The Internal Revenue Service has slammed the Miccosukee Indians with a bill of $170 million for the West Miami-Dade tribe’s failure to report and withhold taxes from its distribution of gambling profits to tribal members, according to court records.
In a long-running battle, the IRS also has smacked hundreds of the tribe’s members with separate bills totaling $58 million for their failure to pay personal income taxes on those distributions during the same period, 2000 to 2005, records show.
The agency’s crackdown comes after years of fighting with the 600-member tribe over its refusal to pay taxes on the distribution of profits from its casino operation off the Tamiami Trail. The assessments for back taxes, interest and penalties, outlined in federal tax lien notices filed in Miami-Dade Circuit Court, reveal for the first time the sheer scope of the tribe’s tax problems with the IRS.
Without the extras, the tribe’s withholding taxes alone for 2000 to 2005 totaled $45 million, and individual members’ taxes amounted to $30 million for that period, according to the tax liens.
The tax obligations of the tribe and its members are expected to soar because IRS examiners also are auditing the Miccosukee’s gambling distributions for the years 2006-2010, when payouts to each member were as high as $160,000 annually.
Despite the audits, the Miccosukee Tribe continues to argue that it does not have to withhold taxes on the gaming distributions and that individual members do not have to pay taxes on the income derived from the Miccosukee’s bingo-style slot machines and poker.
“The Miccosukee people will continue to pay all applicable lawful taxes, as they always have, and we will continue our efforts to find a fair and workable solution to this dispute,’’ Chairman Colley Billie wrote in a statement to The Miami Herald Tuesday.
“The Miccosukee people, however, will not be intimidated or coerced by these tax liens into surrendering tribal sovereignty or principles for which so many of our ancestors have paid a very high price in blood, lives, and tears.’’
The tribe’s general counsel, Bernardo Roman III, wrote the IRS in 2011 that “the distributions at issue are not subject to federal income taxation and therefore not subject to federal reporting and withholding under applicable Supreme Court precedent.”
According to federal law, the Miccosukee Tribe’s status as a sovereign nation means the entity itself is not subject to taxes. But once the tribe distributes profits from its casino to members, they are individually responsible for reporting and paying income taxes on their annual tax returns, several legal experts say. Moreover, the tribe itself must withhold taxes on the income and turn those deductions over to the IRS.
Experts say those requirements are spelled out clearly in the 1988 Indian Gaming Regulatory Act and in the IRS tax code. David Garvin, a prominent Miami defense attorney and CPA, said that the Miccosukee Tribe is going to lose the battle.
“Ultimately, reality will set in and, ultimately, taxes will be paid,” Garvin said. “I think they have kicked the can a little bit down the road, but the problem is the number is going to increase substantially when the next round of years hits. … It’s a little perplexing that the tribe continues with their old ways of not paying their taxes.”