Law & Principles

In major win for Stitt, Chickasaw Nation signs new compacts

January 22, 2024

Ray Carter

In a major victory for Gov. Kevin Stitt, the Chickasaw Nation and Apache Tribe have agreed to new state-tribal compacts on tobacco and license tags that address key issues raised by the governor.

The tobacco agreement provides each tribe with the same significant financial windfall from their sale of tobacco products to non-Indians as past compacts, but also includes language that prevents a dramatic expansion of the area covered by the compact, a key concern raised by the governor.

The agreements also ensure that state police have registration information for all vehicles with a Chickasaw Nation car tag, addressing a concern raised in recent months by law enforcement officials.

“We now have fully executed tobacco compacts with both the Chickasaw and the Apache tribes that maintain jurisdictional continuity in Oklahoma,” Stitt said. “We also finalized a car tag compact with the Chickasaw tribe that ensures Oklahoma law enforcement can confidently identify vehicles on the road and guarantees that our turnpikes can read tribal tags. For the safety of all law enforcement, and for tag compacts to be workable, the state must have uninhibited, up-to-date access to driver registration information, and this agreement ensures that.

“While I’m glad we could come to an agreement on these compacts, I still believe there is work to be done to ensure we are not further eroding Oklahoma’s revenue base in order to continue to provide public services to people across the state,” Stitt added. “I continue to welcome other federally recognized tribes in Oklahoma to engage with my office in the compacting process.”

The Chickasaw tobacco compact notes that the U.S. Supreme Court has affirmed that tribal governments have the right to “offer the retail sale of tobacco products to a Tribal nation’s citizens within their jurisdiction free from State taxation,” but that the U.S. Supreme Court has also affirmed that “Oklahoma tax law applies to retail sales of tobacco products by Tribal nations to non-citizens of the Nation within their jurisdiction.”

The agreement maintains the 50-50 split on tobacco-tax collections provided in prior compacts, meaning the Chickasaw Nation gets half of all tobacco tax collections generated at their shops, effectively retaining millions in tax collections on sales to non-Indian customers.

But the compact also defines the agreement’s jurisdiction to include the Chickasaw Nation’s “retail sales of cigarettes and other tobacco products at premises located on lands that (i) the United States holds in trust for the benefit of the Nation or (ii) are restricted allotments held by the Nation or a citizen of the Nation.”

That limitation addresses a key concern raised by Stitt following the U.S. Supreme Court’s 2020 ruling in McGirt v. Oklahoma, which declared the Muscogee (Creek) Nation’s historic Oklahoma reservation was never formally disestablished for purposes of federal major-crimes law. That ruling has since been expanded to include other tribes—the Choctaw, Chickasaw, Cherokee, Seminole, and Quapaw. The historic reservations of the six McGirt tribes cover most of eastern Oklahoma, about 42 percent of the state, or roughly 28,000 square miles.

The jurisdiction of prior state-tribal compacts was “Indian country.” Prior to McGirt, that phrase was understood to refer only to land held in trust for a tribe or restricted allotments, an area covering only about 7 percent of the state.

But after McGirt, the phrase “Indian country” in tobacco compacts could be construed to refer to any sale by any tribal member on any property lying within the roughly 28,000 square miles covered by the historic reservation boundaries of the McGirt tribes.

Records obtained from the federal Bureau of Indian Affairs show that the six “McGirt” tribes—the Muscogee (Creek), Choctaw, Chickasaw, Cherokee, Seminole, and Quapaw—combined have just under 97,760 acres in trust, which is nearly 153 square miles out of the roughly 28,000 impacted by the court ruling.

Without changes to tobacco-compact language on jurisdiction, those six tribes could potentially claim the compacts apply to any business owned by a tribal member within the historic reservation lines dealt with in McGirt, an effective expansion of up to 18,200 percent in land mass.

In May 2023, Stitt offered compact language to 16 tribes that provided the same 50-50 split of tobacco-tax revenue to tribes that they previously received. The main difference between Stitt’s proposal and prior versions is that the governor’s proposal included language to guarantee that tribes would not claim the compact applied to outlets other than those located on trust land.

The 50-50 split provides a particularly lucrative benefit to tribal governments because it provides millions in funding that tribes would not receive based solely on the tax exemption for tobacco sales to tribal citizens.

Census data show just 9.5 percent of Oklahomans are American Indian. Based on recent figures, that means as little as $10.8 million in tobacco-tax collections may be owed to the tribes for sales to tribal citizens. But under Stitt’s proposal, the tribes would continue to receive $57 million per year, or 427 percent more than what may truly be owed under existing court rulings.

Various tribal officials initially balked at Stitt’s offer and instead successfully lobbied the Oklahoma Legislature to pass bills providing for one-year compacts that retained the potentially expansionary language that concerned Stitt.

The Chickasaw tribe’s decision to concede to Stitt’s language restricting jurisdiction indicates that tribal officials now see more long-term stability via agreements than what would occur if they continued to decline to negotiate new agreements and potentially send the issue to court.

The terms of the Chickasaw tobacco compact took effect on Jan. 1, 2024, and extend to Dec. 31, 2034.

The tobacco compact with the Apache tribe has similar language and notes the U.S. Supreme Court has “affirmed Oklahoma tax law applies to retail sales of tobacco products by federally recognized Tribes to non-member citizens, regardless of the land’s designation or status.”

The Chickasaws also agreed to a new state-tribal compact on motor-vehicle registration and license tags. The compact declares that the state of Oklahoma will be the “exclusive manufacturer” of Chickasaw license plates, allowing state officials to have records of all individuals with Chickasaw license plates.

That continues a practice established in the prior state-tribal license-tag compact with the Chickasaws but also solidifies Stitt’s efforts to make that practice the standard for all such agreements.

Only three tribes have had compacts with the state of Oklahoma authorizing tribal car tags—the Cherokee, Choctaw, and Chickasaw—and only the Choctaws and Chickasaws ran that process through a local state tag office.

Many other tribal tags are illegal and may have cost the state more than $143.7 million, according to estimates from the Oklahoma Department of Public Safety.

In July, the head of the Oklahoma Department of Public Safety told lawmakers that the lack of registration information on many tribal tags placed law-enforcement officials in danger during traffic stops and that organized crime figures were starting to exploit the registration loophole.

At that same July meeting, officials with the Oklahoma Turnpike Authority told lawmakers that the lack of registration information on many tribal tags allowed drivers with those tags to evade payment of turnpike tolls.

Drivers with Cherokee Nation tags accrued more than $1.5 million in unpaid tolls from May 15 to July 18. Cars with Muscogee (Creek) Nation tags accrued $675,167 in unpaid tolls during those two months.

Based on April 2023 data, the Oklahoma Turnpike Authority estimated that drivers with tribal tags would evade payment of more than $10.8 million in turnpike fees per year.

Senate leaders welcomed news of the new agreement.

Senate Pro Tem Greg Treat, R-Oklahoma City, called the new compacts “a major win for the state of Oklahoma and our tribal partners.”

State Sen. Greg McCortney, an Ada Republican who serves as Senate majority floor leader, said, “First and foremost, I want to share my appreciation for Governor Stitt and his team for their efforts to negotiate and enter the tobacco and vehicle tag compacts with the Chickasaw Nation, one of our state’s largest and most economically diverse tribal nations. These agreements show promise that our state-tribal relations are moving in a positive direction and offer hope that we’ll see more tribes signing compacts soon.”