I described this case in a previous post, 2011-2012 Supreme Court Term: Armour v. Indianapolis, No. 11-161 (Equal Protection). In this case the City of Indianapolis assessed a group of 180 homeowners nearly $10,000 to connect their sewer lines to the city's system. Thirty-eight families paid the entire fee up front, and the remainder decided to pay the assessed fee over time. The next year the City forgave all of the outstanding indebtedness and instituted a much less expensive program to pay for sewer hook-ups. The 38 families who paid the fee in advance sued on the ground that the city's action violated the Equal Protection Clause.
The Indiana Supreme Court found that there were four legitimate reasons for the city to have forgiven the outstanding indebtedness owed by other homeowners. These reasons were:
"reducing its administrative costs, providing relief for property owners experiencing financial hardship,establishing a clear transition from [the] Barrett Law to STEP, and preserving its limited resources."The Indiana Supreme Court ruled that these reasons were sufficient to constitute a "rational basis" for the city's action.
The United States Supreme Court affirmed the decision of the Indiana Supreme Court. The Court first determined that there was no reason to apply any standard other than the "rational basis test":
Indianapolis’ classification involves neither a “fundamental right” nor a “suspect” classification. Its subject matter is local, economic, social, and commercial. It is a tax classification. And no one here claims that Indianapolis has discriminated against out-of-state commerce or new residents.The United States Supreme Court found that it would have been burdensome for the city to extend refunds to homeowners in this and 40 other similar sewer projects; it would have been difficult to determine who should receive those refunds (for example, if people had sold their homes during that period) and what level of refunds would be fair to everyone involved (considering the number of years that people had enjoyed sewer service, for example). It was simpler and less burdensome for the city simply to declare an "amnesty" for any outstanding assessments. Furthermore, to hold the city's action unconstitutional would call into question practically any amnesty program instituted by government.
The six justices in the majority did not find that "providing relief for property owners experiencing financial hardship" justified the city's refusal to grant refunds to the 38 homeowners who had paid their sewer assessments in full. Instead, they based their decision solely on the ground of administrative convenience.
In light of the burdens of administering a program of tax refunds, the Supreme Court found the City's tax forgiveness program to be "rational" and "reasonable" and upheld the city's action.
In what may or may not be a harbinger of the pending decision on the constitutionality of the Affordable Care Act, the majority noted that the courts must defer to legislative judgment in cases involving laws regulating "ordinary commercial transactions":
We have made clear in analogous contexts that,where “ordinary commercial transactions” are at issue, rational basis review requires deference to reasonable underlying legislative judgments.
Chief Justice Roberts, joined by Justice Scalia and Justice Alito, dissented on the ground that Indianapolis's program denied the 38 homeowners "rough equality of tax treatment" as required in the 1989 case Allegheny Pittsburgh Coal Co. v. Commission of Webster City.
Wilson Huhn teaches Constitutional Law at The University of Akron School of Law.