NCAI wants states to refund Native veterans’ taxes

By Alysa Landry, Navajo Times

WASHINGTON, August 22, 2013 – State governments may owe Native veterans as much as $20 million in income tax reimbursements.

This is according to the National Congress of American Indians, which recently approved a resolution urging Congress to refund state personal income taxes improperly withheld from Native service members’ paychecks while they were on active duty.

Eligible service members are those who served between 1977 and 2001 and whose permanent residence was on tribal land during the time they served. The resolution targets 26 states with American Indian reservations – including Arizona, New Mexico and Utah – that illegally taxed Native service members for 24 years.

“Hopefully this is going to right a wrong,” said Derrick Beetso, a staff attorney for the National Congress of American Indians. “This was wrongfully imposed for a number of years, so the action we’re looking for is to right the wrong and get back the money.”

New Mexico refund
The resolution comes six months after a settlement fund for Native veterans in New Mexico expired. The state paid out $1.5 million to eligible veterans, said Alan Martinez, deputy secretary of the New Mexico Department of Veterans’ Services.

The settlement addressed claims from veterans groups that the state owed them hundreds of thousands of dollars illegally withheld from their personal income checks. In some cases, veterans claimed they were paid in cash and had no paper trail to prove how much taxes were withheld.

Initial estimates identified more than 7,000 Native veterans in New Mexico who were eligible for refunds, though fewer than 6,000 applied for them, Martinez said. That settlement program started in 2008 when then-Gov. Bill Richardson signed a bill to create a settlement fund. Money was appropriated for the fund in 2009. It expired Dec. 31, 2012.

No one has applied for a refund in the last eight months, Martinez said, though he believes the state still owes money to some veterans.

“We pushed for any Native American who felt he had been taxed to apply for the program,” he said. “There’s probably still some out there that are affected.”

The Department of Veterans’ Services verified that veterans seeking refunds were domiciled in New Mexico at the time of their service, that they served after 1977 and that their permanent addresses were on tribal land. The state finance department and Taxation and Revenue Department worked together to issue refunds, Martinez said.

Navajo veteran
Although courts for decades have wrangled over the legal questions of taxing American Indians serving in the military, New Mexico was the first state to address it.

It all started with a group of Navajo veterans from Shiprock, Martinez said. Because the statute of limitations for tax claims is three years, members of the Shiprock Agency Veterans Organization took their claim to district court.

“Many of these veterans had already passed the three-year mark,” he said. “When the district court kicked it out, they went to their senators and began attacking this legislatively.”

Sen. John Pinto, D-Tohatchi, sponsored the bill that called for creation of a settlement fund and instructed the secretary of Veterans’ Services to count Native veterans owed refunds and the amount owed.

Shiprock veterans claimed all who served between 1942 and 1977 were eligible for refunds. The state disagreed, however, and found that New Mexico signed an agreement with the federal Department of Defense in 1977 to withhold taxes. The settlement fund was extended only to veterans serving after 1977.

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