A unanimous Supreme Court on Thursday dealt a massive blow to a practice that is common around the nation – governments taking a property for unpaid taxes, selling it, and keeping ALL the proceeds.
That offends, the court ruled, the Takings Clause of the United States Constitution.
The fight at hand involved a condominium formerly owned by Geraldine Tyler in Hennepin County, Minnesota, but the same facts have played out over and over across the nation in recent years. In fact, some state laws authorized this specific action.
In this case, Tyler owed about $15,000 in unpaid taxes and penalties, so the county “seized the condo and sold it for $40,000, keeping the $25,000 excess over Tyler’s tax debt for itself,” the court said.
She sued, charge the county unconstitutionally retained the excess value of her home in violation of the Takings Clause of the Fifth Amendment and the Excessive Fines Clause of the Eighth Amendment.
Lower courts dismissed her charges. But the court’s ruling said Tyler plausibly charged the retention of the excess value above her debt violated the Constitution.
The ruling said that the excess value of confiscated property protected by the clause “depends on state law,” but state law “cannot be the only one because otherwise a state could ‘sidestep the Takings Clause by disavowing traditional property interests’ in assets it wishes to appropriate.”
“History and precedent dictate that, while the county had the power to sell Tyler’s home to recover the unpaid property taxes, it could not use the tax debt to confiscate more property than was due. Doing so effected a ‘classic taking in which the government directly appropriates private property for its own use.’”
Such a concept, the justices schooled Minnesota authorities, “can trace it s origins at least as far back as the Magna Carta.”
The ruling noted that “most states” today “require excess value to be returned to the taxpayer whose property is sold to satisfy outstanding tax debt.”
Minnesota, however, set up its process to provide “no opportunity for the taxpayer to recover the excess value from the state.”
“Significantly, Minnesota law itself recognizes in many other contexts that a property owner is entitled to the surplus in excess of her debt. If a bank forecloses on a mortgaged property, state law entitles the homeowner to the surplus from the sale. And in collecting past due taxes on income or personal property, Minnesota protects the taxpayers’ right to surplus.
“Minnesota may not extinguish a property interest that it recognizes everywhere else to avoid paying just compensation when the state does the taking,” the ruling said.
The court rejected outright the county’s claim that Tyler “constructively abandoned” her home.
Chief Justice John Roberts delivered the opinion of the court. Tyler, now 94, had purchased the condo in 1999 and lived there for years.
Then she decided it would be safer for her in a senior community, and moved. But nobody continued paying the property taxes and soon the county added $13,000 in interest and penalties.
Roberts explained Tyler sustained “a classic pocketbook injury sufficient to give her standing.”
“The taxpayer must render unto Caesar what is Caesar’s, but no more,” he said.
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