Supreme Court Rules That States Are Not Entitled to Windfalls in Tax Disputes

supreme court unanimously decided on Thursday A state that seizes and sells private property to recover unpaid taxes violates the tax collection provisions of the Constitution if it holds more than the taxpayer owes.

The case involved a 94-year-old Minnesota woman who stopped paying property taxes on her apartment after moving into a welfare center.

At the time Hennepin County seized the land, the woman, Geraldine Tyler, had paid about $2,000 in taxes and an additional $13,000 in fines and interest. The county sold the condo at auction for $40,000, keeping not only the $15,000 agreed-upon payment term, but the remaining $25,000.

Minnesota law allows you to retain the entire value of a forfeited property, even if the outstanding debt was only part of it.

The county argued that Minnesota’s laws are rooted in historical practice and encourage homeowners to take steps to protect their property.

Chief Justice John G. Roberts Jr. wrote to the court that “history and precedent say otherwise.”

“The county had the authority to sell Tyler’s home to recover unpaid property taxes,” he wrote, but “use the tax liability as a stepping stone to confiscate more than the estimated amount.” I couldn’t do it,” he added.

The county’s action is a classic violation of the takeover clause, which states that property “cannot be put into public use without just compensation,” he wrote.

Chief Justice Roberts writes that history supports that view.

“The principle that a government should not take more from a taxpayer than it owes can be traced to at least 1215 Runnymede, when King John swore in the Magna Carta: The sheriffs and bailiffs said, ‘If a dead man came to collect a debt owed to him, they could ‘remove the property until the obvious debts were paid in full. and the remainder shall be left to the executor to carry out the will of the deceased. “

“Our case law also recognizes the doctrine that taxpayers are entitled to surpluses in excess of their debt,” he added.

Minnesota’s approach is a relative outlier, he wrote. “36 states and the federal government are seeking to refund the excess to taxpayers,” he wrote.

The Constitution prohibits conduct in other states, Chief Justice Roberts wrote in his opinion in Tyler v. Hennepin County, No. 22-166.

Citing an earlier ruling, he said, “The burden clause is intended to prohibit governments from imposing public burdens on some people that, in fairness and justice, should be borne by the whole population. ‘ wrote. A taxpayer who loses a $40,000 home to the state to meet a $15,000 tax liability has made a far greater financial contribution than it borrowed. The taxpayer must give to Caesar what is Caesar’s, but no more. “

Pacific Law Foundation attorney Christina Martin, who represents Tyler, called the decision “a big win for American property rights.”

“The court’s ruling makes it clear that theft of residential property is not only unjustified, but unconstitutional,” she said in a statement.

Justice Neil M. Gorsuch, along with Justice Ketanji Brown Jackson, issued a concurring opinion exploring another possible basis for ruling in Tyler’s favor. That is the Eighth Amendment to the U.S. Constitution prohibiting “excessive fines.”

Judge Gorsuch said, “Economic fines imposed for deterring willful violations of the law are fines by any name.” “And the Constitution says that there should be no excesses about them.”

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