In 2023, the United States Supreme Court in Tyler v. Hennepin County, Minnesota ruled that a homeowner, while liable for the taxes owed, was still protected by the Takings Clause. Although the Court acknowledged the government’s ability to engage in lawful tax sale for unpaid property taxes, they do not have the authority to retain proceeds beyond what is necessary to satisfy the taxpayer’s debt. In other words, the Court ruled that once a property is sold at a tax sale, any proceeds that remain after the back taxes are paid must be returned to the taxpayer.
In Pung v. Isabella County, which was decided on June 23, 2026, the Court was asked to consider a different question of whether a taxpayer was entitled to the fair market value of their property after it was sold by the government for unpaid taxes.
Isabella County (Michigan) claimed that Pung had an outstanding property tax debt of $2,241.93. The home had an assessed value of $194,000, and after the county foreclosed, it sold for $76,008 at a public auction. Once the tax sale was completed, the county refunded the balance after the unpaid tax amount was paid, in alignment with Tyler v. Hennepin County. However, the property was later resold on the open market for $195,000 by the new owner.
Justice Samuel Alito, writing for the Majority, wrote that “for hundreds of years, English and American law have allowed the seizure and sale of property as a tax-collection method, provided that the government return any surplus proceeds to the debtor. Our Nation’s history and this Court’s precedent thus establish the principle that when the government seizes and sells property to collect a tax debt, the owner is entitled to the surplus sale proceeds—nothing less, and nothing more.”
Just as with Tyler, the Court acknowledged the legal precedent going back to England’s Magna Carta, which was issued on June 12, 1215, about the ability for government to seize property for unpaid taxes, while generally recognizing that any surplus from the sale belongs to the property owner.
The Pungs, however, argued that the later resale reflected the home’s true market value and showed that the initial auction price had substantially undervalued the property. As a result, they contended they were entitled to receive the fair market value of their home, and believe that they were “entitled to receive approximately $192,000 – the difference between the second sale price (which he says was the fair market value) and the taxes that he owed.”
The key phrase from Justice Alito in his Opinion is “…nothing less, and nothing more.” The Court ruled the tax sale proceeds were handled appropriately, according to the law. The fact that the home was assessed for more, or that it was later sold for more, did not matter in the Court’s decision.
Justice Alito further argued that “the Fifth Amendment protects the family’s right to surplus proceeds from the tax sale, not compensation for the property’s fair market value.” The Court also affirmed that “the auction price is the proper baseline, at least when the procedure is fair in light of our country’s history of tax sales.”
Property rights are enshrined in both the United States and Iowa constitutions. Article 1 of Iowa’s Constitution states that “all men and women are, by nature, free and equal, and have certain inalienable rights — among which are those of enjoying and defending life and liberty, acquiring, possessing and protecting property…”
The United States Constitution speaks specifically to property rights in the Fifth and Fourteenth Amendments. The Fifth Amendment protects property rights in two ways. Its Due Process Clause provides that no person shall “be deprived of life, liberty, or property, without due process of law.” Its Takings Clause further provides that private property shall not “be taken for public use, without just compensation.” The Fourteenth Amendment contains its own Due Process Clause and has long been interpreted to make the protections of the Fifth Amendment’s Takings Clause applicable to state and local governments.
Interestingly, while Justice Clarence Thomas concurred in the Court’s judgment, he wrote separately to emphasize that property rights occupy a special place in our constitutional system. He makes the point that the Constitution places strict limits on how government may collect taxes when doing so requires taking private property.
Justice Thomas wrote, “Property is a natural, fundamental right,” and used the observation that “the principal aim of society is to protect individuals in the enjoyment of those absolute rights, which were vested in them by the immutable laws of nature.” Thomas ultimately concluded that “What Isabella County did to the Pungs was wrong, and, on my initial view, likely unconstitutional,” before ending with a broader reminder that “the government exists to protect property; property does not exist to support the government.” The Court’s decision in Pung reinforces that government has the authority to collect lawfully owed taxes, but it also reaffirms that authority has constitutional limits. At the same time, this entire issue can serve as a reminder that legality and sound public policy are not always the same thing. Governments exist to collect only what is lawfully owed, not to maximize revenue at the expense of the people they serve.
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