Supreme Court Clarifies Constitutionality of Tax Foreclosure Sales

In Pung v. Isabella County, 609 U.S. ____ (2026), the U.S. Supreme Court held that the proper baseline for measuring “just compensation” following a fairly conducted tax sale is the auction sale price, not the property’s hypothetical fair market value. The justices further found that Isabella County did not violate the Eighth Amendment’s excessive fines clause by failing to compensate the taxpayer for his property’s fair market value.

Facts of the Case

The Pung family owed $2,241.93 in real-property taxes, so local tax authorities in Isabella County, Michigan, initiated foreclosure proceedings and sold the Pung home—assessed at $194,400 for tax purposes—for $76,008 at public auction.

Michael Pung sued in Federal court, alleging that the County violated the Takings Clause of the Fifth Amendment and the Excessive Fines Clause of the Eighth Amendment. The District Court granted Pung partial summary judgment on his Fifth Amendment claim, holding that he was entitled to the surplus proceeds from the tax sale. Because it ruled for Pung on his Fifth Amendment claim, the District Court concluded it need not reach whether the Eighth Amendment demanded a similar result. Although the District Court agreed with Pung that the County had to refund the surplus proceeds of the tax sale, it rejected his argument that the property’s fair market value should measure compensation.

Pung appealed, and the Sixth Circuit affirmed. Citing Circuit precedent, the appeals court found that a “‘plaintiff whose property is foreclosed and sold at a public auction for failure to pay taxes is [not] entitled to recoup the fair market value of the property.’” Instead, “‘when a municipality sells foreclosed property at a properly conducted auction,’ the owner is entitled to ‘the amount of the sale above his debt and no more.’” Accordingly, the court concluded that Pung should receive $73,766.07—the difference between the home’s sale price and the tax debt.

The Sixth Circuit also rejected Pung’s Eighth Amendment claim. Bound by Circuit precedent, the court held that because the Michigan tax-foreclosure regime was not punitive, it was not “within the ambit of the Eighth Amendment.”

Supreme Court’s Decision

The Supreme Court reversed. “We conclude that the proper baseline under the Takings Clause is the price obtained in a tax sale, at least when the sale is fairly conducted in light of our country’s history of tax sales,” Justice Samuel Alito wrote for the majority. “We also hold that, following a tax sale, the Eighth Amendment Excessive Fines Clause does not require the government to return more than the surplus proceeds. Neither the Fifth nor the Eighth Amendment requires the government to compensate former owners based on the hypothetical fair market value of their property.”

The Supreme Court first addressed whether “just compensation” following a tax sale is measured by the price that the property obtained at auction or its fair market value. The justices ultimately concluded that the auction price is the proper baseline.

According to the Court, English and American law have historically allowed the seizure and sale of property as a tax-collection method, provided that the government returns any surplus proceeds to the debtor. Moreover, neither history nor precedent supports Pung’s contrary argument, including cases about the seizure of multiple pieces of property and eminent-domain cases. Justice Alito further noted that Pung’s fair-market-value theory would impose unprecedented burdens on jurisdictions that wish to collect unpaid taxes and might well make tax sales impractical. “Thus, under Pung’s rule, a tax sale to collect $20,000 in delinquent taxes would net the government a $20,000 loss—a loss paid out to the delinquent taxpayer himself. The possibility of such a perverse result would render tax sales infeasible as a debt-collection mechanism,” Justice Alito wrote. He added:

If the Takings Clause had been understood to impose restrictions that rendered these sales untenable, they would have presumably faded away after the Fourteenth Amendment incorporated the Takings Clause against the States. See Chicago, B. & Q. R. Co. v. Chicago, 166 U. S. 226, 241 (1897). Yet these sales remained common then and are common today. That Pung’s novel interpretation of the Takings Clause would whisk this longstanding practice into the dustbin is strong evidence that his interpretation is incorrect.

The Court also rejected Pung’s argument that the County violated the Eighth Amendment’s Excessive Fines Clause by failing to compensate him for his property’s fair market value. Citing Austin v. United States, 509 U.S. 602 (1993), Justice Alito emphasized that  forfeiture of property can be a “fine” for purposes of the Eighth Amendment if it serves “in part to punish.” The Court also cited a lack of precedent or historical evidence suggesting that a tax sale fairly conducted in light of our Nation’s history would violate the Eighth Amendment. In addition, it found that imposing Pung’s fair-market-value rule under the Eighth Amendment would entail the same drastic consequences as imposing the rule under the Fifth Amendment.