                  United States Court of Appeals
                             For the Eighth Circuit
                         ___________________________

                                 No. 18-2750
                         ___________________________

          Flandreau Santee Sioux Tribe, a Federally-recognized Indian tribe

                         lllllllllllllllllllllPlaintiff - Appellee

                                            v.

             Josh Haeder, Treasurer of the State of South Dakota, et al.*

                       lllllllllllllllllllllDefendants - Appellants
                                        ____________

                      Appeal from United States District Court
                    for the District of South Dakota - Sioux Falls
                                     ____________

                            Submitted: February 13, 2019
                              Filed: September 6, 2019
                                   ____________

Before LOKEN, COLLOTON, and KELLY, Circuit Judges.
                          ____________

LOKEN, Circuit Judge.

      In this case, as in Flandreau Santee Sioux Tribe v. Noem, No. 18-1271, also
decided today, we are called upon to determine whether a South Dakota tax on

      *
        We grant the State’s motion to substitute Treasurer Josh Haeder, Secretary of
Revenue James Terwilliger, and Governor Kristi Noem, in their official capacities,
in place of former Treasurer Richard Sattgast, former Governor Dennis Daugaard, and
former Secretary of Revenue Andy Gerlach.
nonmember activity on the Flandreau Indian Reservation in Moody County, South
Dakota is preempted by federal law. South Dakota imposes a 2% excise tax on the
gross receipts of a contractor if its services “entail the construction, building,
installation, or repair of a fixture of realty” within the State. S.D.C.L. 10-46A-1. The
issue is whether federal law preempts imposition of this statewide tax on the gross
receipts of a nonmember contractor for services performed in renovating and
expanding the Flandreau Santee Sioux Tribe’s gaming casino located on the
Reservation. The State appeals the district court’s grant of summary judgment in
favor of the Tribe. We review the grant of summary judgment de novo, and the facts
in the light most favorable to the State, the non-moving party. See Casino Res. Corp.
v. Harrah’s Entm’t, Inc., 243 F.3d 435, 437 (8th Cir. 2001) (standard of review). We
conclude on the summary judgment record that the tax is not preempted and therefore
reverse.

                                   I. Background.

       The Tribe owns and operates the Royal River Casino & Hotel (the “Casino”)
on the Reservation, where it conducts “Class III gaming” such as table games and slot
machines. As required by the federal Indian Gaming Regulatory Act (“IGRA”), the
Tribe and the State entered into a gaming compact that provides the terms under
which the Tribe is authorized to conduct Class III gaming at the Casino. See 25
U.S.C. § 2710(d). The Casino, opened in 1990 and relocated in 1997, operates in a
building that houses a gaming floor, a hotel, a restaurant, a bar, a gift shop, a snack
bar, and a live entertainment venue.

      The Tribe planned and has partially implemented a $24 million renovation and
expansion of the Casino, in part to compete with a newer, larger casino that opened
nearby in 2011. To this end, the Tribe and the State agreed to double the number of
slot machines allowed under the gaming compact. In October 2015, the Tribe
contracted with a nonmember construction company, Henry Carlson Company, to

                                          -2-
carry out the planned renovation. It is undisputed that the Henry Carlson Company’s
construction services under this contract would be subject to the 2% excise tax if not
performed on an Indian reservation. Cf. Valley Power Sys. v. S.D. Dep’t of Revenue,
905 N.W.2d 328, 331 (S.D. 2017). The compact between the Tribe and the State is
silent as to whether the State may impose the excise tax on a nonmember contractor
performing construction services on the Casino’s realty.

       Construction on the Casino project began in December 2016. Certain
construction projects within Indian country, such as construction of schools and tribal
government buildings, are exempt from the excise tax, based on a project-by-project
analysis by the South Dakota Department of Revenue using criteria developed by the
State from federal preemption decisions. Henry Carlson Company twice requested
an exemption for the Casino renovation project. Both requests were denied by the
Department of Revenue, which does not grant exemptions for nonmember contractor
work on “commercial” projects such as a casino. Henry Carlson Company then
remitted the excise tax under protest and requested that the State refund the tax to the
Tribe. See S.D.C.L. 10-27-2. When the State denied the request, the Tribe filed this
action in April 2017, seeking declaratory relief, an injunction, and a refund of the tax
paid under protest.1

       Ruling on the parties’ cross-motions for summary judgment, the district court
concluded that IGRA expressly preempts the state excise tax for two reasons: (i) The
federal statute comprehensively regulates gaming activity on tribal lands to provide
tribes with revenue and to promote tribal self-sufficiency, and it requires a tribal


      1
       Though it is undisputed that the legal incidence of this excise tax falls on the
contractor, not on the Tribe as project owner, the tax is listed as a separate item on
Henry Carlson Company’s invoices and thus in substance is paid by the Tribe. The
State does not contend the Tribe is not a proper plaintiff here. However, the Tribe
dismissed without prejudice its claim for refund of the tax paid by the Henry Carlson
Company based on the State’s claim of Eleventh Amendment immunity.

                                          -3-
resolution for the construction and maintenance of the gaming facility that is subject
to approval by the Chairman of the National Indian Gaming Commission (“NIGC”),
see 25 U.S.C. § 2710(2)(E). (ii) The Casino renovation project is “directly related”
to Class III gaming within the meaning of 25 U.S.C. § 2710(d)(3)(C)(vii) because
“without the construction project, the Tribe would be unable to operate its gaming
activities.” As the Tribe’s compact with the State does not authorize the excise tax,
it is preempted by 25 U.S.C. § 2710(d)(4). Alternatively, the court held that the tax
is preempted under the balancing test set forth in White Mountain Apache Tribe v.
Bracker, 448 U.S. 136 (1980), because it “infringes on the Tribe’s ability to govern
itself” and there is no “nexus between any services the State provides to the Tribe or
the contractor and the imposition of the excise tax.”

                                   II. Discussion.

       The analysis begins with Part I of our opinion in Flandreau Santee Sioux Tribe
v. Noem, No. 18-1271, slip op. at 4-13, which is hereby incorporated by reference.
Because the legal incidence of the excise tax falls on the nonmember contractor, not
on the Tribe, the tax is not per se invalid. See Okla. Tax Comm’n v. Chickasaw
Nation, 515 U.S. 450, 453 (1995). Therefore, a particularized inquiry is required to
determine whether federal interests as expressed in IGRA outweigh the State’s
interest in taxing nonmember Henry Carlson Company for its work on the Casino’s
realty. See Ramah Navajo School Bd., Inc. v. Bureau of Revenue of N.M., 458 U.S.
832, 838 (1982) (“Pre-emption analysis in this area is not controlled by mechanical
or absolute conceptions of state or tribal sovereignty; it requires a particularized
examination of the relevant state, federal, and tribal interests.”). Determining whether
federal legislation has preempted state taxation of nonmember activity on Indian land
is “primarily an exercise in examining congressional intent.” Cotton Petroleum Corp.
v. New Mexico, 490 U.S. 163, 176 (1989).




                                          -4-
       In Noem, we concluded that the district court erred in ruling that imposing the
South Dakota use tax on amenities sold to nonmember customers of the Casino was
expressly preempted by IGRA. For the most part, our reasoning in Noem establishes
that the district court likewise erred in concluding that the State’s excise tax on
nonmember construction contractors is expressly preempted:

       -- As we explained in Noem, 25 U.S.C. § 2710(d)(4) does not preempt state
taxation of nonmember activities on a reservation, other than Class III gaming
activity, which the Supreme Court has defined as “what goes on in a casino.” As to
other state taxes, subsection (d)(4) is a lack of authorization, not a prohibition.
“Congress chose to limit the scope of IGRA’s preemptive effect to the governance of
gaming.” Mashantucket Pequot Tribe v. Town of Ledyard, 722 F.3d 457, 473 (2nd
Cir. 2013) (upholding imposition of Connecticut’s personal property tax on
nonmember lessors of slot machines used by the tribe at its on-reservation casino).

       -- the construction contractor excise tax, like the use tax at issue in Noem, is
not expressly preempted by IGRA’s so called “catchall provision” in 25 U.S.C.
§ 2710(d)(3)(C)(vii). First, “directly related to the operation of gaming activities,”
as construed by the Supreme Court in Michigan v. Bay Mills Indian Cmty., 572 U.S.
782, 792 (2014), is a narrower term than directly related to casino operations. See
Navajo Nation v. Dalley, 896 F.3d 1196, 1207 (10th Cir. 2018) (“Class III gaming
activity relates only to the activities actually involved in the playing of the game, and
not activities occurring in proximity to, but not inextricably intertwined with, the
betting of chips, the folding of a hand, or suchlike.”). Thus, the district court erred
in concluding that casino construction and renovation falls within and is preempted
by the catchall provision simply because, “without the construction project, the Tribe
would be unable to operate its gaming activities.”

       Second, the absence of a compact provision addressing the State’s contractor
gross receipts tax does not evidence congressional intent to preempt state taxation of

                                          -5-
the gross receipts of nonmember construction companies renovating tribal casinos.
The catchall provision lists subjects that a compact may include; it does not address
the legal effect of non-inclusion. Third, we agree with the Ninth Circuit that, if
“IGRA itself preempts the state taxation of non-Indian contractors working on tribal
territory, we would effectively ignore Bracker and its progeny.” Barona Band of
Mission Indians v. Yee, 528 F.3d 1184, 1193 (9th Cir. 2008).

       In concluding that IGRA expressly preempts imposing the contractor excise
tax, the district court also relied on another IGRA provision not at issue in Noem --
the requirement that a tribe engaging in Class III gaming must adopt, and the
Chairman of the NIGC must approve, a resolution that provides that “the construction
and maintenance of the gaming facility, and the operation of that gaming is conducted
in a manner which adequately protects the environment and the public health and
safety.” 25 U.S.C. § 2710(b)(2)(E). The district court concluded that this provision
expressly preempts the State’s excise tax on nonmember contractors working on the
Casino’s realty, like the “comprehensive and pervasive” federal regulation of tribal
logging on federal trust lands in Bracker, 448 U.S. at 148-50, and of Indian school
construction and operation in Ramah, 458 U.S. at 839-42. We disagree.

       Other than requiring NIGC approval of a tribal ordinance stating that Casino
construction will adequately protect the environment and public health and safety, the
Commission does not actively regulate construction activity or prescribe what
adequate protection of public health and safety requires. See 25 C.F.R. §§ 559.1-
559.7; 25 C.F.R § 522.4(b)(7). Rather, consistent with IGRA’s purpose to promote
tribal self-sufficiency, NIGC leaves the management of casino construction to the
tribes. The summary judgment record establishes that the NIGC has had no
involvement to date in the Casino renovations at issue. We conclude that this IGRA
provision does not expressly nor by plain implication preempt the State’s contractor
excise tax, a tax which does not regulate or interfere with the Tribe’s design and
completion of the construction project, or its conduct of Class III gaming. “IGRA is

                                         -6-
a gambling statute, not a code governing construction contractors, the legalities of
which are of paramount state and local concern.” Yee, 528 F.3d at 1192.

       Thus, as in Noem, the issue in this case turns upon whether imposition of the
excise tax on nonmember contractors for construction services performed on the
Reservation is preempted under the Bracker balancing test. In conducting this
analysis, we focus on “the extent of federal regulation and control, the regulatory and
revenue-raising interests of states and tribes, and the provision of state or tribal
services.” Felix S. Cohen, Handbook of Federal Indian Law 707 (2012), citing
Cotton, 490 U.S. at 176-77, 186-90; Cent. Mach. Co. v. Ariz. State Tax Comm’n, 448
U.S. 160, 161-63 (1980); and Bracker, 448 U.S. at 150-51. Federal policies reflected
in IGRA and the history of tribal independence with respect to gaming, to the extent
they are implicated, may preempt the tax unless the State’s interest in applying the tax
to Henry Carlson Company’s work on the Casino is sufficient to overcome them. See
New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 334 (1983). The district
court concluded that Bracker balancing tips in favor of preemption. We disagree.

       The federal and tribal interests at issue are expressed in IGRA -- “promoting
tribal economic development, self-sufficiency, and strong tribal government,”
“ensur[ing] that the Indian tribe is the primary beneficiary of the gaming
operation,” and “protect[ing] such gaming as a means of generating tribal revenue,”
25 U.S.C. § 2702 -- and in the “history of tribal independence” in the operation of on-
reservation gaming as recounted in California v. Cabazon Band of Mission Indians,
480 U.S. 202 (1987), the Supreme Court decision that prompted Congress to enact
IGRA the following year. Unlike the ongoing use tax on Casino amenities at issue
in Noem, the generally applicable excise tax is a one-time tax on nonmember
contractor construction services in expanding and renovating the Casino’s realty,
some of which are performed off the reservation. This tax hardly implicates the
relevant federal and tribal interests.



                                          -7-
       Most significantly, the Tribe has presented no evidence that imposition of the
contractor excise tax for Henry Carlson Company’s work on the Casino project will
impede the Tribe’s ability to conduct its Class III gaming activities to generate
gaming revenue. To be sure, revenues from the Casino are of great financial
importance to the Tribe. In 2016 and 2017, the Casino enterprise generated roughly
40% of the Tribe’s budget and more than 90% of its yearly sales tax revenue. The
burden of the State’s contractor excise tax pales in comparison. The projected total
tax that would be paid when the Casino’s renovation is completed is $480,000. While
substantial, that is only a small percentage of the gross Casino revenues generated in
2016 and 2017 alone. Absent a showing that the effect of this one-time tax on
construction would be to reduce the demand for the Casino’s commercial activities,
this indirect financial burden is “simply too indirect and too insubstantial to support
[the Tribe’s] claim of preemption.” Cotton, 490 U.S. at 187; see Mashantucket
Pequot Tribe v. Town of Ledyard, 722 F.3d 457, 473-74 (2nd Cir. 2013). The Tribe
“cannot invalidate the [South Dakota] tax by complaining about a decrease in
revenues.” Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95, 114 (2005),
citing Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S.
134, 156 (1980). The additional federal interests reflected in IGRA and in the history
of tribal independence -- promoting strong tribal government and ensuring tribal
control of gaming operations in Indian country -- are not implicated by an excise tax
that does not regulate Casino construction or gaming activities.

       These rather minimal federal and tribal interests must be balanced against the
State’s significant interest in raising revenue for its general fund to provide services
to residents including the Henry Carlson Company, see Colville, 447 U.S. at 157; and
its “separate sovereign interest in being in control of, and able to apply, its laws
throughout its territory,” Ledyard, 722 F.3d at 476, citing Cotton, 490 U.S. at 188.

      The State’s “legitimate interest in raising revenues for essential government
programs” is “strongest when the tax is directed at off-reservation value and when the

                                          -8-
taxpayer is the recipient of state services.” Colville, 447 U.S. at 157. Therefore, the
Tribe argues, this interest must be heavily discounted because the Casino’s gaming
activities provide on-reservation value, and none of the many services that South
Dakota provides residents from its general fund have “a nexus between the taxed
activity and the government function provided.” Yee, 528 F.3d at 1193. For the most
part, this is true. But “the relevant services provided by the State include those that
are available to the [contractor] and the members of the Tribe off the reservation as
well as on it.” Cotton, 490 U.S. at 189. And the State also has an interest in being
able to apply its generally applicable excise tax throughout its territory. See Ledyard,
722 F.3d at 475-76. Thus, the absence of a more specific nexus, while relevant, is not
a controlling factor.

       Because the Tribe has failed to show that the tax has more than a de minimis
financial impact on federal and tribal interests, as in Ledyard,722 F.3d at 476-77, the
State’s legitimate interests in raising revenues for essential government programs that
benefit the nonmember contractor-taxpayer in this case, as well as its interest in being
able to apply its generally applicable contractor excise tax throughout the State, are
sufficient to justify imposing the excise tax on Henry Carlson Company’s
construction services performed on the Casino’s realty.

       For the foregoing reasons, the judgment of the district court and the order
granting summary judgment in favor of the Tribe on its first, second, and third claims
are reversed. We grant the State’s motion to dismiss the State Treasurer and remand
the case for further proceedings not inconsistent with this opinion.

COLLOTON, Circuit Judge, concurring in the judgment.

        Although I do not join the lead opinion and its incorporation of the analysis in
Flandreau Santee Sioux Tribe v. Noem, No. 18-1271, from which I dissent, I concur
in the judgment here: The South Dakota excise tax on gross receipts of a non-Indian

                                          -9-
contractor for services performed on the Tribe’s casino is not preempted. The
decisions in White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980), and
Ramah Navajo School Board, Inc. v. Bureau of Revenue of New Mexico, 458 U.S. 832
(1982), striking state taxes are not controlling in this context. There is no
comprehensive and pervasive federal regulatory scheme of casino construction that
precludes state taxation. See ante, at 6-7. That sort of federal regulation was
essential to decisions in Bracker, 448 U.S. at 148, 151 n.15, and Ramah, 458 U.S. at
839, 844 n.8; without it, the Tribe’s preemption argument has little force. This case
also does not exhibit “complete abdication or noninvolvement of the State in the on-
reservation activity,” Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 185
(1989), for the State licenses architects and engineers working on the construction
project, R. Doc. 33-11, at 9-15; R. Doc. 33-40, at 2-3; R. Doc. 69-21, at 7, 19; R. Doc.
72, at 14 (¶¶ 81-82); R. Doc. 80-13, at 11-12, issues permits for and conducts
inspections of electrical work on the project, R. Doc. 33-36, at 2-3; R. Doc. 69-14, at
4-5, and may approve a paving-mix manufacturer for the project. R. Doc. 33-11, at
12; R. Doc. 72, at 16 (¶ 88); R. Doc. 72-11, at 3 (¶ 1.6(A)). There is no evidence that
the excise tax “will impede the Tribe’s ability to conduct its Class III gaming
activities to generate gaming revenue,” ante, at 8, and any effect on federal Indian
gaming policy is too indirect and too insubstantial to justify a finding of preemption
in any event. See Cotton Petroleum, 490 U.S. at 187. I thus concur in the judgment
reversing the grant of summary judgment for the Tribe on its first, second, and third
claims, granting the motion to substitute, granting the motion to dismiss the State
Treasurer, and remanding for further proceedings.

KELLY, Circuit Judge, dissenting.

      I agree with the court that IGRA does not expressly preempt the application of
South Dakota’s excise tax in this case. But in my view, the tax is impliedly
preempted under the balancing test articulated by the Supreme Court in Bracker, 448
U.S. 136. Consistent with our opinion in the companion case, see Flandreau Santee

                                         -10-
Sioux Tribe v. Noem, No. 18-1271, slip op. at 9–12, I would conclude that the state’s
generalized interest in raising revenue does not outweigh the relevant federal and
tribal interests.

       In Noem, we faithfully applied Bracker to hold that (1) South Dakota’s interest
in collecting a use tax from the Casino’s patrons was merely a “generalized interest
in raising revenue,” and (2) this interest did not outweigh the federal and tribal
interests at stake. Slip op. at 11; see Bracker, 448 U.S. at 150. That analysis should
control here. South Dakota’s interest in collecting the excise tax from the contractor
here is just as generalized as its interest in collecting the use tax was in Noem. Both
taxes fund the state’s general treasury; there is no evidence that South Dakota uses
the revenues from either tax to provide any particular services to the Tribe or the
Casino.2 South Dakota therefore lacks any “specific, legitimate regulatory interest”
in the activity covered by the excise tax—construction of casino facilities on tribal
lands. Ramah, 458 U.S. at 843; see Noem, slip op. at 11; cf. Colville, 447 U.S. at 157
(“The State[’s] . . . interest in raising revenues . . . is . . . strongest when the tax is
directed at off-reservation value and when the taxpayer is the recipient of state
services.”). Whatever off-reservation benefits the state confers on the contractor,
those benefits cannot “justify a tax imposed on the construction of [Casino] facilities
on tribal lands pursuant to a contract between the tribal organization and the
non-Indian contracting firm.” Ramah, 458 U.S. at 843–44.

       In both Noem and this case, the Tribe has a competing interest in retaining the
tax revenue and using it to promote tribal self-sufficiency through operation of the
Casino. If anything, that interest is most salient here where the tax applies directly
to the construction of additional gaming areas in the Casino. It is undisputed that the

       2
       The record reveals only one instance of South Dakota providing services
related to the Tribe’s construction project: electrical inspections and permits. The
excise tax would not fund those services; the Tribe’s electrical contractor paid
separate fees to the state covering those costs.

                                           -11-
Tribe’s expansion and renovation project was a “necessary expense” to compete with
a newer nearby casino that reduced the Tribe’s gaming revenues. Flandreau Santee
Sioux Tribe v. Sattgast, 325 F. Supp. 3d 995, 1003 (D.S.D. 2018). Those gaming
revenues supply roughly 40% of the Tribe’s annual budget, supra at 8, and the
expansion project was needed to keep the Casino profitable. The court acknowledges
that the cost of this tax to the Tribe—$480,000—is “substantial” but then
characterizes it as “too insubstantial to support the Tribe’s claim of preemption.” Id.
(cleaned up). In my view, the first characterization is correct; the Tribe’s interest in
retaining this $480,000 is substantial, and it outweighs the state’s interest in raising
additional revenue for its general fund.3

       Federal interests, although not strong, further weigh in the Tribe’s favor.
Federal regulation of the Casino’s construction may not be “comprehensive and
pervasive,” see Ramah, 458 U.S. at 839, but it does exist. The NIGC Chairman plays
a role in ensuring that “the construction and maintenance of the gaming facility . . .
adequately protects the environment and the public health and safety.” See 25 U.S.C.
§ 2710(b)(2)(E), (d)(1)(A). And the federal government shares the Tribe’s interest
in “promoting tribal self-sufficiency and economic development,” which is furthered
through operation of a commercially successful Casino. Bracker, 448 U.S. at 143; see
25 U.S.C. § 2702(1).




      3
       The court compares the one-time payment of $480,000 to the Tribe’s
combined gross casino revenues between 2016 and 2017. Of course, gross revenue
does not account for all of the costs of operating the Casino; those expenses reduced
the Casino’s operating revenue by nearly 80% over those two years. Nor does it
account for the Tribe’s $24 million investment in the renovation project. In context,
this $480,000 surely means more to the Tribe than to South Dakota, which has an
annual budget of over $4 billion.

                                         -12-
       As in Noem, I would conclude that federal and tribal interests outweigh the
state’s general interest in raising revenue through collection of this tax. I would
accordingly affirm the district court’s judgment.
                        ______________________________




                                       -13-
