Tax Foundation Legal Brief: Taxpayers Who Pay a Cancelled Tax Should Get Refunds

September 12, 2011

Last week we filed in the U.S. Supreme Court arguing that taxpayers who paid a cancelled tax should get refunds.

When Indianapolis reduced its sewer tax in 2005, the city forgave all future payment obligations by those who were paying the tax in installments. Taxpayers who paid it up front were given no refund. The Indiana Supreme Court upheld the City’s arbitrary refund policy, arguing that it is conceivable that such a policy would reduce administrative burdens and help the poor.

Our brief argues:

  • Courts must evaluate whether claimed justifications have any rational connection to the stated policy, particularly where there is a strong perception of unfairness and arbitrary action.
  • If allowed to stand, the Indiana decision will undermine business certainty, tax compliance, and respect for the law.

The U.S. Supreme Court will decide this fall whether to accept the appeal, Armour v. City of Indianapolis, No. 11-161.

For more on the Tax Foundation’s involvement in the Armour case and to read the brief we filed, see here.

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