Supreme Court Limits “Just Compensation” in Tax Seizures

In June 2026, the Supreme Court clarified the baseline for just compensation under the Fifth Amendment’s Takings Clause following its landmark decision in Tyler v. Hennepin County, 598 U.S. 631 (2023). While older adults often have greater equity in their homes, they are also disproportionately more vulnerable to tax foreclosures and property seizures due to a variety of circumstances.

Decision: Pung v. Isabella County, Michigan, 146 S. Ct. 1964 (2026)

Holding: In a unanimous 9-0 decision, authored by Justice Samuel Alito, the Supreme Court held that, for purposes of the Fifth Amendment’s Takings Clause, “just compensation” consists of the sale price at a fairly conducted tax foreclosure sale minus the tax debt, “not the property’s hypothetical fair market value.” Pung v. Isabella Cnty., Michigan, 146 S. Ct. 1964, 1969-70 (2026). The Court further held that Isabella County did not violate the Eighth Amendment’s Excessive Fines Clause by failing to compensate the property owner based on the fair market value. Id. at 1969-73. Rejecting the plaintiff’s theory that any recovery below fair market value constitutes an excessive fine, the Court determined that the Excessive Fines Clause required no more than the return of surplus proceeds generated by the tax sale. Id.

AARP and AARP Foundation filed an amicus brief arguing that older adults should receive the fair market value of their property upon tax foreclosures. While the Court did not agree with our arguments, the Court favorably cited our brief for examples of what state legislatures are doing to provide fair market value as just compensation to homeowners. See id. at 1971 n.3.

Implications    

The Supreme Court’s decision narrowed protections for property owners in tax foreclosure cases. The ruling may have significant consequences for older homeowners, who can lose substantial accumulated equity when their properties are sold below market value.

Rachel N. Lokken, RLokken@aarp.org