In May 2023, the Supreme Court decided Tyler v. Hennepin County, 598 U.S. 631 (2023). Tyler involved a challenge to the Minnesota property tax collection program. In Minnesota, if a homeowner fell behind on their property taxes, the County was empowered to seize that property, sell it, and maintain all proceeds from that sale to cover the tax debt. The plaintiff in Tyler argued that she was entitled to the surplus from that sale, minus the delinquent tax. The Supreme Court agreed. The Court specifically found that the Fifth Amendment’s Takings Clause prevented the government from taking more money than was necessary to cover the tax debt.

In the wake of Tyler, many states have had their property tax programs challenged. One such challenge occurred in Pung v. Isabella County, Case No. 25-95, 609 U.S. ______(2026).   Pung involved Michigan’s tax collection program, where tax-delinquent properties fell to the County and were sold at a public auction to cover the debt. The Pung family’s property was valued at $194,000. The property was seized by the County for $2,242 in delinquent tax debt and sold at an auction for $76,008–less than 40% of its fair market value. The County agreed that the Pung family was owed the surplus from the sale, but the Pung family argued that they were actually entitled to compensation up to the full $194,000.

In a unanimous decision, the Supreme Court agreed with the County. The Court found that fair-market value was not an appropriate measure of compensation for a delinquent property sold at a tax auction. Although it is true that tax sale prices are often depressed, it would be unfair to require the County to seek full fair market value for a delinquent property. If such a rule were enforced, counties would more often lose money in their attempts to balance their books through tax sales. As such, just compensation under the Fifth Amendment was the difference between the tax auction price and the unpaid taxes.

Counties should be mindful of the Pung decision and consider what impact it may have on their own tax sales. The caution is augmented by the passage of House Bill 4537, which tweaks the current Illinois tax sale system. The Pung decision outlines the delicate balance between a person’s right to just compensation and a county’s right to collect property taxes to fund the operation of local government. Although one can empathize with the Pung family, the Court stressed the unfairness to the counties that would result from being liable for the fair market value of delinquent properties. Doing so would generate a windfall for people who refuse to pay their property taxes. While Tyler is an example of a facially unfair system, the Pung decision shows that every state property tax collection system is unique and deserves independent scrutiny.

For more information about this article, please contact Alexander T. Myers at amyers@tresslerllp.com.

Alexander (Alex) T. Myers serves as an associate in Tressler’s Local Government and Litigation Practice Groups. His practice is primarily focused on civil rights litigation, tort litigation, employment litigation and counseling, matters arising from section 1983, and police misconduct. Alex’s legal background as a Deputy Attorney General for the Office of the Indiana Attorney General (OAG) encompassed numerous litigation topics across both state and federal courts. Click here to read Alexander’s full attorney bio.