Miccosukees lose $1 billion bet with IRS

More than 50 years after U.S. recognition as a tribe, and more than 25 years after collecting its first dollar via gambling, the steadfastly independent Miccosukee Tribe of Florida is finally approaching a day of reckoning: paying up on $1 billion in taxes that tribal members have dodged for decades.

Like almost 240 Native American tribes across the United States, the Miccosukees operate a casino. But unlike every other tribe, the Miccosukees, in west Miami-Dade County, have claimed that the revenues distributed to tribal members are exempt from income taxes. That claim is despite a federal law passed in 1988 to address Native American casino operations.

Almost everyone familiar with the case shakes their head at the Miccosukees’ belligerence, saying that tribal leaders know they’ve been holding a ticking time bomb.

On Aug. 19, U.S. District Judge Cecilia Altonaga ruled a tribal member must pay $278,758 in taxes, interest and penalties to the Internal Revenue Service after she failed to file a 2001 return. The decision provides the IRS power to compel other tribal members to pay personal income taxes on casino gaming distributions dating back more than a decade, attorneys said.

The Miccosukees’ stand hasn’t changed since they opened a bingo hall in 1990 (the casino opened in 1999). They claim their operation doesn’t have to follow U.S. tax rules.

Tribal leader Billy Cypress stonewalled the IRS when he led the tribe from 1995 to 2009, when he was removed and accused of swindling $26 million in casino revenues. When rival Colley Billie took over as leader, he began properly withholding taxes on tribal members’ checks.

What’d that get him? Ousted! Billie was impeached last November, and Cypress came back into power — pledging to keep taxes from going to the U.S. government.

The Miccosukees are the lesser-known tribe in Florida, having broken off from the Seminole Tribe. The Seminoles now operate seven casinos and paid more than $1 billion to the state over five years to offer blackjack and other table games. The Miccosukees — here comes that steadfast sovereign thing again — have chosen not to enter an agreement with the state.

I estimate the tribe’s annual slot revenues at $72 million to $106 million. (That’s taking the weakest of the four Miami-Dade casinos as the low end, and the county average of $182 per machine times the tribe’s 1,600 machines as the high end.) Properly, the Miccosukees pay no state taxes on their slot revenues, while racetrack casinos pay 35 percent to the state, so the Miccosukee bottom line is likely the best in the county.

Reports say each of 600 tribal members receives $120,000 to $160,000 annually as a share of the casino profits, which the government has always said is taxable. That position was cemented by the Indian Gaming Regulatory Act (IGRA) of 1988. Among the spending priorities in IGRA are funding tribal government programs and the general welfare of the tribe — taking care of everyone. If those needs are met, a tribe can then distribute annual payments to tribal members. But the tribe must have a Revenue Allocation Plan, which is approved by the Secretary of the Interior. Guess which tribe refuses to do that?

So, what happens next? Long-term, the IRS could place a lien on casino revenues, or the feds could flat-out shut the place down. Wouldn’t that make for some compelling video?

Why do we care? Well, $1 billion sure could help some federal program purged because of budget cuts. And that $1 billion not being properly recycled is money bet by all casino visitors, not just tribal members. Thinking of the tribe pocketing an unfair amount of our cash should, I hope, puncture any romanticized vision of stoic tribal members holding out against The Man.

Nick Sortal writes about gambling weekly for The Miami Herald's Weekend section.