NTLA Analysis of Oral Argument

On February 25, 2026, the United States Supreme Court heard oral argument in Pung v. Isabella County, a case challenging how Michigan’s tax foreclosure system addresses surplus value after foreclosure.

After reviewing the transcript and listening to the argument, many practitioners in the tax lien and tax deed community reached the same conclusion: the Court appeared reluctant about adopting a sweeping constitutional rule that would destabilize upending long-standing constitutionally protected tax enforcement systems nationwide.

The Tone from the Bench

From the outset, several Justices pressed petitioner’s counsel on practical realities…not theoretical abstractions.

Justice Alito immediately focused on personal responsibility and available remedies:

JUSTICE ALITO:

“Were there not steps that your client could have taken to prevent landing in the predicament where your client found himself?”

He continued:

“If they had $190,000 equity in this house, couldn’t your client have gotten a loan using that as collateral, paid the taxes, and there never would have been a sale?”

Justice Jackson echoed the same concern:

JUSTICE JACKSON:

“If Mr. Pung says, please don’t because my house is worth a hundred thousand dollars and, if you put it into a tax sale, it’s only going to get $70,000, he can sell the house and get the hundred thousand dollars and pay the tax bill. The government doesn’t care about that.”

Then came the direct question:

“And why didn’t he do that?”

Justice Alito added pointedly:

“If the taxpayer doesn’t take “them” (options available) for whatever reason the taxpayer has, then perhaps one shouldn’t feel so sorry for the taxpayer when the tax sale occurs.” 

These exchanges reflect a fundamental reality: Mr. Pung had years — over 1,000 days — to resolve a roughly $2,200 tax obligation. He had equity. He had notice. He had options.  Instead of resolving his tax bill, he chose to force the government to expend valuable resources litigating his reluctance to pay his taxes.

The Government Is Not a Real Estate Agent

Justice Jackson further pressed petitioner’s theory:

“I guess I don’t understand why your argument doesn’t kind of turn the government into Mr. Pung’s real estate agent with some sort of fiduciary duty to maximize the value of this asset.”

She followed with:

“The government’s only real interest in this is covering its tax liability.”

That framing goes to the heart of the case. Tax foreclosure is a mechanism to collect unpaid taxes — not a constitutional guarantee of retail pricing in a distressed sale environment.

Chief Justice Roberts raised a similar concern:

“If you’re satisfied with the fairness of the process and it comes out with something below what you think is fair market value, is that just too bad?”

The questioning suggests skepticism toward the idea that the Constitution requires governments to guarantee fair-market-value outcomes in forced-sale settings.

Inconvenient Facts for the Petitioner

1. This Property Was Not an Immediate “Flip”

Contrary to repeated suggestions in briefing, the tax deed purchaser did not immediately resell the property at a windfall. The buyer renovated the property and sold it approximately 18 months later.

That timeline matters.

Capital was deployed. Risk was assumed. Improvements were made. Market conditions changed. If the petitioner wanted “fair market value,” he had over 1,000 days to list and sell the property himself or with the help of a real estate professional.

2. “Fair Market Value” Is Not a Mass Appraisal Number

Local government property appraisers perform mass appraisals for tax assessment purposes. These are generalized valuation models. They are not interior inspections or arm’s-length retail valuations.

The Court repeatedly questioned how “fair market value” would be determined in distressed foreclosure settings. That concern is well placed. Tax foreclosures are not traditional listings.

The petitioner’s theory would effectively require governments to guarantee appraisal-based outcomes regardless of market risk. Such a rule would have implications far beyond tax sales.

3. Distressed Properties Are Often Not Market-Ready

Tax-foreclosed properties frequently involve:

• Structural deterioration
• Environmental contamination
• Occupant resistance
• Inaccessible interiors
• Uncertain title issues

Lost in legal argument — but well understood by practitioners — is that many of these properties are effectively unmarketable in their current state. Auction pricing reflects risk. And can often be more than the property is truly worth.

What the Argument Suggests

The Sixth Circuit ruled that when property is foreclosed for unpaid taxes, the Constitution requires payment of any surplus auction proceeds to the former owner, but does not require the government to guarantee a separate fair market value payment beyond what the auction produces.

Most observers of the oral argument believe the Supreme Court is unlikely to overturn that holding outright.

The questioning reflected:

• Concern about administrability
• Skepticism toward constitutionalizing a rigid fair-market-value mandate
• Awareness of the consequences for local governments nationwide

Bruce Bronster of Bronster LLP, who assisted in drafting NTLA’s amicus brief in support of Isabella County, observed:

“The Justices were asking practical questions. They were not signaling a desire to dismantle property tax enforcement. From what we heard, this case looks far more like a candidate for remand or narrow treatment than a sweeping reversal.”

Brad Westover, Executive Director of the National Tax Lien Association added:

“The Court’s questions demonstrated a serious concern about how petitioner’s theory would function in actual tax systems. Constitutional rules must be workable. The Justices appeared focused on real-world consequences.”

The Broader Stakes

Property taxes fund schools, public safety, infrastructure, and essential services. Every state relies on enforceable collection systems.

While equity protections matter, constitutional doctrine must account for how these systems function in practice.

Nothing in yesterday’s oral argument suggested a Court eager to impose a rule that would destabilize tax enforcement nationwide.

Based on the tenor of the questioning, many practitioners believe the Court will either affirm the Sixth Circuit or remand for further proceedings rather than issue a sweeping constitutional ruling.

NTLA will continue monitoring developments and will provide updates when the Court issues its opinion.