The following text is excerpted from Restatement of the Law, The Law of American Indians, Tentative Draft No. 4, Chapter. 4. Tribal Economic Development 

Included below is the complete Section 52. Tribal Regulatory Powers on Indian Lands from Subchapter 1 – Indian Tribes as Economic Regulators. The post contains the Black Letter, Comment, and Reporters’ Notes from this Section.   

This text has not been considered by the membership of The American Law Institute and therefore does not represent the position of the Institute on any of the issues with which it deals. This supplement may be revised or supplemented prior to consideration by the membership in May 2021. If you are interested in obtaining a copy of this or any other Section of this project, please contact us.  

 Subchapter 1 – Indian Tribes as Economic Regulators 

§52. Tribal Regulatory Powerson Indian Lands

Unless limited by Congress (see § 22), Indian tribes have the power to enact and enforce laws governing economic activity within Indian lands (§ 15), including authority to:

(a)          tax (§ 28); 
(b)          generate revenue to support governmental services through gaming
and other enterprises;
(c)          regulate land use, natural-resources exploitation, and environmental
protection (§§ 29, 30);  
(d)          regulate labor and employment relations;
(e)          create, license, and regulate business organizations; and
(f)           regulate contracts and other economic obligations. 

Comment: 

        a. In general. Indian tribes retain inherent power to govern the economic enterprises of members and nonmembers on Indian lands (see § 15) unless divested of that power by federal law. For further discussion see §§ 20-22, 34(a). Indian tribes derive territorial sovereignty from their status both as sovereigns and as landowners.  

As with all analyses of the powers of tribal governments, the starting point is that a tribal government presumptively retains authority unless a specific power is divested by the federal government. Examples related to economic development follow. 

       b. Taxation. Indian tribes have the inherent power to tax income, property, and activities on Indian lands. For further discussion see § 28. 

        c. Generating governmental revenues. When Indian tribes establish and operate gaming and other enterprises on Indian lands to generate revenues to support governmental services for their members, they do so pursuant to their inherent sovereign authority. For example, an Indian tribe’s operation of a casino pursuant to its inherent authority codified by Congress in the Indian Gaming Regulatory Act, 25 U.S.C. § 2710 et seq. (“IGRA”), is a governmental undertaking for a governmental purpose: to generate revenues to support governmental services. Tribes own and operate gaming facilities under IGRA and other enterprises in much the same way that states own and operate lotteries, horse-racing tracks, and liquor stores—in order to generate governmental revenue. 

      d. Regulating employment relations.Indian tribes retain inherent sovereign authority to regulate employer–employee relations on Indian lands, including the enactment, implementation, and enforcement of laws governing employment discrimination; wages, hours, and working conditions; and unions and collective bargaining. 

       e. Regulating land, natural resources, and environmental protection. Indian tribes have inherent sovereign authority to manage and regulate land, natural resources, and environmental protection within Indian lands. For further discussion see § 30. 

        f. Establishing, licensing, and regulating business organizations.Indian tribes have inherent sovereign authority to create and regulate business organizations and associations. This includes authority to enact and enforce laws governing the licensing of business associations, including corporations and limited-liability corporations operating on Indian lands. 

       g. Regulating contracts and other economic obligations. Indian tribes have inherent sovereign authority to enact and enforce laws governing contracts and other economic obligations, including sales, security interests, consumer protection, and unfair trade practices on Indian lands. 

REPORTERS’ NOTES 

                 Comment a. The Supreme Court has consistently held that Indian tribes are governments predating the formation of the United States and, as such, that they retain “‘sovereignty over both their members and their territory,’ . . . to the extent that sovereignty has not been withdrawn by federal statute or treaty.” Iowa Mutual Ins. Co. v. LaPlante, 480 U.S. 9, 14 (1987) (citation omitted). See also United States v. Mazurie, 419 U.S. 544, 557 (1975) (“[Indian tribes retain] attributes of sovereignty over both their members and their territory.”); United States v Wheeler, 435 U.S. 313, 323 (1978) (quoting Mazurie). In Michigan v. Bay Mills Indian Community, 134 S. Ct. 2024 (2014), the Supreme Court explained: 

Indian tribes are “domestic dependent nations” that exercise “inherent sovereign authority.” . . . As dependents, the tribes are subject to plenary control by Congress. See United States v. Lara, 541 U.S. 193, 200, 124 S. Ct. 1628, 158 L. Ed.2d 420 (2004) (“[T]he Constitution grants Congress” powers “we have consistently described as ‘plenary and exclusive’” to “legislate in respect to Indian tribes”). And yet they remain “separate sovereigns pre-existing the Constitution.” . . . Thus, unless and “until Congress acts, the tribes retain” their historic sovereign authority. 

Id. at 2030 (citations omitted). See also New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 332 (1983) (“[T]ribes retain any aspect of their historical sovereignty not ‘inconsistent with the overriding interests of the National Government.’”) (citations omitted). Given their status as “domestic dependent nations,” with “inherent sovereign authority,” the Court has consistently admonished that Indian tribes cannot be conceived of, or treated by the law as, “private, voluntary organizations.” See, e.g., Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 140 (1982); Bryan v. Itasca Cty., Minnesota, 426 U.S. 373, 388 (1976); Mazurie, 419 U.S. at 557. 

The inherent sovereign power of Indian tribes to regulate the activities of both their members and nonmembers engaged in economic activity on Indian lands is well-established. As the Supreme Court has explained, “tribes have the power to manage the use of [their] territory and resources by both members and nonmembers, to undertake and regulate economic activity within the reservation, and to defray the cost of governmental services by levying taxes.” Mescalero Apache Tribe, 462 U.S. at 335-336 & n.17.  

In Merrion v. Jicarilla Apache Tribe, 455 U.S. 130 (1982), the Supreme Court held that one aspect of this power, “the Tribe’s authority to tax non-Indians who conduct business on the reservation[,] does not simply derive from the Tribe’s power to exclude such persons, but is an inherent power necessary to tribal self-government and territorial management.” Id. at 141. Nevertheless, the Court has also said that a “tribe’s traditional and undisputed power to exclude persons from tribal land . . . gives it the power to set conditions on entry to that land via licensing requirements,” because “[r]egulatory authority goes hand in hand with the power to exclude.” Plains Commerce Bank v. Long Family & Cattle Co., Inc., 554 U.S. 316, 335 (2008) (internal quotation marks omitted); accord Water Wheel Camp Recreational Area, Inc. v. LaRance, 642 F.3d 802, 808-809, 811-812 (9th Cir. 2011) (citing cases). The power to exclude, with the attendant power to regulate, is considered “essential to the tribe’s identity or its self-governing [authority].” Nevada v. Hicks, 533 U.S. 353, 379 (2001) (Souter, J., concurring). Because it is “intimately tied to a tribe’s ability to protect the integrity and order of its territory and the welfare of its members, it is an internal matter over which tribes retain sovereignty.” Felix S. Cohen, Handbook of Federal Indian Law § 4.01[2][e], at 220.  

                Comment b. The leading Supreme Court case addressing the inherent sovereign authority of Indian tribes to tax property and activities on Indian lands is Merrion v. Jicarilla Apache Tribe, 455 U.S. 130 (1982). That case involved the imposition of a severance tax on nonmember entities exploiting oil and gas resources on the lands of the Tribe. The Court explained as follows: 

[T]he views of the three federal branches of government, as well as general principles of taxation, confirm that Indian tribes enjoy authority to finance their governmental services through taxation of non-Indians who benefit from those services. Indeed, the conception of Indian sovereignty that this Court has consistently reaffirmed permits no other conclusion. . . . [Indian tribes] “are unique aggregations possessing attributes of sovereignty over both their members and their territory. . . . Adhering to this understanding, we conclude that the Tribe’s authority to tax non-Indians who conduct business on the reservation . . . is an inherent power necessary to tribal self-government and territorial management.  

Id. at 140-141. See also Kerr-McGee Corp. v. Navajo Tribe of Indians, 471 U.S. 195 (1985) (federal authorization not needed for tribal tax on nonmember activities on Indian lands; the tribe’s inherent power to tax is sufficient). Other cases in which the Court has recognized that Indian tribes have inherent authority to tax nonmembers on Indian lands include Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95 (2005), and Washington v. Confederated Tribes of Colville Reservation, 447 U.S. 134 (1980). 

                  Comment c. The leading Supreme Court cases are New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 333 (1983) (holding that Tribe’s regulation of hunting and fishing on Indian lands by nonmembers and its related generation of governmental revenues through operating a hunting and fishing lodge constituted an exercise in inherent sovereign authority; state licensing of those hunting and fishing activities struck down as incompatible with tribal self-government) and California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1986) (citing Mescalero Apache Tribe and holding that Tribe’s operation of gaming facility on Indian lands to generate governmental revenues constituted exercise of inherent sovereign authority free from state civil regulatory authority that would infringe upon tribal self-government and thwart related federal goals of encouraging tribal economic independence). See also Merrion, 455 U.S. at 144 (tribes retain sovereign authority to “raise revenues to pay for the costs of government”). Congress codified the Supreme Court’s holding in Cabazon in the Indian Gaming Regulatory Act, 25 U.S.C. § 2701 et seq., stating that “Indian tribes have the exclusive right to regulate gaming activity on Indian lands if the gaming activity is not specifically prohibited by Federal law and is conducted within a State which does not, as a matter of criminal law and public policy, prohibit such gaming activity.” § 2701(5). Pursuant to IGRA, Congress then preempted the field of Indian gaming and gave states limited authority over Indian gaming by requiring tribal–state compacts for the conduct of Class III (casino-style) gaming on Indian lands. See §§ ___ (discussing IGRA).  

Characterizations of Indian gaming under IGRA as “commercial,” not “governmental,” activities,—see, e.g., San Manuel Indian Bingo and Casino v. NLRB, 475 F.3d 1306, 1315 (D.C. Cir. 2007) (describing IGRA gaming as a commercial undertaking); In re San Manuel Indian Bingo & Casino, 341 N.L.R.B. 1055, 1057-1064 (2004) (same)—misapprehend the importance of tribe-owned enterprises for tribal economic independence and the building of strong tribal governments in the face of sparse, if any, tax bases. See Michigan v. Bay Mills Indian Cmty., 134 S. Ct. 2024, 2043 (2014) (Sotomayor, J., concurring) (A tribe’s economic enterprises “are critical to the goals of tribal self-sufficiency because such enterprises in some cases may be the only means by which a tribe can raise revenues.”); id at 2045 (“[P]roper respect for tribal sovereignty . . . counsel[s] against creating a special ‘commercial activity’ exception to tribal sovereign immunity.”); Breakthrough Mgmt. Grp., Inc. v. Chukchansi Gold Casino & Resort, 629 F.3d 1173, 1183 (10th Cir. 2010) (“One of the ways that Congress has promoted tribal sovereignty through economic development is . . . the authorization of Indian gaming.”). See also 25 U.S.C. § 2701(1), (4) (purpose of IGRA is to enable tribes to “defray the cost of governmental services”); id. § 2710(b)(2)(B) (tribes must hold “sole proprietary interest” in gaming facilities on Indian lands and net revenues from gaming under IGRA must be used to support governmental services). In an analogous setting, the Supreme Court rejected the “commercial/governmental” distinction for state activities in applying the Tenth Amendment. See Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528, 546-547 (1985). 

                      Comment d. The inherent sovereign authority of Indian tribes to govern labor and employment relations on Indian lands flows directly from their sovereign authority to govern economic activity on Indian lands in general. See Cabazon, 480 U.S. at 207, 220 (“Indian tribes retain attributes of sovereignty over both their members and their territory”; Indian gaming to “generate[] funds for essential tribal services and provide[] employment for tribal members” implicates tribal authority over noncitizens within the reservation); Mescalero Apache Tribe, 462 U.S. at 335 (Indian tribes have inherent power “to undertake and regulate economic activity within the reservation” and “to manage the use of [their] territory and resources by both members and nonmembers.”); Merrion, 455 U.S. at 144 (tribes have inherent power to regulate noncitizens who enter their reservations). The leading cases establishing that tribes have inherent sovereign authority to govern labor and employment relations on Indian lands include N.L.R.B. v. Pueblo of San Juan, 276 F.3d 1186, 1192-1193 (10th Cir. 2002) (en banc) (enactment and implementation of “right-to-work” law covering nonmember reservation business and its member and nonmember employees); Penobscot Nation v. Fellencer, 164 F.3d 706, 711-712 (1st Cir. 1999) (regulation of employment-discrimination claim by nonmember arising within the reservation); Reich v. Great Lakes Indian Fish and Wildlife Comm’n, 4 F.3d 490, 494-495 (7th Cir. 1993) (regulation of wages and hours of member game wardens); E.E.O.C. v. Fond du Lac Heavy Equip. and Constr. Co., Inc., 986 F.2d 246, 249 (8th Cir. 1993) (regulation and adjudication of employment–discrimination claim); FMC v. Shoshone-Bannock Tribes, 905 F.2d 1311 (9th Cir. 1990) (enactment and implementation of tribal employment preference law). See also MacArthur v. San Juan Cty., 309 F.3d 1216 (10th Cir. 2002); Graham v. Applied Geo Technologies, 593 F. Supp. 2d 915, 919-920 (S.D. Miss. 2008); Davis v. Mille Lacs Band of Chippewa Indians, 26 F. Supp. 2d 1175, 1179 (D. Minn. 1998), aff’d on other grounds, 193 F.3d 990 (8th Cir. 1999); Rodriguez v. Wong, 82 P.3d 263, 266-267 (Wash. Ct. App. 2004). 

                   Comment e. The Supreme Court has made clear that Indian tribes have the “power to manage the use of their territory and resources by both members and nonmembers.” Merrion, 455 U.S. at 147. Federal circuit Courts of Appeals have held that Indian tribes have inherent sovereign authority to regulate environmental matters, such as water quality, within their Indian lands. See, e.g., State of Wisconsin v. EPA, 266 F.3d 741 (7th Cir. 2001); State of Montana v. EPA, 137 F.3d 1135 (9th Cir. 1998); City of Albuquerque v. Browner, 97 F.3d 415 (10th Cir. 1996). See also Brendale v. Confederated Tribes and Bands of the Yakima Indian Nation, 492 U.S. 408 (1989) (tribe has inherent authority to apply zoning laws on nonmember fee lands within the “closed” part of the reservation, that part of the reservation generally closed to the public). 

                Comment f. The inherent power of Indian tribes to license business activities by members and nonmembers on Indian lands is well-established. See New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 337-338 (1983) (tribal power to regulate/license all hunting and fishing on Indian lands); Montana v. United States, 450 U.S. 544, 557-567 (1981) (“The Court of Appeals held that the Tribe may prohibit nonmembers from hunting or fishing on land belonging to the Tribe or held by the United States in trust for the Tribe, . . . and with this holding we can readily agree. We also agree with the Court of Appeals that if the Tribe permits nonmembers to fish or hunt on such lands, it may condition their entry by charging a fee or establishing bag and creel limits.”) (citation omitted). See also Plains Commerce Bank v. Long Family Land and Cattle Co, 554 U.S. 316, 335 (2008) (“The tribe’s traditional and undisputed power to exclude persons from tribal lands . . . gives it the power to set conditions on entry to that land via licensing requirements and hunting regulations”; “Regulatory authority goes hand in hand with the power to exclude”) (citations and quotations omitted) (emphasis added); Nevada v. Hicks, 533 U.S. 353, 379 (2001) (“‘the ability [of an Indian tribe] to maintain law and order on the reservation and to exclude nondesireable [sic] nonmembers . . . is . . . essential to the tribe’s identity or its self-governing status’”) (Souter, J., concurring) (citation omitted).  

In the exercise of their inherent sovereign authority to regulate economic activity on Indian lands, tribes enact, implement, and enforce business codes, the equivalent of Uniform Commercial Codes, and laws for the establishment of tribally licensed business organizations.  

                    Comment g. In the exercise of their inherent sovereign authority to regulate economic activities on Indian lands, tribes also enact, implement, and enforce laws governing contracts and other economic obligations, including sales, security interests, consumer protection, and unfair trade practices on Indian lands.