3 Takeaways from the Supreme Court's Mich. Tax Sale Case

State and Local Tax (SALT) attorney Jennifer Karpchuk was quoted in a Law360 article recapping oral arguments in Pung v. Isabella County, a case before the U.S. Supreme Court involving a dispute that arose after a Michigan county seized a home because of unpaid property taxes and sold it at auction. The case implicates the Fifth Amendment's Takings Clause and Eighth Amendment's Excessive Fines Clause, as the plaintiff argues the county's action represented an illegal taking and excessive fine because it took the property for a $2,200 tax debt compared to its $194,000 value, then sold it for $76,000 and returned $74,000 to the homeowner. Ms. Karpchuk expressed surprise at how little the excessive fines question came up during the hearing, given the court's 2023 decision in Tyler v. Hennepin County on a similar situation that featured a concurring opinion written by Justices Neil Gorsuch and Kentanji Brown Jackson. She added, however, that the case also raises constitutional issues about just compensation and fairness in state property tax foreclosure and auction practices, given the gap between the amount of debt owned and property value, disparity between the asking price at auction and said value, and amount ultimately returned to the family post-sale. She said she hopes the justices consider the "very clear inequity" demonstrated by this and other examples.

"This happens, multiple times, every single year, where someone is losing their home over a trivial tax debt," she commented. "If there are tighter parameters around what needs to be just compensation to an individual who has their equity taken in a home, maybe a government will think more closely before it takes a house for such a small amount."

Ms. Karpchuk also produced a Holland & Knight Real Estate Law Unlocked podcast episode on this case.

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