What Pung v. Isabella Means for Communities Dealing with Vacant, Tax-Delinquent Property

On June 23, 2026, the US Supreme Court handed down its decision in Pung v. Isabella County, clarifying property tax foreclosure process requirements. State and local tax foreclosure systems that comply with or were reformed in response to the Court’s ruling in Tyler v. Hennepin County (2023) likely require no or little additional reform.

In short, the Court ruled:

1. The Fifth Amendment protects a former property owner’s right to surplus proceeds from tax sale. Surplus proceeds are calculated based on the sale price at the tax sale. It does not require compensation based on the difference between the taxes and costs owed and the fair market value.
2. The Eighth Amendment offers no greater protections to former property owners than the Fifth Amendment.
3. The Sixth Circuit’s ruling was vacated and remanded, giving the Sixth Circuit the opportunity to assess whether the Pung family properly preserved its ability to litigate whether the County’s procedures were “blatantly unfair” and perhaps violated other protections under the US Constitution, such as the Due Process Clause.

The remainder of this post summarizes the outcome of Pung v. Isabella County and offers other important property tax foreclosure considerations for communities.

Background on Tyler v. Hennepin County

In 2023, the US Supreme Court decided Tyler v. Hennepin County, weighing in on property tax foreclosure for the first time in decades. The Court held that a government’s failure to return this surplus to the former owner is a violation of the Takings Clause of the Fifth Amendment of the Constitution.

The decision compelled more than a dozen states across the country to reform their tax foreclosure laws to ensure former owners of tax delinquent property can receive surplus proceeds generated from the foreclosure and sale of the property, if any surplus is generated.

You can read more about the Tyler case and how Community Progress suggested communities look at reform in our policy brief.

Pung v. Isabella County clarifies how surplus proceeds are calculated

Under the Takings Clause, property owners are entitled to “just compensation” when the government takes—or fails to return—private property. Since the Tyler ruling, there has been much discussion and litigation over how “just compensation” should be calculated in the context of a tax foreclosure where the government “takes” or fails to return surplus to the former owner.

Pung clarified how to calculate the amount of surplus due:

Our Nation’s history and this Court’s precedent…establish the principle that when the government seizes and sells property to collect a tax debt, the owner is entitled to the surplus sale proceeds—nothing less, and nothing more… The proper baseline for measuring “just compensation” following a tax sale is the auction sale price, not the property’s hypothetical fair market value, at least when the sale is fairly conducted in light of the country’s history of tax sales. [emphasis added]

The Tyler ruling established that former property owners have a constitutionally protected right to surplus value in properties lost to tax foreclosure and sale. The Pung ruling simply clarifies that this right is limited to the surplus proceeds generated by the sale, if any, so long as the sale is “fairly conducted.”  (The Court declined to further discuss what constitutes a “fairly conducted” sale, leaving the issue for remand or another case entirely.)

The Court also rejected Pung’s claims that the County violated the Excessive Fines Clause of the Eighth Amendment, which the Court’s decision in Austin v. United States (1993) declared “limits the government’s power to extract payments, whether in cash or kind, ‘as punishment for some offense.’”

Clarity for Local Governments

For state and local governments confronting vacant, abandoned, and tax-delinquent property, the Pung decision provides some helpful clarity. State tax foreclosure processes that have a transparent public auction and sale of the property and a clear process for surplus to be returned to former owners are likely to withstand future scrutiny. Future litigation may further specify what constitutes a fairly conducted tax sale.

Property Tax Reforms that Help Vulnerable Homeowners

Many property tax systems still need substantive reform, particularly to ensure property owners have every opportunity to avoid tax delinquency. For homeowners facing the loss of their family home, the Pung decision—and the tax foreclosure system in general—does little to improve the fundamental fairness of the system or the ability for homeowners to protect their equity in the property. An equitable property tax system must have upstream measures that keep people out of tax delinquency in the first place.

States and local governments must seek to:

• Ensure accurate property tax assessments that are sensitive to market realities and historical context.
• Enhance “circuit breakers” like tax breaks, exemptions, and payment plans for vulnerable, lower-income owners.
• Create funding mechanisms in the form of grants or low-interest loans to help owners experiencing financial hardship pay their taxes or make critical repairs to a property.
• Address other aspects that touch property acquisition and disposition, like eliminating predatory loans that targeted populations of color and left them more vulnerable to foreclosure.

Truly helping vulnerable homeowners protect their equity is robust work that goes beyond property tax system reform.

Property Tax Reforms that Help Address Vacant Properties

Most properties exposed to tax foreclosure, however, are vacant, abandoned, and deteriorated. In many cases, the taxes owed exceed the value of the property. These properties are often owned by absent speculators or defunct LLCs and tend to cause significant harm to neighborhoods as they continue to deteriorate. Lengthy and inefficient tax enforcement systems allow these properties to sit vacant for even longer periods of time.

For communities seeking to address vacant property and limit any potential liability associated with Tyler or Pung, core components of an optimal tax foreclosure system include:

• Judicial oversight
• Reducing the complexity of multi-stage enforcement events
• Expediting the foreclosure timeline for vacant properties
• Pursuing an in rem judgment that extends only to the property rather than an in personam judgement against the owner
• An open, well-advertised, transparent auction process
• The ability for a homeowner to redeem up to the day the property is officially sold and confirmed by the court
• A clear and accessible process for former owners to acquire surplus
• A minimum bid of at least the amount of the unpaid taxes and municipal charges, plus any applicable interest, fees, or charges
• Opportunity for the local government or land bank to hold the default bid if private bidders fail to bid at least the minimum

Communities should also look for additional reform opportunities related to vacant properties, such as housing and building code enforcement and land banking, which can help prevent decline and responsibly return these properties to productive use.

What Should Communities Expect After Pung?

The Court ultimately vacated the decision of the Sixth Circuit Court of Appeals and remanded for the court to assess whether the Pung family properly preserved its ability to litigate whether the foreclosing County’s procedures were “blatantly unfair” and/or violated other protections under the Constitution, such as the Due Process Clause.

Whether on remand or in a different case entirely, it is likely the next phase of tax foreclosure litigation will look more closely at what a fair public auction must entail. These considerations may include how the length of post-sale redemption periods affect bidding and the impact of tax lien sales.

Community Progress will continue monitoring these proceedings and looking for opportunities to bring governments, homeowners, and other stakeholders together to continue to improve the property tax system.

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Community Progress provides customized, expert guidance to state and local governments to assess tax enforcement policies and practices and recommend solutions for equitable neighborhood revitalization. Contact us at [email protected] for help.