March court date set to look at IRS action against Crow Creek Indians

December 11, 2009

Tribal land sale precedent alarms Herseth Sandlin
March court date set to look at IRS action
Dalton Walker
dwalker1@argusleader.com


U.S. Rep. Stephanie Herseth Sandlin is questioning the Internal Revenue Service's unusual move to auction tribal land on the Crow Creek Indian Reservation, saying she is concerned about the precedent it sets.

About 7,100 acres, or 11 square miles, of tribal land was auctioned by the IRS on Dec. 3 to settle overdue employment taxes it claims are owed by the tribe. The land, valued at an estimated $4.6 million, sold for $2.6 million.

The tribe has gone to court to try to stop the auction, but U.S. District Judge Roberto Lange allowed it to proceed. However, the judge agreed to allow both sides to make their arguments in March court date. The land would not change hands officially until after the court date.

"We are looking at the options for Crow Creek," Herseth Sandlin said Thursday during a conference call with reporters. "We have been working with the tribe for many years. (I'm) very concerned. We are trying to work through some of these issues."

Asked whether the IRS should back down, Herseth Sandlin said it was premature to answer as her office is seeking additional information on the matter.

In a statement issued later in the day, Herseth Sandlin said she will continue to monitor the situation and hopes it can be resolved "in a fair and expeditious manner."

"It's unfortunate that the issue was not resolved after several previous attempts, and has resulted in the seizing of land by the IRS," she said.

The land is owned by Crow Creek Tribal Farms, a corporation formed under tribal laws which filed for bankruptcy in May, according to records from the U.S. Bankruptcy Court for the District of South Dakota.

As of August, the IRS claimed the tribe owed roughly $3.1 million in back taxes, penalties and interest. The tribe maintains that the corporation is not delinquent on any taxes and the IRS has no right to auction the land in order to settle the tribe's tax bill.

Crow Creek Tribal Chairman Brandon Sazue could not be reached for comment.

South Dakota senators Tim Johnson and John Thune both said Thursday they had hoped an agreement could be made but did not want to speculate on an ongoing court case.

"It is unfortunate that this situation has escalated to this level," Thune said in a statement. "The Congressional delegation has been working for a number of years with tribal leaders and the IRS to come to a mutually beneficial outcome. Now that this issue is before the courts it would be inappropriate to speculate or propose a conclusion."

Johnson said in a statement he had hoped a solution would be found and "since the tribe has chosen to challenge the IRS auction of their land in court, this is now an active court case and I would not want to speculate on ongoing litigation."

The land in question has not always been controlled by the tribe. It was a part of the original reservation established by the Treaty of 1868 and was once held in trust by the U.S. government for the tribe. It came out of trust and was sold to non-Indians, and eventually became known as the LeMaster Ranch.

A little more 10 years ago, the Crow Creek Sioux Tribe acquired the land back. The reservation is located in Buffalo County, the nation's poorest county, where the per capita income was $5,213, according to the census.

Law experts have said it is a rare situation that the IRS would auction property on tribal land to pay off a tax bill.

Indian tribes are typically not subject to federal taxes, but there are exceptions to that rule for business entities associated with tribes such as casinos, said David Getches, dean of the University of Colorado Law School.

"What is scary to tribes is the prospect of having lands that they own being auctioned off for back taxes," Getches said.

Reach reporter Dalton Walker at 977-2206.

Source URL: http://www.argusleader.com/article/20091211/NEWS/912110338/1001