Don't Mess With Taxes

Remember the 94-year-old Minnesota woman whose home was seized by country tax collectors after she stopped paying her property tax bills?

Such action is commonplace, as noted in my earlier post on this topic. But in Geraldine Tyler's case, Hennepin County kept all the money it got when it sold her condo, not just the amount needed to cover her delinquent real estate taxes.

Those taxes, plus penalties, interest, and other costs, came to $15,000. The Minnesota county got $40,000 for the property.

Yesterday (May 25), the Supreme Court of the United States, or SCOTUS, unanimously ruled in Tyler's favor.

That's great news for Tyler, who fell behind on her property taxes after she moved to an apartment for assisted senior living. But the nation's highest court's ruling doesn't mean she automatically gets the $25,000 sale profit left after Hennepin County took its tax cut.

It does mean, however, that Tyler now can take her case to a trial court, where she will argue that she is owed the fair market value of her property, minus her tax debt, as just compensation for the condo's taking.

And a dozen other jurisdictions that use the same process as Minnesota probably should take a look at their statutes.

What the 9 justices said: Obviously, no court date has been set yet. But you can be sure that when it happens, Tyler's lawyers will cite the SCOTUs findings.

"The County had the power to sell Tyler's home to recover the unpaid property taxes. But it could not use the toehold of the tax debt to confiscate more property than was due," wrote Chief Justice John Roberts in the opinion.

"By doing so, it effected a 'classic taking in which the government directly appropriates private property for its own use,'" added Roberts. "The taxpayer must render unto Caesar what is Caesars, but no more."

"Economic penalties imposed to deter willful noncompliance with the law are fines by any other name," wrote Justices Neil Gorsuch and Ketanji Brown Jackson in a concurring opinion (appended to the main Roberts' ruling). "And the Constitution has something to say about them: They cannot be excessive."

Same situations in other states: The Pacific Legal Foundation (PLF), which represented Tyler in her Supreme Court case, characterizes such excess takings as home equity theft. PLF said that more than a dozen states engage in the practice, which it figures has cost homeowners across the United States more than $860 million.

Source: Pacific Legal Foundation

The states with laws similar to Minnesota that allow governments to keep all proceeds from seized property sales are Alabama, Arizona, Colorado, Illinois, Maine, Massachusetts, Nebraska, New Jersey, New York, Oregon, South Dakota, and the District of Columbia. More on these and all states at PLF's interactive map.

"Today's decision is a major victory for property rights in the United States," said PLF attorney Christina Martin, who argued the case before the Supreme Court. "This decision affirms that property rights are fundamental and don't depend solely on state law."

As for those other states, PLF is sending letters to all states that permit the practice, demanding they change their laws (using PLF's suggested reform guidelines) to comply with the SCOTUS Tyler decision.

You also might find these items of interest:

• Making sure your property tax bill is correct
• Beware unsolicited — and questionable — property tax payment plans
• Alert property assessors of disaster damage ASAP to avoid wrong real estate tax bill

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