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Protest, but pay, your property tax bill or risk losing your house…and more money

Updated, Thursday, May 25, 2023 (see so-noted paragraph below)

The interior of the U.S. Supreme Court (Photo by Phil Roeder, Flickr via Wikipedia)

April is not a fun fiscal month for a lot of us. In addition to Tax Day, when many of us, including the hubby and me, owe the U.S. Treasury a bit, along with an estimated tax payment, it is property appraisal time here in Texas.

The last couple of years, that's been particularly distressing. If we were putting our house on the market like a couple of our neighbors, we'd be happy that we could ask for big bucks.

But we're staying put. And unless the firm we hire to protest our appraisal can work some major magic, we're looking at a bigger property tax bill (again) this fall.

Regardless of where you live, it's worth a shot to protest your appraisal. My post on protesting an exorbitant home value appraisal has more on the process. If your, or your hired agent's, too-high appraisal argument is successful, you could save some county or parish tax money.

But no matter what your final real estate value and subsequent property tax bill turns out to be, you need to pay it. If you don't, you'll lose your home and possibly more.

Tax sales commonplace: Unfortunately, that happens all too often. Many times, the homeowners are older, on fixed incomes, and without other resources to cover their tax bills, which have escalated in parts of Texas and across the country.

UPDATE, Thursday, May 25, 2023: The Supreme Court today unanimously decided in favor of a 94-year-old homeowner whose home was seized and sold to cover unpaid real estate taxes. The Minnesota county taxing authority got more than enough to cover the delinquent taxes and kept the excess. Now, say the High Court justices, she can pursue her efforts to get the excess sale profit. You can read more on the SCOTUS ruling in this NBC News story. For the basis of the case in today's ruling, keep reading my original post below. 

One case of a home seizure and sale to cover unpaid property taxes now is before the Supreme Court of the United States (SCOTUS). Here's the synopsis, from The Washington Post's coverage of the oral arguments before the justices on Wednesday, April 26:

   Hennepin County, which contains Minneapolis, foreclosed on Geraldine Tyler's one-bedroom condo after she moved into an apartment building for the elderly and stopped paying property taxes for five years.

   She owed about $15,000 in taxes and penalties. The county sold her condo for $40,000 and kept the surplus, as the law allows in Minnesota, the District of Columbia and about a dozen other states.

   The Supreme Court is considering Tyler's claim that keeping the excess money violates the Constitution's prohibition on the taking of private property without fair compensation by the government, as well as protection against excessive fines.

How much more than tax due: The Pacific Legal Foundation, a property-rights group representing the 94-year-old Tyler, calls what Hennepin County did "equity-stealing."

The county's attorneys countered that Tyler ignored five years of warnings about not paying property taxes and other offers of how to restructure payment of what she owed.

The issue here is not whether the county should be paid the taxes it was owed. That's a given.

But should it be able, once it sells a seized property, to keep all the proceeds? Should Hennepin officials have taken their cut, with late charges, and given the remainder to Tyler?

The county's attorney told the justices that it is unfair to local governments to make them act as real "estate agents of last resort," seizing a property, going through the trouble of selling it, and then returning any amount left after the taxes are paid to the former owner.

"The county doesn't even break even through its administration of the tax forfeiture laws," Hennepin County's attorney told the High Court.


Picking on grandma: One of the first things to note about the case is the plaintiff. Did I mention that she's 94?

Merits of the argument aside, Pacific Legal Foundation found the perfect plaintiff, a grandmotherly nonagenarian. If the house had been owned by a raucous family that engaged in questionable behavior, the facts would be getting more attention than the owner.

And that is, if not fine, the way the legal system works. Good lawyers on both sides look for every edge and angle.

It's also how the tax system works in Minnesota and in Alabama, Arizona, Colorado, Illinois, Maine, Massachusetts, Nebraska, New Jersey, New York, Oregon, and South Dakota, according the Pacific Legal Foundation.

I feel for Tyler and her family, who urged her to move out of the condo where she lived alone and to a place nearer them. I've been a caregiver of an older parent, and it is a challenge, financially and emotionally.

Equal tax treatment: But I'm also all for everyone paying the taxes they owe, be it income, property, and all the other permutations that governments collect.

During the Supreme Court arguments, the Hennepin County attorney said Tyler ignored five years of warnings about not paying property taxes and other offers of how to restructure payment of what she owed.

Most counties do have options for delinquent property taxpayers. Here in Texas, state law allows homeowners age 65 or older to apply for a property tax deferral. For married couples, only one spouse needs to meet the requisite age. Tax deferral also is an option for certain disabled residence owners.

If granted, collection of the residential property taxes is stopped until the qualifying owner no longer owns the real estate. This could be upon sale of the home, or the death of the owner.

This is only a deferral of the taxes. The county where the home is located continues to assess the taxes, which will accumulate each tax year. Also, even with a deferral, interest charges on the unpaid taxes will continue to accrue. This fact sheet from Denton County, Texas, has more on the residential property tax deferral program.

Depending on the tax bill and the eventual value of the home when it is sold and taxes are due, the deferral could wipe out any profit the owner (or heirs) might hope to one day get from the home's sale. But it does provide immediate cash-flow help to owners with limited income or resources to pay what seem to be ever-increasing property tax bills.

But not more than owed: I'm not sure what type of restructuring Hennepin County provides, but its system of lienor takes all in a forfeiture case seems a bit skewed. In fact, keeping more than the due tax bill and reasonable fines and fees seems egregious.

Heck, even the IRS says in its Taxpayer Bill of Rights that taxpayers have the right to pay no more than the correct amount of legally due tax, including interest and penalties.

As for the hassle imposed on the collecting taxing agency, I offer a sincere eyeroll. Can it really be that bothersome? The agency uses the same system that's been in place for as long as it's been collecting taxes and seizing properties when the taxes aren't paid.

All it takes is one more step to subtract the taxes and penalties from the sale proceeds. I bet ChatGPT can work out a program if it's too much for old-fashioned calculators to handle.

Then put that excess money in an account and make the affected owners apply for it. The counties can even set a time limit, like the IRS does for unclaimed federal tax refunds, for the former owners to claim the sale proceeds left after the tax bill is settled.

Decision expected this summer: The Washington Post's and other media outlets' reports indicate that the Supreme Court justices appeared, based on their questioning of both sides, to favor Tyler's argument. You can decide for yourself by reading the exchanges in the oral arguments' transcript.

A district court and the U.S. Court of Appeals for the 8th Circuit sided with the Minnesota county before Tyler's appeal made to the nation's highest court in Washington, D.C. The justices are expected to issue a decision this June.

If SCOTUS finds for Tyler, the case would go back to the lower courts for further action.

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