8 ms·

Supreme Court will decide if all home equity may be forfeited for unpaid taxes

54 points by sbuttgereit 4y ago

josephcsible 4y ago
Is putting people in jail for not paying property taxes a better solution? If not, then wouldn't a "no" ruling here effectively make it legal to not pay your taxes?
- thebooktocome 4y ago
  The IRS regularly forgives large amounts of tax debt for various reasons, some of which are humanitarian.
- criddell 4y ago
  I think the argument is that if $40k in taxes are owed and the county sells the property for $60k, should they get to keep the extra $20k?
  - highwaylights 4y ago
    That's a pretty shocking conflict of interest if true.
  - flerchin 4y ago
    Exactly that. She owed $2300, and they seized and sold for $40k. She says she's due the rest, and as of right now, the county has just kept the $37.7k.
  - izzydata 4y ago
    The thought that any other result could occur is insane because the owner could in theory sell the property themselves to pay for the tax debt. Forcing that decision upon you shouldn't result in stolen equity.
    - criddell 4y ago
      Say I do $500 worth of work for you and you pay me by giving me an old watch you had kicking around. If I discover that it’s actually a valuable watch and sell it, should I have to return to you the excess over $500? Maybe this is a bad analogy, but it’s the only argument that makes sense to me.
      - Clamchop 4y ago
        I think giving versus taking materially changes the ethics of the scenario. If someone gives you something as payment, no strings attached and no misrepresentation, then it's a fair play. They gave you a watch as payment, they didn't ask you to sell it and pay back the difference. The debt is settled even if the watch isn't worth enough, because it was the payment, whatever its value ends up being. If you took the watch to repay a debt, then yeah, it's unethical not to pay back the difference. Thinking about it in the converse helps: if you took the watch and it wasn't worth enough to pay back the debt, you would probably insist they're still on the hook for the rest. Cuts both ways.
        criddell 4y ago
        > Cuts both ways. I think for property tax cases like this, once you forfeit the property the debts are cancelled.
      - medvezhenok 4y ago
        Similar questions have been litigated before, and the answer is not unequivocally no, contrary to what you might expect. It depends on whether you knew that what you were buying was worth more and whether you bought/got it with intent to deceive the other person about its true value (which is a hard thing to determine in the moment)
  - TheAdamist 4y ago
    Theres been more egregious cases of being under a dollar short on taxes, and the cities profiting to the tune of hundreds of thousands of dollars. Which makes for weaponized taking of only profitable properties and not ones that taxes are so far behind theres no equity left.
  - josephcsible 4y ago
    If the only consequence for burglary were that the government forcibly took back what you stole and returned it to its rightful owner, then I'd say that's basically making burglary legal too.
- cool_dude85 4y ago
  Presumably the government would be able to collect justified costs as well as the back taxes in selling the property. So, you don't pay your taxes, they seize and sell your home, then you pay for them to do all that from the proceeds. Maybe in state law there's an additional fine that's reasonable. Seems to be a deterrent.
- benmmurphy 4y ago
  this case is where the home was sold for more than the tax bill and the difference wasn't refunded to the owner. the situation is a bit more complicated but its not about protecting the whole value of the home from being seized.
- JustSomeNobody 4y ago
  > Is putting people in jail for not paying property taxes a better solution? Wouldn't this be a debtors prison?
- chipsa 4y ago
  There's such a thing as a tax lien, so if you sell or transfer, the government can get its taxes then. Or, you know, refunding the excess value of the property, if the government forecloses on it.
- jmull 4y ago
  You're asking the wrong questions here. Wasn't it clear in the article that the issue was not whether the county was justified recouping the unpaid taxes, interest and penalties, but whether it could keep substantial gains above and beyond the amount of the unpaid taxes, interest and penalties?
justinzollars 4y ago
The Supreme Court should take up the idea of property taxes. If you have to pay taxes on property do you really own that property?
- cool_dude85 4y ago
  Yes. What's the alternative answer? What proposed relationship do you identify between paying taxes on something and the ownership of that thing?
  - tick_tock_tick 4y ago
    > What's the alternative answer? Property taxes, and hopefully all forms of wealth taxes, are unconstitutional and local towns / state must find an alternative method of funding themselves such as higher income tax, sales, VAT, etc.
    - cool_dude85 4y ago
      Maybe there's a legal argument in the Constitution, I'm not a lawyer. What is baffling me is the idea that if you must pay a tax on something you don't own it. It seems like more of a philosophical claim than a legal one, but I can't imagine any basis to claim that it's true.
      - ghaff 4y ago
        A lot of things related to property ownership among other assets are ultimately philosophical. Although given that land (and other wealth) taxes have been around for something like six thousand years I don't see them going away soon.
      - ifyoubuildit 4y ago
        I think it comes from people operating on different definitions. The word own, at least as I learned it, means you alone have control of the thing, and it can't be taken from you unless you agree to give it away. Other people seem to have a different definition, and I can't easily put it to words. Something like "you have some control of this thing and you can keep that control as long as you meet some list of conditions". I find it hard to argue against calling that something closer to renting than owning. I don't know. How would you define ownership?
toomuchtodo 4y ago
> Minnesota is among roughly a dozen states and the District of Columbia that allow local jurisdictions to keep the excess money, according to the Pacific Legal Foundation, which is representing Tyler at the Supreme Court. https://pacificlegal.org/property-rights/home-equity-theft/ https://pacificlegal.org/property-rights/home-equity-theft/ (contains map of states that allows this practice) https://pacificlegal.org/case/mn_home_equity_theft/ https://pacificlegal.org/case/mn_home_equity_theft/ (case story)
- Kon-Peki 4y ago
  Thank you for the link. It helped understand what was going on. I originally wondered how a case like this kept going against the lady all the way to the Supreme Court. But now I see it isn't so cut and dried. It seems to come down to whether or not you can "abandon" real property to the point that you have no ownership interest anymore, and if so, how long does that take? Turns out I live in a state that allows this practice, so I'll have to pay attention to this case.
  - deleted 4y ago
    [deleted]
iamnotamouse 4y ago
I think the title is confusing people. A more descriptive title might be, Supreme Court to decide if county can seize and sell $40k condo as penalty for $2k unpaid taxes, without giving back the excess value. It's not in question the government can penalize you for unpaid taxes by taking your property.
- pixl97 4y ago
  Heh, the state/county will just find a way to add a $36k filing fee most likely if it doesn't go their way
  - _fat_santa 4y ago
    Oh you paid online? We charge a $36k "convenience fee" for online payments.
  - dwater 4y ago
    A representative of this tax office said that the office does not turn a profit on these tax sales, it loses money. Which is believable because this woman was given 5 years to pay the $2300 bill or sign up for a repayment program. There are repayment programs that require a person to pay as little as 3% of their income per year. The county wasn't pushing her out the door to get their hands on her wealth, they tried repeatedly over multiple years to get her to make an effort and she never did anything. What I would guess will happen is that the court will rule that keeping the excess equity is unconstitutional, but assessing fees equal to the cost of running the program is not, so they will raise the fees to compensate. Which will be good for some and bad for some, but feel more reasonable overall.
    - dragonwriter 4y ago
      Yeah, so, if the tax office applied specific penalties for the delay, accounted for cost of sale, and deducted those specific costs, assessed with due process and challengable on their own merits, before refunding any excess value, that would be one thing. But “we don’t profit in net from this practice so we should be free to keep arbitrary and unlimited excess proceeds from every individual subject regardless of the actual bill and reasonable costs in the specific case” is simply not a viable takings clause argument as I see it. And I think the Supreme Court majority is less favorable to the government on taking clause issues in general than I am...
TuringNYC 4y ago
One thing not everyone realizes is how distributed and diverse the property tax systems and processes are. They arent national, they arent state-level, they might be city or county or township level. Some tax bills are paid by mortgage companies escrow services, some are not. Sometimes, you dont get your property tax bill. Some times it gets lost. Some times you pay and the check gets lost. Some times they have working or non-working electronic payment systems. Bills change quarter to quarter, so you cannot necessarily push the payment, as the amount isnt consistent (though I've never seen it go down, only up.) I've heard locals joke (cant verify) that modern-day "carpetbaggers" (outsiders who arent truly locals) might not get their bill and end up with a lien when they dont pay on time.
- fnordpiglet 4y ago
  Sometimes you get really old, like the 94 year old woman they stole from.
JustSomeNobody 4y ago
[flagged]
- hn_version_0023 4y ago
  As a US citizen, I'm forced to agree. As with so many other things in the US of A, the cruelty of this was likely the entire point.
- dwater 4y ago
  They tried. She never responded. Her attorney does not dispute the fact that she failed to respond to any and all contacts for 5 years.
  - dsfyu404ed 4y ago
    This is exactly the kind of thing a lien is perfect for. Slap a lien on it with a reasonable interest rate and call it good. Sales have to be registered publicly so it's not like it's hard to collect.
- purpleblue 4y ago
  She abandoned the property, didn't live in it, and didn't pay taxes for years. That said it doesn't give the government the right to take all of the excess profits from selling the house.
- yamtaddle 4y ago
  > They could have let her live there a until she passed. She wasn't living there. > Or they could have worked it out with here SOME OTHER WAY. What asshole decided THIS was the way??? She ignored attempts to notify her about several OTHER WAYs. For years.
busterarm 4y ago
I remember a few decades ago when NY did this to a guy's multi-million dollar property on Fire Island for a low 5-digit tax bill that was in dispute. Then a NY Tax & Finance department employee bought the house for pennies on the dollar at auction...
- deleted 4y ago
  [deleted]
TrackerFF 4y ago
How are these kind of sales done, in practice, in the US? Over here (Norway) the process is something like the following: - Creditor has to send warnings multiple times, then go through a debt collection agency - Debt collection agency tries to contact / get the debtor to pay. - If nothing works, they go to court and can get wage / pension / benefits garnishment, but also petition for foreclosure and seize any assets of value. - The local sheriff (guess that's the closest term) can then vacate the property, and seize any assets, like vehicles, etc. - The items are then sold off at auction, usually starting at a price/bid which equals to the outstanding debt. Unfortunately these auctions aren't that well marketed or advertised, so there's a good chance the assets could sell for less than the going market value. Creditors are given what they're owed from the sale, and if there's anything left, debtors get the surplus money. It's not uncommon for friends / family of the debtor to bid on these things, if it goes that far.
- yamtaddle 4y ago
  It seems they sent warnings for several years before seizing the property, all without any response. The local government claims there were programs she could have used to pay off the debt over a period of a decade, in order to keep the property, or she could have sold it herself. She already wasn't living in it, so no eviction of an occupant occurred. Debt collection agencies are more common with private creditors & bills, or with unsecured debt. Typically, the entity engaging the agency gets only pennies on the dollar (they usually sell the debt, and the right to pursue it, to the agency). No point in doing that, in this case, since the entire value could be recovered. As I understand it, yes, this was sold at auction, and, as part of the seizure process, the property's mortgage was nullified—without which action, the (auction) sale price would not have covered the remaining balance on the mortgage.

54 points by sbuttgereit 4y ago

Is putting people in jail for not paying property taxes a better solution? If not, then wouldn't a "no" ruling here effectively make it legal to not pay your taxes?

thebooktocome 4y ago
The IRS regularly forgives large amounts of tax debt for various reasons, some of which are humanitarian.
criddell 4y ago
I think the argument is that if $40k in taxes are owed and the county sells the property for $60k, should they get to keep the extra $20k?
- highwaylights 4y ago
  That's a pretty shocking conflict of interest if true.
- flerchin 4y ago
  Exactly that. She owed $2300, and they seized and sold for $40k. She says she's due the rest, and as of right now, the county has just kept the $37.7k.
- izzydata 4y ago
  The thought that any other result could occur is insane because the owner could in theory sell the property themselves to pay for the tax debt. Forcing that decision upon you shouldn't result in stolen equity.
  - criddell 4y ago
    Say I do $500 worth of work for you and you pay me by giving me an old watch you had kicking around. If I discover that it’s actually a valuable watch and sell it, should I have to return to you the excess over $500? Maybe this is a bad analogy, but it’s the only argument that makes sense to me.
    - Clamchop 4y ago
      I think giving versus taking materially changes the ethics of the scenario. If someone gives you something as payment, no strings attached and no misrepresentation, then it's a fair play. They gave you a watch as payment, they didn't ask you to sell it and pay back the difference. The debt is settled even if the watch isn't worth enough, because it was the payment, whatever its value ends up being. If you took the watch to repay a debt, then yeah, it's unethical not to pay back the difference. Thinking about it in the converse helps: if you took the watch and it wasn't worth enough to pay back the debt, you would probably insist they're still on the hook for the rest. Cuts both ways.
      - criddell 4y ago
        > Cuts both ways. I think for property tax cases like this, once you forfeit the property the debts are cancelled.
    - medvezhenok 4y ago
      Similar questions have been litigated before, and the answer is not unequivocally no, contrary to what you might expect. It depends on whether you knew that what you were buying was worth more and whether you bought/got it with intent to deceive the other person about its true value (which is a hard thing to determine in the moment)
- TheAdamist 4y ago
  Theres been more egregious cases of being under a dollar short on taxes, and the cities profiting to the tune of hundreds of thousands of dollars. Which makes for weaponized taking of only profitable properties and not ones that taxes are so far behind theres no equity left.
- josephcsible 4y ago
  If the only consequence for burglary were that the government forcibly took back what you stole and returned it to its rightful owner, then I'd say that's basically making burglary legal too.
cool_dude85 4y ago
Presumably the government would be able to collect justified costs as well as the back taxes in selling the property. So, you don't pay your taxes, they seize and sell your home, then you pay for them to do all that from the proceeds. Maybe in state law there's an additional fine that's reasonable. Seems to be a deterrent.
benmmurphy 4y ago
this case is where the home was sold for more than the tax bill and the difference wasn't refunded to the owner. the situation is a bit more complicated but its not about protecting the whole value of the home from being seized.
JustSomeNobody 4y ago
> Is putting people in jail for not paying property taxes a better solution? Wouldn't this be a debtors prison?
chipsa 4y ago
There's such a thing as a tax lien, so if you sell or transfer, the government can get its taxes then. Or, you know, refunding the excess value of the property, if the government forecloses on it.
jmull 4y ago
You're asking the wrong questions here. Wasn't it clear in the article that the issue was not whether the county was justified recouping the unpaid taxes, interest and penalties, but whether it could keep substantial gains above and beyond the amount of the unpaid taxes, interest and penalties?

justinzollars 4y ago

The Supreme Court should take up the idea of property taxes. If you have to pay taxes on property do you really own that property?

cool_dude85 4y ago
Yes. What's the alternative answer? What proposed relationship do you identify between paying taxes on something and the ownership of that thing?
- tick_tock_tick 4y ago
  > What's the alternative answer? Property taxes, and hopefully all forms of wealth taxes, are unconstitutional and local towns / state must find an alternative method of funding themselves such as higher income tax, sales, VAT, etc.
  - cool_dude85 4y ago
    Maybe there's a legal argument in the Constitution, I'm not a lawyer. What is baffling me is the idea that if you must pay a tax on something you don't own it. It seems like more of a philosophical claim than a legal one, but I can't imagine any basis to claim that it's true.
    - ghaff 4y ago
      A lot of things related to property ownership among other assets are ultimately philosophical. Although given that land (and other wealth) taxes have been around for something like six thousand years I don't see them going away soon.
    - ifyoubuildit 4y ago
      I think it comes from people operating on different definitions. The word own, at least as I learned it, means you alone have control of the thing, and it can't be taken from you unless you agree to give it away. Other people seem to have a different definition, and I can't easily put it to words. Something like "you have some control of this thing and you can keep that control as long as you meet some list of conditions". I find it hard to argue against calling that something closer to renting than owning. I don't know. How would you define ownership?

toomuchtodo 4y ago

> Minnesota is among roughly a dozen states and the District of Columbia that allow local jurisdictions to keep the excess money, according to the Pacific Legal Foundation, which is representing Tyler at the Supreme Court. https://pacificlegal.org/property-rights/home-equity-theft/ https://pacificlegal.org/property-rights/home-equity-theft/ (contains map of states that allows this practice) https://pacificlegal.org/case/mn_home_equity_theft/ https://pacificlegal.org/case/mn_home_equity_theft/ (case story)

Kon-Peki 4y ago
Thank you for the link. It helped understand what was going on. I originally wondered how a case like this kept going against the lady all the way to the Supreme Court. But now I see it isn't so cut and dried. It seems to come down to whether or not you can "abandon" real property to the point that you have no ownership interest anymore, and if so, how long does that take? Turns out I live in a state that allows this practice, so I'll have to pay attention to this case.
- deleted 4y ago
  [deleted]

iamnotamouse 4y ago

I think the title is confusing people. A more descriptive title might be, Supreme Court to decide if county can seize and sell $40k condo as penalty for $2k unpaid taxes, without giving back the excess value. It's not in question the government can penalize you for unpaid taxes by taking your property.

pixl97 4y ago
Heh, the state/county will just find a way to add a $36k filing fee most likely if it doesn't go their way
- _fat_santa 4y ago
  Oh you paid online? We charge a $36k "convenience fee" for online payments.
- dwater 4y ago
  A representative of this tax office said that the office does not turn a profit on these tax sales, it loses money. Which is believable because this woman was given 5 years to pay the $2300 bill or sign up for a repayment program. There are repayment programs that require a person to pay as little as 3% of their income per year. The county wasn't pushing her out the door to get their hands on her wealth, they tried repeatedly over multiple years to get her to make an effort and she never did anything. What I would guess will happen is that the court will rule that keeping the excess equity is unconstitutional, but assessing fees equal to the cost of running the program is not, so they will raise the fees to compensate. Which will be good for some and bad for some, but feel more reasonable overall.
  - dragonwriter 4y ago
    Yeah, so, if the tax office applied specific penalties for the delay, accounted for cost of sale, and deducted those specific costs, assessed with due process and challengable on their own merits, before refunding any excess value, that would be one thing. But “we don’t profit in net from this practice so we should be free to keep arbitrary and unlimited excess proceeds from every individual subject regardless of the actual bill and reasonable costs in the specific case” is simply not a viable takings clause argument as I see it. And I think the Supreme Court majority is less favorable to the government on taking clause issues in general than I am...

TuringNYC 4y ago

One thing not everyone realizes is how distributed and diverse the property tax systems and processes are. They arent national, they arent state-level, they might be city or county or township level. Some tax bills are paid by mortgage companies escrow services, some are not. Sometimes, you dont get your property tax bill. Some times it gets lost. Some times you pay and the check gets lost. Some times they have working or non-working electronic payment systems. Bills change quarter to quarter, so you cannot necessarily push the payment, as the amount isnt consistent (though I've never seen it go down, only up.) I've heard locals joke (cant verify) that modern-day "carpetbaggers" (outsiders who arent truly locals) might not get their bill and end up with a lien when they dont pay on time.

fnordpiglet 4y ago
Sometimes you get really old, like the 94 year old woman they stole from.

JustSomeNobody 4y ago

[flagged]

hn_version_0023 4y ago
As a US citizen, I'm forced to agree. As with so many other things in the US of A, the cruelty of this was likely the entire point.
dwater 4y ago
They tried. She never responded. Her attorney does not dispute the fact that she failed to respond to any and all contacts for 5 years.
- dsfyu404ed 4y ago
  This is exactly the kind of thing a lien is perfect for. Slap a lien on it with a reasonable interest rate and call it good. Sales have to be registered publicly so it's not like it's hard to collect.
purpleblue 4y ago
She abandoned the property, didn't live in it, and didn't pay taxes for years. That said it doesn't give the government the right to take all of the excess profits from selling the house.
yamtaddle 4y ago
> They could have let her live there a until she passed. She wasn't living there. > Or they could have worked it out with here SOME OTHER WAY. What asshole decided THIS was the way??? She ignored attempts to notify her about several OTHER WAYs. For years.

busterarm 4y ago

I remember a few decades ago when NY did this to a guy's multi-million dollar property on Fire Island for a low 5-digit tax bill that was in dispute. Then a NY Tax & Finance department employee bought the house for pennies on the dollar at auction...

deleted 4y ago
[deleted]

TrackerFF 4y ago

How are these kind of sales done, in practice, in the US? Over here (Norway) the process is something like the following: - Creditor has to send warnings multiple times, then go through a debt collection agency - Debt collection agency tries to contact / get the debtor to pay. - If nothing works, they go to court and can get wage / pension / benefits garnishment, but also petition for foreclosure and seize any assets of value. - The local sheriff (guess that's the closest term) can then vacate the property, and seize any assets, like vehicles, etc. - The items are then sold off at auction, usually starting at a price/bid which equals to the outstanding debt. Unfortunately these auctions aren't that well marketed or advertised, so there's a good chance the assets could sell for less than the going market value. Creditors are given what they're owed from the sale, and if there's anything left, debtors get the surplus money. It's not uncommon for friends / family of the debtor to bid on these things, if it goes that far.

yamtaddle 4y ago
It seems they sent warnings for several years before seizing the property, all without any response. The local government claims there were programs she could have used to pay off the debt over a period of a decade, in order to keep the property, or she could have sold it herself. She already wasn't living in it, so no eviction of an occupant occurred. Debt collection agencies are more common with private creditors & bills, or with unsecured debt. Typically, the entity engaging the agency gets only pennies on the dollar (they usually sell the debt, and the right to pursue it, to the agency). No point in doing that, in this case, since the entire value could be recovered. As I understand it, yes, this was sold at auction, and, as part of the seizure process, the property's mortgage was nullified—without which action, the (auction) sale price would not have covered the remaining balance on the mortgage.