Facts of the Case

The Indian Regulatory Gaming Act provides that Internal Revenue Code provisions "(including sections 1441, 3402(q), 6041, and 6050I, and chapter 35() concerning the reporting and withholding of taxes" with respect to gambling operations shall apply to Indian tribes in the same way as they apply to States. Chapter 35 imposes taxes from which it exempts certain state-controlled gambling activities, but says nothing about tax reporting or withholding. The Choctaw and Chickasaw Nations, in a lawsuit, claimed that the Gaming Act subsection's explicit parenthetical reference exempts them from paying those chapter 35 taxes from which the States are exempt. Rejecting that claim, the Court of Appeals ultimately held that the subsection applies only to Code provisions concerning tax withholding and reporting.

Question

Does the Indian Regulatory Gaming Act exempt tribes from paying the gambling-related taxes, which State need not pay, imposed by chapter 35 of the Internal Revenue Code?

Conclusion

No. In a 7-2 opinion delivered by Justice Stephen G. Breyer, the Court held that Indian Regulatory Gaming Act does not create such an exemption. The Court reasoned that despite its parenthetical reference, the language outside the parenthetical was unambiguous and the subsection applied only to Internal Revenue Code provisions that concerned the reporting and withholding of taxes. The language inside the parenthetical was meant simply to be illustrative. Moreover, the Court noted that when Congress enacts a tax exemption, it ordinarily does so explicitly. "We can find no comparable instance in which Congress legislated an exemption through an inexplicit numerical cross-reference -- especially a cross-reference that might easily escape notice," wrote Justice Breyer.