The U.S. Supreme Court recently held that the city of Indianapolis did not violate the Equal Protection Clause of the United States Constitution when it forgave all future sewer tax obligations of those property owners who elected to pay their portion of the tax on an installment basis over 10, 20 or 30 years with interest, but did not issue refunds to those property owners who had previously paid their portion of the tax in a single lump sum.

An Indiana statute (the Barrett Law) permitted cities to assess benefitted property owners the cost of public improvements, including sewage projects, by requiring the owners to pay their portion of the project in a single lump sum or installment payments (with interest) over a period of years. The city of Indianapolis later replaced the Barrett Law with a less expensive assessment and payment method and forgave any remaining installment payments owed under the Barrett Law. In Armour v. City of Indianapolis, the plaintiffs, owners who had previously paid their portion of the sewer tax in a single lump sum, argued that the city’s forgiveness of outstanding debts of those who elected to pay on an installment basis without issuing refunds to the plaintiffs discriminated against them in violation of the Equal Protection Clause.

The U.S. Supreme Court found no Equal Protection violation because the city had a rational basis for distinguishing between property owners who had already paid the tax and property owners who had elected to pay on an installment basis. The Court accepted as a rational basis the city’s administrative concerns, including maintaining a complex and expensive administrative system to process, collect and enforce the outstanding Barrett Law debts and process refunds. Moreover, the Court noted that the rationality of distinguishing between past payments and future obligations often comes up in the law, for example, in amnesty programs involving mortgage payments, taxes or parking tickets.