Nov 14 (Reuters) - The Supreme Court on Monday agreed to
review whether the city of Indianapolis has authority to
forgive tax obligations for some taxpayers while failing to
issue refunds to others.
At issue is whether the Equal Protection Clause of the
Fourteenth Amendment of the U.S. Constitution precludes a local
taxing authority from refusing to refund payments made by those
who paid their tax assessments in full, while forgiving the
obligations of identically situated taxpayers who chose to pay
in installments. The local authority argues that its refusal is
justified for reasons including its need to reduce
administrative costs and conserve its limited resources.
The case began in 2004 when a sewer tax was levied on
certain properties in Indianapolis, and property owners were
given the option of paying the $9,278 tax up front or in
monthly installments. Thirty-one owners chose to pay up front
while 142 elected to pay in installments.
In 2005, however, the Indianapolis Board of Public Works
decided it would forgive the existing tax obligations of those
who were paying in installments. Those who paid upfront lobbied
the board for a refund but were denied, which is when the case
headed to the courts.
After the Indiana Court of Appeals upheld the trial court
decision that the board's refusal to refund those who had paid
up front violated the plaintiffs' equal protection rights, the
city appealed to the state's supreme court. Both sides agreed
that the correct standard of review was the so-called "rational
basis" standard, which requires a high degree of deference to
the challenged law.
The property owners argued the board's decision failed even
this weak level of scrutiny, while the city argued that its
decision passed constitutional muster because it was related to
a legitimate government interest under that standard. That
interest, it said, was to reduce its administrative costs,
provide relief for property owners experiencing financial
hardship, and preserve its limited resources.
In May, the Indiana Supreme Court overturned the lower
courts and found in favor of the city. The property owners
petitioned the U.S. Supreme Court.
Mark Stacil, of Robbins, Russell, Englert, Orseck,
Untereiner & Sauber, who will be arguing the case for the
property owners when the Supreme Court hears the case next
year, said that the if the high court agrees with the city,
"then virtually any tax decision could be insulated from
Indianapolis corporation counsel Samantha Karn said she
hoped the state supreme court ruling would be upheld. "Our
intention is to represent the best interests of the city," she
The Supreme Court will have to grapple with what
constitutes fairness with respect to taxpayer refunds, said
Joseph Henchman, vice president of state and legal projects at
the Tax Foundation, a nonpartisan group that filed a Supreme
Court brief in favor of the property owners. "That's a big
issue for taxpayers everywhere," Henchman said.
The case is Christine Armour et al v. City of Indianapolis,
Indiana, et al, no. 11-161 in the U.S. Supreme Court.
For the city: not immediately available.
(Reporting by Rebecca Hamilton in New York)
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(CORRECTION: An earlier version of this story incorrectly
stated the Supreme Court would hear arguments later this year.
Arguments will be next year.)