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By: Rebecca K. Wohltman | Contributions Made By: Sara E. Rutherford, Law Clerk

On May 25, 2023, the U.S. Supreme Court issued another taxpayer-friendly decision in the case of Tyler v. Hennepin County, MN.

In this case, the Petitioner, Ms. Tyler, owed $2,300 in property taxes plus $12,700 in penalties and interest (a total of $15,000) to Hennepin County, MN. The County sold her home in a tax sale for $40,000. The County retained the $25,000 surplus from the sale; it did not give the surplus to Ms. Tyler. Ms. Tyler sued the County, alleging the County had unconstitutionally taken her property.

The U.S. Supreme Court unanimously agreed with Ms. Tyler. All of the justices agreed that the County had unconstitutionally taken Ms. Tyler’s property and that surpluses from tax sales must be paid to the property owner after all tax debts have been satisfied.

Before the Tyler decision, 14 states had laws that did not require surpluses from tax sales be paid to property owners – including Illinois. Illinois law provided that a surplus would be distributed to “any interested party,” provided that party petitioned the court to receive the surplus. In other words, if a property owner did not file a petition with the court for any surplus to be distributed to the owner, in Illinois, that owner may not receive any portion of the surplus.

In light of the Tyler decision, Illinois law will need to change. The law will need to require that any surplus be paid to the property owner – not retained by the county or distributed to any other party (unless that party has a valid interest in the surplus).
A unanimous Supreme Court decision is rare. This decision is the right decision. As the Supreme Court wrote, “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.”

Sara Rutherford, Mathis, Marifian & Richter, Ltd. Law Clerk, contributed to this blog.

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