The U.S. Supreme Court ruled unanimously Tuesday that local governments are not constitutionally required to pay homeowners the fair market value of property seized and sold in tax foreclosure proceedings. The 9-0 decision in Pung v. Isabella County, Michigan, rejected a decade-long challenge brought by the estate of a family whose home was seized over a disputed $2,241.93 tax bill and auctioned for $76,008 — well below its $194,400 assessed value. The ruling sets a clear baseline for takings-clause disputes but leaves a live procedural fight still unresolved in the lower courts.
A Pragmatic Ruling With a Moral Asterisk
Justice Samuel Alito, writing for the court, held that the Fifth Amendment's Takings Clause requires only that the government pay the price obtained at a fairly conducted public tax sale — not a hypothetical fair market value. The reasoning was explicitly practical: requiring full market-value compensation would impose "unprecedented burdens" on local governments trying to collect delinquent taxes and would make such sales "impractical." Alito sharpened the point with a concrete illustration from the record — a tax sale to collect $20,000 in delinquent taxes would net the government a $20,000 loss under the Pung family's theory, a result the majority called a "perverse" outcome that would render tax sales "infeasible as a debt-collection mechanism."
The ruling does not come without moral friction. Justice Clarence Thomas, joined by Justice Neil Gorsuch, wrote separately that what Isabella County did to the Pungs was "wrong, and, on my initial view, likely unconstitutional." That concurrence matters. It signals two justices believe the procedural fairness question — which the majority deliberately left open — could yet produce constitutional liability in the right case.
What the Remand Leaves Unresolved
Isabella County did not receive a clean victory. The court vacated and remanded the case to the U.S. Court of Appeals for the Sixth Circuit, directing it to reconsider the Pung estate's claims that the county's foreclosure procedure was itself unfair. The majority declined to address whether the process the county followed in seizing and selling the property met constitutional standards. That distinction is material: the court ruled on what measure of compensation is owed after a valid tax sale, not on whether this particular sale was validly conducted.
Larry Salzman, an attorney at the Pacific Legal Foundation who represented the Pung estate, said the team was disappointed but prepared to continue fighting in the lower courts, emphasizing the family still has an opportunity to remedy the harms done to them. Notably, Salzman pointed out that Justices Thomas and Gorsuch shared the view that fair market value can, in at least some cases, be constitutionally required.
The Stakes for Local Governments
Isabella County entered the case backed by ten other states and the District of Columbia — a coalition that itself signals how broadly municipal tax-collection authority was understood to be at stake. The court sided with that coalition's core argument: that tax foreclosure sales are constrained transactions by nature and cannot be expected to yield market prices, and that holding governments liable for the gap would dismantle a centuries-old debt-collection mechanism.
Local governments can now proceed with tax sales without facing takings-clause liability for below-market auction outcomes, provided the sale is fairly conducted. That final qualifier is now the live legal question heading back to the Sixth Circuit — and the Thomas-Gorsuch concurrence ensures it will not go unanswered quietly.