SCOTUS Weighs Case Involving Foreclosure to Pay Off Tax Debt

State and Local Tax (SALT) attorney Jennifer Karpchuk was cited in an Accounting Today article examining the U.S. Supreme Court's oral arguments in Pung v. Isabella County, a case that will decide whether a Michigan county violated a homeowner's constitutional rights by foreclosing on and selling a home for far more than the amount owed in property taxes. The article explored questions surrounding the Fifth Amendment's Takings Clause and Eighth Amendment's Excessive Fines Clause, including whether auction procedures may depress property values and when the "taking" occurs for purposes of determining just compensation. Discussing the procedural issues raised during the hearing, Ms. Karpchuk noted that several justices focused on whether the structure of Michigan's property tax system itself may contribute to lower sale prices.

"Multiple justices recognized that the foreclosure and auction process, specifically in Michigan, can depress prices through procedures such as cash-only requirements and no property inspections," she said.

Ms. Karpchuk also pointed to the broader constitutional and fairness concerns underlying the case, particularly the extent to which government actions can strip homeowners of substantial equity over relatively minor tax debts.

"Several justices expressed discomfort with a system that allows a government to destroy most of a homeowner's equity to collect a trivial debt – in this case around $2,000, but in some cases even lower amounts," she added.

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