A county in Michigan was owed about $2,200 in back taxes. To collect it, the government took a home worth close to $200,000, auctioned it for a fraction of that, and called the matter settled. The family is now putting a simple question to the Supreme Court: when the state sells your house over a small debt, does it owe you the real worth of what it took or only whatever the auction happened to fetch?

The Rule that is Already on the Books

Three years ago, the court drew a clear line. Geraldine Tyler, then in her 90s, had let a $2,311 levy on a Minneapolis condo balloon to about $15,000 once penalties and interest stacked up. Hennepin County took the unit, found a buyer at $40,000, and held onto all of it. By any fair reckoning, the $25,000 above her debt was Tyler’s money – even though the county walked away with it. Minnesota law blessed that, as did 11 other states and the District of Columbia, plus nine more states under narrower terms.

A unanimous court ended the practice. Chief Justice Roberts wrote that a government can sell property to satisfy a tax debt but cannot help itself to more than the debt is worth. Leftover equity belongs to the owner, and a state cannot dodge that by defining the property interest away.

The Question Tyler Left Hanging

Tyler was tidy because the surplus was undeniable. Subtract a debt near $15,000 from a $40,000 sale, and the leftover is beyond dispute. The justices never had to confront the messier case where the sale price itself is artificially low. If a forced auction brings in far less than a home would fetch on the open market, is that depressed number really the measure of what the owner lost?

That is the gap, and tax auctions are where it opens. Unlike an ordinary listing, these sales draw a thin crowd of investors and speculators, and the government has little reason to chase top dollar. A county could therefore obey Tyler to the letter, hand back every cent of the auction surplus, and still watch most of a family’s equity vanish.

How the Pung Family Got Here

Three-and-a-half decades ago, Timothy Scott Pung paid $125,000 for a roughly 3,000-square-foot house in Isabella County, and for years it carried Michigan’s Principal Residence Exemption. Scott died in 2004, and his wife in 2008. Their son Marc stayed on, assuming the exemption rolled forward without any new filing. The assessor saw it otherwise and stripped the break retroactively. Marc fought back, and a state tax tribunal agreed no further paperwork had ever been required.

The assessor would not let it go. Over a shortfall of $2,241.93, on a place the county itself pegged at $194,400, the family was thrown out, and the home went under the hammer for $76,000. Nobody disputes that the estate is owed the surplus. The quarrel is how to measure it. Isabella County treats the surplus as the hammer price minus the debt, leaving about $74,000. The estate says the yardstick should be the home’s true market value minus the debt, pushing the number toward $194,400. The spread tops $100,000.

Bigger Than One House

The stakes reach far past Michigan. Minnesota alone moved more than 4,300 properties through these sales between 2014 and 2020. Across the 1,200-plus that were family homes, the typical owner lost some 92 percent of the equity above the debt, averaging around $207,000 against bills averaging just $17,000. In the nation’s capital, a veteran with dementia lost a $200,000 home over $133.88.

There is a second front, too. The estate contends the foreclosure worked as an excessive fine barred by the Eighth Amendment, a theory the lower court waved off as ordinary tax collection but one that Justices Gorsuch and Jackson have flagged for review.

Argument wrapped on Feb. 25 with a ruling likely any day now. The court has already said the government cannot keep more than it is owed. Now it must decide whether that shield covers only the cash left after the gavel, or the equity that vanished before.

Artificial intelligence is driving an unprecedented surge in data center construction. Developers, private equity sponsors and their tax advisors are navigating a complicated web of questions that touch everything from ownership structure to site selection to power sourcing. Get the early decisions wrong and the tax consequences can follow a project for years.

Why REITs Have Become the Structure of Choice

Private equity has increasingly turned to real estate investment trusts when backing data center projects. Structure a REIT correctly, and you sidestep corporate-level taxation entirely. Foreign investors get an even better deal. Sovereign wealth funds and foreign pension funds can participate without any obligation to file U.S. tax returns. Data centers, with their heavy real estate footprint, slot into the REIT framework more naturally than many other asset classes.

That said, the fit is not seamless. Related party rent rules create traps for the unwary. Public pension funds and sovereign wealth funds need to confirm they do not hold stakes in both a data center REIT and its tenant. Another wrinkle involves equipment. Data centers demand significant upfront investment in personal property that may not count as qualifying REIT assets. The tax code requires that 75 percent of a REIT’s total asset value consist of real estate, cash, and government securities at each quarter’s close. Developers often must segregate personal property until the REIT builds up enough good assets to clear that hurdle.

The Power and Water Challenge

Reliable power and water access have become one of the toughest operational problems in the industry. Demand is so intense that many developers are generating their own electricity on-site. The tax treatment of these co-located power facilities depends heavily on the energy source and delivery method. Get it wrong, and the generation asset may not qualify for REIT treatment.

Solar photovoltaic systems sit on relatively solid ground under existing guidance. Nuclear and natural gas, which many see as the next wave of data center power, do not. Current rules leave significant uncertainty around whether these sources can work within a REIT structure.

Legislative and Executive Developments

The IRS priority guidance plan for 2025 and 2026 contains no projects aimed squarely at data centers. Regulation section 1.856-10(g), finalized in 2016, includes an example analyzing customized electrical and telecommunications systems in a data center context, but practitioners continue pushing for clearer rules on alternative energy.

Congress may offer relief on the waterfront. In April 2025, Representative Darin LaHood of Illinois proposed a new section 48F that would provide a 30 percent credit for qualifying water reuse projects, including on-site recycling systems at data centers. With U.S. data centers projected to consume 33 billion gallons of water by 2028, the bill attracted 21 cosponsors and bipartisan support.

The White House has made its priorities clear as well. The Trump administration’s July 2025 AI action plan established a goal of achieving global dominance in artificial intelligence, with infrastructure as one of three pillars. An executive order, issued July 23, 2025, focused specifically on reducing federal regulatory obstacles to data center construction.

Conclusion and OBBBA Incentives Worth Watching

Several provisions in the One Big Beautiful Bill Act benefit data center projects, even though lawmakers did not design them with that sector in mind. The return of 100 percent bonus depreciation under section 168(k) matters enormously for an industry requiring massive capital outlays.

Rural Opportunity Zones sweeten the economics further. Investments in qualified rural opportunity funds now qualify for a 30 percent basis step-up after five years, triple the 10 percent available in standard zones. A special rule targeting improvements to existing structures in rural areas cuts the substantial improvement threshold to 50 percent of adjusted basis, compared to more than 100 percent for non-rural funds.

Developers and investors evaluating new projects will find that entity structure, site selection, and the shifting regulatory environment all interact in ways that directly affect the bottom line. Getting the tax picture right from the start remains essential.

Picture two things happening at the same time. The agency responsible for reviewing your tax return is understaffed and buried under a backlog, and the software that the agency uses to catch filing errors just keeps getting better.

That combination should give any taxpayer pause this season. Not because an audit is necessarily coming, but because if something does go wrong, the window for getting it resolved quickly has shrunk considerably.

The IRS Is Running Lean, But It’s Technology Isn’t

The agency lost more than a quarter of its workforce in 2025. The National Taxpayer Advocate’s most recent annual report to Congress documented the drop: from roughly 102,000 employees to about 74,000. Those departures, through a mix of voluntary exits and layoffs, spread across nearly every division.

Funding took a hit at the same time. Congress reversed a significant portion of the IRS budget boost approved through the Inflation Reduction Act, pulling back billions earmarked for enforcement and technology investment. A government shutdown that stretched across October and November of last year piled further delays onto an already strained system. The Treasury Inspector General for Tax Administration confirmed in a January report what tax practitioners were already seeing firsthand: a serious backlog in the processing of amended returns and taxpayer correspondence.

Here’s the part that catches people off guard. None of that has slowed the IRS’s ability to spot problems on your return. The agency’s systems cross-reference what you report against data received independently from employers, brokers, and financial institutions. Artificial intelligence and expanded automation have made error detection faster and more precise, staffing levels notwithstanding.

Fewer people are available to handle problems once they surface. But the technology responsible for finding those problems is running better than ever.

What This Looks Like in Practice

Tax professionals working with real clients are the best window into what this means day to day. Advisors report receiving IRS notices today that are resolving matters dating back to 2023, showing a multi-year lag on what should be routine correspondence. The practical response among preparers has been to tighten processes and leave less to chance.

Some advisors have added specific safeguards, such as obtaining power of attorney to monitor clients’ IRS online accounts directly rather than waiting for slow paper notices. Others describe the current environment plainly: the cost of needing to amend a return has gone up, not necessarily in dollars, but in time and uncertainty.

A poll of tax and financial advisors conducted during a recent industry webinar found that every respondent is maintaining at least the same level of care they applied when IRS staffing was at full strength. Nearly half said they are actively raising the bar this season.

What You Should Do Differently

Here are a few practical steps worth taking seriously this year:

• Give your preparer complete and accurate information. Incomplete or inconsistent reporting is where most errors begin, and those errors are exactly what the IRS’ matching systems are built to catch.
• If you are claiming something new on your return, ask your preparer to walk you through the basis for it. Understanding what you are filing and why is reasonable.
• Set up an IRS online account at IRS.gov if you haven’t already. You can monitor your filing status, review transcripts, and spot potential issues before they become formal notices.
• And if something does go sideways, respond early. Letting a notice sit without a response doesn’t slow the IRS down. It just costs you time you don’t have.

Conclusion

The agency may be a smaller operation than it was a few years ago. But the part of it designed to find mistakes on your return is still very much running.