B-119574, JUN. 14, 1955

B-119574, JUN. 14, 1955

TO THE HONORABLE SECRETARY OF THE INTERIOR:

IN LETTER DATED JANUARY 14, 1955, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY, RECONSIDERATION IS REQUESTED OF OUR DECISION OF NOVEMBER 3, 1954, B-119574, TO YOU, WHICH HELD THAT DEDUCTIONS ARE REQUIRED TO BE MADE, UNDER THE ACT OF FEBRUARY 14, 1920, 41 STAT. 415, AS AMENDED BY THE ACT OF MARCH 1, 1933, 47 STAT. 1417 (25 U.S.C. 413), AND APPLICABLE REGULATIONS THEREUNDER, FOR ADMINISTRATIVE SERVICES RENDERED INCIDENT TO CERTAIN TIMBER SALES TO THE NAVAJO TRIBAL SAWMILL.

THE DECISION WAS BASED ON THE PROVISIONS OF THE REGULATIONS ISSUED BY THE SECRETARY (25 CFR 61.25), UNDER AUTHORITY OF THE ABOVE STATUTES. THE REGULATIONS REQUIRE, IN THE ABSENCE OF SPECIAL INSTRUCTIONS BY THE COMMISSIONER OF INDIAN AFFAIRS, THAT A 10 PERCENT DEDUCTION BE MADE FROM THE GROSS PROCEEDS IN "ALL SALES OF TIMBER FROM EITHER ALLOTTED OR UNALLOTTED LAND" TO COVER THE COSTS OF CERTAIN ADMINISTRATIVE EXPENSES.

THE DEPARTMENT'S LETTER STATES THAT IT IS NECESSARY TO CONSIDER THE SECRETARY'S REGULATIONS APPEARING AS 25 CFR PART 61, IN THEIR ENTIRETY IN ORDER TO DETERMINE WHETHER SECTION 61.25 IS APPLICABLE TO SALES TO THE TRIBAL SAWMILL ENTERPRISE. THE LETTER DIRECTS ATTENTION TO THE DISTINCTION IN THE REGULATIONS BETWEEN "THE DEVELOPMENT OF INDIAN TIMBER BY THE INDIAN PEOPLE" (61.1 (C) AND 61.12) AND "THE SALE OF INDIAN TIMBER IN OPEN COMPETITIVE MARKETS" (61.1/D) AND 61.13). ALSO, THE LETTER STATES THAT SECTIONS 61.13 TO 61.26 INCLUSIVE, ARE ALL CONCERNED WITH ACTIONS TO BE TAKEN IN CONNECTION WITH "THE SALE OF INDIAN TIMBER IN OPEN COMPETITIVE MARKETS" OR ,SALES TO INDIANS WITHOUT ADVERTISEMENT" PURSUANT TO 25 CFR 61.17. FURTHER, IT STATES THAT OFFICIALS OF THE BUREAU OF INDIAN AFFAIRS HAVE NOT CONSIDERED THAT THE REQUIREMENTS OF SECTION 61.13 TO 61.26 (WHICH INCLUDES SECTION 61.25) ARE APPLICABLE TO "THE DEVELOPMENT OF INDIAN TIMBER BY INDIAN PEOPLE.' IN CONCLUSION, IT IS STATED THAT SINCE IT HAS NOT BEEN CONSIDERED THAT THE REQUIREMENTS OF SECTION 61.25 GOVERNING DEDUCTIONS FOR ADMINISTRATIVE PURPOSES ARE APPLICABLE TO INDIAN TIMBER ENTERPRISES, IT HAS NEVER BEEN CONSIDERED NECESSARY EITHER TO MAKE SUCH DEDUCTIONS OR TO ISSUE SPECIAL INSTRUCTIONS WAIVING THAT REQUIREMENT.

WE HAVE GIVEN CAREFUL CONSIDERATION TO THE DEPARTMENT'S EXPLANATION AND INTERPRETATION OF THE REGULATIONS. HOWEVER, THE CONCLUSION URGED TO THE EFFECT THAT SECTION 61.25 IS NOT APPLICABLE TO SALES TO INDIAN TIMBER ENTERPRISES DOES NOT APPEAR TO BE JUSTIFIED. SECTION 61.25 IS ALL INCLUSIVE. IT EMBRACES "ALL SALES OF TIMBER.' IT MAKES NO DISTINCTION BETWEEN EXPENSES INCURRED INCIDENT TO SALES TO INDIAN TIMBER ENTERPRISES AND THE SALE OF INDIAN TIMBER IN THE OPEN COMPETITIVE MARKET. WHILE UNDER THE DISCRETIONARY AUTHORITY GRANTED BY THE AMENDED STATUTE SUCH A DISTINCTION MIGHT HAVE BEEN PROPER EITHER BY AMENDING THE REGULATIONS OR BY THE ISSUANCE OF SPECIAL INSTRUCTIONS TO APPLY PROSPECTIVELY, NO ACTION WAS TAKEN IN THE MATTER UNTIL AUGUST 10, 1954, WHEN THE BUREAU INSTRUCTED THE AREA DIRECTOR THAT FOR THE FISCAL YEAR ENDING JUNE 30, 1954, THERE SHOULD BE NO DEDUCTION FROM THE VALUE OF STUMPAGE USED BY THE ENTERPRISE TO COVER ADMINISTRATIVE EXPENSES AS REQUIRED BY THE REGULATIONS.

AS TO THE CONTENTION THAT SECTION 61.25 HAS NOT BEEN CONSIDERED BY THE OFFICIALS OF THE BUREAU TO BE APPLICABLE TO DEVELOPMENT OF INDIAN TIMBER BY INDIAN PEOPLE, EXAMINATION OF THE RECORDS OF THE AREA OFFICE BY AUDITORS OF OUR OFFICE DISCLOSES THAT THE MATTER OF ADMINISTRATIVE DEDUCTIONS INCIDENT TO THIS ENTERPRISE HAS BEEN UNDER CONSIDERATION SINCE 1939, WHEN THE LOAN WAS APPROVED FOR THE ESTABLISHMENT AND OPERATION OF THE SAWMILL. IT IS INDICATED THAT, WHEN THE INDIAN OFFICE APPROVED THE LOAN, AUTHORITY WAS GRANTED TO WAIVE PAYMENT OF THE STUMPAGE CHARGE UNTIL SUCH TIME AS THE LOAN HAD BEEN REPAID IN FULL. THE RECORD, HERE INDICATES, THE LOAN WAS PAID IN FULL SEPTEMBER 27, 1946. IT APPEARS TO HAVE BEEN THE VIEW OF THE BRANCH OF FOREST AND RANGE MANAGEMENT THAT THE SAWMILL ENTERPRISE THEREAFTER SHOULD BE TREATED ON THE SAME BASIS AS OTHER LUMBERING OPERATIONS AND THAT IT SHOULD NOT BE ACCORDED PREFERENTIAL TREATMENT PARTICULARLY SINCE THE STUMPAGE CHARGES--- FOLLOWING REPAYMENT OF THE LOAN--- HAVE BEEN COMPARABLE TO GOING TIMBER SALES ON FEDERAL LANDS. CONSISTENT WITH THE FOREGOING VIEW, IT APPEARS THAT IN LETTER DATED JANUARY 4, 1949, FROM THE REGIONAL FORESTER TO THE DIRECTOR OF FORESTRY, IT WAS STATED THAT THE QUESTION OF DEDUCTIONS FOR ADMINISTRATIVE EXPENSES FROM STUMPAGE CHARGES SHOULD BE REFERRED TO THE CENTRAL OFFICE FOR DETERMINATION. THE FACT THAT AUTHORITY WAS GRANTED TO WAIVE THE STUMPAGE CHARGE UNTIL THE LOAN WAS REPAID, AND THAT THE ORDER WAS ISSUED ON AUGUST 10, 1954, PURPORTING RETROACTIVELY TO WAIVE THE 10 PERCENT CHARGE, WOULD APPEAR CLEARLY TO ESTABLISH THAT THE BUREAU REGARDED THE 10 PERCENT CHARGE TO BE APPLICABLE TO THE SAWMILL ENTERPRISE. OTHERWISE, THE WAIVERS WOULD HAVE BEEN UNNECESSARY AND WOULD NOT HAVE BEEN ISSUED. MOREOVER, IN LETTER DATED AUGUST 10, 1954, FROM THE ACTING COMMISSIONER OF INDIAN AFFAIRS TO THE AREA DIRECTOR, GALLUP, NEW MEXICO, DIRECTING THAT 10 PERCENT OF STUMPAGE VALUES BE IMPOUNDED FOR ADMINISTRATIVE EXPENSES, IT IS STATED, IN PART, AS FOLLOWS:

"THE FACT THAT THE VALUE OF TRIBALLY CONTRIBUTED FUNDS HAS BEEN MORE THAN TWICE THE VALUE OF ESTIMATED DEDUCTIONS IS NOT PERTINENT TO THE QUESTION. THE ACT OF FEBRUARY 14, 1920, AS AMENDED, CONTEMPLATES THAT THE FEDERAL GOVERNMENT WILL BE COMPENSATED IN FULL OR IN PART FOR ITS EXPENDITURES IN CONNECTION WITH THE SALE OR USE OF TRIBAL TIMBER.'

FOR THE FOREGOING REASONS AND SINCE THE RECORD SHOWS ADMINISTRATIVE EXPENDITURES WERE INCURRED BY THE UNITED STATES DURING THE PERIOD FROM 1948 THROUGH 1952 IN CONNECTION WITH THE SALE OF THE INVOLVED TIMBER, THERE APPEARS TO BE NO PROPER BASIS FOR ANY MODIFICATION IN THE CONCLUSION REACHED IN OUR DECISION OF NOVEMBER 3, 1954, TO YOU.