Nebraska Supreme Court: Takings Clause is a Plausible Avenue for Property Owners Regarding Tax Sales

Nieveen v. TAX 106, 317 Neb. 425 (2024) and Cont’l Res. v. Fair, 317 Neb. 391 (2024)

Under Nebraska’s tax sale statutes, a county takes an automatic lien on property within its jurisdiction for property taxes.  If a taxpayer is delinquent in paying property taxes, the county can sell the lien through a tax certificate after complying with a statutory waiting period and other requirements.  Often, private entities purchase these tax certificates from the state or county.  The previous land owner may redeem the certificate by paying the amount owed plus any associated interest and fees.  If the owner does not cure the delinquency, the certificate buyer may acquire the property.

The Nebraska Supreme Court recently analyzed these requirements and processes in two important cases.[1]  In both Nieveen v. TAX 106, 311 Neb. 574 (2022) and Continental Resources v. Fair, 311 Neb. 184 (2022), property owners failed to pay their property taxes.  Private parties purchased tax certificates from the counties.  The landowners then failed to redeem their property within the three-year statutory period.  Instead, the landowners brought suit alleging they had a right to retain the property under several constitutional theories.  

The plaintiffs’ theories included challenges under the Due Process Clause, the Excessive Fines Clause, and most importantly, the Takings Clause.  The Nebraska Supreme Court declined these arguments and affirmed the previous judgments.

After the Nebraska Supreme Court rejected those challenges, the United States Supreme Court decided Tyler v. Hennepin County, Minnesota in May 2023.[2]  There, an individual owed $15,000 in real estate tax debt plus interest.  When the individual ultimately became delinquent, Hennepin County seized the property, sold it for $40,000, and kept the difference of $25,000.  

The Supreme Court held any surplus that exceeded the taxpayer’s debt to the state belongs to the taxpayer.  The court held that by keeping the surplus, the county had unconstitutionally taken private property without just compensation in violation of the Takings Clause.

In light of Tyler, the Nebraska Supreme Court vacated and remanded Nieveen and Continental Resources for further consideration. 

On remand, the Nebraska Supreme Court adopted the Tyler reasoning.  The court held former property owners who lose “title through the issuance of a tax deed [have] a protected property interest to the extent the value of his or her property exceed[s] his or her tax debt.”[3]  Former property owners may thus recoup that excess amount through a form of just compensation, instead of losing the difference to another party.

Attorneys at Baird Holm specialize in various subject matter areas including tax matters, land use, and other property interests.  Please do not hesitate to contact us if you have any questions regarding these rulings or any other matter.