Cotton Petroleum Corporation v. New Mexico/Opinion of the Court

by John Paul Stevens

This case is a sequel to Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 102 S.Ct. 894, 71 L.Ed.2d 21 (1982), in which we held that the Jicarilla Apache Tribe (Tribe) has the power to impose a severance tax on the production of oil and gas by non-Indian lessees of wells located on the Tribe's reservation. We must now decide whether the State of New Mexico can continue to impose its severance taxes on the same production of oil and gas.

* All 742,135 acres of the Jicarilla Apache Reservation are located in northwestern New Mexico. Id., at 133, 102 S.Ct., at 899. In 1887, President Cleveland issued an Executive Order setting aside this tract of public land "as a reservation for the use and occupation of the Jicarilla Apache Indians." 1 C. Kappler, Indian Affairs, Laws and Treaties 875 (1904). The only qualification contained in the order was a proviso protecting bona fide settlers from defeasance of previously acquired federal rights. ^[1] Ibid. The land is still owned by the United States and is held in trust for the Tribe.

The Tribe, which consists of approximately 2,500 enrolled members, is organized under the Indian Reorganization Act. 48 Stat. 984, 25 U.S.C. § 461 et seq. The Indian Mineral Leasing Act of 1938 (1938 Act) grants the Tribe authority, subject to the approval of the Secretary of the Interior (Secretary), to execute mineral leases. 52 Stat. 347, 25 U.S.C. § 396a et seq. Since at least as early as 1953, the Tribe has been leasing reservation lands to nonmembers for the production of oil and gas. See Merrion, supra, at 135, 102 S.Ct., at 900. Mineral leases now encompass a substantial portion of the reservation and constitute the primary source of the Tribe's general operating revenues. In 1969, the Secretary approved an amendment to the Tribe's Constitution authorizing it to enact ordinances, subject to his approval, imposing taxes on non-members doing business in the reservation. See Revised Constitution of the Jicarilla Apache Tribe, Art. XI, § 1(e) (Equity). The Tribe enacted such an ordinance in 1976, imposing a severance tax on "any oil and natural gas severed, saved and removed from Tribal lands." Oil and Gas Severance Tax, Ordinance No. 77-0-02, Jicarilla Apache Tribal Code (hereinafter J.A.T.C.), Tit. 11, ch. 1 (1987) (Equity); see also Merrion, supra, at 135-136, 102 S.Ct., at 900-901. The Secretary approved the ordinance later that year, and in 1982 this Court upheld the Tribe's power to impose a severance tax on pre-existing as well as future leases. See Merrion, supra. Subsequently, the Tribe enacted a privilege tax, which the Secretary also approved. See Oil and Gas Privilege Tax, Ordinance No. 85-0-434, J.A.T.C., Tit. 11, ch. 2 (1985). ^[2]

In 1976, Cotton Petroleum Corporation (Cotton), a non-Indian company in the business of extracting and marketing oil and gas, acquired five leases covering approximately 15,000 acres of the reservation. There were then 15 operating wells on the leased acreage and Cotton has since drilled another 50 wells. The leases were issued by the Tribe and the United States under the authority of the 1938 Act. Pursuant to the terms of the leases, Cotton pays the Tribe a rent of $125 per acre, plus a royalty of 121/2 percent of the value of its production. ^[3] In addition, Cotton pays the Tribe's oil and gas severance and privilege taxes, which amount to approximately 6 percent of the value of its production. Thus, Cotton's aggregate payment to the Tribe includes an acreage rent in excess of $1 million, plus royalties and taxes amounting to about 181/2 percent of its production.

Prior to 1982, Cotton paid, without objection, five different oil and gas production taxes to the State of New Mexico. ^[4] The state taxes amount to about 8 percent of the value of Cotton's production. The same 8 percent is collected from producers throughout the State. Thus, on wells outside the reservation, the total tax burden is only 8 percent, while Cotton's reservation wells are taxed at a total rate of 14 percent (8 percent by the State and 6 percent by the Tribe). No state tax is imposed on the royalties received by the Tribe.

At the end of our opinion in Merrion, 455 U.S., at 158-159, n. 26, 102 S.Ct., at 912-913, n. 26, we added a footnote rejecting the taxpayer's argument that the tribal tax was invalid as a "multiple tax burden on interstate commerce" because imposed on the same activity already taxed by the State. One of the reasons the argument failed was that the taxpayer had made no attempt to show that the Tribe was "seek[ing] to seize more tax revenues than would be fairly related to the services provided by the Tribe." Ibid. After making that point, the footnote suggested that the state tax might be invalid under the Commerce Clause if in excess of what "the State's contact with the activity would justify." ^[5] Ibid. (emphasis in original).

In 1982, Cotton paid its state taxes under protest and then brought an action in the District Court for Santa Fe County challenging the taxes under the Indian Commerce, Interstate Commerce, Due Process, and Supremacy Clauses of the Federal Constitution. App. 2-15. Relying on the Merrion footnote, Cotton contended that state taxes imposed on reservation activity are only valid if related to actual expenditures by the State in relation to the activity being taxed. Record 421. In support of this theory, Cotton presented evidence at trial tending to prove that the amount of tax it paid to the State far exceeded the value of services that the State provided to it and that the taxes paid by all nonmember oil producers far exceeded the value of services provided to the reservation as a whole. ^[6] Cotton did not, however, attempt to prove that the state taxes imposed any burden on the Tribe.

After trial, the Tribe sought, and was granted, leave to file a brief amicus curiae. Id., at 128. The Tribe argued that a decision upholding the state taxes would substantially interfere with the Tribe's ability to raise its own tax rates and would diminish the desirability of on-reservation oil and gas leases. Id., at 124. The Tribe expressed a particular concern about what it characterized as a failure of the State "to provide services commensurate with the taxes collected." Ibid. After the Tribe filed its brief, the New Mexico district court issued a decision upholding the state taxes. App. to Juris. Statement 14. The district court found that "New Mexico provides substantial services to both the Jicarilla Tribe and Cotton," ^[7] and concluded that the State had a valid interest in imposing taxes on non-Indians on the reservation. ^[8] Squarely rejecting Cotton's theory of the case, the court stated that "[t]he theory of public finance does not require expenditures equal to revenues." Id., at 17. Turning to the question whether the state taxes were inconsistent with the federal interest in fostering the economic development of Indian tribes, the district court found that the "economic and legal burden of paying the state taxes falls on Cotton or its buyers" and that "[n]o economic burden falls on the tribe by virtue of the state taxes." Id., at 15. More specifically, it found that the state taxes had not affected the Tribe's ability to collect its taxes or to impose a higher tax, and had "not in any way deterred production of oil and gas" on the reservation. Id., at 16-17. It concluded that the taxes had no adverse impact on tribal interests and that they were not pre-empted by federal law. Id., at 17-18. Finally, the District Court held that the taxes were fully consistent with the Commerce and Due Process Clauses of the Federal Constitution. Ibid.

The New Mexico Court of Appeals affirmed. 106 N.M. 517, 745 P.2d 1170 (1987). Like the District Court, it was left unpersuaded by Cotton's contention that the New Mexico taxes are invalid because the State's expenditures on reservation activity do not equal the revenues collected. The Court of Appeals correctly noted that the Merrion footnote, 455 U.S., at 159, n. 26, 102 S.Ct., at 913, n. 26, "intimate[s] no opinion on the possibility of such a challenge," but simply suggests that a state tax "might" be invalid if greater than the State's "contact with the [on-reservation] activity would justify." 106 N.M., at 520, 745 P.2d, at 1173. Finding no support for Cotton's position in Merrion, the Court of Appeals looked instead to our opinion in Commonwealth Edison Co. v. Montana, 453 U.S. 609, 101 S.Ct. 2946, 69 L.Ed.2d 884 (1981), and concluded that a State's power to tax an activity connected to interstate commerce is not limited to the value of the services provided in support of that activity. 106 N.M., at 521, 745 P.2d, at 1174. Agreeing with the trial court that the New Mexico taxes were fairly related to the services provided to Cotton, the Court of Appeals rejected Cotton's Commerce Clause challenge. Ibid.

The Tribe, again participating as an amicus curiae, urged a different approach to the case. Unlike Cotton, the Tribe argued that the state taxes could not withstand traditional pre-emption analysis. The Tribe conceded that state laws, to the extent they do not interfere with tribal self-government, may control the conduct of non-Indians on the reservation. It maintained, however, that the taxes at issue interfered with its ability to raise taxes and thus with its right to self-government. The Court of Appeals rejected this argument because the record contained no evidence of any adverse impact on the Tribe and, indeed, indicated that the Tribe could impose even higher taxes than it had without adverse effect. ^[9]

The New Mexico Supreme Court granted, but then quashed, a writ of certiorari. 106 N.M. 511, 745 P.2d 1159 (1987). We then noted probable jurisdiction and invited the parties to brief and argue the following additional question:

"Does the Commerce Clause require that an Indian Tribe be treated as a State for purposes of determining whether a state tax on nontribal activities conducted on an Indian Reservation must be apportioned to account for taxes imposed on those same activities by the Indian Tribe?" 485 U.S. 1005, 108 S.Ct. 1466, 99 L.Ed.2d 696 (1988).

We now affirm the judgment of the New Mexico Court of Appeals.

This Court's approach to the question whether a State may tax on-reservation oil production by non-Indian lessees has varied over the course of the past century. At one time, such a tax was held invalid unless expressly authorized by Congress; more recently, such taxes have been upheld unless expressly or impliedly prohibited by Congress. The changed approach to these taxes is one aspect of the evolution of the doctrine of intergovernmental tax immunity that we recently discussed in detail in South Carolina v. Baker, 485 U.S. 505, 108 S.Ct. 1355, 99 L.Ed.2d 592 (1988).

During the first third of this century, this Court frequently invalidated state taxes that arguably imposed an indirect economic burden on the Federal Government or its instrumentalities by application of the "intergovernmental immunity" doctrine. That doctrine "was based on the rationale that any tax on income a party received under a contract with the government was a tax on the contract and thus a tax 'on' the government because it burdened the government's power to enter into the contract." Id., at 518, 108 S.Ct., at 1364. In a case decided in 1922, the Court applied the intergovernmental immunity doctrine to invalidate a state tax on income derived by a non-Indian lessee from the sale of his interest in oil produced on Indian land. See Gillespie v. Oklahoma, 257 U.S. 501, 42 S.Ct. 171, 66 L.Ed. 338 (1922). Consistently with the view of intergovernmental immunity that then prevailed, the Court stated that "a tax upon such profits is a direct hamper upon the effort of the United States to make the best terms that it can for its wards." Id., at 506, 42 S.Ct., at 173 (citing Weston v. Charleston, 2 Pet. 449, 468, 7 L.Ed. 481 (1829)). The same reasoning was used to invalidate a variety of other state taxes imposed on non-Indian lessees at that time. ^[10]

Shortly after reaching its zenith in the Gillespie decision, the doctrine of intergovernmental tax immunity started a long path in decline and has now been "thoroughly repudiated" by modern case law. South Carolina v. Baker, supra, 485 U.S., at 520, 108 S.Ct., at 1365. In 1932, four Members of this Court argued that Gillespie was unsound and should be overruled. See Burnet v. Coronado Oil & Gas Co., 285 U.S. 393, 401, 52 S.Ct. 443, 445, 76 L.Ed. 815 (Stone, J., dissenting); id., at 405, 52 S.Ct., at 446 (Brandeis, J., dissenting). Five years later, the Court took a substantial step in that direction, rejecting the view that a nondiscriminatory state tax on a private party contracting with the Government is invalid because the economic burden of the tax may fall on the Government. See James v. Dravo Contracting Co., 302 U.S. 134, 58 S.Ct. 208, 82 L.Ed. 155 (1937). "With the rationale for conferring a tax immunity on parties dealing with another government rejected, the government contract immunities recognized under prior doctrine were, one by one, eliminated." South Carolina v. Baker, supra, 485 U.S., at 521-522, 108 S.Ct., at 1366. Specifically, in Helvering v. Mountain Producers Corp., 303 U.S. 376, 386-387, 58 S.Ct. 623, 627-628, 82 L.Ed. 907 (1938), the Court squarely overruled Gillespie, supra. Thus, after Mountain Producers Corp., supra, was decided, oil and gas lessees operating on Indian reservations were subject to nondiscriminatory state taxation as long as Congress did not act affirmatively to pre-empt the state taxes. See ibid. See also Oklahoma Tax Comm'n v. Texas Co., 336 U.S. 342, 69 S.Ct. 561, 93 L.Ed. 721 (1949).

In sum, it is well settled that, absent express congressional authorization, a State cannot tax the United States directly. See McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579 (1819). It is also clear that the tax immunity of the United States is shared by the Indian tribes for whose benefit the United States holds reservation lands in trust. See Montana v. Blackfeet Tribe, 471 U.S. 759, 764, 105 S.Ct. 2399, 2402, 85 L.Ed.2d 753 (1985). Under current doctrine, however, a State can impose a nondiscriminatory tax on private parties with whom the United States or an Indian tribe does business, even though the financial burden of the tax may fall on the United States or tribe. See id., at 765, 105 S.Ct., at 2402; South Carolina v. Baker, supra, 485 U.S., at 523, 108 S.Ct., at 1366. Although a lessee's oil production on Indian lands is therefore not "automatically exempt from state taxation," Congress does, of course, retain the power to grant such immunity. Mescalero Apache Tribe v. Jones, 411 U.S. 145, 150, 93 S.Ct. 1267, 1271, 36 L.Ed.2d 114 (1973). Whether such immunity shall be granted is thus a question that "is essentially legislative in character." Texas Co., supra, 336 U.S., at 365-366, 69 S.Ct., at 573-574.

The question for us to decide is whether Congress has acted to grant the Tribe such immunity, either expressly or by plain implication. ^[11] In addition, we must consider Cotton's argument that the "multiple burden" imposed by the state and tribal taxes is unconstitutional.

Although determining whether federal legislation has pre-empted state taxation of lessees of Indian land is primarily an exercise in examining congressional intent, the history of tribal sovereignty serves as a necessary "backdrop" to that process. Cf. Rice v. Rehner, 463 U.S. 713, 719, 103 S.Ct. 3291, 3295, 77 L.Ed.2d 961 (1983) (quoting McClanahan v. Arizona State Tax Comm'n, 411 U.S. 164, 172, 93 S.Ct. 1257, 1262, 36 L.Ed.2d 129 (1973)). As a result, questions of pre-emption in this area are not resolved by reference to standards of pre-emption that have developed in other areas of the law, and are not controlled by "mechanical or absolute conceptions of state or tribal sovereignty." White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 145, 100 S.Ct. 2578, 2584, 65 L.Ed.2d 665 (1980). Instead, we have applied a flexible pre-emption analysis sensitive to the particular facts and legislation involved. Each case "requires a particularized examination of the relevant state, federal, and tribal interests." Ramah Navajo School Bd., Inc. v. Bureau of Revenue of New Mexico, 458 U.S. 832, 838, 102 S.Ct. 3394, 3398, 73 L.Ed.2d 1174 (1982). Moreover, in examining the pre-emptive force of the relevant federal legislation, we are cognizant of both the broad policies that underlie the legislation and the history of tribal independence in the field at issue. See ibid. It bears emphasis that although congressional silence no longer entails a broad-based immunity from taxation for private parties doing business with Indian tribes, fe eral pre-emption is not limited to cases in which Congress has expressly-as compared to impliedly-pre-empted the state activity. Finally, we note that although state interests must be given weight and courts should be careful not to make legislative decisions in the absence of congressional action, ambiguities in federal law are, as a rule, resolved in favor of tribal independence. See ibid.

Against this background, Cotton argues that the New Mexico taxes are pre-empted by the "federal laws and policies which protect tribal self-government and strengthen impoverished reservation economies." Brief for Appellants 16. Most significantly, Cotton contends that the 1938 Act exhibits a strong federal interest in guaranteeing Indian tribes the maximum return on their oil and gas leases. Moreover, Cotton maintains that the Federal and Tribal Governments, acting pursuant to the 1938 Act, its accompanying regulations, and the Jicarilla Apache Tribal Code, exercise comprehensive regulatory control over Cotton's on-reservation activity. Cotton describes New Mexico's responsibilities, in contrast, as "significantly limited." Brief for Appellants 21. Thus, weighing the respective state, federal, and tribal interests, Cotton concludes that the New Mexico taxes unduly interfere with the federal interest in promoting tribal economic self-sufficiency and are not justified by an adequate state interest. We disagree.

The 1938 Act neither expressly permits state taxation nor expressly precludes it, but rather simply provides that "unallotted lands within any Indian reservation or lands owned by any tribe . . . may, with the approval of the Secretary of the Interior, be leased for mining purposes, by authority of the tribal council . . ., for terms not to exceed ten years and as long thereafter as minerals are produced in paying quantities." 25 U.S.C. § 396a. The Senate and House Reports that accompanied the Act, moreover-even when considered in their broadest possible terms-shed little light on congressional intent concerning state taxation of oil and gas produced on leased lands. See S.Rep. No. 985, 75th Cong., 1st Sess. (1937); H.R.Rep. No. 1872, 75th Cong., 3d Sess. (1938). Both Reports reflect that the proposed legislation was suggested by the Secretary and considered by the appropriate committees, which recommended that it pass without amendment. Beyond this procedural summary, the Reports simply rely on the Secretary's letter of transmittal to describe the purpose of the Act. That letter provides that the legislation was intended, in light of the disarray of federal law in the area, "to obtain uniformity so far as practicable of the law relating to the leasing of tribal lands for mining purposes," and, in particular, was designed to "bring all mineral leasing matters in harmony with the Indian Reorganization Act." Id., at 1, 3; S.Rep. No. 985, supra, at 2, 3. In addition, the letter contains the following passage:

"It is not believed that the present law is adequate to give the Indians the greatest return from their property. As stated, present law provides for locating and taking mineral leases in the same manner as mining locations are made on the public lands of the United States; but there are disadvantages in following this procedure on Indian lands that are not present in applying for a claim on the public domain. For instance, on the public domain the discoverer of a mineral deposit gets extralateral rights and can follow the ore beyond the side lines indefinitely, while on the Indian lands under the act of June 30, 1919, he is limited to the confines of the survey markers not to exceed 600 feet by 1,500 feet in any one claim. The draft of the bill herewith would permit the obtaining of sufficient acreage to remove the necessity for extralateral rights with all of its attending controversies." Id., at 2; H.R.Rep. No. 1872, supra, at 2 (emphasis added).

Relying on the first sentence in this paragraph, Cotton argues that the 938 Act embodies a broad congressional policy of maximizing revenues for Indian tribes. Cotton finds support for this proposition in Montana v. Blackfeet Tribe, 471 U.S. 759, 105 S.Ct. 2399, 85 L.Ed.2d 753 (1985). That case raised the question whether the 1938 Act authorizes state taxation of a tribe's royalty interests under oil and gas leases issued to nonmembers. Applying the settled rule that a tribe may only be directly taxed by a State if "Congress has made its intention to [lift the tribe's exemption] unmistakably clear," id., at 765, 105 S.Ct., at 2403, we concluded that "the State may not tax Indian royalty income from leases issued pursuant to the 1938 Act," id., at 768, 105 S.Ct., at 2404. In a footnote we added the observation that direct state taxation of Indian revenues would frustrate the 1938 Act's purpose of "ensur[ing] that Indians receive 'the greatest return from their property,' [S.Rep. No. 985, supra, at] 2; H.R.Rep. No. 1872, supra, at 2." Id., at 767, n. 5, 105 S.Ct., at 2404, n. 5.

To the extent Cotton seeks to give the Secretary's reference to "the greatest return from their property" talismanic effect, arguing that these words demonstrate that Congress intended to guarantee Indian tribes the maximum profit available without regard to competing state interests, it overstates its case. There is nothing remarkable in the proposition that, in authorizing mineral leases, Congress sought to provide Indian tribes with a profitable source of revenue. It is however quite remarkable, indeed unfathomable in our view, to suggest that Congress intended to remove all state-imposed obstacles to profitability by attaching to the Senate and House Reports a letter from the Secretary that happened to include the phrase "the greatest return from their property." Read in the broadest terms possible, the relevant paragraph suggests that Congress sought to remove "disadvantages in [leasing mineral rights] on Indian lands that are not present in applying for a claim on the public domain." S.Rep. No. 985, supra, at 2; H.R.Rep. No. 1872, supra, at 2. By 1938, however, it was established that oil and gas lessees of public lands were subject to state taxation. See Mid-Northern Oil Co. v. Walker, 268 U.S. 45, 45 S.Ct. 440, 69 L.Ed. 841 (1925). It is thus apparent that Congress was not concerned with state taxation, but with matters such as the unavailability of extralateral mineral rights on Indian land. Nor do we read the Blackfeet footnote, 471 U.S., at 767, n. 5, 105 S.Ct., at 2404, n. 5, to give the Secretary's words greater effect. We think it clear that the footnote simply stands for the proposition that the Act's purpose of creating a source of revenue for Indian tribes provides evidence that Congress did not intend to authorize direct state taxation of Indian royalties.

We thus agree that a purpose of the 1938 Act is to provide Indian tribes with badly needed revenue, but find no evidence for the further supposition that Congress intended to remove all barriers to profit maximization. The Secretary's letter of transmittal, even when read permissively for broad policy goals and even when read to resolve ambiguities in favor of tribal independence, supports no more.

Our review of the legislation that preceded the 1938 Act provides no additional support for Cotton's expansive view of the Act's purpose. This history is relevant in that it supplies both the legislative background against which Congress enacted the 1938 Act and the relevant "backdrop" of tribal independence. Congress first authorized mineral leasing on Indian lands in 1891. See Act of Feb. 28, 1891, § 3, 26 Stat. 795, 25 U.S.C. § 397 (1891 Act). That legislation, which empowered tribes to enter into grazing and mining leases, only applied to lands "occupied by Indians who have bought and paid for the same," and was thus interpreted to be inapplicable to Executive Order reservations. See British-American Oil Producin Co. v. Board of Equalization of Montana, 299 U.S. 159, 161-162, 164, 57 S.Ct. 132, 133, 134, 81 L.Ed. 95 (1936). Mineral leasing on reservations created by Executive Order-like the Jicarilla Apache Reservation-was not authorized until almost four decades later. After years of debate concerning whether Indians had any right to share in royalties derived from oil and gas leases in Executive Order reservations, ^[12] Congress finally enacted legislation in 1927 that authorized such leases. See Indian Oil Act of 1927, 44 Stat. (part 2) 1347, 25 U.S.C. § 398a (1927 Act).

While both the 1891 and 1927 Acts were in effect, Gillespie was the prevailing law and, under its expansive view of intergovernmental tax immunity, States were powerless to impose severance taxes on oil produced on Indian reservations unless Congress expressly waived that immunity. Just two years after Gillespie was decided, Congress took such express action and authorized state taxation of oil and gas production in treaty reservations. See Indian Oil Leasing Act of 1924, 43 Stat. 244 (1924 Act), current version at 25 U.S.C. § 398. See also British-American Oil Producing Co. v. Board of Equalization, supra (applying 1924 Act to uphold state tax imposed on the production of oil and gas in the Blackfeet Indian Reservation). More significantly for purposes of this case, when Congress first authorized oil and gas leasing on Executive Order reservations in the 1927 Act, it expressly waived immunity from state taxation of oil and gas lessees operating in those reservations. See 44 Stat. (part 2) 1347, 25 U.S.C. § 398c. Thus, at least as to Executive Order reservations, state taxation of nonmember oil and gas lessees was the norm from the very start. There is, accordingly, simply no history of tribal independence from state taxation of these lessees to form a "backdrop" against which the 1938 Act must be read.

We are also unconvinced that the contrast between the 1927 Act's express waiver of immunity and the 1938 Act's silence on the subject suggests that Congress intended to repeal the waiver in the 1938 Act and thus to diametrically change course by implicitly barring state taxation. The general repealer clause contained in the 1938 Act provides that "[a]ll Act[s] or parts of Acts inconsistent herewith are hereby repealed." 52 Stat. 348. Although one might infer from this clause that all preceding, non conflicting legislation in the area, like the 1927 Act's waiver provision, is implicitly incorporated, we need not go so far to simply conclude that the 1938 Act's omission demonstrates no congressional purpose to close the door to state taxation. Moreover, the contrast between the 1927 and 1938 Acts is easily explained by the contemporaneous history of the doctrine of intergovernmental tax immunity. In 1927, Gillespie prevailed, and States were only permitted to tax lessees of Indian lands if Congress expressly so provided. By the time the 1938 Act was enacted, however, Gillespie had been overruled and replaced by the modern rule permitting such taxes absent congressional disapproval. ^[13] Thus, Congress' approaches to both the 1927 and 1938 Acts were fully consistent with an intent to permit state taxation of nonmember lessees. ^[14]

Cotton nonetheless maintains that our decisions in White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 100 S.Ct. 2578, 65 L.Ed.2d 665 (1980), and Ramah Navajo School Bd., Inc. v. Bureau of Revenue of New Mexico, 458 U.S. 832, 102 S.Ct. 3394, 73 L.Ed.2d 1174 (1982), compel the conclusion that the New Mexico taxes are preempted by federal law. In pressing this argument, Cotton ignores the admonition included in both of those decisions that the relevant preemption test is a flexible one sensitive to the particular state, federal, and tribal interests involved. See id., at 838, 102 S.Ct., at 3398; Bracker, supra, 448 U.S., at 145, 100 S.Ct., at 2584.

In Bracker, we addressed the question whether Arizona could impose its motor carrier license and use fuel taxes on a nonmember logging company's use of roads located solely within an Indian reservation. Significantly, the roads at issue were "built, maintained, and policed exclusively by the Federal Government, the Tribe, and its contractors," 448 U.S., at 150, 100 S.Ct., at 2587, and the State was "unable to identify any regulatory function or service [it] performed . . . that would justify the assessment of taxes for activities on Bureau and tribal roads within the reservation," id., at 148-149, 100 S.Ct., at 2586-2587. See also id., at 174, 100 S.Ct., at 2601 (Powell, J., concurring) ("The State has no interest in raising revenues from the use of Indian roads that cost it nothing and over which it exercises no control"). Moreover, it was undisputed in Bracker that the economic burden of the taxes ultimately fell on the Tribe. Id., at 151, 100 S.Ct., at 2587. Based on these facts and on our conclusion that collection of the taxes would undermine federal policy "in a context in which the Federal Government has undertaken to regulate the most minute details" of the Tribe's timber operations, we held that the taxes were pre-empted. Id., at 149, 100 S.Ct., at 2586.

Ramah Navajo School Bd. involved a similar factual scenario. In the late 1960's, New Mexico closed the only public high school that served the Ramah Navajo children. The State then sought to tax two nonmember construction firms hired by the Tribe to build a school in the reservation. As in Bracker, the State asserted no legitimate regulatory interest that might justify the tax. Ramah Navajo School Bd., supra, 458 U.S., at 843-846, 102 S.Ct., at 3401-3403. Also as in Bracker, the economic burden of the tax ultimately fell on the Tribe. And finally, again as in Bracker, we noted that federal law imposed a comprehensive regulatory scheme. Ramah Navajo School Bd., 458 U.S., at 839-842, 102 S.Ct., at 3399-3401. We concluded: "Having declined to take any responsibility for the education of these Indian children, the State is precluded from imposing an additional burden on the comprehensive federal scheme intended to provide this education-a scheme which has 'left the State with no duties or responsibilities.' " Id., at 843, 102 S.Ct., at 3401 (quoting Warren Trading Post Co. v. Arizona Tax Comm'n, 380 U.S. 685, 691, 85 S.Ct. 1242, 1246, 14 L.Ed.2d 165 (1965)).

The factual findings of the New Mexico District Court clearly distinguish this case from both Bracker, supra, and Ramah Navajo School Bd., supra. After conducting a trial, that court found that "New Mexico provides substantial services to both the Jicarilla Tribe and Cotton," costing the State approximately $3 million per year. App. to Juris. Statement 16. Indeed, Cotton concedes that from 1981 through 1985 New Mexico provided its operations with services costing $89,384, but argues that the ost of these services is disproportionate to the $2,293,953 in taxes the State collected from Cotton. Brief for Appellants 13-14. Neither Bracker, nor Ramah Navajo School Bd., however, imposes such a proportionality requirement on the States. ^[15] Rather, both cases involved complete abdication or noninvolvement of the State in the on-reservation activity. The present case is also unlike Bracker and Ramah Navajo School Bd., in that the District Court found that "[n]o economic burden falls on the tribe by virtue of the state taxes," App. to Juris. Statement 15, and that the Tribe could, in fact, increase its taxes without adversely affecting on-reservation oil and gas development, id., at 17. Finally, the District Court found that the State regulates the spacing and mechanical integrity of wells located on the reservation. Id., at 16. Thus, although the federal and tribal regulations in this case are extensive, ^[16] they are not exclusive, as were the regulations in Bracker and Ramah Navajo School Bd.

We thus conclude that federal law, even when given the most generous construction, does not pre-empt New Mexico's oil and gas severance taxes. This is not a case in which the State has had nothing to do with the on-reservation activity, save tax it. Nor is this a case in which an unusually large state tax has imposed a substantial burden on the Tribe. ^[17] It is, of course, reasonable to infer that the New Mexico taxes have at least a marginal effect on the demand for on-reservation leases, the value to the Tribe of those leases, and the ability of the Tribe to increase its tax rate. Any impairment to the federal policy favoring the exploitation of on-reservation oil and gas resources by Indian tribes that might be caused by these effects, however, is simply too indirect and too insubstantial to support Cotton's claim of pre-emption. To find pre-emption of state taxation in such indirect burdens on this broad congressional purpose, absent some special factor such as those present in Bracker and Ramah Navajo School Bd., would be to return to the pre-1937 doctrine of intergovernmental tax immunity. ^[18] Any ad erse effect on the Tribe's finances caused by the taxation of a private party contracting with the Tribe would be ground to strike the state tax. Absent more explicit guidance from Congress, we decline to return to this long-discarded and thoroughly repudiated doctrine.

Cotton also argues that New Mexico's severance taxes-"insofar as they are imposed without allocation or apportionment on top of Jicarilla Apache tribal taxes"-impose "an unlawful multiple tax burden on interstate commerce." Brief for Appellants 33. In support of this argument, Cotton relies on three facts: (1) that the State and the Tribe tax the same activity; (2) that the total tax burden on Cotton is higher than the burden on its off-reservation competitors who pay no tribal tax; and (3) that the state taxes generate revenues that far exceed the value of the services it provides on the reservation.

As we pointed out in the Merrion footnote, see n. 5, supra, a multiple taxation issue may arise when more than one State attempts to tax the same activity. If a unitary business derives income from several States, each State may only tax the portion of that income that is attributable to activity within its borders. ^[19] See, e.g., Exxon Corp. v. Wisconsin Department of Revenue, 447 U.S. 207, 100 S.Ct. 2109, 65 L.Ed.2d 66 (1980). Thus, in such a case, an apportionment formula is necessary in order to identify the scope of the taxpayer's business that is within the taxing jurisdiction of each State. In this case, however, all of Cotton's leases are located entirely within the borders of the State of New Mexico and also within the borders of the Jicarilla Apache Reservation. Indeed, they are also within the borders of the United States. There are, therefore, three different governmental entities, each of which has taxing jurisdiction over all of the non-Indian wells. Cf. Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134, 100 S.Ct. 2069, 65 L.Ed.2d 10 (1980) (Indian Tribe did not oust State of power to impose cigarette tax on on-reservation sales to non-Indian customers by imposing its own tax on transaction). The federal sovereign has the undoubted power to prohibit taxation of the Tribe's lessees by the Tribe, by the State, or by both, but since it has not exercise that power, concurrent taxing jurisdiction over all of Cotton's on-reservation leases exists. Cf. Commonwealth Edison Co. v. Montana, 453 U.S., at 617, 101 S.Ct., at 2953 (noting that because the taxed activity took place exclusively within Montana-although much of it on federal lands within the State-no nexus or apportionment problem existed). Unless and until Congress provides otherwise, each of the other two sovereigns has taxing jurisdiction over all of Cotton's leases.

It is, of course, true that the total taxes paid by Cotton are higher than those paid by off-reservation producers. But neither the State nor the Tribe imposes a discriminatory tax. The burdensome consequence is entirely attributable to the fact that the leases are located in an area where two governmental entities share jurisdiction. As we noted in Merrion, the tribal tax does "not treat minerals transported away from the reservation differently than it treats minerals that might be sold on the reservation." 455 U.S., at 157-158, 102 S.Ct., at 912. Similarly, the New Mexico taxes are administered in an evenhanded manner and are imposed at a uniform rate throughout the State-both on and off the reservation. See 106 N.M., at 521, 745 P.2d, at 1174.

Cotton's most persuasive argument is based on the evidence that tax payments by reservation lessees far exceed the value of services provided by the State to the lessees, or more generally, to the reservation as a whole. See n. 6, supra. There are, however, two sufficient reasons for rejecting this argument. First, the relevant services provided by the State include those that are available to the lessees and the members of the Tribe off the reservation as well as on it. The intangible value of citizenship in an organized society is not easily measured in dollars and cents; moreover, the District Court found that the actual per capita state expenditures for Jicarilla members are equal to or greater than the per capita expenditures for non-Indian citizens. See App. to Juris. Statement 16. Second, there is no constitutional requirement that the benefits received from a taxing authority by an ordinary commercial taxpayer-or by those living in the community where the taxpayer is located-must equal the amount of its tax obligations. See Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S. 470, 491, n. 21, 107 S.Ct. 1232, 1245, n. 21, 94 L.Ed.2d 472 (1987). As we recently explained:

"[T]here is no requirement under the Due Process Clause that the amount of general revenue taxes collected from a particular activity must be reasonably related to the value of the services provided to the activity. Instead, our consistent rule has been:

" 'Nothing is more familiar in taxation than the imposition of a tax upon a class or upon individuals who enjoy no direct benefit from its expenditure, and who are not responsible for the condition to be remedied.

" 'A tax is not an assessment of benefits. It is, as we have said, a means of distributing the burden of the cost of government. The only benefit to which the taxpayer is constitutionally entitled is that derived from his enjoyment of the privileges of living in an organized society, established and safeguarded by the devotion of taxes to public purposes. Any other view would preclude the levying of taxes except as they are used to compensate for the burden on those who pay them, and would involve abandonment of the most fundamental principle of government-that it exists primarily to provide for the common good.' Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 521-523 [57 S.Ct. 868, 878-879, 81 L.Ed. 1245] (1937) (citations and footnote omitted).

* * * * *

"There is no reason to suppose that this latitude afforded the States under the Due Process Clause is somehow divested by the Commerce Clause merely because the taxed activity has some connection to interstate commerce; particularly when the tax is levied on an activity conducted within the State." Commonwealth Edison Co., supra, 453 U.S., at 622-623, 101 S.Ct., at 2955-2956.

Cotton, in effect, asks us to divest New Mexico of its normal latitude because its taxes have "some connection" to commerce with the Tribe. The connection, however, is by no means close enough. There is simply no evidence in the record that the tax has had an adverse effect on the Tribe's ability to attract oil and gas lessees. It is, of course, reasonable to infer that the existence of the state tax imposes some limit on the profitability of Indian oil and gas leases-just as it no doubt imposes a limit on the profitability of off-reservation leasing arrangements-but that is precisely the same indirect burden that we rejected as a basis for granting non-Indian contractors an immunity from state taxation in Helvering v. Mountain Producers Corp., 303 U.S. 376, 58 S.Ct. 623, 82 L.Ed. 907 (1938); Oklahoma Tax Comm'n v. United States, 319 U.S. 598, 63 S.Ct. 1284, 87 L.Ed. 1612 (1943); Oklahoma Tax Comm'n v. Texas Co., 336 U.S. 342, 69 S.Ct. 561, 93 L.Ed. 721 (1949); Moe v. Confederated Salish and Kootenai Tribes of Flathead Reservation, 425 U.S. 463, 96 S.Ct. 1634, 48 L.Ed.2d 96 (1976); and Washington v. Confederated Tribes of Colville Reservation, 447 U.S. 134, 100 S.Ct. 2069, 65 L.Ed.2d 10 (1980).

In our order noting probable jurisdiction we invited the parties to address the question whether the Tribe should be treated as a State for the purpose of determining whether New Mexico's taxes must be apportioned. All of the Indian tribes that have filed amicus curiae briefs addressing this question-including the Jicarilla Apache Tribe-have uniformly taken the position that Indian tribes are not States within the meaning of the Commerce Clause. This position is supported by the text of the Clause itself. Article I, § 8, cl. 3, provides that the "Congress shall have Power . . . To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." Thus, the Commerce Clause draws a clear distinction between "States" and "Indian Tribes." As Chief Justice Marshall observed in Cherokee Nation v. Georgia, 5 Pet. 1, 18, 8 L.Ed. 25 (1831): "The objects to which the power of regulating commerce might be directed, are divided into three distinct classes-foreign nations, the several states, and Indian Tribes. When forming this article, the convention considered them as entirely distinct." In fact, the language of the Clause no more admits of treating Indian tribes as States than of treating foreign nations as States. See ibid.

It is also well established that the Interstate Commerce and Indian Commerce Clauses have very different applications. In particular, while the Interstate Commerce Clause is concerned with maintaining free trade among the States even in the absence of implementing federal legislation, see McLeod v. J.E. Dilworth Co., 322 U.S. 327, 330, 64 S.Ct. 1023, 1025, 88 L.Ed. 1304 (1944); Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970), the central function of the Indian Commerce Clause is to provide Congress with plenary power to legislate in the field of Indian affairs, see Morton v. Mancari, 417 U.S. 535, 551-552, 94 S.Ct. 2474, 2483-2484, 41 L.Ed.2d 290 (1974); F. Cohen, Handbook of Federal Indian Law 207-208, and nn. 2, 3 and 9-11 (1982). The extensive case law that has developed under the Interstate Commerce Clause, moreover, is premised on a structural understanding of the unique role of the States in our constitutional system that is not readily imported to cases involving the Indian Commerce Clause. Most notably, as our discussion of Cotton's "multiple taxation" argument demonstrates, the fact that States and tribes have concurrent jurisdiction over the same territory makes it inappropriate to apply Commerce Clause doctrine developed in the context of commerce "among" States with mutually exclusive territorial jurisdiction to trade "with" Indian tribes.

Accordingly, we have no occasion to modify our comment on this question in the Bracker case:

"Tribal reservations are not States, and the differences in the form and nature of their sovereignty make it treacherous to import to one notions of pre-emption that are properly applied to the other." 448 U.S., at 143, 100 S.Ct., at 2583.

The judgment of the New Mexico Court of Appeals is

Affirmed.

Justice BLACKMUN, with whom Justice BRENNAN and Justice MARSHALL join, dissenting.

Notes

1. The full text of the Executive Order reads as follows:
2. Effective January 1, 1988, the Tribe added a third tax, which is based on the value of possessory interests-including leasehold interests-held by taxpayers on the reservation. See Possessory Interest Tax, Ordinance No. 88-R-152, reprinted in App. to Reply Brief for Appellants 4-19 (filed Mar. 16, 1988). Because Cotton does not seek refund of state taxes paid after the possessory interest tax took effect, and because this tax was not enacted until after the New Mexico Court of Appeals issued its decision, we leave it to the side for purposes of our decision.
3. Cotton also pays an overriding royalty of 121/2 percent of the value of production to the assignors of the five leases. See 106 N.M. 517, 518, 745 P.2d 1170, 1171 (1987).
4. The five taxes are the Oil and Gas Severance Tax, N.M.Stat.Ann. § 7-29-1 (1986); the Oil and Gas Conservation Tax, § 7-30-1; the Oil and Gas Emergency School Tax, § 7-31-1; the Oil and Gas Ad Valorem Production Tax, § 7-32-1; and the Oil and Gas Production Equipment Ad Valorem Tax, § 7-34-1.
5. The entire footnote reads as follows:
6. Cotton's evidence tended to prove that for the tax years 1981-1985 it paid New Mexico $2,293,953, while only receiving the equivalent of $89,384 in services to its operations in return. See 106 N.M., at 520, 745 P.2d, at 1173. Cotton's evidence further suggested that over the same period the State received total tax revenues of $47,483,306 from the on-reservation, nonmember oil and gas producers, while only providing $10,704,748 in services to the reservation as a whole. See ibid.
7. The District Court found that New Mexico spends approximately $3 million per year in providing on-reservation services to Cotton and the Tribe. App. to Juris. Statement 16. In addition, the court found that New Mexico does not discriminate against the Tribe or its members in providing state services; indeed, the State spends as much or more per capita on members of the Tribe than on nonmembers. Ibid. The court further found that New Mexico p ovides services on the reservation not provided by either the Tribal or Federal Governments, and provides additional services off the reservation that benefit the reservation and members of the Tribe. Ibid. Finally, the court found that the State regulates the spacing and mechanical integrity of wells located both on and off the reservation. Ibid.
8. The District Court wrote:
9. The Court of Appeals noted that Cotton, and not the Tribe, paid the taxes at issue; that "[t]he record contains no evidence of an impact [on] tribal sovereignty"; that Cotton drilled 12 new wells while subject to both the state and tribal taxes and "shows no signs of disrupting production because of the tax burden"; and that at trial "[t]he Tribe's own consultant indicated that the Tribe could charge an even higher tax despite the state taxes imposed on Cotton." 106 N.M., at 522, 745 P.2d, at 1175.
10. The Court held that non-Indian mineral lessees were exempt from state occupation and privilege taxes, see Choctaw, O. & G.R. Co. v. Harrison, 235 U.S. 292, 35 S.Ct. 27, 59 L.Ed. 234 (1914), exempt from state taxes on the value of their leasehold, see Indian Territory Illuminating Oil Co. v. Oklahoma, 240 U.S. 522, 36 S.Ct. 453, 60 L.Ed. 779 (1916), exempt from state gross production taxes, see Howard v. Gipsy Oil Co., 247 U.S. 503, 38 S.Ct. 426, 62 L.Ed. 1239 (1918) (per curiam ); Large Oil Co. v. Howard, 248 U.S. 549, 39 S.Ct. 183, 63 L.Ed. 416 (1919) (per curiam ), and exempt from State ad valorem taxes in some circumstances, see Jaybird Mining Co. v. Weir, 271 U.S. 609, 46 S.Ct. 592, 70 L.Ed. 1112 (1926).
11. Although Cotton did not press the pre-emption argument as an independent claim before the New Mexico Court of Appeals, we conclude that the issue is properly before us. Cotton did rely on our pre-emption cases at least as a "backdrop" for its multiple taxation claim. In addition, the pre-emption claim was fully briefed before the Court of Appeals by the Tribe in its status as an amicus curiae. And finally, the pre-emption claim was carefully considered and passed upon by the Court of Appeals.
12. This history is recounted in L. Kelly, The Navajo Indians and Federal Indian Policy 48-103 (1968) (hereinafter Kelly).
13. Although Gillespie was not explicitly overruled until 1938 in Helvering v. Mountain Producers Corp., 303 U.S. 376, 58 S.Ct. 623, the holding in that case was plainly foreshadowed by the development of the law in this area during the preceding decade. See supra, at 174-175. The fact that the text of the 1938 Act had been drafted before our decision in Mountain Producers was actually handed down does not, therefore, have the significance that the dissent ascribes to it. See post, at 197-198.
14. Our decision in Montana v. Blackfeet Tribe, 471 U.S. 759, 105 S.Ct. 2399, 85 L.Ed.2d 753 (1985), is not to the contrary. In that case we considered the distinct question whether the 1938 Act, through incorporation of the 1927 Act, expressly authorized direct taxation of Indian royalties. In concluding that it did not, we made clear that our holding turned on the rule that Indian tribes, like the Federal Government itself, are exempt from direct state taxation and that this exemption is "lifted only when Congress has made its intention to do so unmistakably clear." Id., at 765, 105 S.Ct., at 2402. We stressed that the 1938 Act "contains no explicit consent to state taxation," and that the reverse implication of the general repealer clause that the 1927 waiver might be incorporated "does not satisfy the requirement that Congress clearly consent to state taxation." Id., at 766-767, 105 S.Ct., at 2403-2404. Our conclusion that the 1938 Act does not expressly authorize direct taxation of Indian tribes does not entail the further step that the Act impliedly prohibits taxation of nonmembers doing business on a reservation.
15. Nor are we inclined to do so today. Not only would such a proportionality requirement create nightmarish administrative burdens, but it would also be antithetical to the traditional notion that taxation is not premised on a strict quid pro quo relationship between the taxpayer and the tax collector. See Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 521-523, 57 S.Ct. 868, 878-879, 81 L.Ed. 1245 (1937).
16. The federal regulations provide, inter alia, that tribal leases may only be offered for sale pursuant to specified standards governing notice and bidding, 25 CFR § 211.3(a) (1988), that the Secretary reserves "the right to reject all bids when in his judgment the interests of the Indians will be best served by so doing," § 211.3(b), that corporate bidders must submit detailed information concerning their officers, directors, shareholders, and finances, § 211.5, that no single lease for oil and gas may exceed 2,560 acres, § 211.9, and that a primary lease may not exceed 10 years, § 211.10. The regulations also address the manner of payment and amount of rents and royalties, §§ 211.12, 211.13(a), and provide for Interior Department inspection of lessees' premises and records, § 211.18. Other federal regulations address the spacing, drilling, and plugging of wells and impose reporting requirements concerning production and environmental protection. See 43 CFR §§ 3160.0-1-3186.4 (1987).
17. We therefore have no occasion to reexamine our summary affirmance of the Court of Appeals for the Ninth Circuit's conclusion that Montana's unique severance and gross proceeds taxes may not be imposed on coal mined on Crow tribal property. See Montana v. Crow Tribe, 484 U.S. 997, 108 S.Ct. 685, 98 L.Ed.2d 638 (1988), summarily aff'g 819 F.2d 895 (1987). In that case, as the Ninth Circuit noted, the state taxes had a negative effect on the marketability of coal produced in Montana. See id., at 900. Moreover, as the Solicitor General stated in urging that we affirm the judgment of the Court of Appeals, the Montana taxes at issue were "extraordinarily high." Motion to Affirm for United States, O.T. 1987, No. 87-343, p. 12. According to the Crow Tribe's expert, the combined effective rate of the Montana taxes was 32.9 percent, "more than twice that of any other state's coal taxes." 819 F.2d, at 899, n. 2. See also Justice BLACKMUN's discussion of the "enormous revenues" generated by the Montana severance tax in Commonwealth Edison Co. v. Montana, 453 U.S. 609, 641-642, 101 S.Ct. 2946, 69 L.Ed.2d 884 (1981) (dissenting opinion).
18. It is important to keep in mind that the primary burden of the state taxation falls on the non-Indian taxpayers. Amicus curiae briefs supporting the position of Cotton in this case have been filed by New Mexico Oil & Gas Association, Texaco Inc., Chevron U.S.A. Inc., Union Oil Company of California, Phillips Petroleum Company, Wilshire Oil Company of Texas, Exxon Corporation, Mobil Exploration and Producing North America Inc., Anadarko Petroleum Corporation, Southland Royalty Company, and Marathon Oil Company.
19. In Hans Rees' Sons, Inc. v. North Carolina ex rel. Maxwell, 283 U.S. 123, 134, 51 S.Ct. 385, 389, 75 L.Ed. 879 (1931), we wrote:

"When . . . there are different taxing jurisdictions, each competent to lay a tax with respect to what lies within, and is done within, its own borders, and the question is necessarily one of apportionment, evidence may always be received which tends to show that a State has applied a method, which, albeit fair on its face, operates so as to reach profits which are in no just sense attributable to transactions within its jurisdiction."