Improper State Taxation of Reservation-Domiciled Military Servicemembers

A week before the country celebrated Independence Day, the Iowa Tribe of Oklahoma became the first Native nation to adopt an official resolution in support of restoring improperly withheld pay to eligible Native American veterans and service members.

“Historically, Native Americans serve our U.S. Military at a higher rate than any ethnic group. Ensuring the welfare of our military veterans has been a sacred tradition since the founding of this country and a promise that we must always keep. They have put their lives on the line to protect us and this country. As citizens of the Iowa Nation and as citizens of the United States, we need to fight for them like they have fought for us,” stated Janice Rowe-Kurak, Chairwoman of the Tribe.

The service and loyalty of American Indian people to the United States military was instrumental in the formation of this country and continues to be instrumental in ensuring the freedom of the United States and its citizens today. As pointed out by Chairwoman Rowe-Kurak, Native Americans have the highest rate of military service of any other ethnic group in the Nation. Nearly 16% of the Native American population aged 16 years and older are veterans. 

From the World War II era to 2001, the United States military withheld state income tax from the paychecks of Native American service members who claimed Indian land as their home. Under federal statutory law and federal legal principles related to state income taxation of Native  American individuals, Native American military service members domiciled on Indian land are exempt from state income tax on their military pay. It is believed that over the decades of  improper state income tax withholding, hundreds, if not thousands, of Native service members and veterans did not receive the full pay to which they were entitled for their committed service.  Under current law these Native service members have little if no ability to recover the money that is owed to them.

In 2001, the Department of Defense halted the practice of improperly  withholding state income tax from such Native American service members’ pay in response to a memorandum opinion issued by the U.S. Department of Justice. The Department of Justice opinion stated that federal law and federal legal principles regarding the taxation of Native American individuals preempted the withholding of state income tax from the military pay of Native service members domiciled on Indian land. The Department of Defense now employs Form 2058-2, which enables a Native service member domiciled on Indian land to voluntarily stop state income tax withholding from his military compensation. But this relatively new practice does nothing for those Native service members who were improperly taxed in years prior to 2001.

 One such veteran is Richard Adame, a member of the Prairie Band Potawatomi Nation and a retired Sergeant First Class who served 20 years in the United States Army. During the time of his service, his domicile was his family’s allotment on the Prairie Band Potawatomi reservation. Adame believes that during his tenure with the U.S. Army, 20 years’ worth of state income tax was improperly withheld from his military pay.

Adame hails from a long line of dedicated U.S. military service members. “My grandfather served in WWI before he was a citizen … he is one among many who served this country in the armed forces before citizenship was granted,” shared Adame. Adame himself served in Operation Desert Storm. Speaking about his active duty service, Adame revealed feelings that he, like nearly every veteran who has served during war time, experienced. “I cried. I was scared. I thought I would never come home.”

 Luckily for those Native service members improperly taxed, Adame did come home. Adame has championed the restoration of improperly withheld income tax monies to eligible Native veterans and service members for nearly a decade. When he and his fellow Prairie Band veterans discovered that state income tax had potentially been improperly withheld from their military pay throughout their careers, he began to seek assistance in rectifying the injustice. Adame feels that this issue requires urgent attention by Congress, Tribes, and concerned citizens. “I have a dire feeling that if I cannot get anything done about a decades old injustice whose victims are almost all passed away, that nothing will ever be done. I feel like it is my responsibility to do what I can for my Grandfather and the relatives of thousands of my fellow tribal veterans.”  

According to Adame, his voice went largely unheard until he gave a presentation before United Nations Special Rapporteur James Anaya during Anaya’s visit to the University of Tulsa in May 2012. Three Indian law attorneys, including one who specializes in taxation in Indian country, took notice of the injustice presented by Adame.  Each coming from military families themselves, the attorneys agreed to volunteer their services to help Adame get this issue the attention it deserves. 

The attorneys helped Adame submit testimony on the improper taxation to the Senate Committee on Indian Affairs’ oversight hearing on Native Veterans’ issues. One of the attorneys presented the issue on the Native Veteran’s panel at the 25th annual Sovereignty Symposium in Oklahoma City. In the panel audience sat an employee of the Iowa Tribe of Oklahoma whose Native veteran spouse returned 70% disabled from a recent tour in Iraq. Her commitment to Native veterans’ issues spurred her to then present the improper taxation issue to the Iowa Tribe.

 The Iowa Tribe’s Business Committee, comprised of several Native veterans itself, was quick to take action. The IBC drafted and unanimously passed a tribal resolution in support of restoring improperly withheld pay to eligible Native American veterans and service members. The resolution urges Congress take action to restore such improperly withheld pay to eligible Native service members and veterans. It also urges the National Congress of American Indians to adopt a similar resolution in support of restoring pay improperly withheld as state income tax by the U.S. Military to eligible Native service members and veterans. 

It is Adame’s hope that other Native nations will follow the Iowa tribe’s lead. The more tribes  that adopt similar resolutions, the more united the front in Indian country to press the United States to restore improperly withheld pay to Native heroes. “I truly appreciate the support of the Iowa Tribe,” Adame remarked.

Story by Rebbecca Redelman (initially printed in the July 13, 2012 issue of Native American Times)