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PRELIMINARY MEMORANDUM No. 11–161–CSX ARMOUR, et al. (property owners allege tax scheme violates the equal protection) v.

CITY OF INDIANAPOLIS, INDIANA, et al. (city provides rational basis for differentiation) State/Civil Timely Cert to Ind SCt (Sullivan; conc: Shepard, David; diss: Rucker, Dickson)


The issue in this case is whether the City of Indianapolis violated the equal

protection rights of property owners who prepaid their sewer bills and were not given a refund after the city changed its sewer fee policy. Petrs maintain that the Ind SCt erred in determining that resps had a rational basis for treating taxpayers who paid the assessment in full differently from taxpayers who paid in installments. Given this issue has widespread implications on how governments function, the varying interpretations of the Court‘s precedents, and that the Court has never specifically addressed this issue, I recommend the Court GRANT. Indiana‘s Barrett Law allows municipalities to fund


public improvements through special assessments levied against and apportioned equally among benefited homeowners. Using the Barrett Law, the City of Indianapolis (―City‖), resp, funded numerous sewer projects, including connecting 180 properties in the Northern Estates neighborhood to the Indianapolis sewer system. The Indianapolis Board of Public Works (―Board‖) levied a $9,278 special assessment that the property owner could either pay up front or in monthly installments, subject to an annual interest rate. The owners of thirty-one of the parcels, petrs, chose to pay the assessment

S. All parties filed for summary judgment. the Board approved the discontinuance of the use of the Barrett Law funding in Marion County and replaced it with the Septic Tank Elimination Program (―STEP‖). DECISIONS BELOW: On July 22. On appeal. Consequently.S. Resolution 101 forgave all outstanding Barrett Law assessment balances owned as of November 1. 2005 adopted Resolution No.00 sewer connection fee to the County and a monthly sewer bill. The Ind SCt granted the City‘s motion to transfer the case. a homeowner would pay a flat $2. vacating the decision of the Ind Ct App. the City on December 7. Constitution. arguing that the resps violated The Equal Protection Clause. the majority reversed the tct judgment against resp – which held the City violated the Equal Protection Clause – and found no constitutional violation under the 14th Amendment . a claim under 42 U. 101. The property owners requested compensation from the City in February of 2006 and were denied on the grounds that it would be unfair to owners who had paid assessments for other Barrett Law projects. the petrs abandoned their due process claim. The petrs asserted. 3. § 1983.500.C. 2005 (―Resolution 101‖). As a result of the change. among other things. property owners who chose to pay their assessment in monthly installments were forgiven from future payment. The Ind Ct App determined that the resps lacked a rational basis for eliminating the debt of installment taxpayers while denying any relief to owners who paid the assessment up front violating the Equal Protection Clause of the U. One year after levying the special assessment. Owners who chose to pay their assessment in their entirety were given no reimbursement. alleging that the City‘s arbitrary classification of taxpayers violated the Equal Protection Clause of the Fourteenth Amendment.968 to the homeowners in addition to paying interest and attorneys‘ fees. Resps were ordered to pay back $8. In a 3-2 decision by the Ind SCt. 2007 Petrs filed a complaint in Ind tct against the City of Indianapolis and related entities and officials (resps). 2005. the Ind tct granted the petrs motion.2 immediately in its entirety. Under STEP. and entered judgment against resps.

at 572 citing Allied Stores of Ohio. v. City of Euclid. Wells. Particularly.‖ City of Indianapolis v. 358 U. meaning the rationale was reasonable and coincided with the government‘s interest in moving away from the Barrett Law system because of the financial burdens it created. because Allegheny Pittsburgh ―was the rare case where the facts precluded any plausible interference that the reason for the unequal assessment practice was‖ legitimate in this case.2d 839 (Mich. 477 (Ohio 1969). Justice Frank Sullivan wrote the majority opinion and was joined by Chief Justice Randall T. Armour. Dep’t of Treasury. 244 N.E.2d 445. The court reasoned. at 567. 527 (1959). The majority found that the city‘s rationale was that low. 1936). 522.2d 553. Justices Rucker. Shepard and Justice Steven David. v. Id. 1984). Stephan v.S. CONTENTIONS: Petrs: [1] The Ind SCt decision directly conflicts with the decisions of state SCts. 946 N. ―[t]he stated purpose in Resolution 101 simply fails to express any connection to the distinction between residents who elected to pay their assessment in a lump sum and those who elected to pay in installments. dissented. See Armco Steel Corp. In my view this disconnect demonstrates that the classification fails to have a ‗fair and substantial relation‘ to the statutory objective. 1995). 4. 166 So. Four state SCts have held that the Equal Protection Clause prohibits tax-forgiveness measures that differentiate between taxpayer who promptly paid their tax assessments in full and those who delayed full payment. while Justices Robert Rucker and Brent Dickson dissented. joined by Justice Dickson.and middle-class families were more likely to have been paying gradually and those who paid in full up front were likely higher income. Parrish. 819 (Fla.3 had occurred.2d 475. Inc. 563. Richey v. The cases established that a state or .E. 891 P. 817.W. State ex rel. 358 N. Bowers. dictating that ―[t]he City clearly has a legitimate interest in not emptying its coffers to provide refunds to those who had already paid their assessment. finding the city‘s ―rational basis‖ wasn‘t sufficient and was used as more a blanket reason without any practical justification of the rationale actually doing what it claimed to do. Id. 457 (Kan. Perk v.

City of Indianapolis. City of Indianapolis. arrived at the opposite conclusion. 2010 WL 2484620. in a subsequent decision addressed to the question of remedy. 343. 2011). Constitution. The justifications evoked by the City did not withstand rational-basis scrutiny and therefore violated the Equal Protection Clause. implement a discriminatory tax-forgiveness mechanism that punishes taxpayers who pay their taxes in full and rewards taxpayers who delay payment. City of Indianapolis. at *2 (US Dist.‖ (Cox v. 2011 WL 2446702. In Cox v. Cty.. Despite the City‘s grossly discriminatory taxation regime similar to Armco. June 14. 1:09-cv-435—TWP-MJD. 1:09-cv-435—WTL-DML. A federal district court. 2010). at *2 n. Comm’n. v. Richey. relying heavily on the ―persuasive‖ authority of the Ind Court of Appeals opinion that was reversed by the Ind Supreme Court. 488 U. 2010). Ct. June 15.‖ Allegheny Pittsburgh Coal Co. but also creates an intractable federal-state split within Indiana on the precise question presented in this case. No. June 14. and Parrish the Ind SCt ruled that the City did not act unconstitutionally. The Ind SCt‘s decision therefore not only conflicts with the decisions of other state supreme courts. which held that the Equal Protection Clause requires ―a rough equality in tax treatment of similarly situated property owners.) The dct relied heavily on the unanimous decision in Allegheny Pittsburgh. 2010 WL 2484620. addressing the exact same question. No.1 (US Dist. the federal court took note of the Indiana Supreme Court's decision but did not change its own view. SD Ind. [2] The decision below also directly conflicted with a recent decision in which an Ind dct. observing that ―[w]hile Indiana Supreme Court decisions regarding issues of state law are binding on this Court. 336..S.4 municipal taxing authority could not consistent with the Equal Protection Clause.S. SD Ind. such decisions are only persuasive authority on matters of federal law — such as the interpretation of the Equal Protection Clause of the U. Moreover. No. SD Ind. 1:09-cv-435—WTL-DML. [3] Accepting the justifications embraced by the Ind SCt to satisfy rational basis scrutiny such . Perk. concluded that the Indianapolis ordinance violated the Equal Protection Clause (Cox v. Ct.. at *2 (US Dist. Ct.

at 342. at 346. tax compliance. Webster County. The city‘s actions in this case are arbitrary and irrational. at 338. Id. In Allegheny Pittsburgh Coal v. Id. This court should take the opportunity to restrict arbitrary and irrational state refund practices. The Ind SCt‘s reliance on this Court‘s welfare-benefits cases claiming ―resource preservation‖ is a constitutionally adequate justification for disparate taxation is unfounded. the court held that the hugely disparate tax assessments between similar properties violated the plaintiff‘s Equal Protection rights. the classifications must be reasonable. a West Virginia county used a tax assessment method that produced dramatic valuation differences between recently purchased property and nearby older property. Furthermore. outlier interpretation of Allegheny Pittsburgh adopted by the court below. Additionally. [5] The question presented is of significant national importance and will recur with sufficient regularity to justify review by this Court. There. the decision of the court below will undermine business certainty. If allowed to stand. As such. the plaintiffs were assessed and taxed between 8-35 times higher than owners of similar property during a nine-year period. and respect for the law. 336 (1989). Id. The Ind SCt interpreted Allegheny Pittsburgh as contained to its facts effectively ignoring an important precedent set by the Court. this case presents important legal issues that affect taxpayers across the country Amicus Brief of National Taxpayers Union in support of petn for cert: Allowing the City to . [4] The Ind SCt decision conflicts with decisions of this Court striking down discriminatory tax-forgiveness schemes that violate the equal protection clause.S. 488 U. The Court below erred in upholding the plainly irrational tax in this case. The Court noted that while states have broad powers to impose taxes and divide different kinds of property into classes with different tax burdens. the administrative burdens justification is just as problematic. Id. This Court should correct the erroneous.5 as ―preservation of limited resources‖ would allow any taxing authority to do whatever it wants just saying that it needs the money. at 344.

Further if the City‘s conduct is upheld. The Cox judgment is only an interlocutory order that may be revisited before final judgment.S. All of these cases are readily distinguishable because in those circumstances the tax was illegal or the taxpayers were in default. all of the cited state cases include patent unfairness. The National Taxpayers Union argues that by providing a choice between methods of payment. creating tension between citizens and government. large expenditure. but will ultimately limit the flexibility of taxing authorities. The conflict between the Ind SCt and the unpublished memorandum decision of the Southern District of Indiana in Cox v. unlike the present case. Ind. Therefore this case provides a poor vehicle for this Court to review. the government can raise some funds quickly without forcing all taxpayers to make a single. The Court should await the development of a split before addressing this issue. Tax Foundation also reiterates petrs‘ arguments. subsequently owned payments did not imply impropriety in the underlying tax assessment. Dist. Indianapolis. Resp: [1] The petrs claim that the Ind SCt‘s holding conflicts with other state court holdings is flawed. National Taxpayers Union also reiterates petrs‘ arguments Amicus Brief of the Tax Foundation in support of petn for cert: The Ind SCt decision will undermine business certainty and respect for the law. LEXIS 58876 (S. 2010 U. the present forgiveness of long-term financed.6 eliminate outstanding balances will not cause harm to taxpayers. . Further. June 14. Moreover. Here. 2010) does not require intervention of this Court. it will discourage taxpayers from paying assessments in up front and ultimately cause the government to make politically impractical decisions that require all taxpayers to pay the amount in full.D. Businesses will face greater difficulty making reasonable predictions about the future tax climate when a city acts arbitrarily. the City‘s conduct will cause taxpayers to view tax policies as unfair. [2] Conflict with an interlocutory order from a district court does not merit cert.

Doing so allows a clean break from the previously used method and avoids confusion regarding whether a transition from one financing regime to another has taken place. Further.‖ Norlinger v. As this Court and the Ind SCt have both recognized. fact bound decision. This facilitates a transition that has a lesser financial impact on lower-and middle-income residents. it was reasonable for resps to eliminate any outstanding debt from the unpopular Barrett Law financing method. Hahn. Furthermore. 505 U. not a revolution in Equal Protection jurisprudence. . not tax forgiveness. 1 (1992). [5] The Ind Sct correctly interpreted previous Court precedents. in reviewing the circumstances of the classification of this case. the Allegheny Pittsburgh ruling was so limited. Allegheny Pittsburgh is distinguishable because it dealt with assessments.S. rational basis only requires that the challenged classification promote a legitimate state interest to be constitutional. because they would not be subjected to any double payments arising out of the old and new financing methods. the government‘s limited resources are a necessary part of this decision making process. confirmed that the Allegheny Pittsburgh decision was a narrow. Further. Ultimately. the elimination of prospective payment obligations makes administrative sense. this type of review is particularly deferential when the government action at issue relates to taxation. for the City otherwise would be collecting Barrett payments for up to thirty years. [4] The Resp point out that rational basis review determines whether a government‘s actions were in violation of the Equal Protection Clause.7 [3] The city properly considered fiscal responsibility in its legislative line drawing. Allegheny Pittsburgh was ―severely circumscribed. Moreover. that the Indianapolis taxpayers did not even rely upon it in the lower courts. and that the burden is up to the party challenging the legislation to overcome a strong presumption that the classification is valid. simplifying the transition process serves an important purpose of ensuring a smooth regulatory transition. Moreover.‖ and the state court rulings cited by the petr are ―inapposite. Therefore.

S. City of Indianapolis. and Richey v. The salient comparison is the resps separate decision to withhold relief from petrs because they had already paid their tax bills in full. Armco. the decision of the U. Further. District Court for the Southern District of Indiana in Cox v.8 [6] Finally.W. Stephen v. Along the same sides. the dct held that the City violated the Equal Protection Clause by withholding refunds from homeowners who had paid their Barrett Assessment in full. Parrish. City of Euclid. even if the petrs are successful. Wells – involved government decisions to forgive the debts of delinquent taxpayers are not relevant. It will merely add one more voice to the preexisting conflict. The differences such as the initial tax assessment in Armco was subsequently invalidated or that the three other decisions with conflict with the decision below – State ex rel. the resp argument that the cost-saving justification is unique to this case fails muster. Additionally. it would apply to every . the resps claim that these cases differed because they dealt with ―patent unfairness‖ misses the mark for the same reason. 2010) clearly establishes that a conflict exists. Petr Brief in Reply to Resp: [1] The Resps attempts to distinguish the state supreme court cases that are in conflict with the Ind SCt decision fail. All of the petrs payments have already been spent on sewer construction and petrs have no evidence indicating the resp would have spent millions of additional dollars to provide refunds if they knew forgiveness would otherwise violate equal protection. the only permissible remedy in this case would be to invalidate the forgiveness. [2] The resps contention that the sole justification of cost saving provides a rational basis for disparate treatment of similarly situated taxpayers is clearly erroneous. the Ind SCt conceded that its decision created a conflict with decisions of other state supreme courts. 2010 WL 2484620 (June 14.2d at 841. Lastly. If accepted. Perk v. Further. Armco clearly rejected this justification and it should fail in this case as well. it does matter that the Seventh Circuit has yet to weigh in on Cox. Applying the rule from other supreme court cases. 358 N. All four state supreme court cases dealt precisely with that government issue.

Therefore. [4] The Resps argue that the Indiana state law does not require continued equity in Barrett Law taxation. in this case the petrs legitimately expected that they were not risking unnecessary expenditure of thousands of dollars by paying their taxes in full. just as in Allegheny Pittsburgh. Resps contend that Nordlinger tacitly overruled Allegheny Pittsburgh. the Ind SCt which they heavily support dictated that this equality in taxation exists in Barrett Law taxation. Additionally. [5] The reasoning of Nordlinger actually provides support for petrs.S. an express basis of the State‘s taxation scheme. even if refunds are not required.9 case in which a state or municipal taxation authority imposes a discriminatory tax-forgiveness scheme. 6. [3] Resps efforts to rectify the decision below with Allegheny Pittsburgh and Nordlinger are unsuccessful. However. at 739. DISCUSSION: The ultimate issue in this case is whether the resps acted with rational a legitimate purpose when they needed to implement a tax scheme that treated identical taxpayers . Matthews rejected the assertion that such remedial limitations are a barrier to review. 465 U. The result would lead to arbitrary taxation schemes with no constitutional check. Unlike in Nordlinger. Therefore. equality in taxation. this has never been decided by the Court and other courts have continued to follow the decision in Allegheny Pittsburgh. [6] The resps contention that refunds would not be the proper remedy completely ignores Allegheny Pittsburgh. this case provides the Court with an opportunity to clarify the confusion these two precedents have caused in lower courts. The lack of refund would further support the need for review in this case because future litigants could be discouraged from challenging such patently unconstitutional schemes if authorities could so easily withhold monetary relief. Heckler. Heckler v. where the taxpayers lacked legitimate expectation and reliance interests. However.

Considerable portions of the petrs and resps briefs emphasize how important the Court‘s prior precedents are to the outcome. Basically whether Allegheny Pittsburgh is still good law or whether Nordlinger speaks more directly to tax classifications. Lastly. the resps arguments are not persuasive. For example. However. this Court guidance is required. 7.E. I feel that the dispute in this case has a much different focus thus these precedents are not very helpful. As to rational basis. in light of differing interpretations of Allegheny Pittsburgh and other state SCt holdings I believe Cox reinforces the Court‘s immediate review of this issue. than a reason.10 substantially different. amnesty programs could be implicated in the Court‘s decision. The acute split with the Ind dct in Cox does not by itself support this Court‘s immediate review. GRANT Name 946 N. the amicus briefs for the petrs illustrate that the Ind SCT decision will have wide implications on the economy and government regulations. for treating taxpayers differently.2d 553 . Further. In light of the division between state and federal courts over the identical issue. I find these briefs persuasive demonstrate the negative implications of the Ind SCt decision that will facilitate more unfair and arbitrary tax schemes. Resps offered more of an excuse. the post hoc explanations by the resp to help lower income homeowners lack validity and support. RECOMMENDATION: There is a response. Namely this is a novel important issue of whether tax forgiveness has to satisfy equal protection principles. It has broader implications as well to any form of tax forgiveness that results in gross disparities between like taxpayers.