Do tribal citizens owe state taxes after McGirt? Oklahoma Supreme Court will hear case

The Oklahoma Supreme Court has agreed to hear oral arguments in a milestone tax dispute tied to McGirt v. Oklahoma.

The central question in the case is whether a Muscogee Nation citizen who works for her tribe and lives within its reservation must pay state income taxes.

Arguments in the case, Alicia Stroble v. Oklahoma Tax Commission, are set for Jan. 17.

Gov. Kevin Stitt has brought widespread attention to the case and routinely peppers his public remarks with criticisms of the dispute. He contends the challenge could open up Oklahoma to a flood of tax waiver requests from tribal citizens after the 2020 McGirt ruling. In the landmark decision, the U.S. Supreme Court recognized the Muscogee reservation still exists.

More: Why a federal judge dismissed tribal citizens' Oklahoma tax lawsuit

States cannot tax tribal citizens who live and work in Indian Country. Stitt has tried to prevent the Muscogee reservation — as well as seven other tribal reservations recognized after the McGirt ruling — from falling under that scope.

A look at the case so far, and how much tax revenue might be impacted

The Tax Commission has estimated annual income tax collections could drop by as much as $73 million, or about 2%, as a result of the McGirt ruling.

Stroble asked for refunds for the 2017, 2018 and 2019 tax years. An administrative judge initially sided with her in April 2022. But the three-person tax commission ruled in October 2022 that Oklahoma could still tax Stroble’s wages. She then appealed to the state’s highest civil court.

It was unknown when the court would act until earlier this month, when it set the date for oral arguments. Attorneys for the Muscogee Nation and other tribes will be allowed to present arguments on behalf of Stroble, in addition to her own lawyer, Michael Parks.

Parks, of McAlester, said the hearing will give the court’s nine justices an opportunity to ask both sides questions before making a decision.

More: Oklahoma's governor ramps up rhetoric against tribal governments

The court also gave Attorney General Gentner Drummond until Nov. 1 to say whether he also would like to be heard in the matter. A spokesperson for Drummond has not yet said what he plans to do.

The Tax Commission is currently represented by its in-house attorney and a prominent Washington, D.C.-based lawyer, Kannon Shanmugam. He represented Oklahoma before the U.S. Supreme Court last year in a case that restored some of the state’s authority to prosecute crimes involving Native American victims on reservations.

In September, Stitt pressed the Oklahoma Legislature to pass a trigger law that would eliminate the state income tax altogether if the court ruled in favor of Stroble. Lawmakers did not heed the request.

Molly Young covers Indigenous affairs. Reach her at mollyyoung@gannett.com or 405-347-3534.

This article originally appeared on Oklahoman: Oklahoma Supreme Court will hear McGirt tax case