The Internal Revenue Service on Thursday auctioned off a large swath of land owned by an impoverished Indian tribe to help pay off more than $3 million in back taxes, penalties and interest — a sale the tribe says is illegal under federal laws protecting Indian land.

The 7,100 acres, or 11 square miles, of Crow Creek Sioux tribal land in central South Dakota ranch sold for almost $2.6 million, less than the $4.6 million it was appraised at, said IRS spokeswoman Carrie Resch. She did not say who bought the land.

The tribe filed a lawsuit Monday in U.S. District court in Pierre seeking to block the sale. Judge Roberto A. Lange declined their request but promised to schedule a trial to hear the tribe's arguments.

The land in question was part of the tribe's original reservation established in an 1868 treaty, and was held by the federal government in a trust for the tribe. But it was eventually allotted to individual tribal members, who then sold it to non-Indians, putting it outside the tribe's legal jurisdiction.

The tribe bought the ranch back in 1998 but the Bureau of Indian Affairs did not put the land back into trust, which would have protected it from seizure, Tribal Secretary Tommy Thompson said.

Tribal Chairman Brandon Sazue said he hopes the tax dispute can still be resolved in a way that allows the tribe to keep the land.

"It's very disgraceful, very shameful. It's devastating to us," Sazue said after the auction. "Our land is never for sale."

Lawyers said the tribe can purchase the land back during a 180-day redemption period, and the land will not change possession during that time. A trial is tentatively set for March 29-30, which is within the redemption period.

According to the lawsuit, the IRS was auctioning the land to recover more than $3.1 million in federal employment taxes owed by the tribe. The tribe didn't pay the taxes because it was told, erroneously, by an official connected to the BIA that federally recognized tribes do not have to pay the taxes, according to the lawsuit.

The auction was unnecessary because the tribe is seeking a loan to pay off its tax bill, the lawsuit said.

The tribe contends the IRS cannot legally seize and sell the land because it is owned by Crow Creek Tribal Farms Inc., a corporation set up by the tribe that is not legally responsible for settling the tribe's tax debts.

Members of the tribe have used the land and lived on it for a long time, according to the suit. "Members died and were buried on the land. Indeed, the lands were considered so important to the Crow Creek Sioux Tribe that the Tribe went into debt to acquire the land as part of its land consolidation effort to enlarge the Crow Creek Indian Reservation," it contends.

The tribe also argues that the seizure is illegal because the land cannot be taken without congressional approval and the IRS has not followed a federal law requiring an environmental assessment of the sale's impact.

The tribe's lawyer, Mario Gonzalez of Rapid City, said the IRS action was unusual. "This is the only instance that I know of where the IRS has levied on tribally owned land on an Indian reservation."

Resch, the IRS spokeswoman, said she could not comment on the tribe's legal arguments because the IRS does not comment on pending litigation.

Thompson said the IRS should have negotiated with the tribe, and that the tax bill could have been paid from trust money held for the tribe by the federal government.

"I'm kind of upset and kind of furious with the IRS," Thompson said.

The land is particularly valuable to the tribe because it has been designated as a site for construction of wind towers to generate electrical energy, Sazue and Thompson said.

Buffalo County, which encompasses the Crow Creek reservation, is consistently listed by the U.S. Census Bureau as one of the poorest counties in the nation. The Census Bureau reported that more than 39 percent of the county's population lived in poverty in 2005, when the annual median household income was just $16,868. The county had a 20 percent unemployment rate in October, four times higher than the state average, according to the South Dakota Department of Labor.