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Tax Collectors & Treasurers (TCTANJ)

Posted on: May 26, 2023

SCOTUS Decision Could Impact NJ Property Tax Laws

This week, SCOTUS issued a unanimous decision in Tyler v. Hennepin County, Minnesota, a case where a property owner argued that the Minnesota state law allowing Hennepin County to retain a $25,000 surplus following the auction sale of her home for unpaid taxes for roughly $15,000 should be struck down because it amounted to a taking of her home equity, a compensable property interest. 

The taxpayer argued that the retention of the surplus above the amount she owed in taxes amounted to a taking and violated the Takings Clause in the Fifth Amendment of the US Constitution. The takings clause says that private property cannot be taken for public use without just compensation. 

The Court ruled in favor of the taxpayer, finding that the County’s retention of the surplus money from the sale of the property violated Constitutional principles. Finding that “[t]he Takings Clause “was designed to bar the Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”… A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed. The taxpayer must render unto Caesar what is Caesar’s but no more.” 

The taxpayer also made an argument that the surplus retention violated the Excessive Fines Clause of the Eighth Amendment, but because the Court was able to reach a decision on the Fifth Amendment claims, they did not address the Eighth Amendment argument. It is noteworthy, however, that a concurring opinion written by Justice Gorsuch and joined by Justice Jackson did briefly address the excessive fines issue. While concurring opinion does not have precedential authority, it can provide valuable insight into how the Court could react to unaddressed matters. Often, concurring opinions and guidance in other dicta are used to guide future legislation and the lower courts. 

With this ruling, New Jersey’s tax foreclosure laws, being similar to Minnesota’s, will likely need to be reexamined to ensure Constitutional compliance in line with the Court’s opinion. A similar challenge has already been brought in state court by a New Jersey taxpayer. The League is still reviewing this opinion to determine the extent of its impact on municipalities. 

Contact: Frank Marshall, Esq., Associate General Counsel, fmarshall@njlm.org, 609-695-3481, x137.

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