NTLA cheers Supreme Court tax sale ruling in Pung v. Isabella County

The National Tax Lien Association praised a June 26, 2026 U.S. Supreme Court decision that said governments must return surplus proceeds from tax sales but do not have to pay former owners based on hypothetical fair market value. The ruling gives counties and municipalities clearer constitutional guidance on tax foreclosure and tax sale procedures.

Why it matters: - The decision preserves the core tax-sale framework used by local governments to collect delinquent taxes. - The ruling protects surplus-proceeds rights for property owners while rejecting a broader compensation theory tied to hypothetical market value. - Counties, municipalities, investors, taxpayers and policymakers now have clearer guidance on what the Constitution requires after a lawful tax sale. - NTLA said the decision supports funding for schools, public safety, roads, parks and other public services.

What happened: - The U.S. Supreme Court decided Pung v. Isabella County, Michigan on June 26, 2026. - The National Tax Lien Association applauded the ruling. - The Court rejected an argument that governments must compensate delinquent taxpayers based on a property's hypothetical fair market value instead of actual tax-sale proceeds. - The ruling reaffirmed that governments must return any surplus proceeds from a tax sale. - The NTLA filed an amicus brief through Bronster, LLP.

The details: - The NTLA said the Court preserved a principle rooted in American legal history: governments may conduct tax sales to satisfy delinquent taxes, but they must return surplus proceeds generated by the sale. - Brad Westover, NTLA executive director, said the ruling is a victory for local governments, taxpayers who pay on time and communities that depend on effective tax collection. - Westover said adopting the petitioner's theory would make tax sales economically unworkable and shift costs onto responsible taxpayers. - Westover said tax sales help return vacant, abandoned and tax-delinquent properties to productive use. - Bruce Bronster, founding partner of Bronster LLP and former NTLA president, said the Court preserved the ability of governments to collect delinquent taxes through public, noticed, fair and transparent tax sales. - Bronster said the petitioner's theory would have upended centuries of legal precedent and created a system local governments could not administer.

Between the lines: - The ruling appears to draw a line between constitutional protection for surplus equity and a broader takings-style claim based on market value. - The NTLA framed the case as a defense of both property rights and local-government finance. - The association's comments also underscore a policy tension between protecting delinquent owners and preserving an efficient tax-collection system. - The decision leaves Tyler v. Hennepin County intact as the key precedent on surplus proceeds.

What's next: - Counties and municipalities will likely use the ruling as guidance when designing or defending tax foreclosure procedures. - Tax-sale participants and policymakers now have a narrower constitutional standard to apply in future disputes. - The NTLA said its members will continue promoting ethical tax sale practices, property rights protections and community revitalization.

The bottom line: - The Supreme Court kept surplus-proceeds protections in place, but it did not require governments to pay former owners based on speculative property values after a valid tax sale.