Alabama’s Tax Lien System Stands Strong Against Supreme Court Scrutiny

By Gregory S. Stanley, Esq., Gregory@Stanley-Law.com

Recent Supreme Court decisions have cast a national spotlight on state tax foreclosure systems, raising constitutional alarms about takings, due process, and the fate of surplus equity. But while states like Minnesota and Michigan face legal upheaval, Alabama’s tax lien framework remains constitutionally sound and investor-secure. The reason is simple: Alabama’s system is fundamentally different—more protective of property owners, more transparent in process, and more equitable in outcome.

Geraldine Tyler v. Hennepin County et al: A Minnesota Problem, Not an Alabama One

In Tyler v. Hennepin County, 598 U.S. __ (2023), the Supreme Court unanimously held that Minnesota’s tax forfeiture scheme violated the Takings Clause of the Fifth Amendment. There, the county seized a condominium over $15,000 in unpaid taxes and retained the entire $40,000 in sale proceeds—leaving the elderly owner with nothing. The Court ruled that the government cannot take more than it is owed without compensating the owner for the surplus.

But Alabama’s system bears no resemblance to Minnesota’s. In Alabama, the state does not automatically retain surplus proceeds from tax sales. Instead, after a tax sale or redemption, any excess funds are held for the benefit of the original owner, who may claim them through a straightforward statutory process. The Alabama Supreme Court has long recognized the owner’s right to surplus equity as a protected property interest. In short, the constitutional defect that doomed Minnesota’s system simply does not exist here in Alabama. Further. with the 2024 legislative change, any interested party can demand a public auction of tax lien property which will ensure an equitable benefit to the delinquent taxpayer.

Pung v. Isabella County: Michigan’s Missteps, Alabama’s Safeguards

The Supreme Court has now granted certiorari in Pung v. Isabella County, No. 25-95, a case arising from a tax foreclosure in Mount Pleasant, Michigan. There, the county sold a home for $76,008 to satisfy a disputed $2,200 tax debt—later determined to be erroneous—and kept the entire sale price. The Pung estate, which lost over $118,000 in equity, sued under both the Takings Clause and the Eighth Amendment’s Excessive Fines Clause.

The Sixth Circuit affirmed a limited remedy: the estate could recover only the “surplus proceeds” after taxes, not the full fair market value. The Supreme Court will now decide whether the Constitution requires compensation based on the property’s full value and whether the forfeiture of equity constitutes an excessive fine.

Again, Alabama’s system is not implicated. Unlike Michigan, Alabama does not allow counties to retain windfalls from tax sales. Nor does it permit foreclosure without robust notice, due process, and judicial oversight. Alabama law bends over backwards to ensure that property owners receive due process before any loss of title. Statutory notice requirements are strictly enforced, redemption rights are preserved for years, and any surplus proceeds are earmarked for the owner—not the state or county. Again, applying Supreme Court rulings regarding another state's (Michigan) tax liens to Alabama's unique (Frankenstein) system is inapposite.

Investor Confidence in Alabama’s Tax Lien Market

For investors, the implications are clear: Alabama’s tax lien system is not only constitutionally compliant, but also structurally insulated from the types of legal challenges now roiling other states. The state’s hybrid tax lien certificate model—where investors purchase liens, not deeds, notice and time are excessive, and where judicial confirmation is required for title—adds layers of protection for both owners and investors.

Moreover, Alabama’s courts have consistently upheld the integrity of its tax sale procedures. The system is designed to balance the government’s interest in collecting taxes with the individual’s right to property and equity. That balance, codified in statute and reinforced by precedent, makes Alabama’s framework a national hallmark of due process and fairness.

Conclusion: No Supreme Court Reckoning for Alabama

No lawyer will guaranty what a judge or the Supreme Court will rule, but in my opinion, Alabama investors will not face legal challenges in the US Supreme Court.

While Tyler and Pung may reshape tax foreclosure practices in states with aggressive forfeiture regimes, they will not disrupt Alabama’s overly protective system. Here, owners are notified, notified, heard, and protected. Surplus equity is preserved. And investors can proceed with confidence, knowing that Alabama’s tax lien process is not only lawful—but just.

In a legal landscape where constitutional scrutiny is intensifying, Alabama stands apart—not because it avoids the law, but because it already meets these challenges being raised in other states

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