the distribution of gaming revenues, so extensive that the Secretary should be found to implicitly "hold in trust" the HoChunk casino profits used to make the per capita distributions in question. Essentially, the recipients assert that in regulating distribution, the Secretary effectively "holds" the gaming revenues, and that in protecting the interests of minors and other legally incompetent persons, the Secretary is acting as a trustee. We do not believe recipients accurately represent the legal role granted to the Secretary with regard to Tribal gaming revenue distribution.
In United States v. Mitchell, 463 U.S. 206 (1983) (Mitchell II), the Supreme Court found that the Secretary of the Interior played a "pervasive role in the sales of timber from Indian lands". 463 U.S. at 219. Congress imposed strict duties upon the Secretary with respect to Indian timber management, such that the Department of the Interior--through the Bureau of Indian Affairs--"'exercise[d] literally daily supervision over the harvesting and management of tribal timber.' (citation omitted) Virtually every stage of the process is under federal control. [footnote 24: The Secretary even has authority to invest tribal and individual Indian funds held in trust in banks, bonds, notes, or other public debt obligations....]" 463 U.S. at 222. Accordingly, the Supreme Court found a trust relationship to exist, and declared the Secretary to owe a fiduciary duty to the tribe whose lands it managed with regard to the harvest and sale of timber. 463 U.S. at 226.
Other cases that have identified the Secretary of the Interior as a trustee have done so with regard to the sale of goods harvested from Indian lands, including timber (Navajo Tribe of Indians v. United States, 624 F.2d 981 (Ct. Cl. 1980)), fossils (Black Hills Institute v. South Dakota School of Mines and Technology, 12 F.3d 737 (8th Cir. 1993)), minerals (Leahy v. State Treasurer, 297 U.S. 420 (1936)), and water (Pyramid Lake v. United States, 354 F.Supp. 252 (D.D.C. 1973) (subsequent history omitted)). In each of those cases, the profits arose directly out of the land that the Secretary held in trust for the tribes. While the Seventh Circuit Court of Appeals has suggested in dictum that casino revenues arise from the use of the land, U.S. ex rel. Mosay v. Buffalo Brothers Management Co., 20 F.3d 739, 742 (7th Cir. 1994), no direct link exists between the land and the HoChunk Casino profits as in the case of timber, minerals, and water./ We believe this is an important distinction.
Because the recipients argue that the Secretary is acting as a trustee, it is useful to examine some of the functions typical of a trustee and compare them to the Secretary's role with regard to the HoChunk Casino profits. A trustee has a duty to take possession of trust property as soon as is reasonably possible after he has become trustee. Restatement (Second) of Trusts, §§ 175, 177. As discussed above, the Secretary never takes possession of the HoChunk Casino profits. A trustee traditionally identifies and notifies trust beneficiaries. Rogers v. United States, 697 F.2d 886, 890 (9th Cir. 1983). Based upon the information available to us, it appears that the Secretary has no role in notifying members of the HoChunk Tribe of their eligibility for per capita payments from the Tribe's casino revenues. In accordance with the general rule that a trustee is obligated to manage the corpus of the trust to preserve and enlarge it, Restatement (Second) of Trusts, §§ 176, 181, 379, Congress directed the Secretary of the Interior to cooperate with the Secretary of the Treasury to invest all funds held in trust by the United States for Indian tribes, 25 U.S.C.A. § 161a. The Secretary does not control the investment of the profits of the HoChunk Casino.
The Tribe, and not the Secretary, decides if, when, and in what amount it will make per capita distribution of casino revenues. The Secretary's role is restricted to determining whether the plan comports with Congress' edicts with regard to the purposes for which Indian gaming revenues may be used, and to approving (with the governing body of the Tribe) a plan for protection of the interests of minors and other legally incompetent persons by disbursing the per capita payments to parents or legal guardians. Thus, not even with regard to minors and legal incompetents does the Secretary assume the role of trustee; that role is reserved for individuals or for the Tribe.
In our view, the Secretary's role with regard to the per capita distributions of HoChunk Casino profits is analogous to the role of a court supervising the conduct of a trustee. As discussed above, the Tribe has the duty and the power to invest and distribute the Casino profits; the Secretary merely supervises the process to ensure that the provisions of the IGRA are followed, just as a court would supervise the actions of a trustee to ensure that he acted in accordance with the terms of the trust and with prevailing law. The Tribe must provide to the National Indian Gaming Commission an annual audit of the gaming revenues and certain related expenses, just as a trustee may be obligated to render an accounting to a supervising court. Just as a trustee may lease real property held in trust and arrange for the management of the property, the Tribe may issue licenses to conduct gaming activity on Tribal lands and enter into management agreements for the operation of gaming activity. 25 U.S.C.A. § 2710(b)-(d). The Secretary has no authority to enter into gaming management contracts on behalf of the Tribe, nor can he issue gaming licenses. Further, the Tribe could not conduct class III casino-style gaming without entering into a compact with the State of Wisconsin, which regulates class III gaming together with the Tribe according to the terms of the compact. The Secretary's role in that regard is quite limited.
For the reasons stated above, we believe that the Secretary of the Interior does not "hold in trust" for the HoChunk Tribe the profits of the HoChunk Casino. While the general relationship between the Government and the Tribe involves some aspects of the trustee-beneficiary relationship, we do not believe that a trust is created by the Secretary's supervisory role with regard to the distribution of HoChunk Casino profits. We believe the better supported position is that all per capita distributions of gambling casino revenues are properly considered in determining the SSI eligibility of members of the HoChunk Tribe.