Bloomberg Tax
May 26, 2023, 2:00 PM

Supreme Court Ruling Strikes Blow to States’ Tax Forfeiture Laws

Steven Wells
Steven Wells
Dorsey & Whitney
Nick Bullard
Nick Bullard
Dorsey & Whitney

The US Supreme Court on Thursday issued an important property rights decision, concluding that the government violates the Constitution if it confiscates property to satisfy a tax bill and keeps more than what the taxpayer owes.

In a unanimous decision written by Chief Justice John Roberts, the court held in Tyler v. Hennepin County that Hennepin County, Minn., violated the Fifth Amendment when it seized 94-year-old Geraldine Tyler’s condo to satisfy her $15,000 tax debt, sold the condo for $40,000, and kept the extra $25,000 for itself.

The court laid down a seemingly hard-and-fast rule: “A government may not take more from a taxpayer than she owes.”

The decision calls into question at least 13 other states’ tax forfeiture laws that, like Minnesota’s law, allow local governments to keep more than what a taxpayer owes. The decision may have even further-reaching effects because, according to the county, a win for Tyler would invalidate 25 states’ tax forfeiture laws.

The court rejected the county’s arguments that history and precedent supported its practice of retaining excess value in tax forfeiture. On history, the court found a historical “consensus that a government could not take more property than it was owed” with only a “minority” of outliers. That principle, according to the court, is also reflected in its precedents and Minnesota law itself.

The decision being unanimous, with all justices joining in the result and the reasoning in the chief justice’s opinion, is a relatively rare outcome in recent years—justices frequently write separate decisions.

The court’s decision leaves many important unanswered questions, however. Does the government violate the Fifth Amendment at the moment it seizes property with excess value, or only after the property is sold? When must the government pay the taxpayer the excess value? And must the government take steps to maximize the property’s sale price? More litigation is certain to ensue.

The court also didn’t address whether the county violated the Eighth Amendment’s ban on “excessive” fines. However, Justices Neil Gorsuch and Ketanji Brown Jackson wrote a concurrence explaining that the lower courts shouldn’t have dismissed Tyler’s Eighth Amendment claim.

The case is: Tyler v. Hennepin Cnty., U.S., No. 22-166, opinion 5/25/23

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Steven Wells is a partner at Dorsey & Whitney and a trial and appellate lawyer with over 38 years of experience. He has strategized, briefed, argued, and won appeals in state and federal courts throughout the country, including the US Supreme Court.

Nick Bullard, a partner at Dorsey & Whitney, represents clients in federal and state appellate courts across the country. Before private practice, he clerked for Judge James B. Loken of the US Court of Appeals for the Eighth Circuit.

The authors are counsel to Notre Dame Law Professor James J. Kelly Jr., who filed a brief in support of Hennepin County.

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