A Nebraska County Took His $25,000 Property To Settle a $986 Tax Debt. Now the U.S. Supreme Court Could Get Involved.

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Walter Barnette knew he owed property taxes to the Nebraska county where he lived, but he didn't know that his own land had been sold out from under him until it had already happened.

Under Nebraska state law, counties are allowed to seize properties with delinquent taxes and turn those properties over to private investors—and as Barnette learned the hard way in 2013, it can happen without the current property owner even being notified. But after the Nebraska Supreme Court upheld the seizure and selling of Barnette's land without his knowledge, attorneys from the Pacific Legal Foundation, a pro-market law firm, are petitioning the U.S. Supreme Court to review the practice.

What happened to Barnette seems like it could happen to anyone. He'd bought an acre of land in Bellevue, Nebraska, in 2002 but fell behind on his tax payments during the Great Recession. He owed $986 in back taxes by 2013—plus a few hundred dollars in fees, interest, and penalties—when Sarpy County offered Barnette's land to a private investor who offered to pay off the debt.

Under state law, the investor, Pontian Land Holdings LLC, was required to notify Barnette of the potential sale before it could take possession of his title by sending a letter via certified mail. But the letter was never delivered—it was, according to court documents, returned to Pontian three times as unclaimed—and the state does not require any additional follow-up.

Having met the incredibly limited notification requirements under state law, Pontian was able to obtain a new deed for the property, which was assessed for about $25,000. Barnette was left with nothing.

"You would think that the government would have to ensure that you get a fair notice," says Christina Martin, the Pacific Legal Foundation attorney who filed the cert petition asking the U.S. Supreme Court to review the case. "They didn't even have to put a stamp on that same letter and send it back in the regular mail so he might have seen it."

The entire process is bizarre and seems ripe for cronyism. Unfortunately, it's not unique to Nebraska. There are at least a dozen states where counties are empowered to seize and sell private property to settle tax debts, even when the property is far more valuable than the taxes owed. The specifics of this so-called home equity forfeiture process can differ from place to place, but the end result is usually the same: property owners losing far more than what they owe to their local governments.

In that case, Cass County, Michigan, seized a multi-million-dollar lakefront home from Sergei Antipov when the property (which was still under construction) fell into tax delinquency. County officials sent certified letters to the home on multiple occasions before seizing the land, but no one was living there to receive them and officials did not take any additional steps to notify Antipov.

They hardly had an incentive to do so. In a subsequent lawsuit challenging the forfeiture, it was revealed that the county treasurer and other county employees exchanged emails planning future backyard barbeques at the property while the forfeiture proceeding was taking place. When Antipov eventually realized what had happened, he offered to pay the back taxes immediately. The county refused to accept his check, taking the property instead.

Part of the problem in all these cases, Martin says, is that the courts view forfeiture action differently than legal action taken against a person. In other words, if a county is going to sue you for some reason, it would have to exhaust every available measure to serve you that lawsuit. But if it sues your home, it can simply send a letter and call it a day.

"It's not fair," says Martin. She compares it to what might happen when someone fails to pay a utility bill or misses a payment for their internet service.

"When you fall behind on those types of debts, you'll get phone calls, emails, text messages," she says, "but in Nebraska, apparently, all they have to do is try to send a single letter via certified mail."