As reported by: The Associated Press
Congress should limit the amount of casino revenue tribes can give to states because large payments can constitute an illegal tax, an Interior Department official said Wednesday.

George Skibine, director of the Bureau of Indian Affairs' Office of Indian Gaming Management, said at a Senate Indian Affairs Committee hearing that tribal payments should be capped at 10 percent of revenue.

That would be less than half the 25 percent paid by some rich tribes in Connecticut and New York and sought by Gov. Arnold Schwarzenegger in his ongoing negotiations with California tribes.

"The payment has to be something that is in exchange for a benefit. If the payment greatly exceeds the value of the benefit ... that's a tax, and that's prohibited," Skibine said. "I think that we should explore having a cap on the payment of net revenues. I think it should be single digits, maybe, or 10 percent. ... If it goes above that I think it may be problematic for the tribes."

States cannot tax tribes because tribes are sovereign governments. But as Nevada-style tribal gambling has exploded and catapulted some Indians from poverty to extreme wealth, tribes that want to sign deals with states to establish casinos are increasingly agreeing to share their revenue.

Such agreements allow tribes to pay portions of their winnings to the state in exchange for a benefit - for example, a monopoly on gambling in a certain area.

The committee hearing was to consider a bill to amend the Indian Gaming Regulatory Act, including the addition of various conditions required for tribes to share revenue with states. Skibine said after the hearing that his department prefers a more straightforward cap, which is not currently in the bill.

Schwarzenegger, who ran for governor last year on a campaign promise to get more gambling revenue from tribes, sent a letter to Committee Chairman Sen. Ben Nighthorse Campbell, R-Colo., and to Vice Chairman Sen. Daniel Inouye, D-Hawaii, objecting to the proposed changes, which would make it harder to reach revenue-sharing agreements.

But a tribal leader at the hearing supported the changes.

"Tribal governments did not create these state budget problems, and tribal governments should not be looked to as a way out," said Ernest L. Stevens Jr., chairman of the National Indian Gaming Association.

Skibine also suggested that the committee clarify the conditions under which tribes can build off-reservation casinos, a controversial and growing trend that the Indian Gaming Regulatory Act permits under certain circumstances.

The Indian Gaming Regulatory Act has not been amended since its passage in 1988, despite previous attempts.