Indiana Municipal Power Agency v. United States, 20-2038

Background:

Six public power entities issued Direct Payment Build America Bonds (BABs) under ARRA §1531; issuers were entitled to refundable credits equal to 35% of interest under 26 U.S.C. §6431, paid via IRS Form 8038‑CP and funded by permanent appropriation authority in 31 U.S.C. §1324.
The Treasury/IRS paid the full 35% rate through 2012; beginning in 2013 sequestration required by the Budget Control Act and implemented by the Taxpayer Relief Act reduced payments (e.g., to 8.7% in 2013).
Plaintiffs sued in the Court of Federal Claims seeking damages for the reduced payments, asserting statutory claims (violation of ARRA §1531/§6431) and breach‑of‑contract claims (that the statute created contractual rights).
The government moved to dismiss under RCFC 12(b)(6), arguing the BAB payments are direct spending subject to sequestration and that ARRA did not create contract rights.
The court (Judge Hertling) held the payments are direct spending under §1324 and therefore subject to sequestration under later statutes; it also held ARRA §1531 did not create a contract with the United States, and dismissed all claims.

Issues:

Issue	Plaintiff's Argument	Defendant's Argument	Held
Are BAB payments funded by an "appropriation Act" (therefore exempt) or by direct spending (subject to sequestration)?	§1324 is an appropriation that exempts BAB refunds from sequestration.	§1324 is a permanent appropriation statute but not an "appropriation Act" as that term is used in Title 2; it provides direct spending subject to sequestration.	§1324 is direct spending, not an "appropriation Act," so BAB payments are subject to sequestration.
Can plaintiffs avoid sequestration by labeling payments as tax "overpayments," "obligated funds," or "unobligated balances"?	Payments are tax overpayments or legally obligated/unobligated balances exempt from sequestration.	Those characterizations do not overcome sequestration: refunds to entities under §1324 are sequesterable; funds are not obligated for the life of the bonds until processed annually.	Court rejected these labels; payments remain subject to sequestration.
Did later statutes (Budget Control Act/Taxpayer Relief Act) unlawfully modify or implicitly repeal the ARRA obligation to pay 35%?	Later statutes did not repeal or alter the government’s 35% payment obligation.	Taxpayer Relief Act expressly required sequestration "notwithstanding any other provision of law," so it modified the payment formula and cancelled sequestered budgetary resources.	Later sequestration statutes validly altered the payment formula; sequestration reduced the government’s payment obligation.
Did ARRA §1531 create a contractual obligation enforceable against the United States?	The statute (and program administration) created contractual rights to 35% payments for the life of the bonds.	Statutes presumptively do not create contracts; §1531 contains no language evincing an intent to bind the government contractually.	No statutory contract: plaintiffs failed to plead the government’s intent to contract; contract claims dismissed.

Key Cases Cited

United States v. White Mountain Apache Tribe, 537 U.S. 465 (2003) (Tucker Act does not itself create a substantive money‑mandating right)
Dorsey v. United States, 567 U.S. 260 (2012) (later Congress may modify or repeal earlier statutes)
Nat’l R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451 (1985) (presumption that statutes do not create private contractual rights absent clear legislative intent)
Am. Bankers Ass’n v. United States, 932 F.3d 1375 (Fed. Cir. 2019) (statutory language required to show intent to create contract; courts apply presumption against statutory contracts)
Moda Health Plan, Inc. v. United States, 892 F.3d 1311 (Fed. Cir. 2018) (statute and agency conduct analyzed for contract intent; federal circuit recognized presumption against statutory contracts)
Maine Cmty. Health Options v. United States, 140 S. Ct. 1308 (2020) (distinguishes failure to appropriate from later statutes that reform statutory payment formulas)
Kane Cnty. v. United States, 127 Fed. Cl. 696 (2016) (Court of Federal Claims held sequestration altered a statutory payment program similar to BABs)
LCM Energy Sols. v. United States, 128 Fed. Cl. 728 (2016) (treating ARRA payment provisions as money‑mandating for jurisdictional purposes)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: accept well‑pleaded facts and draw inferences for plaintiff)
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)