A Guide to Public Law 100-241
to the Alaska Native Claims Settlement Act (Part 1 and Part 8 are included in this web site)
Alaska Federation of Natives
Table of Contents
The land protections described in this section are probably the most significant gains for Alaska Natives contained in the "1991" law.
The "1991" law provides that all "undeveloped" land owned by village, urban and regional corporations automatically have the following protections:
Because these land protections are so important, they are now automatic. The corporations board of directors does not need to take action, unless an activity creating "development" has already occurred. Shareholders do not need to vote in order to protect the corporations undeveloped land.
Loss of Land Protections
Members of a Native corporation board of directors must understand that actions they take could result in the loss of these land protections. Land protections can be lost in three ways:
1. Leased: If the board of directors leases the land, the protections are lost. Even though the leased land is not "developed," it can be taxed, taken by adverse possession or sold by creditors or a bankruptcy judge to pay the corporations debts.
Exception: If the purpose of the lease is to allow oil, gas or mineral exploration, then the land protections continue to apply.
2. Pledged: Protections can be lost if the board of directors mortgages or pledges the land as security in a commercial transaction, such as a bank loan. If the land is pledged, it can be taxed and it can be sold by creditors or a bankruptcy judge to pay the corporation's debts.
3. Developed: If the board of directors develops the land, it loses the automatic protections. The land can be taxed, taken by adverse possession, or, if the corporation gets into trouble, the land can be seized and sold by creditors or a bankruptcy judge to pay the corporation's debts.
Native corporations should be very cautious about pledging their undeveloped land to a bank or anyone else.
Definition of "Developed" Land
The "1991" law defines "developed" as "a purposeful modification of land from its original state that effectuates a condition of gainful and productive present use without further substantial modification."'
Because this definition is complicated, it is important that a board of directors be very cautious when it makes decisions about using the corporations land. If there is any question that a board action or decision might result in losing land protections, the board should seek advice from an attorney before a final decision is made.
Some things can be done on the land without losing the protections. In some circumstances, land can be surveyed, and roads, electricity lines and sewers can be built. Whether such actions are "safe" can only be determined on a case by case basis.
Finally, land is automatically considered to be "developed" if it is subdivided, even if no changes are made to the land. For that reason, the corporation should never subdivide any of its land without careful study of the impacts on the status of its land.
To protect important subsistence uses, the law says that hunting and fishing on village and regional corporation land do not make the land "developed." For that reason, fish camps, trapping cabins and other structures may be built and used on the land if they are needed for subsistence hunting, fishing or gathering. The corporation may also charge a fee to hunters, fishermen and guides without losing the protections of "undeveloped" land.
Regaining Land Protections
Even if land is mortgaged, leased or "developed," the protections automatically resume when the mortgage or lease expires or the development ends. For example, if a village corporation leases some of its land for five years, during the years it is leased, the land can be taxed or sold to pay the corporations debts. However, when the five years are over and the lease expires, the land is again automatically protected from taxation and creditors.
Example: A corporation runs a gold-mining operation on otherwise-undeveloped land. During the years that the mining takes place, the land can be taxed or taken to pay a debt. But if the corporation closes down the mining operation, and restores the land to its original condition, the land then qualifies as "undeveloped" and gains back the protection lost when the venture began.
If a corporation has already subdivided land, it can be returned to "undeveloped" status if the land is resubdivided back to its original state. The resubdivision must be approved by whichever platting authority has jurisdiction. In these cases, the protections do apply to land that was previously subdivided.
The "1991" law makes an important change on how protections apply to timber development. For example, if a village corporation cuts timber on its land, only the approximate area where timber is actually cut can be taxed. Under the old law, a larger area of land would lose the protections and thus become vulnerable to taxes and loss by other means. Now, protections are lost only on the parcel of land where timber cutting and development are actually occurring and only during the period of harvest.
Timber lands can also regain land protection. During the years a village corporation cuts timber for commercial sale, the land is considered "developed," and thus can be taxed, if the corporation is in a taxing jurisdiction, or taken to pay creditors. When the commercial harvest ends, though, the land is no longer considered to be "developed" and the land is automatically protected.
Tax Recapture on Subdivided Land
If a Native corporation is in a taxing jurisdiction and its land is subdivided, the corporation must pay the amount of taxes that would have been levied during the 30 months before the subdivision plat is recorded. The back taxes must be paid in semi-annual installments. The entire amount must be paid off within 30 months of the date the plat is recorded.
Before the final plat is approved, the government with tax jurisdiction must notify the corporation of the taxes it will owe.
Example: Corporation Z decides to subdivide 50 acres on a scenic river site. Until now, the land has been "undeveloped" and exempt from property taxes. On September 1, 1990, the subdivision plat is recorded. The corporation must pay an amount equal to property taxes it would have paid on that 50 acres from March 1, 1988 to September 1, 1990. The total tax bill on the 50 acres is $10,000. Corporation Z must make its first $2,000 payment March 1, 1991. The total bill must be paid off by March 1, 1993.
Tax recapture applies only if the land being subdivided is within the boundaries of a taxing jurisdiction, such as a borough or municipality with the power to tax.
One of the most important changes made by the "1991" law is that Land Bank protections are now automatic. No board action is required because the land protections automatically apply to all undeveloped ANCSA lands. Native land, so long as it remains undeveloped, is protected from property taxes, from squatters, from being taken to pay a bad debt and from bankruptcy.
Before, corporations had to apply to the federal government to get these protections. Now, theyre automatic; nothing else is required. A corporation loses these protections if its land is pledged, leased, developed or subdivided. Native corporation board members must recognize the types of actions that may result in losing land protections.
Board members may want to review the status of their lands in light of the definition of "developed," to determine whether any of the corporations land does not qualify for automatic protections.
Even if the land protections are lost, they can be regained if the lease ends or development activity stops.
"Minority" Status & Shareholder Hire
The "1991" law clarifies that Native corporations qualify as minority businesses if Natives or Native descendants hold a majority of the corporations total equity and a majority of the total voting power.
Subsidiaries, joint ventures and partnerships also qualify as minority-owned businesses if a majority of the total equity and the total voting power is held by Natives or descendants of Natives.
Minority status gives Native corporations and their affiliates an advantage in bidding for state and federally-funded projects, such as roads and other construction projects. As minority businesses, Native corporations are eligible for federal financial assistance programs and business set-asides. Minority status is an advantage within the state, as well, because state agencies use similar guidelines for minority contracting.
The issue was included in the "1991" law because the State of Alaska and the Small Business Administration had attempted to exclude Native corporations in which the day-to-day operations are not managed by Natives.
The "1991" law also clarifies that Native corporations, like lower 48 Indian tribes, are exempt from the Civil Rights Act of 1964, and thus able to give preference in hiring to their shareholders.
Subsidiaries and affiliates, such as joint ventures, also may give shareholders preference in hiring, so long as the Native corporation owns at least 25 percent equity in the subsidiary or affiliate.
Mergers of Native Corporations
Native corporations may merge as long as Settlement Common Stock remains restricted in all the corporations participating in the merger. In village/region or village/village mergers, the corporations do not have to grant dissenters rights as long as the Settlement Common Stock of each participating corporation remains restricted. Under the old law, the deadline for mergers was 1991. The "1991" law extends the merger deadline indefinitely.
The original merger legislation of 1975 was designed to consolidate Native corporations in order to save money on administrative, legal, accounting and other costs. Merging can solve the problem of some village corporations whose small capital bases are not sufficient to cover the cost of operating businesses, managing their land and meeting the other responsibilities of a corporation.
Since 1975, two regions, NANA and Ahtna, have merged with the majority of their villages. A number of villages in other regions Doyon, Calista, Bristol Bay and Koniag have merged among themselves.
The extension of stock restrictions and the automatic land protections provided in the "1991" law make merger among Native corporations even more attractive than before.
Securities Laws Exemption
A Native corporation is exempt from certain securities laws until one of the following occurs:
1. The corporation issues stock other than Settlement Common Stock (not otherwise exempt from securities requirements) to people who are none of the following:
2. Restrictions on Settlement Common Stock expire; or
3. The corporation voluntarily files a registration statement with the Securities and Exchange Commission.
The exemptions are from the Investment Company Act of 1940, the Securities Act of 1933, and the Securities and Exchange Act. For purposes of determining whether a corporation has enough shareholders to be required to register under the Securities Exchange Act of 1934, the holders of Settlement Common Stock are excluded.
Until January 1, 2001, all Native corporations and their subsidiaries are exempt from the Investment Company Act of 1940 if the subsidiary is wholly-owned by the corporation and the corporation owns at least 95 percent of the subsidiarys equity. That exemption until the year 2001 applies even if stock is unrestricted.
The Investment Company Act of 1940 does not apply to Settlement Trusts. However, a Native corporation may voluntarily fall under the Investment Company Act.
Any lawsuit which challenges the constitutionality of the "1991" law must be filed in the U.S. District Court for the District of Alaska. The case will be heard by a special three-judge District Court, with direct appeal to the United States Supreme Court. This procedure bypasses the Court of Appeals, but the Supreme Court does not always hear direct appeals.
There is a specific time period, a "statute of limitations," during which a constitutional challenge can be filed. With a few exceptions, lawsuits on constitutional grounds must be filed by February 3, 1990.
Challenges to the following situations are exceptions:
1) When new Settlement Common Stock (such as to New Natives or Elders) is issued for no payment or payment below fair value.
2) When stock restrictions are continued as part of a plan which also issues new stock, as could occur under a Recapitalization plan or Opt-In approach.
3) When dissenters rights are denied on an Opt-Out vote.
These challenges must be filed within one year of the shareholder vote. A person filing one of these three challenges must request a declaratory judgment or an injunction before the new stock is actually issued. After the shareholder vote, the corporation must wait at least 14 days before issuing the new stock.
Under a "hold harmless" provision in the "1991" law, even if a constitutional challenge is successful, the United States government cannot be forced to pay a money judgment.
Native corporations and their subsidiaries qualify as minority-owned businesses, so long as Natives and their descendants hold a majority of the total equity and total voting power of the corporation. Minority status makes Native corporations eligible for special federal financial assistance programs.
Native corporations and their affiliates also may give Native shareholders preference for jobs in the corporation or affiliate.
A Native corporation can merge with another Native corporation as long [as] the stock in both remains restricted. If a village corporation merges with a regional corporation, dissenters rights dont apply as long as the stock in both is restricted.
Native corporations are exempt from federal securities laws unless stock restrictions are lifted, or until they issue unrestricted stock to non-Natives. However, Native corporations may voluntarily come under securities laws requirements.
Legal challenges of the "1991" law on constitutional grounds cannot be filed after a certain period of time, depending on the issue that is challenged.