The special political-legal status of tribes can contribute to barriers to business development and associated employment in Indian country in the following ways:
- Complex Business Site Leasing Process. Some reservations are "closed," (i.e., all land is owned by the tribe rather than by individuals) making it difficult or impossible for a private sector, non-Indian-owned business to purchase or lease land. If leasing land is permitted, the approval process may be complex and time-consuming, requiring years to complete, thus discouraging a business from opening on the reservation. If the land is held in trust by the United States, additional approvals may be required by the Secretary of the Interior, adding to the complexity of the process.
- Sovereign Immunity of Tribes. Because tribes have sovereign immunity, nontribal businesses and other entities cannot sue them in case of contractual or other disputes. Businesses may fear that they may not obtain a judicial remedy from arbitrary or unfair decisions made by a tribe associated with changes in tribal administration or other factors.
- Trust Status of Land. Land on a reservation may be held in trust by the federal government and, thus, cannot be bought and sold. Consequently, the tribe cannot use trust land as collateral to obtain a loan from a financial institution. Some businesses have refused to locate on a reservation if they cannot own the land where the business is located.
- Dual Taxation. While there are federal tax incentives designed to foster economic development on reservations, companies operating on reservations may be subject to dual taxation--by the tribe and by the state in which they are located.
- Lack of a Commercial Code Regulating Business. A tribe may lack a commercial code (i.e., laws and regulations governing commerce on the reservation). Lack of such a code can discourage banks from financing businesses. It also may discourage commercial development, because potential investors and developers require the structure and security such a code provides. Such concerns are amplified by the sovereign immunity of a tribe.