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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Ketchikan Gateway Borough v. Ketchikan Indian Corp. (8/15/2003) sp-5726

Ketchikan Gateway Borough v. Ketchikan Indian Corp. (8/15/2003) sp-5726

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
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            THE SUPREME COURT OF THE STATE OF ALASKA

KETCHIKAN GATEWAY BOROUGH and )
KETCHIKAN GATEWAY BOROUGH     )    Supreme Court No. S-10332
BOARD OF EQUALIZATION,             )
                                   )    Superior Court Nos.
               Appellants,              )    1KE-00-226 CI
                                   )    1KE-00-403 CI
     v.                            )
                                   )
KETCHIKAN INDIAN CORPORATION, )    O P I N I O N
                                   )
                Appellee.            )    [No. 5726 - August  15,
2003]
                                   )


          Appeal  from the Superior Court of the  State
          of    Alaska,   First   Judicial    District,
          Ketchikan, Trevor N. Stephens, Judge.

          Appearances:    Scott   A.   Brandt-Erichsen,
          Borough  Attorney, Ketchikan, for Appellants.
          Jahna  M.  Lindemuth, Dorsey &  Whitney  LLP,
          Anchorage, for Appellee.

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, Bryner, and Carpeneti, Justices.

          MATTHEWS, Justice.
           FABE,  Chief  Justice, with whom  CARPENETI,  Justice,
joins, dissenting.

            The   superior  court  applied  the  implied  federal

preemption doctrine to exempt from borough taxes all space  in  a

building that contains a tribally operated clinic that is subject

to  detailed oversight by the Indian Health Service.  The  narrow

question presented here is whether space in the building that  is

not  committed to use by the clinic should be exempt.  We  answer

in  the negative because such space is not necessarily part of  a

pervasively and comprehensively regulated federal program and the

borough's interest in taxing the property is not inconsequential.

I.   FACTS AND PROCEEDINGS

          In 1997 the United States conveyed a three-quarter-acre

parcel  located in Ketchikan to the Ketchikan Indian  Corporation

(KIC).   KIC began to construct a five-story building that,  when

completed, was intended primarily to contain a clinic run by  KIC

but  funded  by the Indian Health Service.  As of  the  tax  day,

January 1, 2000, the building was more than half complete.

          KIC requested a tax exemption for the property from the

Ketchikan   Gateway  Borough.   The  borough  assessor  initially

granted  a ten percent charitable exemption.  He determined  that

ten  percent of the services offered by KIC were available to the

community  at  large and not restricted to Alaska  Natives.   KIC

appealed  to  the Borough Board of Equalization.   At  a  hearing

before  the  board  the  assessor  modified  his  position.    He

continued to adhere to the theory that the building could have  a

ten  percent  charitable exemption, but added that another  fifty

percent  could be exempt as space committed to clinic use.1   The

sixty percent exemption, based on an appraised value of the  land

and  partially  completed building as  of  January  1,  2000,  of

$2,360,300, resulted in a taxable value of $944,100.   The  board

accepted the assessor's position but made no specific findings.

           The  evidence  presented to the board  concerning  the

amount  of space in the building that was not committed to clinic

purposes  was  both sparse and conflicting.  KIC's zoning  permit

application  indicated  that two floors would  be  used  for  the

clinic, one floor would be used for offices, and two floors would

be  "lease space."  The plans of the building indicate two floors

of  clinic space, one floor of office space, one floor  of  lease

space, and one floor of daycare space.  But it is unclear whether

the  zoning application or the plans reflected the intent of  KIC

as of January 1, 2000, regarding the use of the building.  At the

board  hearing KIC's attorney argued that all of the floor  space

that  "is being used, is being used for hospital purposes."   But

he  acknowledged  that there were unused spaces and  that  "[t]he

intent  of  KIC for the unused space is still unknown,"  although

"long-term  plans  and  strategy  includes  expansion  of   their

hospital  functions  into those unused  spaces."   KIC's  general

manager  acknowledged that there is space in the  building  which

might  either be leased or used for other programs  of  KIC.   He

stated  that  KIC would be obligated to devote lease revenues  to

Indian  Health  Services programs, but later  stated  that  lease

revenues could be used to pay the debt service on the building.

          KIC paid under protest the resulting taxes, $12,462.12,

both  appealing the board's decision and filing a  separate  suit

seeking  a  tax refund.  The borough cross-appealed  the  board's

decision,  arguing that the exemption should only have  been  ten

percent  rather  than  sixty percent, and  filed  a  counterclaim

seeking  a  declaration  that  the  clinic  is  not  a  nonprofit

hospital.  The superior court consolidated the cases.

          Following briefing and argument, the superior court

      (1)  dismissed  the cross-appeal on the  grounds  that  the

borough lacked standing and, alternatively, that the borough  was

precluded  from  appealing  from  a  decision  that  adopted  the

assessor's position in its entirety;

      (2)  held that the property was entirely exempt because  of

implied  federal preemption, based on Ramah Navajo School  Board,

Inc. v. Bureau of Revenue of New Mexico;2

      (3)  awarded full fees of $62,694.70 and costs to KIC under

AS 29.45.500(a); and

     (4) ruled that its earlier decision dismissing the borough's

cross-appeal in effect dismissed the borough's counterclaim.

           On appeal, the borough challenges the superior court's

decision  on  the  merits  only to the extent  that  it  exempted

portions of the building that were not committed for use as  part

of  the  clinic.  The borough also challenges the award  of  full

attorney's fees.

II.  STANDARD  OF REVIEW AND GENERAL PRINCIPLES RELEVANT  TO  TAX
     EXEMPTION CASES
     
           The main question involved in this case is one of  law

in which "we apply our independent judgment and adopt the rule of

law  that  is most persuasive in light of precedent, reason,  and

policy."3

           Taxpayer exemptions are strictly construed against the

taxpayer  and in favor of the taxing authority.4  The  burden  of

proving  eligibility for an exemption is on the  taxpayer.5   The

policy  underlying the rule of strict construction and the burden

of proof is:

                 All  property  is  benefited  by   the
          security  and  protection  furnished  by  the
          State, and it is only just and equitable that
          expenses   incurred  in  the  operation   and
          maintenance  of government should  be  fairly
          apportioned upon the property of all.[6]
          
           Notwithstanding the rule of strict construction, where

the  question  is whether federal law requires the  exemption  of

tribal interests from taxation, ambiguities in federal law should

be resolved in favor of the tribe.7

           Boards of equalization may spatially apportion  exempt

from  nonexempt  uses of a building and tax the nonexempt  space.

In  all  contested cases boards of equalization are  required  to

make findings of fact sufficient to explain the reasons for their

decisions.8  Such findings are reviewed deferentially and will be

affirmed if they are supported by substantial evidence.9

III. DISCUSSION10
     
          A.    Space in the Building that Has Not Been Committed
          for  Use  by the Clinic Is Not Exempt under the Implied
          Federal Preemption Doctrine.
          
           The  superior court concluded that the implied federal

preemption  doctrine  as reflected in the 1982  decision  of  the

United States Supreme Court in Ramah Navajo School Board, Inc. v.

Bureau  of  Revenue of New Mexico11 applied to  the  property  in

question  and  resulted  in  its  total  exemption  from  borough

taxation.   Implied  federal preemption in Indian  tax  cases  is

distinct from federal preemption in other areas of the law.   The

law of federal preemption generally requires that one "start with

the assumption that the historic police powers of the States were

not to be superseded by [a] Federal Act unless that was the clear

and manifest purpose of Congress."12

                 To   determine  whether  Congress  has
          preempted state action in a particular  arena
          .  .  .  [g]enerally,  we  apply  a  two-step
          analysis to preemption questions.  First,  we
          look  to  see  whether Congress  has  overtly
          preempted the subject matter the state wishes
          to  regulate, either explicitly, by declaring
          its intent to preempt all state authority, or
          implicitly, by occupying the entire field  of
          regulation  on the subject in question.   See
          Webster,  621  P.2d  at 897-98.   Second,  if
          neither  kind of direct preemption is  found,
          we  look  to  whether federal and  state  law
          conflict  in  this  particular  instance.  If
          state and federal regulations openly conflict
          or  if state regulations obstruct the purpose
          of  federal  regulations, then the  supremacy
          clause blocks the state regulation.  See  id.
          at  897,  900-01; Bald [v. RCA  Alascom,  569
          P.2d 1328, 1331 (Alaska 1977)].[13]
          
          In contrast, questions of implied federal preemption in

Indian  tax cases "are not resolved by reference to standards  of

pre-emption  that have developed in other areas of the  law"  and

are  "not limited to cases in which Congress has expressly  -  as

compared to impliedly - pre-empted the state activity."14

          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 Sch. Bd.,  Inc.  v.
          Bureau  of  Revenue of New Mexico,  458  U.S.
          832, 838 (1982).[15]
          
           Ramah  involved the application of New Mexico's  gross

receipts  tax  to  receipts that a non-Indian  construction  firm

received  from  a tribal school board for the construction  of  a

school  for Indian children on a reservation.  The Supreme  Court

held that federal law impliedly preempted application of the tax,

following  a  methodology established in  White  Mountain  Apache

Tribe v. Bracker,16 requiring "a particularized examination of the

relevant state, federal, and tribal interests."17  The Court noted

the federal policy of encouraging tribal control of education and

explained  in detail the "comprehensive and pervasive" regulatory

system  pertaining  to the construction and financing  of  Indian

schools.18   By contrast, the Ramah Court found that the  state's

interest  in the tax was inconsequential.  Noting the  historical

fact  that the state had closed the only public school  near  the

reservation, the Court stated:

          [T]he  State does not seek to assess its  tax
          in  return for the governmental functions  it
          provides to those who must bear the burden of
          paying this tax.  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."[19]
          
The  Court also observed that the "case would be different if the

State  were  actively seeking tax revenues  for  the  purpose  of

constructing,  or  assisting in the effort to  provide,  adequate

educational facilities for Ramah Navajo children."20

           The other United States Supreme Court case finding  an

implied  federal preemption is Bracker.21  It has in common  with

Ramah  the  twin  factors  of  a  comprehensive  and  pervasively

regulated   activity   concerning   tribal   interests   and   an

inconsequential state taxing interest.  In Cotton Petroleum Corp.

the United States Supreme Court summarized Bracker as follows:

                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, 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.  See also
          id.,  at  174 (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.
          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.[22]
          
           In  Board of Equalization for the Borough of Ketchikan

v.  Alaska Native Brotherhood & Sisterhood, Camp No. 14,  we  had

occasion  to  rule  on  the application of  the  implied  federal

preemption doctrine to municipal real estate taxes.23   At  issue

was  the taxability of a federally funded building built  by  KIC

and  held  by it under a long-term lease.  KIC conducted "various

cultural,  educational, vocational, health and community  service

programs"  in the building.24  We observed that the tax  revenues

"will  be  used  to  provide police and fire  protection  to  the

premises,  as  well  as  to provide water, electrical  and  sewer

services  to the building. . . .  Ketchikan has a strong interest

in raising these revenues by taxing the property because they are

for  services  that  must  be provided to  the  property."25   We

concluded that the borough taxes were not preempted in  light  of

the services that the borough was providing:

          [W]e   conclude  that  our  analysis  is   in
          complete  accordance  with  Ramah.   In  that
          case,  the Supreme Court struck down a  state
          gross  receipts tax imposed on  a  non-Indian
          subcontractor    of   a    school    building
          constructed  for the Navajo  tribe  on  their
          reservation.  The Court held that the tax was
          implicitly  preempted  by  the  comprehensive
          federal   regulatory  scheme  governing   the
          construction of autonomous Indian educational
          facilities.   The Court noted  that  the  tax
          served  only  to  generate  revenue  for  the
          state,   which   was   not   providing    any
          correlative  services  to  the  tribe.    The
          Court's opinion specifically indicates:   "In
          this  case, the State does not seek to assess
          its   tax  in  return  for  the  governmental
          functions it provides to those who must  bear
          the burden of paying this tax."  [458 U.S. at
          843.]
          
                In  the  case  before us, however,  the
          taxes assessed by Ketchikan are in return for
          the governmental functions it provides to the
          property leased by KIC.  Accordingly, the tax
          is  not impermissible, nor is it preempted by
          federal  regulations because it  is  apparent
          that  when the "relevant state, federal,  and
          tribal  interests," Ramah, 458 U.S. at [838],
          are   examined   and  balanced,   Ketchikan's
          assertion    of    taxing    authority     is
          reasonable.[26]
          
           In  the  present case, in our view the  space  in  the

building  that  is not used or committed to use as  part  of  the

clinic  cannot  be  considered as exempted from borough  taxation

under  the  implied federal preemption doctrine.   One  essential

feature  of the doctrine is that the activities in question  must

be  subject  to  comprehensive and pervasive  federal  oversight.

While  the  operation of the clinic may well be subject  to  such

oversight,  the  same cannot be said concerning  the  uncommitted

space.   Since  as  of  the tax date it  was  uncertain  how  the

uncommitted  space would be used, the space cannot be  considered

to  be  part  of any particular program, much less one  which  is

pervasively regulated.27

           We also believe that the second element of the implied

federal  preemption  cases  -  relatively  inconsequential  state

interest - is missing in this case.  Our observations in Board of

Equalization concerning the substantial services that the borough

afforded to the building and the tribe are as applicable  now  as

they were in that case.28

           Accordingly, it seems clear that the uncommitted space

is  not  entitled  to  a  tax exemption.29   But  there  is  much

uncertainty  in  the record before us as to how  much  space  was

uncommitted as of January 1, 2000.  The board made no findings on

this or any other subject, and the parties' presentations on this

point  were  vague  and unfocused.  A remand for  a  new  hearing

before  the  board  will be necessary in order  to  determine  an

appropriate spatial apportionment.  The board should make written

findings supporting its determination.

     B.   Costs and Attorney's Fees.

          Because we are remanding for a new hearing to determine

the  appropriate  spatial apportionment between clinic  and  non-

clinic  use,  it is no longer certain that KIC will prevail.   We

therefore  vacate  the  superior court's grant  to  KIC  of  full

reasonable costs and attorney's fees.  If it prevails on  remand,

however,  KIC  will  be  entitled to full  reasonable  costs  and

attorney's  fees  under  AS 29.45.500(a)  and  Ketchikan  Gateway

Borough Code  45.13.110.30

IV.  CONCLUSION

           We REVERSE the superior court's holding that space  in

the  building not committed to use by the clinic is  exempt  from

borough  taxes  and  REMAND to the board for  a  new  hearing  to

determine  the  appropriate spatial apportionment between  clinic

and  non-clinic areas.  In light of this remand,  we  VACATE  the

superior court's award of costs and attorney's fees to KIC.

FABE,   Chief  Justice,  with  whom  CARPENETI,  Justice,  joins,

dissenting.

           I  disagree  with  the  court's  conclusion  that  the

uncommitted  space in KIC's building is not exempt  from  borough

taxes.   In  my  view,  KIC has presented a  sufficiently  strong

federal  and  tribal  interest to  allow  extension  of  its  tax

exemption to temporarily unused spaces.

           As  the court's opinion recognizes, the United  States

Supreme  Court  held in Ramah that questions of  implied  federal

preemption   in   Indian  tax  cases  require  "a  particularized

examination   of   the  relevant  state,  federal,   and   tribal

interests."31   Informing  the  preemption  analysis   are   "the

traditional  notions of tribal sovereignty, and  the  recognition

and  encouragement  of  this sovereignty  in  congressional  Acts

promoting  tribal  independence  and  economic  development[.]"32

Relevant federal statutes, therefore, "must be examined in  light

of  `the  broad  policies that underlie them and the  notions  of

sovereignty  that  have developed from historical  traditions  of

tribal independence.' "33

           Consideration of the federal and tribal  interests  is

the  first  step  of  the balancing required by  implied  federal

preemption analysis.  The court's opinion concludes that there is

no weight at all on this half of the scale because there is not a

comprehensive and pervasive federal program dealing  with  unused

spaces.   But  I believe that the court has unduly  narrowed  the

scope of inquiry.  The proper question is whether an Indian tribe

that  is operating a health care facility under the aegis of  the

Indian Self-Determination and Education Assistance Act (ISDEAA)34

can  be  granted  reasonable flexibility  in  extending  its  tax

exemption  to  temporarily unused spaces  in  the  building  -  a

situation not uncommon in such facilities.

           Looking  at  this broader question,  the  federal  and

tribal  interests  are  clear and strong.   Provision  of  Indian

health   care   services  is  comprehensively   and   pervasively

regulated; this is manifest both in the ISDEAA and in the  Indian

Health  Care  Improvement Act (IHCIA).35  Congress expressed  its

intention  in  the  ISDEAA  that  those  operating  under   self-

determination  contracts receive the same amount  of  funding  as

would  the federal government if one of its departments was still

providing the services in question.36  In Ramah, the Court  found

that  the  burden  imposed by the state's taxation  impeded  "the

clearly expressed federal interest in promoting the `quality  and

quantity'  of educational opportunities for Indians by  depleting

the  funds  available for the construction of Indian  schools."37

Local  taxes on unused spaces could similarly impede the  federal

interest  in promoting Indian health care by reducing  the  funds

available  to  Indian  tribes  that have  clinic  buildings  with

unoccupied space.38

           KIC's  counsel argued at the board hearing that "[t]he

intent  of  KIC  for the unused space is still unknown,  although

there  [are]  long  term  plans and strateg[ies  that]  include[]

expansion of their hospital functions into those unused  spaces."

Allowing  KIC the flexibility to maintain tax-exempt  open  space

for  expansion or reorganization of health services comports with

the   federal  policy  of  encouraging  tribal  sovereignty   and

promoting tribal independence and economic development.

           The  state interests constitute the other half of  the

balancing analysis.  In Ramah, the state interest was merely  the

collection  of  revenue; the state provided no  services  to  the

school  being  constructed  on  the  reservation.39   The   Court

determined  that  this was insufficient to  justify  the  burdens

imposed  by  the  tax.40   Here, KGB  is  providing  governmental

functions  to the KIC building.  The opinion accurately  compares

this provision of services to those in Board of Equalization  for

the   Borough  of  Ketchikan  v.  Alaska  Native  Brotherhood   &

Sisterhood, Camp No. 14, in which we upheld the Borough's  taxing

authority.41   The  federal and tribal interests  in  that  case,

however, were different.  There, we only examined whether KIC was

exempt from ad valorem taxes under the Indian Reorganization Act,42

under  a  theory of tribal sovereignty,43 or under  a  theory  of

federal  instrumentality.44   We concluded  that  none  of  these

theories had merit,45 in part "because the Borough's interest  in

generating the revenue from the non-discriminatory tax to pay for

services  provided  to  the property exceeds  KIC's  interest  in

retaining  the  revenue to provide governmental programs  to  its

members."46

           Here,  in  contrast,  we  are addressing  clearer  and

stronger federal and tribal interests as expressed in the  ISDEAA

and  IHCIA,  as  well  as the explicit congressional  desire  for

Indian   tribes  to  have  the  same  funding  that  the  federal

government  would have to provide health services.  Striking  the

balance  between these competing interests is thus more difficult

than  in  Board of Equalization.  Given the congressional  desire

for  Indian  tribes to have equal funding, the obstacle  to  that

goal  that  could  be presented by allowing Borough  taxation  of

unused spaces in a health care facility, and the policy expressed

in   Cotton  Petroleum  Corp.  that  ambiguities  concerning  the

exemption of tribal interests from taxation should be resolved in

favor  of the tribe,47 I would conclude that the balance tips  in

favor of the federal and tribal interests - and thus exemption.

           KIC should be granted the flexibility to maintain some

unused  space in its health services building without sacrificing

its  tax-exempt status for those spaces.48  Accordingly, I  would

affirm  the  superior court's decision.  I therefore respectfully

dissent from the court's opinion.

_______________________________
1The assessor testified that the third and fourth floors and some
common areas were for clinic use.
2458 U.S. 832 (1982).
3State,  Dep't of Transp. & Pub. Facilities v. Sanders, 944  P.2d
453, 456 (Alaska 1997).
4Sisters  of Providence in Washington, Inc. v. Mun. of Anchorage,
672 P.2d 446, 447 (Alaska 1983).
5City of Nome v. Catholic Bishop of N. Alaska, 707 P.2d 870,  877
(Alaska 1985).
6Id.  at 879 (quoting Animal Rescue League v. Bourne's Assessors,
37 N.E.2d 1019, 1021 (Mass. 1941)).
7Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 177 (1989).
8City of Nome, 707 P.2d at 875.
9Balough  v.  Fairbanks North Star Borough,  995  P.2d  245,  254
(Alaska 2000).
10KIC contends that this appeal is untimely.  We conclude to  the
contrary, because the notice of appeal was filed before the court
ruled  that  the  borough's  counterclaim  was  dismissed.    The
counterclaim sought declaratory relief and thus was  not  subject
to  the  year-specific procedural defenses on which the dismissal
of  the borough's cross-appeal was based.  The prematurity  of  a
notice  of appeal may be ignored where no harm is done, and  that
is  the case here.  Garrison v. Dixon, 19 P.3d 1229, 1232 (Alaska
2001).
11458 U.S. 832 (1982).
12Webster  v.  Bechtel,  Inc., 621 P.2d 890,  898  (Alaska  1980)
(quoting  Rice  v.  Santa Fe Elevator Corp., 331  U.S.  218,  230
(1947)).
13Tlingit-Haida Reg'l Elec. Auth. v. State, 15 P.3d  754,  766-67
(Alaska 2001).
14Cotton Petroleum, 490 U.S. at 176-77.
15Id. at 176.
16448 U.S. 136 (1980).
17Ramah, 458 U.S. at 838.
18Id. at 839-41.
19Id.  at  843  (quoting Warren Trading Post Co. v.  Arizona  Tax
Comm'n, 380 U.S. 685, 691 (1965)).
20Id. at 844 n.7.
21448 U.S. 136 (1980).
22490  U.S.  at  184.  We note that the Ninth Circuit  takes  the
position  that the Bracker implied preemption doctrine  does  not
apply outside of Indian country.  Malabed v. North Slope Borough,
2003  WL  21524776  (9th  Cir. 2003) ("[T]he  Supreme  Court  has
unmistakably held that nondiscriminatory state laws that apply to
Native Americans outside of Indian country may be preempted  only
by an `express federal law to the contrary,' not by a generalized
federal  policy.   White Mtn. Apache Tribe v. Bracker,  448  U.S.
136,  144 n.11 (1980).").  2003 WL 21524776 * 6.  See also  Blunk
v. Arizona Dep't of Transp., 177 F.3d 879, 882-84 (9th Cir. 1999)
("White Mountain balancing test" does not apply outside of Indian
country).
23666 P.2d 1015, 1022 n.5 (Alaska 1983).
24Id. at 1017.
25Id. at 1022.
26Id. at 1022 n.5.
27In Dist. of Columbia v. Catholic Univ. of Am., 397 A.2d 915, 921-
22  (D.C.  1979); Our Savior Lutheran Church v. Dep't of Revenue,
562  N.E.2d  1198, 1201 (Ill. App. 1990); and United Way  of  the
Midlands  v. Douglas County Bd. of Equalization, 337 N.W.2d  103,
107  (Neb.  1983),  all cited in footnote 18  of  the  dissenting
opinion, the unused space, when used, was intended to be used for
tax-exempt  purposes.  By contrast, in the  present  case  it  is
unknown how the unused space will be used, but it appears that at
least  for near-term purposes it will either be leased to  others
or used for other programs of KIC.  See supra page 3.
28See  Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163 (1989),
where  the  Court  declined  to apply the  Ramah/Bracker  implied
preemption  approach to a state severance tax on oil produced  by
non-Indians on a reservation.  One of the reasons given for  this
conclusion  was that the state provided substantial  services  to
the  tribe  and  to the oil producer, whereas Ramah  and  Bracker
"involved complete abdication or noninvolvement of the  State  in
the  on-reservation activity."  Cotton Petroleum Corp., 490  U.S.
at 185.
29Following a New Mexico Court of Appeals case, Ramah Navajo Sch.
Bd.,  Inc. v. New Mexico Taxation & Revenue Dep't, 977 P.2d  1021
(N.M.  App.  1999), cert denied, 981 P.2d 1207 (N.M. 1999),  cert
denied,  528 U.S. 928 (1999), the superior court found  that  the
borough  taxes were also preempted under the "general  preemption
doctrine."   However, as Congress has not overtly  preempted  the
tax,  and because state and federal laws do not conflict in  this
area, the borough is not barred by federal preemption from taxing
the  space  in the building not dedicated to use by  the  clinic.
See Tlingit-Haida Reg'l Elec. Auth. v. State, 15 P.3d 754, 766-67
(Alaska 2001).
30See Kenai Peninsula Borough v. Port Graham Corp., 871 P.2d 1135
(Alaska  1994);  Kenai Peninsula Borough v.  Cook  Inlet  Region,
Inc., 807 P.2d 487 (Alaska 1991).
31Slip Op. at 7; Ramah Navajo Sch. Bd., Inc. v. Bureau of Revenue
of N.M., 458 U.S. 832, 838 (1982).
32Ramah, 458 U.S. at 838.
33Id.  (quoting White Mountain Apache Tribe v. Bracker, 448  U.S.
136, 144-45 (1980)).
3425 U.S.C.  450-458bbb-2 (2001).
3525 U.S.C.  1601-1683 (2001).
3625 U.S.C.  450j-1(a)(1) (2001); see also Ramah Navajo Sch. Bd.,
Inc.  v. N.M. Taxation & Revenue Dep't, 977 P.2d 1021, 1033 (N.M.
App.  1999),  cert.  denied, 981 P.2d  1207  (N.M.  1999),  cert.
denied,  528 U.S. 928 (1999) ("Congress has provided that  Indian
communities  will  not  suffer financially  by  the  transfer  of
services from the federal government to tribal agencies.  .  .  .
The  Act's purpose of providing tribes with the same funding that
the federal agency would receive for the same service is undercut
if  the State imposes a tax that makes performance of the service
more expensive for the tribe than for the federal agency.").
37Ramah, 458 U.S. at 842.
38Imposing  the  tax  in  this case will  result  in  KIC  having
$12,462.12  less to provide medical services.  This  effect  does
not  seem  compatible  with Congress's intent,  in  enacting  the
ISDEAA,  to  see  that  those operating under  self-determination
contracts  would receive the same amount of funding as would  the
federal  government if one of its departments was still providing
the services in question.  In addition, imposing a tax on KIC for
space  that it could have decided to use in the future for clinic
space  may well foreclose that possibility by creating a  present
need  to  generate  revenue from the space.   This  effect  seems
contrary  to  the  federal interest, evident  in  the  IHCIA,  in
promoting   Indian  health care.  See, e.g., 25  U.S.C.   1601(b)
(2001) ("A major national goal of the United States is to provide
the quantity and quality of health services which will permit the
health  status  of  Indians to be raised to the highest  possible
level  and  to encourage the maximum participation of Indians  in
the planning and management of those services.").
39Ramah, 458 U.S. at 843, 845.
40Id. at 845.
41666 P.2d 1015 (Alaska 1983).
4225 U.S.C.  465 (2001); 666 P.2d at 1018.
43666 P.2d at 1019.
44Id. at 1022.
45Id. at 1023.
46Id.
47Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 177 (1989).
48Cf.  Dist. of Columbia v. Catholic Univ. of Am., 397 A.2d  915,
921-22  (D.C.  1979)  ("A school the size of Catholic  University
must have some flexibility in its operation and its exempt status
should  not  be disturbed merely because it elects, for  a  given
period,  not to use a given classroom, or portion of a dormitory,
or  other building . . . ."); Our Savior Lutheran Church v. Dep't
of  Revenue, 562 N.E.2d 1198, 1201 (Ill. App. 1990) ("We  do  not
think that mere temporary vacancy or lack of use of a portion  of
an  otherwise  exempt  parcel of property  renders  that  portion
taxable.   To  hold  that when a portion of a building  otherwise
used  for an exempt purpose becomes temporarily vacant or  unused
it  loses  its  exempt status is nonsensical and  impractical  of
application."); United Way of the Midlands v. Douglas County  Bd.
of Equalization, 337 N.W.2d 103, 107 (Neb. 1983) ("The facts here
are  similar to the not unusual situation of unused  rooms  in  a
charitable  hospital  or  in  the  dormitory  of  an  educational
institution.  Oftentimes  a qualified  organization  acquires  or
maintains  building  space  in reasonable  anticipation  of  full
occupancy  for  an  exempt purpose but cannot do  so  because  of
economic conditions or other legitimate reasons.").