The Miccosukee Tribe has been dealt another devastating blow in its marathon legal battle with the U.S. government over failure to report and withhold taxes on hundreds of millions of dollars in casino income distributed to tribal members.
A federal appeals court ruled Monday that Miccosukee Chairman Colley Billie must answer Internal Revenue Service demands for records showing more than $300 million in gaming distributions to 600 members of the West Miami-Dade tribe over a five-year period. That averages out to roughly $100,000 for each member annually.
The 11th Circuit Court of Appeals in Atlanta said that the tribe’s claim of sovereign immunity does not protect Billie from having to turn over those records for 2000 to 2005 to a “superior sovereign,” the U.S. government. In a new claim, the tribe also argued that the casino distributions are “general welfare payments” under a 2014 law passed by Congress and therefore are not taxable — but the appeals court sharply disagreed.
The three-judge panel found that “there is a high likelihood the present payments would not qualify as ‘general welfare payments,’’’ which are traditionally for housing, healthcare and education. Moreover, the panel ruled that much of the new law “at least arguably conflicts with separate U.S. Code provisions that mandate reporting, withholding and taxation of distributions of tribal gaming revenue.”
The appellate court’s decision reinforces a previous ruling that ordered the tribe’s financial service companies — American Express, Citibank, Morgan Stanley and Wachovia Bank — to turn over casino distribution records to the IRS.
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 2006 to 2014, when payouts to each member were sometimes as high as $160,000 annually.
Despite IRS 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.
Billie, who has been chairman since 2010, could not be reached for comment Tuesday. The tribe’s general counsel, Bernardo Roman, was recently fired. The South Florida law firm, Gunster, which defended the tribe in a major dispute with its previous lawyers, declined to comment.
The IRS has been fighting with the tribe for years over its refusal to pay taxes on the distribution of profits from its casino operation off of Tamiami Trail. The assessments for back taxes, interest and penalties, outlined in federal tax lien notices filed in Miami-Dade Circuit Court two years ago, revealed for the first time the scope of the tribe's tax problems with the IRS.
Frustrated with the tribe’s stubborn stand, the IRS slammed the Miccosukee Indians with a bill of $170 million for the tribe's failure to report and withhold taxes from its distribution of gambling profits from 2000 to 2005, according to court records.
The IRS also 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, records show.