State-Tribal Relations

Case in Brief: Squire, Collector of Internal Revenue v. Capoeman et. ux. (1956)

Respondents, husband and wife, were members of the Quinaielt Tribe of Indians. Pursuant to the Quinaielt Treaty and under the General Allotment Act of 1887, they were allotted 93.25 acres and received a trust patent for that land on October 1, 1907. During the tax year 1943, they reported a long-term capital gain from the sale of timber on their land in that year. Upon demand of petitioner, Collector of Internal Revenue for the District of Washington, they paid taxes shown due on the proceeds from the sale of timber from their allotted land. Thereafter, they filed a timely claim for refund of the taxes paid. They contended that the proceeds from the sale of timber from the allotted land were not subject to federal income taxation because such taxation would be in violation of the provisions of the Quinaielt Treaty, the trust patent, and the General Allotment Act (Act). Their claim for a refund was denied. The U.S. Supreme Court held that income from the sale of standing timber on allotted forest land on the Quinaielt Indian Reservation held in trust by the U.S. government may not be subjected to a capital gains tax.

Q.        What was the case about?

A.        The Quinaielt Treaty of 1855 stipulated that the Quinaeilts were to have exclusive use of their reservation. In 1887, Congress passed the General Allotment Act of 1887 (24 Stat. 388). Pursuant to the Act, Indians were to be allotted lands on their reservations not to exceed 160 acres of grazing land or 80 acres of agricultural land.  After 25 years, the allottees were to receive the lands, discharged of the trust, in fee status and free of all encumbrances.  

During the tax year here in question, 1943, the fee title to the 93.25 acres of respondents’ land were still held by the United States, and were not subject to transfer or encumbrance, except with the consent of the government, which had never been given. The land was forest land, covered by coniferous trees and was not adaptable to agricultural purposes. The land was of little value after the timber was cut.

In 1943, the Bureau of Indian Affairs of the U.S. Department of Interior entered into a contract for sale of the standing timber on respondent’s allotted land for a total price of $15, 080.80. The government received the sum of $8,418.28 on behalf of the respondent in that year. The sale was pursuant to a pattern generally adopted by the government of selling timber from Indian allotments.

The courts that considered this case prior to the U.S. Supreme Court held that the imposition of the tax here was inconsistent with the government’s promise to transfer the fee “free of all charge or encumbrance whatsoever.”

Q.        What did the U.S. Supreme Court say?

A.        The U.S. Supreme Court stated that although the language of the Act was not expressly couched in terms of non-taxability, “doubtful expressions are to be resolved in favor of the [tribe].”

The Court found that the literal language of the Act evidenced a congressional intent to subject an Indian allotment to all taxes only after a patent in fee is issued to the allottee. Until the patent is issued, the allotment shall be free from taxes, both now and in the future.

Q.        What does this ruling mean for other states and tribes?

A.        The ruling in this case has been interpreted to prevent taxation of income or capital gains “derived directly” from allotted land while it remains in trust status.

Case Citation:
Squire v. Capoeman et ux., 351 U.S. 1 (1956)

For More Information:
Contact Andrea Wilkins of NCSL's State-Tribal Relations Project at 303-856-1558 or State-Tribal Relations Program.

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