The Pung family didn’t win everything they wanted in the Supreme Court, but they have another chance to make their case.
Pacific Legal Foundation – Jason Dixson Photography 2026
When the government takes your home to collect a tax debt and sells it at auction, how much does it really owe you?
The Supreme Court has now answered part of this question. And like many tax issues, the answer is complicated.
The Court held that when a government conducts an equitable tax sale, the Constitution does not require it to compensate the former owner based on the home’s fair market value. Instead, the constitutional basis is the auction sale price, minus the tax liability. But this was not a complete victory for Isabella County, Michigan. The justices overturned the Sixth Circuit’s ruling against the family and sent the case back to a lower court to consider whether the county’s sale process was conducted fairly in the first place.
Background
The case, Pung v. Isabella County, is the follow-up to Tyler v. Hennepin County, the 2023 Supreme Court decision that struck down what critics call “home equity theft.” In Tyler, a 94-year-old Minnesota woman lost her apartment due to unpaid property taxes. Hennepin County sold the property for $40,000, kept the entire amount and applied only about $15,000 in taxes, penalties, interest and costs. The Supreme Court unanimously ruled that the county could not keep the surplus.
Tyler established a basic principle: The government can collect taxes, but it cannot use a tax debt as an excuse to seize more property than it owes.
Pung had a variation on this question: What counts as surplus?
Timothy Scott Pung bought his family home decades ago. After his death, and later the death of his wife, his son Marc remained at home with his family. The home had received Michigan’s principal residence exemption, which reduces certain school tax liabilities for qualifying residences. The family believed the exemption continued because family members and beneficiaries of the estate continued to live in the home. The local tax assessor disagreed and denied the exemption for several years.
The Pungs challenged that decision and won in the Michigan Tax Court. The court concluded that no additional documentation was required as long as family members and beneficiaries still resided in the home.
But the controversy did not end there. Despite the ruling, the tax assessor continued to treat the property as delinquent and the county proceeded to foreclose. The alleged delinquency? Just $2,241.93. The home was assessed for tax purposes at $194,400.
Isabella County foreclosed and sold the property at public auction for $76,008. Marc Pung, his wife and their young child were evicted.
Michael Pung, as personal representative of the estate, sued. He argued that the county’s actions violated the Takings Clause of the Fifth Amendment and the Excessive Fines Clause of the Eighth Amendment. The district court gave the estate a partial victory, ruling that the family was entitled to the excess proceeds from the tax sale – the auction sale price minus the tax debt. But the court rejected the family’s argument that compensation should be measured by the fair market value of the home.
The Sixth Circuit affirmed the lower court. Under this approach, the estate will receive approximately $73,766 (the auction price of $76,008 minus the tax liability of $2,241.93).
Decision of the Supreme Court
The Supreme Court agreed with this part of the lower court’s analysis. Writing for the Court, Justice Samuel Alito said the proper basis for “just compensation” after a tax sale is the price received at auction, not the property’s hypothetical fair market value, “at least when the sale is fairly conducted in light of our nation’s history of tax sales.”
The Court’s opinion relied heavily on history. For hundreds of years, governments have used the seizure and sale of property as a way to collect unpaid taxes. But the traditional rule, the Court explained, was that the government had to return the “surplus,” meaning the amount that came from the sale over and above the debt owed. In other words, under Tyler, taxpayers are guaranteed the surplus proceeds from a tax sale. However, as the Court ruled, it does not guarantee taxpayers the difference between the tax owed and what the home could have gotten in a conventional real estate transaction.
The Pacific Legal Foundation, which represented Tyler and has been involved in similar challenges around the country, had asked the Court to recognize that fair market value may be required in some cases, especially when a forced tax sale causes a deeply depressed price. The Court declined to go that far.
The Court also rejected Pung’s Eighth Amendment claim that the failure to compensate the property based on fair market value amounted to an excessive fine. The Court held that the Eighth Amendment requires no more than surplus revenue when a tax sale is fairly held.
Unanswered Questions
The majority (Chief Justice Roberts and Justices Sotomayor, Kagan, Gorsuch, Kavanaugh, Barrett and Jackson joined Alito, with Justice Thomas dissenting) did not decide whether the sale was fair. Instead, it said the Sixth Circuit can consider with reserva whether Pung properly preserved arguments that Isabella County’s proceedings were constitutionally unfair. Pung argued, among other things, that the county seized more property than was necessary to satisfy the alleged debt and that the county’s handling of the property sale process should not be viewed as constitutionally adequate simply because it complied with state law.
Sotomayor, along with Gorsuch and Jackson, filed a concurring opinion to emphasize that the Court was not defining what makes a tax auction fair. The majority opinion, he wrote, should not be construed as endorsing either party’s version of the fair auction standard. These issues remain on hold.
Thomas, along with Gorshus to a considerable degree, was blunter in his lengthy concurrence. In his view, the Pungs paid their property taxes on time and in full, and the additional amount the county sought to collect was based on an unfair denial of the principal residence exemption. Thomas noted that the family had won the court battle over the exemption, but the county continued the foreclosure. He also highlighted the dramatic gap between the property’s assessed value and the auction price: The county assessed the home at $194,400 for tax purposes, but sold it for $76,008, less than 40 percent of that amount. “What Isabella County did to the Pungs was wrong and, in my original view, likely unconstitutional,” he wrote.
What’s next
The case has been partially reinstated, meaning it has been sent to a lower court for further proceedings. The issue on remand is not whether the Pungs were entitled to fair market value as an automatic constitutional rule. The Supreme Court said it wasn’t. The question is whether Isabella County’s conduct was sufficiently fair for the auction price to serve as a constitutional basis.
For now, the Pung family has not won the compensation rule it sought. But as Larry Salzman, the Pacific Legal Foundation’s vice president of litigation and strategy, noted, “The case is not over. The Pungs have won the right to continue their fight in the lower courts.”
The case is Michael Pung, Personal Representative of the Estate of Timothy Scott Pung, Petitioner v. Isabella County, Michigan. You can find the opinion here.
