Also known as: tax sales · tax-sale
Written by attorneys — see sources below.
A statutory mechanism for transferring real property title by operation of law when the owner fails to pay taxes. The taxing authority conducts a public sale and conveys ownership to the purchaser without any deed from the delinquent owner. A fiduciary deed may later be recorded only to perfect the record title already created by the sale.
Tori Taylor fell behind on property taxes on her strip mall. The county treasurer conducted a properly noticed tax sale at which Paula purchased the property. Taylor died shortly afterward and her will purported to devise the mall to her children. Paula holds title because the tax sale transferred ownership by operation of law without any deed from Taylor.
Grable & Sons failed to pay federal taxes on Michigan real property. The IRS seized and sold the land at a federal tax sale to Darue Engineering. Grable later sued in state court claiming the sale was invalid under federal tax law. The dispute over title obtained at the federal tax sale supported removal to federal court.
In 1994, the Internal Revenue Service seized real property in Michigan belonging to Grable & Sons Metal Products, Inc., to satisfy the company's federal tax delinquency. The IRS provided notice of the seizure to Grable by certified mail, which Grable received before selling the property to Darue Engineering & Manufacturing. Grable did not redeem the property within the 180-day statutory period following the sale. After that period had passed, the Government gave Darue a quitclaim deed. Five years later, Grable brought a quiet title action in Michigan state court against Darue. Grable claimed that Darue’s record title was invalid because the IRS had failed to notify Grable of its seizure of the property in the exact manner required by federal statute. Grable asserted that the statute required personal service rather than service by certified mail. Darue removed the case to the United States District Court for the Western District of Michigan. The district court declined to remand after finding that the claim posed a significant question of federal law and granted summary judgment to Darue. The Court of Appeals for the Sixth Circuit affirmed. The Supreme Court granted certiorari on the jurisdictional question alone.
View caseOwner Owen fell behind on property taxes. The county conducted a properly noticed tax sale and conveyed the land to Buyer Betty. Owen later claimed he still owned the parcel. Betty holds title because the tax sale transferred ownership by operation of law without any deed from Owen.
In 1982 Texas enacted a sales and use tax exemption for periodicals published or distributed by a religious faith and consisting wholly of writings promulgating the teaching of the faith, along with books consisting solely of writings sacred to a religious faith, under Tex. Tax Code Ann. § 151.312. Prior to October 2, 1984, Texas also exempted magazine subscriptions running half a year or longer and entered as second class mail. That general exemption was repealed effective October 2, 1984, and remained repealed until October 1, 1987. During the three-year interval, Texas Monthly, Inc., which publishes a monthly general interest magazine not limited to religious teachings, was required to collect and remit sales taxes on its qualifying subscription sales. Texas Monthly paid $149,107.74 in sales taxes under protest in 1985 and filed suit in the District Court of Travis County, Texas, seeking a refund of those payments. The district court ruled that the religious periodicals exemption had no basis other than the promotion of religion itself. The court also found that the exemption discriminated on the basis of publication content. It declared the tax unconstitutional as applied to nonreligious periodicals and ordered the State to refund the amount paid plus interest. The Court of Appeals, Third Supreme Judicial District of Texas, reversed the district court's judgment by a 2-to-1 vote. The Court of Appeals applied the tripartite test from Lemon v. Kurtzman. It concluded that the exemption served a secular purpose of preserving separation between church and state, did not have the primary effect of advancing or inhibiting religion, and did not produce impermissible government entanglement with religion. Therefore the Court of Appeals upheld the exemption. The United States Supreme Court noted probable jurisdiction to consider the constitutionality of the exemption.
View caseNo. Title passes by operation of law once the taxing authority completes the statutory procedures for the sale. A later fiduciary deed may be executed only to perfect the record, not to create the transfer itself.
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The devise is cut off. The tax sale extinguishes the owner's interest before death, so nothing remains for the will to pass to the devisees.
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Yes. The tax sale operates independently of probate and passes title by operation of law regardless of any subsequent or pending testamentary transfer.
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