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Takings

Supreme Court Issues Terrible Takings Decision in Pung v. Isabella County

The Court ruled that local goverments may pay compensation far below fair market value for property seized in tax foreclosures.

Ilya Somin | 6.23.2026 12:28 PM

Today, the Supreme Court issued a terrible Takings Clause decision in Pung v. Isabella County. It's the worst Supreme Court takings decision in a long time, and perpetuates the Court's tradition of issuing awful property rights decisions on June 23 (which is the anniversary of Kelo v. City of New London). The ruling is unanimous, albeit with a concurring opinion by Justice Thomas, joined by Gorsuch, which is really more of a dissent.

Isabella County, Michigan seized the late Timothy Pung's house because he supposedly failed to pay some $2200 in taxes and fees (his estate claims he didn't actually owe anything). They then sold the property at auction for about $76,000; the County kept the $2200 it thought was owed and transferred the remaining funds (about $73,800) to Pung's estate. But the County had earlier appraised the value of the property at $194,400 and the winner of the auction quickly resold the home for $195,000. That's strong evidence the auction price undercompensated the Pungs, and the County failed to pay the "just compensation" required by the Takings Clause of the Fifth Amendment.

In Tyler v. Hennepin County (2023), the Supreme Court unanimously ruled that "home equity theft" (the use of tax foreclosure auctions to take more than the owner owed) is a taking, and emphasized "[t]he principle that a government may not take more from a taxpayer than she owes." Nonetheless, today, in an opinion by Justice Samuel Alito, the Supreme Court ruled that owners whose property is taken by tax foreclosure are only entitled to the difference between the auction price and what they owed in delinquent taxes. This goes against the longstanding principle that "fair market value" is the standard for just compensation, and that the compensation is based on what the owner lost, not what the government gained.

Justice Alito cites two major justifications for the decision: that longstanding precedent supports it, and that a contrary ruling "would impose unprecedented burdens on jurisdictions that wish to collect unpaid taxes and might well make tax sales impractical" because local governments might end up suffering a "net loss" from foreclosure auction sales that sold for significantly less than fair market value.

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