When the government takes your home to collect a tax debt and sells it, how much does it actually owe you? That’s a question now before the U.S. Supreme Court. And while a similar case was resolved last year—Tyler v. Hennepin—a big question about valuation remains unanswered.
Background
Thirty-five years ago, Timothy Scott Pung purchased a 3,000-square-foot house in Isabella County, Michigan, for $125,000. While he was alive, the property benefited from the state’s Principal Residence Exemption, which reduces some school-tax obligations for qualifying homes. After his unexpected death in 2004 followed by the death of his wife in 2008, his son, Marc, remained in the house with his family. He believed that under Michigan law, the tax exemption continued automatically (without the need for any additional paperwork) as long as family members lived in the home.
A local tax assessor saw things differently and retroactively denied the exemption for three years (2007, 2008 and 2009), arguing that Marc should have resubmitted paperwork.
The Pungs challenged the move in court. An administrative law judge at the Michigan Tax Tribunal agreed with the family and ruled in their favor. During the challenge, the assessor continued to deny the family the exemption for the years 2010 and 2011. The tax tribunal reversed the denial for the 2007-2011 tax years, holding that so long as the family and beneficiaries of Scott’s estate remained in the home, no further paperwork was ever necessary.
The assessor disagreed. Despite the ruling, she labeled the property as delinquent, and the county moved to foreclose. The alleged delinquency was just $2,241.93 (the house was assessed at $194,400). The county evicted the family, and sold their home at a tax auction for just $76,008.
After the foreclosure, Pung’s estate sued, arguing that the county had taken property in violation of the Fifth Amendment’s Takings Clause and had also imposed an excessive fine in violation of the Eighth Amendment. The district court gave the estate a partial victory, concluding that the estate was entitled to the surplus proceeds, plus interest, from the auction—that is, the auction sale price minus the tax debt. The estate, however, argued that the recovery should be measured by the property’s fair market value minus the amount owed, and not simply the auction amount.
That distinction may sound technical, but it is worth a lot of money. If compensation is based on the auction price, the estate would receive roughly $76,008 minus the tax debt. If compensation is based on fair market value, the estate’s recovery could be closer to $194,400, minus the debt. Here, the dispute is not whether the government may collect taxes, but whether the government can return only what a tax auction produces, even if that sale price is far below the market value.
That question has now landed in the U.S. Supreme Court where the Pungs are represented pro bono (for free) by the Pacific Legal Foundation, a public interest law firm. The issue in front of the Court? When the government takes your home to collect a tax debt and sells it at an allegedly depressed auction price, what does “just compensation” actually require?
The Case That Set the Stage: Tyler v. Hennepin County
To understand why Pung matters, you have to go back three years to a 94-year-old grandmother named Geraldine Tyler.
In 1999, Tyler—then age 70—bought a modest one-bedroom condo in Minneapolis, Minnesota. She lived there for a decade until concerns about neighborhood safety prompted her to move to a senior community across town. She couldn’t afford to keep up with bills on both places, and by 2015, she had racked up $2,311 in unpaid property taxes on the condo, with interest, penalties, costs, and fees bringing the total to roughly $15,000. Hennepin County seized her condo and sold it for $40,000. The county kept every dollar, even though it was owed only $15,000, pocketing a $25,000 windfall that, by any reasonable measure, belonged to Tyler.
That practice was perfectly legal in Minnesota. In fact, 12 states and the District of Columbia allowed some version of it, with nine other states permitting it in limited circumstances. The Pacific Legal Foundation called it “home equity theft” and took Tyler’s case pro bono.
The Supreme Court unanimously ruled in Tyler’s favor under the Takings Clause. Chief Justice John Roberts, writing for the Court, explained that while the government may seize and sell property to recover unpaid taxes, it may not use that tax debt to confiscate more property than it is owed. The Court rooted that conclusion in historical practice, traditional property principles, and the basic rule that a taxpayer is entitled to the surplus after a debt is satisfied.
That holding was important because states and local governments had defended these laws by arguing that once property was forfeited under state law, the former owner had no property interest left. The Court rejected that interpretation finding that a state cannot avoid the Takings Clause simply by defining away a traditional property interest. If that were allowed, constitutional protection would depend entirely on the government’s own drafting choices. Tyler stands for the idea that surplus equity is property.
But Tyler was also an easy case in one respect: the surplus was obvious. The county sold the condo for $40,000 and was owed about $15,000. The $25,000 difference was the windfall. The Court did not need to decide what happens when the government sells the property for less than its fair market value. Nor did it have to decide whether a tax foreclosure auction price is a constitutionally adequate measure of just compensation. Tyler left those questions unanswered.
What Tyler Didn’t Resolve
Tyler established that a homeowner can have a property interest in home equity beyond what is owed in back taxes. What it didn’t do was define how to measure that equity, or more precisely, what happens when the government sells the home at a tax auction that produces a fraction of the property’s real-world value.
Think of it this way: Tyler asked, “Can the government keep your surplus equity?” The Court said no.
Pung asks, “What is your surplus equity actually worth?” Those are two very different questions with very different consequences.
In Pung, Isabella County’s position is narrower than Hennepin County’s was in Tyler. The county agrees that the taxpayer is entitled to the surplus proceeds. The question is how to calculate that surplus. From the county’s perspective, the surplus is the auction price minus the tax debt. If the property sold for about $76,008, and the debt was about $2,242, then the surplus is the difference between those two numbers.
Pung’s response is that this approach allows the government to evade Tyler in practice. If the government can force a tax sale under conditions likely to produce a depressed price and rely only on that valuation, the owner may still lose a large portion of the home’s equity. The government would not be keeping the “surplus proceeds” in the Tyler sense, but it would still be extinguishing equity far beyond the debt.
That is why Pung is not simply a repeat of Tyler. It asks what “just compensation” means after a tax foreclosure. Is just compensation tied to what the property happened to bring at a forced auction? Or is it tied to the fair market value of the property interest the owner lost?
The Auction-Price Problem
Tax foreclosure auctions are not like ordinary real estate transactions. They often attract a narrow pool of buyers—primarily investors and speculators who understand the process—and government sellers have little incentive to maximize value. In many cases, properties sell for well below what a motivated seller would get on the open market.
If governments can use the auction price as the constitutional benchmark for “just compensation,” then they could technically comply while still allowing much of a homeowner’s actual equity to disappear.
That’s what’s driving Pung. Tyler says the government cannot profit beyond the amount it is owed. Pung asks what the government owes when its own process may convert a more valuable asset into a lower sale price.
The Sixth Circuit initially sided with Isabella County, relying on precedent that treated the foreclosure auction price as the appropriate measure of surplus. It also rejected the Eighth Amendment excessive-fines theory on the grounds that Michigan’s tax-foreclosure regime is remedial tax collection, not punishment which means it falls outside the Excessive Fines Clause.
The Supreme Court’s decision to take the case is intended to resolve that issue and puts the valuation question Tyler left open squarely before the justices.
Why It Matters Beyond Michigan
In Minnesota before Tyler, more than 4,300 properties were seized and sold between 2014 and 2020. Among the more than 1,200 that were family homes, owners on average lost 92% of their property’s value beyond the tax debt — a gap of roughly $207,000 per family, against an average tax debt of $17,000. In Washington, D.C., a 76-year-old veteran with severe dementia lost a $200,000 home over a $133.88 tax bill. In Michigan, before state courts intervened in a separate case, a property owner lost his property after underpaying by $8.41.
Some states have reformed their laws in response to Tyler or earlier state-court decisions. Michigan’s Supreme Court had already ruled in homeowners’ favor before Tyler came down. A ruling for Pung could require state governments to calculate just compensation based on fair market value, fundamentally reshaping the economics of tax-foreclosure cases. A ruling for Isabella County would leave governments with a much narrower obligation: return the auction surplus with interest, but bear no responsibility for the gap between what the auction produced and what the home was allegedly worth.
The Eighth Amendment Question
Pung also revives a constitutional question. Tyler won on the Takings Clause, so the Supreme Court didn’t need to decide whether Hennepin County’s conduct also amounted to an excessive fine under the Eighth Amendment. But the issue didn’t disappear quietly. Justice Neil Gorsuch, joined by Justice Ketanji Brown Jackson (an odd pairing for sure), wrote separately to warn that the lower courts’ Excessive Fines Clause analysis contained “mistakes future lower courts should not be quick to emulate.”
The Excessive Fines Clause bars the government from imposing fines grossly disproportionate to the offense, but only if what happened qualifies as a “fine” in the first place. Governments argue it doesn’t, believing that tax foreclosure is remedial, not punitive. The fine label, they say, doesn’t fit.
Property owners argue that when the government walks away with property worth many times the tax debt, the excess isn’t remedial, it’s punishment. Gorsuch’s concurrence in Tyler acknowledged that a scheme can serve both purposes at once. The Sixth Circuit dismissed the fines theory in Pung on exactly the grounds Gorsuch cautioned against. Whether the Supreme Court corrects that is an open question.
What’s Really At Stake
Pung is not about whether counties can collect unpaid taxes. They can. It is about what Tyler means when a tax sale produces less than the property is worth.
Isabella County says Tyler requires only the return of surplus auction proceeds: the sale price minus the tax debt. That rule is easy to apply. But the estate says that rule weakens Tyler.
Put another way, Tyler said the government cannot keep more than it is owed. Pung asks whether that protects only the cash left after the auction or the homeowner’s equity before the auction erased it.
When to Expect a Decision
Oral argument in Pung concluded February 25, 2026. The Court typically works through argued cases before breaking for the summer, meaning a decision is expected before the end of the Court’s term, likely by late June.
Given that Tyler was unanimous, and that Pung presents the natural follow-on question the Court left open three years ago, the justices aren’t likely to skirt the valuation issue. The harder question is how far they go. Tyler and Pung ask the Court to consider a bigger constitutional problem: when the government enforces public debts like tax bills, where is the line between collection and confiscation?
The case is Michael Pung, Personal Representative of the Estate of Timothy Scott Pung, Petitioner v. Isabella County, Michigan.
