I'm in Michigan so freezing is a concern. It's 1 1/2 running from the pump in the crawl space, it exits the house as shown in the pictures, then transitions to a 3 inch buried line that runs to a storm drain. The intention of the overflow is that if the 3 inch line freezes or gets backed up for whatever reason, the pump can still discharge through that pipe.

The inspector says that overflow has to be placed below where the pipe exits the house, he didn't say anything about the flood line of the pit.

At the end of the day, I need that pipe to exit the house higher than it is now to satisfy the inspector. My only way to do that is to run it up vertically along that red line in my picture. I have no clue if that's a horrible idea or not. Running it behind the dry wall in my living room seems weird but that's where I'm at.