He Fell Behind on His Taxes. So the Government Seized His Home, Sold It, and Kept the $258,000 Profit.
In 2012, the city of Newburgh, New York, foreclosed on Sikorsky's house after he fell behind on his property taxes. The parties were later able to broker an agreement that allowed him to repurchase the home for the price of his outstanding debt. But he was unable to satisfy those regular installments, prompting the city to cancel the sale.
The government later found another buyer who could pay much more than the value of Sikorsky's debt, which with penalties, interest, and fees stood at $92,786.24. The sale went through in June 2021 for $350,500.
The city then pocketed the profit: $257,713.76.
Sikorsky is far from the first person to experience this nightmare scenario. But his case coincided with a petition that would upend the practice nationwide. Geraldine Tyler argued that the practice was unconstitutional after Hennepin County, Minnesota, seized her Minneapolis condo over a modest tax debt, sold it, and kept the profit. This worked its way through the court system until 2023, when the Supreme Court sided with Tyler.
"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," wrote Chief Justice John Roberts for the unanimous Court. "The taxpayer must render unto Caesar what is Caesar's, but no more." The decision centered around the Takings Clause of the 5th Amendment, which says the government cannot take private property without providing "just compensation." So foreclosing on a property to collect a debt is constitutional, but pocketing the profit is not.
Sikorsky's suit made it to the U.S. District Court for the Southern District of New York shortly after that ruling. Sounds like perfect timing, yet the court ruled against him. But now the United States Court of Appeals for the Second Circuit has ruled that he can, in fact, sue for his equity under the Takings Clause, resuscitating his suit and sending it back to the district court for review.
While the high court ruled the practice unconstitutional, several states—including Arizona, Alabama, New Jersey, and Sikorsky's home of New York—responded by passing labyrinthine debt collection statutes that seek to technically comply with the law while simultaneously making it difficult for property owners to collect their surplus equity. Michigander Chelsea Koetter, for example, lost her house in 2021 over a $3,863.40 tax debt. Manistee County, Michigan, then auctioned it off and kept the $102,636 profit. But the state's supreme court had already ruled the practice illegal in 2020—after which the Legislature approved a debt-collection law that sends owners on an obstacle course should they want to get their leftover equity back. Koetter, according to her complaint, submitted a form 8 days late, which the government said justified its decision to keep her six figures of equity.
In Sikorsky's case, New York's new statute applies only to people whose properties were sold on or after May 25, 2023, so he will get to proceed under the Takings Clause of the U.S. Constitution instead. But future plaintiffs who lose everything after falling on hard times may find it much harder to recover their money.
The post He Fell Behind on His Taxes. So the Government Seized His Home, Sold It, and Kept the $258,000 Profit. appeared first on Reason.com.
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The Constitutional Accountability Center, a liberal group, authored a brief in the Beck case arguing that the 'sweeping bar to recovery for servicemembers' adopted by the Feres decision 'is at odds' with what Congress intended. But the federal government, regardless of which party controls the White House, has long rejected those arguments. The Justice Department urged the Supreme Court to reject Beck's case, noting that Feres has 'been the law for more than 70 years, and has been repeatedly reaffirmed by this court.' Prominent religious groups are taking aim at a 25-year-old Supreme Court precedent that barred prayer from being broadcast over the public address system before varsity football games at a Texas high school. In that 6-3 decision, the court ruled that a policy permitting the student-led prayer violated the Establishment Clause, a part of the First Amendment that blocks the government from establishing a state religion. But the court's makeup and views on religion have shifted substantially since then, with a series of significant rulings that thinned the wall that once separated church from state. When the justices meet in late September to decide whether to grant new appeals, they will weigh a request to overturn that earlier decision, Santa Fe Independent School District v. Doe. The new case involves a Christian school in Florida that was forbidden by the state athletic association from broadcasting the prayer ahead of a championship game with another religious school. The Supreme Court should overrule Santa Fe 'as out of step with its more recent government-speech precedent,' the school's attorneys told the high court in its appeal. 'Santa Fe,' they said, 'was dubious from the outset.' It is an argument that may find purchase with the court's conservatives, who have increasingly framed state policies that exclude religious actors as discriminatory. In 2022, the high court reinstated a football coach, Joseph Kennedy, who lost his job at a public high school after praying at the 50-yard line after games. Those prayers, conservative Justice Neil Gorsuch wrote for the court at the time, amounted to 'a brief, quiet, personal religious observance.' Kennedy submitted a brief in the new case urging the Supreme Court to take up the appeal – and to now let pregame prayers reverberate through the stadium. The school, Kennedy's lawyers wrote, 'has a longstanding tradition of, and deeply held belief in, opening games with a prayer over the stadium loudspeaker.'
