Reservation ruling could cost Oklahoma $200M a year in lost revenue

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Oklahoma stands to lose more than $200 million per year in income and sales tax revenue as a result of a U.S. Supreme Court ruling that the eastern half of the state remains reservations for five tribes, according to the state Tax Commission.

If the ruling applies to all five tribes, the state would receive $72.7 million less in income taxes and $132.2 million less in sales and use taxes each year, according to a letter from commission Executive Director Jay Doyle.

“The Oklahoma Tax Commission anticipates a significant, immediate and ongoing fiscal impact resulting from the expanded boundaries of the Muscogee (Creek) Nation under McGirt,” Doyle wrote in a letter to the Oklahoma Commission on Cooperative Sovereignty last week.

The Tax Commission anticipates a $60 million annual loss of income tax and sales and use taxes collected in the 3 million-acre Muscogee Nation alone. But the July 9 ruling is expected to apply to the Cherokee, Chickasaw, Choctaw and Seminole nations that, along with the Muscogee make up what is known as the Five Civilized Tribes and cover most of eastern Oklahoma.

The Tax Commission also anticipates $218 million in income tax refunds to tribal citizens. Taxpayers can request refunds going back three years.

The Oklahoma Commission on Cooperative Sovereignty was created by Gov. Kevin Stitt on July 20 to address concerns and make recommendations to the state and Congress after the U.S. Supreme Court decisions in McGirt v. Oklahoma and Sharp v. Murphy.

Oklahoma Gov. Kevin Stitt

The commission will advise the governor on civil, criminal and regulatory concerns, and is made up of leaders in law, government and business. Larry Nichols, co-founder of Oklahoma City-based Devon Energy, is chair.

Additional members may also include a representative of the Oklahoma Attorney General’s office, a member of the District Attorney's Council and representatives of Oklahoma’s federally recognized Indian Tribes.

“We absolutely need the partnership of the Tribes for this process to be successful,” Stitt said. “I respect and recognize the sovereignty of every Tribe in Oklahoma and look forward to working with every Tribe to ensure that we meet our shared economic, security and social goals.”

While the court's 5-4 decision that the reservations still exist came in a case of criminal jurisdiction, the ruling is expected to have widespread impact.

The ruling is likely to give the state's Native American tribes more control over drilling and other activities, according to S&P Global Ratings.

The ruling found the Creek Nation's reservation was not officially terminated at Oklahoma statehood in 1907.

"The federal government promised the Creek a reservation in perpetuity," the decision reads. "Over time, Congress has diminished that reservation. It has sometimes restricted and other times expanded the Tribe's authority. But Congress has never withdrawn the promised reservation."

The Petroleum Alliance of Oklahoma expressed disappointment in the court's decision.

"We are moving forward to work with the state of Oklahoma, the tribes and Oklahoma's Congressional delegation to ensure that our members continue to have a stable, predictable regulatory and tax environment consistent with their interests," said Petroleum Alliance President Brook Simmons. "It is critical for continued investment in Oklahoma that the state maintain primacy with regard to the regulation of oil and gas operations, and that issues of title with regard to real property remain unaffected."

"The McGirt decision is a historical win for the Muscogee Creek Nation, and time will tell how it affects other Oklahoma tribes in their jurisdictional claims," said Creek Nation attorney Jordan Harmon.

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