Source: https://www.aptcnet.com/property-tax-resources/national-property-tax-updates/indiana-property-tax-updates
Timestamp: 2019-04-20 08:46:24+00:00

Document:
Assessor timely filed his petition to the Tax Court. But the Assessor served a summons on the clerk a day after the window for filing a petition closed. In addition, Assessor served a copy of the petition on Owner’s counsel, not the Owner. Owner claimed these were procedural errors that warranted dismissal of the Assessor’s appeal for lack of subject matter jurisdiction.
To timely initiate an original tax appeal, the Tax Court’s rules – unlike the trial rules governing other civil actions – do not require submission of the appropriate process papers with the clerk.
Owner’s motion to dismiss was denied.
Point of Interest: Wigwam Holdings LLC (“Holdings”) claimed that an appraisal and purchase price of $0 supported a zero assessment for its improvements, a former school property with an iconic basketball arena. Holdings was denied an injunction for the collection of tax, because it failed to show that it has a reasonable opportunity to prevail on the merits.
Synopsis: Holdings acquired four parcels by Quitclaim Deed from the City of Anderson Department of Redevelopment. The only parcel at issue contained, among other things, an 8,996-seat basketball facility. The Madison County Property Tax Assessment Board of Appeals had reduced the assessment from $11,415,000 down to $2,115,200. Holdings filed its appeal to the Indiana Board and claimed its assessment should be reduced to $68,500 ($68,500 for land and $0 for improvements). In support of its appeal, Holdings presented a USPAP-compliant appraisal, testimony of an appraiser, and documents related to the purchase.
Holdings argued that it was likely to prevail on the merits because of its appraisal and the testimony of its expert witness. The Court noted that there is no per se rule that a USPAP-compliant appraisal automatically establishes a prima facie case for reducing an assessment. The Assessor’s expert witness testified that the property was a special purpose property. Therefore, according to the witness, the cost approach was the appropriate valuation method. The Indiana Board, the Court reasoned, properly exercised its discretion and weighed the competing evidence.
In addition, Holdings claimed that it had a chance of success on the merits based on the September 2014 acquisition price. Assessor’s witness claimed that the seller was atypically motivated, as shown by the buyer having paid zero dollars and received access to substantial funds for site restoration. Holdings was unable to point to anything in the administrative record indicating the Indiana Board abused its discretion.
Finally, Holdings asserted that it “presented uncontroverted evidence of the Wigwam’s significant functional and economic obsolescence.” But Holdings failed to provide any evidence to quantify the alleged obsolescence and its impact on the value of the property.
For these reasons, the Court found that Holdings did not have a reasonable opportunity to prevail on the issues raised, so there was no need to address the remaining two factors to enjoin the tax. Consequently, the Court denied Holdings’ Petition to Enjoin the Collection of Tax.
Point of Interest: Assessor removed an obsolescence adjustment, causing a 26% assessment increase for a home over its 2013 value. Assessor offered a sales comparison analysis to support his value. Homeowners’ list of comparable assessments failed to support a reduction under a “Section 18” analysis, and they failed to identify the cause of or quantify the impact of obsolescence.
Synopsis: For the January 1, 2014, assessment, Assessor removed an obsolescence adjustment for Homeowners’ single-family residence. The adjustment was first applied to the home for the 2007 assessment based on an appraisal presented in connection with the 2006 appeal of the property. Removing the adjustment caused a 26% increase over the property’s 2013 value.
Due to this massive increase, Assessor under Indiana Code § 6-1.1-15-17.2 (which shifts the burden of proof when certain assessments increase by more than 5% year-over-year) had the burden of proof on appeal. To meet his burden, Assessor presented a sales comparison analysis based on sales of seven, two-story homes in 2013 within a 1,400 foot radius of the subject home. To account for differences between the subject home and the comparable sales, Assessor presented a linear regression model based on 101 property sales from within the subdivision. He relied on information from these sales to develop a time trend analysis. Based on this information and analysis, the Assessor reasoned that removing the obsolescence adjustment brought the subject home’s value in line with those of comparable properties in the neighborhood.
Homeowners responded with a list of property assessments in the subdivision showing increases of only 0%-2% between 2013 and 2014.
Assessor failed to physically inspect the home. This was not necessary, the Court held, because 2014 was not a general reassessment year and assessing officials annually apply a trending process to determine adjustment factors.
The increase of the subject home’s assessment was far above that of comparable properties in the subdivision. Under Indiana Code 6-1.1-15-18, Homeowners were permitted to introduce evidence of the assessments of comparable properties to challenge the subject home’s value. But, under the statute, the “determination of whether properties are comparable shall be made using generally accepted appraisal and assessment practices.” Homeowners offered no credible evidence that the purportedly comparable neighborhood properties were, in fact, comparable to the subject home.
Finally, the Court concluded that Homeowners “did not properly rebut the Assessor’s removal of the obsolescence adjustment because they failed to both identify causes of the purported obsolescence and to quantify the amount of obsolescence they claim should be applied.” Conclusory statements about “serious defects” in the property were not probative and did not rebut the Assessor’s decision to remove the obsolescence adjustment.
Point of Interest: Taxpayer claimed that contaminated industrial land purchased for $1 had $0 value, but it offered no probative evidence that the sale was a reliable indication of value. The administrative record lacked facts showing (i) the property had been exposed to the market, (ii) the property had no value due to the contamination, or (iii) how the 2014 sale price related to the 2016 valuation date.
Synopsis: Taxpayer was in the business of acquiring, remediating, and reselling contaminated properties. In June 2014, it purchased a former foundry with soil and ground water contamination for $1. After entering into a Voluntary Remediation Program with the State of Indiana, Taxpayer sold a ten-acre portion of the property at a discount to a local school corporation for purposes of building a new middle school. The 2015 assessment of $200,000 was appealed; the parties agreed to keep the total value at that level but re-allocated the spilt between land improvements and land, reducing the land value to $68,900. The Assessor and Taxpayer signed a Form 134 Joint Report to memorialize this agreement. In 2015, Taxpayer transferred nearly five acres to another entity and demolished all buildings on the retained portion. For the 2016 assessment, Taxpayer protested the $131,700 assessment — $121,700 for land and $10,000 for improvements. The County Board reduced the land to $95,400, and Taxpayer appealed to the Indiana Board of Tax Review.
Before the Indiana Board, Taxpayer argued the land had $0 value but indicated it would accept the stipulated 2015 value of $68,900. To support its claim, Taxpayer relied on the $1 purchase price, a list of “comparable” properties with their tax records, and the 2015 Form 134. The Indiana Board ruled that the improvements had $0 value, where the evidence showed no building remained on the property as of the January 1, 2016 assessment date, but the evidence did not support a reduction in the property’s land value.
The 2014 $1 purchase. To represent a “market value” transaction, a sold property must have had “reasonable exposure in a competitive market under all conditions requisite to a fair sale.” Here, Taxpayer failed to show that the property had been exposed to the market for a reasonable time before the $1 purchase. The sale also appeared to be influenced by undue duress, according to the Indiana Board. Taxpayer’s conclusory statements to the contrary were not probative of the property’s value.
No evidence of $0 value. Contamination can impact a property’s value, but the fact of contamination “does not by itself necessitate a finding that a property is valueless.” (emphasis in original). The Tax Court observed that the “record is devoid of any objective factual basis that would support Garrett’s claim that its property has no value simply because its contaminated.” Evidence suggested the contaminated property did have some value, e.g. Taxpayer’s sale of a portion of the land to a local school corporation.
Failure to relate 2014 purchase to 2016 assessment date. Even if the 2014 sale price was probative, Taxpayer offered no evidence to relate that price to the January 1, 2016 assessment date. The Court rejected Taxpayer’s “bald assertion” that the 18-month gap was insignificant.
No evidence of comparability. Taxpayer listed three properties it claimed were comparable and supported a reduction, submitting property tax records for two of them. Evidence indicated the purported comparable properties had been transferred by Commissioner’s Tax Deed, or either sold or failed to sale at tax sale. The Indiana Board concluded that the evidence was not probative because Taxpayer “did not provide evidence, explanation, or analysis comparing these properties to the subject property and did not explain how any differences may affect determining the subject property’s market value-in-use.” The Court observed that Taxpayer “provided so little information about these three properties that the Indiana Board had to infer the reason [each property] was presented.” Taxpayer failed to analyze and compare the impact of contamination, if any, on the values of the three comparable properties. Parties must walk the Indiana Board and the Court “through every element of their analyses.” Taxpayer failed to do so.
2015 land stipulation. Taxpayer argued that the 2016 land value could not be higher than the 2015 stipulated value because the land was still contaminated and the property in 2016 was smaller after selling off almost five acres. But the Court declined to “follow Garrett down the rabbit hole and hold that just because fewer acres were assessed in 2016 than 2015, the 2016 assessed value can be no greater than that in 2015.” Each tax year stands alone, and “a prior year’s assessed value is not necessarily probative evidence of a subsequent year’s assessed value in other contexts.” In addition, the 2015 stipulation on its face addressed only that year.
The Court rejected Taxpayer’s “thinly veiled request that the Court reweigh the evidence” presented to the Indiana Board. The Indiana Board’s final determination was affirmed.
Indiana Assessment Notices - and Appeal Opportunities -- are Coming Soon!
Indiana is in a transitional phase regarding appeal deadlines. The deadline to appeal property tax assessments will be different depending on whether the assessment date at issue is January 1, 2018 (or earlier) or January 1, 2019.
For counties (like Marion County, where Indianapolis is located) that use tax bills as assessment notices, the Spring 2018-pay-2019 tax bills will give taxpayers forty-five (45) days after the tax bill is mailed to appeal. If an assessor issues an assessment notice for January 1, 2018 or any earlier assessment date, a taxpayer’s deadline to appeal is forty-five days after the notice is mailed.
Indiana Code 6-1.1-15-1.1 changed the timeline in which a taxpayer may appeal an assessment of tangible property for assessments after December 31, 2018. The new code provision provides two specific dates as a deadline to appeal January 1, 2019 or later assessments, both of which are June 15. If the county mails the notice of assessment before May 1 of the assessment year, then the deadline to appeal the assessment is June 15 of the assessment year. If the county mails the notice of assessment on or after May 1 of the assessment year, then the deadline to appeal the assessment is June 15 of the year in which the tax statement is mailed by the county treasurer.
A taxpayer still initiates an appeal by filing a notice in writing with the county assessor (or, in the rare instance there is one, the township assessor). The taxpayer must file a written notice on the form designated by the Department of Local Government Finance.
Take care in reviewing all tax bills and assessment notices for appeal opportunities.
Synopsis: Taxpayer was in the business of acquiring, remediating, and reselling contaminated properties. In June 2014, it purchased a former foundry with soil and ground water contamination for $1. After entering into a Voluntary Remediation Program with the State of Indiana, Taxpayer sold a ten-acre portion of the property at a discount to a local school corporation for purposes of building a new middle school. The 2015 assessment of $200,000 was appealed; the parties agreed to keep the total value at that level but re-allocated the spilt between land improvements and land, reducing the land value to $68,900. The Assessor and Taxpayer signed a Form 134 Joint Report to memorialize this agreement. In 2015, Taxpayer transferred nearly five acres to another entity and demolished all buildings on the retained portion. For the 2016 assessment, Taxpayer protested the $131,700 assessment -- $121,700 for land and $10,000 for improvements. The County Board reduced the land to $95,400, and Taxpayer appealed to the Indiana Board of Tax Review.
In Nova Tube Indiana II LLC v. Clark County Assessor, Cause No. 49T10-1708-TA-00013 (Ind. Tax Court, May 18, 2018), the Indiana Tax Court reduced the 2011, 2012, and 2013 assessed values of a 100,000+ square foot industrial building in Southeastern Indiana to values concluded to by taxpayer’s USPAP-compliant appraisal. This was a reversal of the Indiana Board of Tax Review’s final determination, which had upheld Nova Tube’s real property assessments for all years at issue.With respect to the 2011 appeal, the Assessor bore the burden of proving that her assessment increase over five-percent was correct under Indiana Code § 6-1.1-15-17.2, commonly known as the “burden-shifting rule.” The Assessor argued that the May 2014 transaction of the subject property was a “market value” transaction, and she provided evidence the market was relatively stable during the years at issue. Nova Tube asserted that the May 2014 sale was not a market value transaction due to the buyer, the Port of Indiana, being atypically motivated. The Port of Indiana is a governmental entity that owned nearly 1,000 acres in the immediate area of the subject property and had a business objective to control all of the land in the area. The Indiana Board weighed the evidence and determined the Assessor met her burden and that Nova Tube did not persuasively rebut the Assessor’s prima facie case.On appeal, Nova Tube contended that the Board erred in upholding the assessments. Regarding the sale of the subject property being a market value transaction, the Tax Court found that the Indiana Board decision was supported by substantial evidence. However, the Tax Court held that the Indiana Board abused its discretion by finding that the May 2014 transaction price was sufficiently related to each of the preceding March 1 valuation dates. Therefore, the Assessor did not meet her initial burden of proving the assessment increases were valid.The Board also found that the appraisals offered by Nova Tube had probative value. The Assessor did not challenge the Board’s finding as to the overall probative value of Nova Tube’s appraisals. Consequently, the Tax Court concluded that the property should be assessed at the values concluded to in the appraisals. The Court’s decision can be viewed here -- https://www.in.gov/judiciary/opinions/pdf/05181801mbw.pdf.
In its 2018 legislative session the Indiana General Assembly enacted and the Governor approved House Enrolled Act No. 1323, which starting in 2019 imposes a new excise tax on “heavy rental equipment” while removing such equipment from taxation as personal property. “Heavy rental equipment” under new Ind. Code § 6-6-15-2 is personal property, including attachments, which is owned by a person that is classified under 532412 of the North American Industry Classification System Manual (“establishments primarily engaged in renting or leasing heavy equipment without operators that may be used for construction, mining, or forestry, such as bulldozers, earthmoving equipment, well drilling machinery and equipment, or cranes”) and that is a retail merchant in the business of renting heavy equipment. The property may not be intended to be permanently affixed to any real property, and it must not be subject to registration for use on a public highway. It does not, however, include equipment rented for mining purposes or equipment subject to abatement during the calendar year. To qualify the rental period must not exceed 365 days or must be open ended with no specified end date.
The legislation imposes a new excise tax upon the rental of heavy rental equipment from a retail merchant and from a location in Indiana. The tax rate is 2.25% of the gross retail income received by the retail merchant for the rental. Transactions are exempt if the “rentee” (the word used in the statute for the party renting the equipment) is the United States, the State of Indiana or a political subdivision. The transaction is also exempt if it is a sub-rental by the rentee to a third party and the rentee was subject to the tax. The rentee is liable for the tax, and the transaction is sourced to the business location of the retail merchant from which the heavy rental equipment is rented.
Starting with the January 1, 2019 assessment date, heavy rental equipment that is rented or held in inventory for rental or sale and the rental of which would be subject to this new excise tax will not be subject to Indiana’s personal property tax.
The Indiana Board of Tax Review on February 26, 2018 applied a partial exemption to a building owned by Historic Landmarks Foundation of Indiana, Inc. The Foundation is a non-profit organization with a mission of historic preservation. It educates the public about contemporary rehabilitation and preservation, provides financial support to local organizations, and acquires historic properties that appear threatened. Properties are resold with protective covenants that require the new owners to complete the restorations. The Foundation has bought and sold more than 500 properties since 1968 – including the subject three-story building in downtown Edinburgh.
The Foundation claimed an exemption for the January 1, 2016 assessment date under two statutes: (i) the fine arts exemption under Indiana Code § 6-1.1-10-18 (for property owned by an Indiana not-for-profit corporation that “is organized and operated for the primary purpose of coordinating, promoting, encouraging, housing, or providing financial support to activities in the field of fine arts,” including architecture, and (ii) the charitable-purpose exemption noted above.
The building did not qualify for the fine arts exemption. The evidence showed that the Foundation may have been organized to preserve and support architecturally significant buildings but it was not operated primarily for that purpose. The Foundation “focused at least as much, if not more, on preserving sites for their historical value as it did on preserving sites for architectural significance.” History and architecture may overlap, but they are not the same the Board reasoned.
[Foundation] had a charitable purpose: preserving the historic character of Edinburgh’s commercial district, at least part of which—the building under appeal—had fallen into disrepair. [Foundation] owned and used the property to further that charitable purpose. It renovated and stabilized the building and attempted to sell the property subject to covenants obligating any buyer to maintain and preserve the building in its historic condition. Similarly, [Foundation] either actually or constructively occupied the property while it was doing those things.
However, the building’s first floor was leased and there was no evidence showing it was occupied by the tenant for an exempt purpose. The property thus qualified for a two-thirds exemption. The Board’s decision can be viewed at http://www.in.gov/ibtr/files/Historic_Landmarks_Foundation_%20of_IN%2041-002-16-2-8-01282-16_etc.pdf.
Indiana Tax Court Breathes New Life into Ministry’s Property Tax Exemption Appeal.
The Tax Court held that the Indiana Board’s regulation “expresses as an absolute that a motion must precede” a dismissal order, which was “consistent with the long-held preference for allowing the parties an opportunity to respond to the motion before the Indiana Board acts.” The Tax Court further concluded that the County Board’s act of listing the wrong taxpayer name as the property owner on its denial was an error that could be addressed in the Petition. However, the record was “bereft of any analysis by the Indiana Board regarding the property’s ownership.” The Court remanded the matter to the Indiana Board to determine if the Ministry’s ownership interest in the real property entitled it to the exemption.
[A] specific statute applies to the valuation of certain rental properties such as the one at issue. Specifically, Ind. Code § 6-1.1-4-39(a) provides in part that the true tax value of real property regularly used to rent or otherwise furnish residential accommodations for periods of 30 days or more and that has more than four rental units is the lowest valuation as determined under the cost approach, the sales comparison approach, and the income valuation approach. [Taxpayer] emphasized the importance of this statute, while [Assessor] simply ignored it altogether.
The cost approach values developed by Taxpayer’s appraiser yielded the lowest values, and the Assessor did nothing to show that those values were inaccurate. The Indiana Board concluded that the Assessor’s omission of a cost approach analysis was a “significant flaw” in his case. The Board lowered the assessed value of the apartment complex for each contested year based on Taxpayer’s cost analyses.
On May 25, 2017, the Indiana Tax Court affirmed the assessment reduction for a 10,800 square foot retail store used as a CVS in Monroe County. In Monroe County Assessor v. SCP 2002 E19 LLC 6697 a/k/a CVS 6697-02, the Tax Court considered an appeal by the Assessor for the 2007 to 2013 tax years. The Indiana Board of Tax Review had reduced the assessments for each year based on the income approach analyses in the USPAP-compliant appraisal submitted by Taxpayer. On appeal, the Assessor claimed that the Indiana Board’s final determination was erroneous because it applied the wrong standard of value and because Taxpayer’s appraisal was based on unreliable data and inadequate explanations.
The Tax Court rejected both claims. As to the first point, i.e. the wrong standard of value, the Court had recently dismissed the same argument for another CVS store in the same county with the same litigants and the same attorneys. The Court declined to “address the argument anew” and simply incorporated its prior analysis and conclusions. Slip op. at 5. As to the second point, i.e. the reliability of data and explanations in Taxpayer’s appraisal, the Assessor’s argument was two-fold: (i) the appraisal failed to rely on local data; and (ii) the Indiana Board had given no weight to the sales comparison approach in Taxpayer’s appraisal, and the values under that approach were close to the values determined under the appraisal’s income approach. The Tax Court declined to reweigh the evidence, and the evidence showed that Taxpayer’s appraisal “adjusted the comparable properties used in its income approach to reflect their differences from the subject and that it provided thorough explanations of the methodologies it employed.” Slip op. at 6. The Assessor failed to identify any evidence showing that the Indiana Board’s final determination was against the logic and effect of the facts and circumstances. In short, the evidence of record supported the Board’s ruling, and the Board had not abused its discretion in reducing the property’s assessed value for each year. The Assessor is currently seeking review of this decision by the Indiana Supreme Court.
Taxpayers in certain Indiana Counties, including Marion County (Indianapolis), will have an opportunity to challenge excessive assessments as of the January 1, 2016, assessment date (for taxes payable in 2017). In these counties, there is a 45-day period in which to file appeals, which right is triggered by the Spring 2017 tax bill. If this narrow filing period is missed, a taxpayer may lose the opportunity to reduce the assessment for 2016-pay-2017.
[A] property’s market value and market-value-in use often coincide and thus, when determining a property’s market value-in-use, it is improper to reject out-of-hand an appraisal that estimates that property’s market value.
Slip op. at 3 (emphasis in original, citing several Tax Court cases). In what the Tax Court described as a “lengthy discussion,” the Tax Court noted that the Indiana Board’s final determination “addressed the strengths and weaknesses of each of [the three approaches to value] within each Appraisal Report.” Id. at 4. The Indiana Board assigned the most weight to the income approach in Taxpayer’s appraisal and reduced the assessments accordingly.
On appeal, the Assessor argued that the Tax Court’s prior decisions interpreting Indiana’s market value-in-use standard were wrongly decided and, therefore, it was unreasonable to rely upon them. The Court concluded: “This very same argument has already been advanced in – and rejected by – the Tax Court.” Slip op. at 6. The Court rejected the argument once again, stating that it “continues to stand by its analyses in those [prior] cases and need not repetitively address the argument in this opinion.” Id.
The Assessor is seeking review of the Tax Court’s ruling by the Indiana Supreme Court.
On December 30, 2016, in Lake County Trust Co., Trust No. 6 (Flowers for Heaven, Inc.) v. St. Joseph County Assessor, the Indiana Tax Court allowed a property tax appeal to move forward on the merits, even though the Trust failed to timely file a copy of the certified administrative record with the Court. Tax Court Rule 3(E) requires the appealing party to file the record within thirty days of being notified of the record’s completion by the Indiana Board of Tax Review. Here, the Trust undisputedly was approximately three months late in filing a copy of the record. But the Assessor did not object to the late filing until after the Trust had filed its brief on the merits. The Court observed that an objection to an untimely procedural prerequisite can be waived if not made at the “appropriate time” – which is the “earliest opportunity.” Slip op. at 3 (quoting Packard v. Shoopman, 852 N.E.2d 927, 932 (Ind. 2006).) That “earliest opportunity” must precede “the furtherance of the merits.” Id. (citing various decisions). By the time the Assessor filed her motion to dismiss, the merits of the appeal had been advanced by the filing of the Trust’s brief. The motion to dismiss was denied. Slip op. at 4.
Summary: The Indiana Tax Court reversed a ruling affirming the allocation of an apartment complex’s residential (subject to a 2% cap) and nonresidential (subject to a 3% cap) property.
The Tax Court in Hamilton Square Investment, LLC v Hamilton County Assessor (Oct. 5, 2016) explained, “Indiana’s property tax caps provide taxpayers with credits against their Indiana property tax liabilities” and the “amount of a credit depends on, among other things, a property’s classification (e.g., homestead, residential, agricultural, or nonresidential) and its overall gross assessed value.” Slip op. at 1-2 (citing Ind. Code § 6-1.1-20.6-7.5). For the March 1, 2012, assessment, Taxpayer challenged the classification of its 200-unit apartment complex. The Assessor had “classified about 70% of the property as residential (i.e., the apartment buildings, attached balconies, and land thereunder) and 30% as nonresidential (i.e., the paving, storage/utility sheds, pool, clubhouse, and all remaining land)” – a 2% cap applies to the residential component and a 3% cap applies to the nonresidential component. Slip op. at 2.
The crux of the dispute was the definition of “common areas.” Taxpayer argued that the 2% cap should apply to common areas beyond the complex’s building footprint. The Assessor countered that the term “excluded ‘standalone structures’ and their supporting land (e.g., clubhouses and sheds).” Slip op. at 6 (citations omitted). The Court rejected the Assessor’s narrow interpretation and concluded that “common area,” as interpreted logically in light of all of the relevant statutory language, “must be understood to include land and improvements that are both attached to, and separated from, a multi-unit apartment building so long as the area is available for the shared use of tenants.” Slip op. at 7. Therefore, the Court reversed the Indiana Board of Tax Review’s ruling affirming the Assessor’s allocation. Slip op. at 8.
The legislature adopted language defining “common areas” in 2013 but the Court found that it did not have to address that change in order to resolve the appeal. Slip op. at 7 n.4 (citing Indiana Code § 6-1.1-20.6-1.2).
As of this posting, the Hamilton County Assessor is seeking review of this ruling by the Indiana Supreme Court.
The Department of Local Government Finance is expected to issue draft rules in October 2016 regarding “market segmentation.” In 2016 the Indiana General Assembly added Ind. Code § 6-1.1-31-6(d) to provide: “With respect to the assessment of an improved property, a valuation does not reflect the true tax value of the improved property if the purportedly comparable sale properties supporting the valuation have a different market or submarket than the current use of the improved property, based on a market segmentation analysis.” Any such analysis “must be conducted in conformity with generally accepted appraisal principles.” And the analysis “is not limited to the categories of markets and submarkets enumerated in the rules or guidance materials adopted” by Indiana’s property tax rulemaking agency, the Department of Local Government Finance (DLGF), which agency was also directed to develop rules classifying improvements in part based on market segmentation.
Indiana Tax Court upholds assessment reductions for big box store, finding no “infirmities” in its prior holdings allowing consideration of sales to “secondary users” and sales of vacant stores.
Let the decisions stand! On September 7, 2016, the Indiana Tax Court relied on the well-established principle of stare decisis – the “foundation stone of the rule of law” – in refusing to overrule the Court’s prior decisions regarding use of comparable sales to so-called “secondary users” and sales of vacant stores.
Both parties agreed the original assessments were excessive. Taxpayer in Howard County Assessor v. Kohl’s Indiana LP occupied an 88,242 square foot retail store and challenged the property’s 2010 to 2012 assessments. Before the Indiana Board of Tax Review, both Taxpayer and Assessor offered appraisals concluding to values lower than the original assessments. The appraisals differed in the comparable sales relied upon. Taxpayer’s appraisal used fee simple sales of nine Midwestern “big box” retail stores. These comparable sales were vacant at the time of sale, and the properties were used for retail purposes before and after their sales. Assessor’s appraisal, in contrast, used only leased fee sales.
After reviewing the evidence presented, the Indiana Board found that because the Assessor 1) acknowledged that properties like the subject property frequently trade in the market for a general retail use, 2) indicated that the subject property’s current use was its highest and best use, and 3) failed to demonstrate that the subject property was in fact a special purpose property, [Taxpayer’s] appraisal better reflected the subject property’s market value-in-use.
The Assessor’s appraisal, on the other hand, improperly “measured the value of a property that was better than, and not similar to, the subject property.” Slip op. at 5.
Tax Court relies on longstanding case law to support Taxpayer’s use of comparable sales. Indiana assessors are required to determine a property’s market value-in-use, defined as the value “of a property for its current use, as reflected by the utility received by the owner or a similar user, from the property.” Slip op. at 7 (citing 2002 Indiana Manual at 2). Under that standard, Indiana “taxes the value of real property – and not business value, investment value, or the value of contractual rights.” Slip op. at 7. The Court explained, “[M]arket value-in-use, as determined by objectively verifiable market data, is the value of a property for its use, not the value of its use.” Slip op. at 7 (quoting Stinson v. Trimas Fasteners, Inc., 923 N.E.2d 496, 501 (Ind. Tax Ct. 2010), emphasis in original). The Court further observed that “when a property’s current use is consistent with its highest and best use and there are regular exchanges within its market so that ask and offer prices converge, a property’s market value-in-use will equal its market value because the sales price fully captures the property’s utility.” Slip op. at 7 (quoting Millennium Real Estate Inv., LLC v. Assessor, Benton Cnty., 979 N.E.2d 192, 196 (Ind. Tax Ct. 2012).) The Court noted that it “has repeatedly interpreted the meaning of ‘current use’ broadly, rejecting the contention that with respect to commercial and industrial properties, properties that have been sold to ‘secondary users’ cannot be considered comparable.” Slip op. at 8 (citing multiple decisions). And the Court “has also disavowed the contention that vacant properties cannot be comparable to occupied properties.” Slip op. at 9 (citing Trimas Fasteners, Inc., 923 N.E.2d at 501).
The Tax Court’s decisions were not “wrongly decided.” The Assessor on appeal offered one argument, i.e. that the Tax Court should abandon its “wrongly decided” prior decisions. Slip op. at 9-10. But the Court found “no infirmities in its decisions” and therefore declined the Assessor’s invitation to overturn those decisions. Slip op. at 10.
The Owner of a lakeside rental property failed to connect her market evidence to the relevant valuation date. Consequently, the Tax Court affirmed the partial denial of Owner’s assessment appeal for the March 1, 2009 assessment date (and its corresponding January 1, 2008, valuation date – a quirk of Indiana law at the time). In Gillette v. Brown County Assessor (June 7, 2016), Owner argued that the Indiana Board of Tax Review improperly rejected her entire evidentiary presentation, which included (i) rental insurance policy declarations for 2005 to 2012; (ii) a 1998 appraisal; (iii) a 2006 appraisal; and (iv) testimony regarding the property’s potential rental income and sales price. But Owner failed to relate her evidence to the applicable valuation date. The Indiana Board, therefore, did not err in rejecting that evidence, the Court concluded.
The Indiana Board had lowered the property’s assessment to its prior year’s value because the Assessor failed to meet her burden of proof justifying the year-over-year increase. The Assessor, in fact, had conceded that the reduction was appropriate. Owner sought, but could not support, a further reduction. Before the Tax Court, she complained that the Indiana Board was required to determine the property’s value using a gross rent multiplier. The Court, however, would not reverse the Indiana Board’s ruling on that basis. Owner did not show that the Indiana Board’s concluded value was unreasonable.
In Jones v. Jefferson County Assessor (May 4, 2016), Homeowners in Jefferson County argued that their partially constructed home should not have been assessed as 100% complete for the 2008 and 2009 tax years. In fact, they argued, the residence should be assigned a $0 value for assessment purposes. The home was constructed on 100 acres of land Southeastern Indiana. For both tax years, the home was assessed for more than $500,000. On appeal to the Indiana Board of Tax Review, Homeowners provided a letter authored by the township’s Trustee/Assessor to the County Assessor stating that, due to litigation between Homeowners and their contractor, the residence was only partially constructed and uninhabitable. The Indiana Board agreed that the residence was assessed as fully completed but “clearly it was not.” Slip op. at 3. Nevertheless, the Board concluded that the assessments would stand because Homeowners’ “primary evidence, the Trustee/Assessor’s document, was unreliable and provided insufficient support for the requested valuation of $0.” Id.
Before the Tax Court, Homeowners reiterated that because their home was only partially constructed in 2008 and 2009, it was ineligible for assessment and therefore had no value. The Court, however, noted that Indiana Code § 6-1.1-2-1 provides that “all tangible property which is within the jurisdiction of this state on the assessment date of a year is subject to assessment and taxation for that year.” The County Assessor was obligated to determine the property’s true tax value. Homeowners provided no market-based evidence of the property’s value to the Indiana Board for either tax year. (They submitted additional evidence to the Court, but the documents had not been presented to the Indiana Board and thus could not be considered by the Court.) Without market-based evidence to review, the Court would not reverse the Indiana Board’s ruling.
Indiana Passes Legislation Implementing Market Segmentation; Tax Court Rules For Taxpayers Regarding Reclassification Of Land And Assessor's "Trial By Ambush"
1. Direct appeals to Indiana Board of Tax Review. Starting July 1, 2016, a Taxpayer may take a direct appeal to the Indiana Board of Tax Review, if the County Board fails to act timely, regarding a property tax exemption filing or a Form 133 Petition for Correction of Error (which a taxpayer files to correct an objective error, to claim taxes are illegal as a matter of law, or to assert a taxpayer was not given credit for an exemption or deduction permitted by law).
3. Parties may challenge sales with market segmentation analysis. The legislature repealed provisions governing the assessments of “big box” retail stores and limiting use of certain vacant properties as comparable sales; in so doing, a new statute was added providing that a party may submit a “market segmentation analysis” that is “conducted in conformity with generally accepted appraisal principles” to show comparable sales do not support a property’s valuation. This is retroactive to January 1, 2016.
On January 29, 2016, the Indiana Tax Court in DeKalb County Assessor v. Chavez upheld the decision by the Indiana Board of Tax Review to reclassify 2.72 acres of land from excess residential to agricultural for the March 1, 2013, assessment date. Owners acquired 5.18 acres in the 1980s. As of the 2013 assessment date, the partially wooded property included a mobile home, a detached garage, and three pole barns. The Assessor classified one acre as residential homesite, 2.72 wooded acres as excess residential, .68 acres as a legal ditch, and .78 acres as a public road. On appeal to the Indiana Board, Owners claimed the 2.72 acres should be classified as agricultural, because it was purchased “as a woods” and Owners intended to grow and harvest the trees. In 2013, however, the property had been “logged out” and no harvesting had occurred, though some trees were mature and others were maturing. The Indiana Board agreed, reclassifying the property as agricultural.
Assessor claimed the disputed acreage was not “devoted to agricultural use” and therefore should not be assessed as agricultural land under Ind. Code § 6-1.1-4-13(a). At best, Owners had only a “casual motivation” to harvest trees. Having a timber management plan and actually harvesting trees are just two factors to consider, the Court observed, so it could not “find the Indiana Board erred in reclassifying [Owners’] land despite the fact they neither had a timber management plan nor had they harvested any trees.” The Indiana Board had given “significant weight” to testimony that Owners purchased the property as a “woods” and intended to harvest the trees, as the prior owners had done. Moreover, there was no evidence that Owners had changed that prior use.
Assessor lamented that placing greater weight on an owner’s intent at the time of purchase creates an “unworkable standard.” The Court would not change that standard. It would not “ignore the purchaser’s intent at the time of purchase or refuse to give it heightened import as the guidelines set forth.” The Indiana Board considered the appropriate factors and its decision was based on relevant evidence. The Tax Court would not reweigh the evidence. The Indiana Board’s decision was affirmed.
Even in a small claims proceeding, the Indiana Board of Tax Review must “uphold the fundamental tenet of our judicial system that neither party be subjected to a trial by ambush.” In RJK Trust v. LaPorte County Assessor (Sept. 18, 2015), Taxpayer appealed the $630,500 assessment of a single family residence for the March 1, 2006, assessment date. Denied relief by the County Board, Taxpayer on appeal to the Indiana Board elected to use the Board’s small claims procedures. The Indiana Board found that the Assessor had the burden of proof. The Assessor submitted an appraisal valuing the property at $800,000. The appraisal, however, had not been produced before the hearing — despite Taxpayer’s written requests seeking copies of the Assessor’s documents pertaining to the appeal. The Indiana Board accepted the appraised value, ruling to increase the home’s assessment.
Before the Tax Court, Taxpayer objected to the Indiana Board’s reliance on an appraisal that had not been timely produced. The Tax Court explained that “the Indiana Board’s small claims regulations require, upon request, pre-hearing disclosure” of a party’s documentary evidence. Slip op. at 5 (citing 52 I.A.C. 3-1-5(d) (emphasis in original).) Despite this mandate, “a trial by ambush is exactly what happened.” Slip op. at 5. Consequently, Taxpayer “had no opportunity to adequately prepare any rebuttal to the evidence in the appraisal report in advance of the hearing or in the twenty minutes it had to present its case.” Id. The Indiana Board “abused its discretion by making a determination that is clearly contrary to the logic and effect of the facts and the law because it is based on evidence tainted by the evils of unfair surprise.” Id. at 6. The Court reversed and remanded the Indiana Board’s final determination for a new hearing.
In a pair of decisions issued on September 30 and December 3, 2015, the Indiana Tax Court upheld the 2006 to 2010 assessment reductions for an Indianapolis shopping center. In Marion County Assessor v. Gateway Arthur, Inc., Taxpayer owned six parcels consisting of three buildings with 270,000 square feet of leasable space, a retention pond, two access roads and a pylon sign. For the 2006 to 2010 tax years, the Assessor assigned values to the property ranging from about $17 to $18.1 Million. The Indiana Board of Tax Review granted reductions to the property’s assessments, lowering the values to approximately $10.5 Million to $14.8 Million. On appeal, the Assessor raised several arguments in challenging the Indiana Board’s final determinations.
For 2006, the Assessor failed to meet his burden of proof. Because the property’s assessment increased by more than 5% from the 2005 to 2006 assessment dates, the Assessor bore the burden of proof on appeal. At the administrative hearing, the Assessor submitted an income analysis and a computer printout showing that the property had been purchased for $21 Million in 2007. Before the Tax Court, the Assessor claimed that Taxpayer, in fact, had the burden of proof. The certified record showed the assessment increase year-over-year, and the Court observed that application of Indiana’s burden-shifting provision “has always been triggered by the filing of an appeal in which there was an annual increase in the assessed value of property in excess of 5%.” (citation omitted).
The Tax Court further noted that conflicting evidence in the record showed that the Assessor’s income analysis failed to account for the impact of property taxes on the shopping center’s value. The Court, therefore, deferred to the Indiana Board’s conclusion that the analysis lacked probative value.
Regarding the property’s purchase price, the Court explained that the Assessor’s computer printout “failed to indicate who entered the data, failed to include all six parcels, and contained the wrong sale and deed dates.” (internal quotes, citations omitted). The Assessor could not produce a sales disclosure form. Moreover, the shopping center was part of a thirty-six property portfolio sale, so it was important to determine whether its allocated sales price included more than the “sticks and the bricks.” Because the Assessor had the burden of proof, Taxpayer was not required to submit independent valuation evidence. The Indiana Board properly reinstated the property’s 2005 assessed value for 2006.
For 2007 to 2010, Taxpayer’s appraisal supported reductions. The Indiana Board had adopted values for the shopping center reflecting the property’s appraised values as “augmented” by $1 Million to account for certain property tax reimbursements. The Assessor asked the Tax Court to reverse, wrongly claiming that Indiana’s assessment guidelines prohibited use of loaded capitalization rates to value property. The Assessor also argued that the appraisal underestimated the shopping center’s value by failing to attribute income to the retention pond, pylon sign and access road parcels. However, the record lacked evidence showing that Taxpayer collected rent from retailers based on their use of these parcels. The Assessor failed to undermine the appraisal’s probative value.
The Assessor further failed to show that his evidence supported a reduction. The Assessor did not explain why his reliance on capitalization rates for national power centers was proper or why Taxpayer’s appraisal, which treated the shopping center as a “hybrid” center, was improper. The Court also noted the same flaws with the Assessor’s income analysis and purchase price information as discussed above.
Finally, the Court found that the Indiana Board did not err in adopting values above the “augmented” values, because the adjustments were based on evidence in the record.
In a consolidated case involving more than two dozen appeals, the Indiana Tax Court on September 3, 2015, found in Pulte Homes of Indiana, LLC v. Hendricks County Assessor that the Indiana Board of Tax of Review properly dismissed Taxpayers’ petitions for multiple assessment dates, concluding that Taxpayers’ improperly used Form 133 petitions to claim their common areas of land in residential areas had no value. The Court explained that a Form 133 petition can be used to assert three claims of error: (1) the taxes were illegal as a matter of law, (2) there was a mathematical error in computing an assessment, or (3) through an error or omission by the county official, the taxpayer was not given credit for an exemption or deduction permitted by law. Here, Taxpayers claimed, in part, that the assessments were illegal as a matter of law.
Evidentiary hearing not required. Taxpayers contended that the Board could not dismiss its claims without holding an evidentiary hearing. The Board had held a show cause hearing, at which deposition testimony and other exhibits were submitted. A hearing was not required, the Court confirmed, when the Board confronted a preliminary procedural issue. Slip op. at 7.
No per se rule of zero value. Based on precedent from the Tax Court and Board, Taxpayers asserted the common areas should have assessed values of zero. That authority, however, was not controlling in the present cases. Determining a zero assessment was an objective decision, Taxpayer further argued, as the decision involves “a simple, uncomplicated finding, which has already been made by many assessing officials, as to whether the subject property is a residential common area.” Slip op. at 8. In short, there was a per se rule that the assessment was zero. Not so, the Court held. Id. at 9. “No per se rule exists that common areas have zero value, and therefore, any evidence presented would necessarily involve subjective judgment because the value cannot be determined from a simple rendition of objective facts.” Because subjective judgment was required, use of the Form 133 petition was not appropriate.
Burden did not shift. Taxpayers argued the Assessor had the burden of proof under Indiana’s burden-shifting statute, Ind. Code § 6-1.1-15-17.2. But that provision applies “only when the validity of the assessment is at issue, not when, as here, there is a preliminary procedural issue being determined.” Id. at 10.
On May 12, 2015, the Indiana Tax Court ruled on the property tax appeals for two residential parcels owned by Property Development Company Four, LLC (the “Company”), which in 2003 bought two parcels in Grant County upon which two homes (the “Eastway Drive” and “Aspen Court” properties) were built. The Grant County Assessor failed to assess the new homes until 2006 and 2007, respectively, because he never received the building permits for the properties. The Assessor assessed both homes starting with the March 1, 2004, assessment date. The Treasurer, however, did not attempt to collect tax for these prior years’ assessments until 2010. On appeal, the Indiana Board of Tax Review nullified the 2004 assessment for the Aspen Court property due to an untimely notice but upheld the other assessments.
“Specific” assessment statute did not control. The Company argued that a more “specific” assessment statute, which applies to subdivision property assessments, trumped the Assessor’s use of the “general” assessment provision, Ind. Code § 6-1.1-9-4 (“Section 4”), to assess the homes. According to the Company, the specific provision applied only prospectively, so the Assessor was prohibited from retroactively increasing the properties’ values. Section 4 (along with Ind. Code § 6-1.1-9-1) allows Indiana assessors to assign value for omitted or undervalued property within three years of the relevant assessment date. The Court concluded, “The application of each of these statutes is triggered by different factual circumstances, and neither statute indicates that the application of one precludes an assessment under the other.” Slip op. at 6. The more “specific” statute, in fact, was merely a different assessment statute. The homes were omitted property, and the Assessor was allowed to assign value to them for prior years. Slip op. at 7.
Assessor’s notices were defective; tax bills were not timely notice. The Assessor used Form 122s to notify the Company of the retroactive assessments. Under the applicable provisions, the Court explained: “[A]n assessing official must mail written notice of the assessment of omitted or undervalued real property to a taxpayer that states 1) a general description of the property; 2) the amount of the increased or new assessment; and 3) a statement regarding the taxpayer’s right to review under Indiana Code § 6-1.1-15-1 [the property tax appeals statutes].” Slip op. at 9 (citations omitted). The Form 122s included descriptions of the homes and statements of the amount of the assessments. But they contained no information regarding the Company’s appeal rights. The notices, therefore, were defective. Slip op. at 9-10. While the annual tax bills may have constituted notice, those bills were not issued within three years of the assessment dates. Slip op. at 10 (citations omitted).
Court would not consider new arguments and new evidence on rehearing. The Assessor sought a rehearing, claiming the Court omitted a material fact in reaching its decision. The Assessor stated that the Company had received Form 11 assessment notices for the prior years’ increases and that those notices explained the Company’s review rights. The Assessor submitted certified copies of blank Form 11 notices as proof. The Assessor apparently “filled out” a Form 11 notice for one property, but that notice was not included in the certified administrative record. In an Order issued August 20, 2015, the Court explained: “When a litigant fails to present evidence to the Indiana Board, the Court may not consider that evidence on appeal.” Order at 2 (citation omitted). The Court could not consider the blank Form 11. Id. at 2-3. The Assessor admitted the Form 122 was inadequate notice, so the Court found that it had not omitted a material fact. The Assessor further claimed the Court’s remedy of invalidating the retroactive assessments was “too extreme.” The Court noted that the Assessor was improperly asserting new arguments or theories. Id. at 3. In addition, the cases relied upon by the Assessor involved criminal convictions, so they were not persuasive. Id. at 4. Finally, the Court noted that it “has previously held that the failure to follow procedural rules is sufficient to invalidate an assessment.” Id. (citation omitted). The Court reaffirmed its holding. The Court’s original opinion can be viewed here, and it’s Order on Petition for Rehearing can be viewed here.
The Tax Court refused to reweigh the evidence in the administrative record in affirming the value of residential land. On September 9, 2015, the Indiana Tax Court upheld the Indiana Board of Tax Review’s decision affirming an assessor’s residential land valuation. In Cooper v. Allen County Assessor, Homeowners argued that the March 1, 2012, assessment of their 7.78 acres of land should be reduced from $172,500 (nearly $22,200 per acre) to $62,240 ($8,000 per acre). At the administrative hearing, Homeowners submitted a 2011 appraisal indicating the lower value – which reflected the land’s 2007 purchase price. However, other evidence showed that Homeowners acquired the land from a relative, with no money actually changing hands. The Assessor, in turn, submitted evidence of the sales prices and listings of vacant lots in the neighborhood, ranging in value from $20,000 to $25,000 per acre. The Board concluded that the Assessor had the burden of proof to support her assessment and did so through the evidence submitted. Furthermore, the Board concluded that Homeowners’ appraisal lacked credibility. Slip op. at 3. On appeal, Homeowners challenged the probative value of Assessor’s evidence, arguing that she failed to explain how the comparable properties differed from the subject land and how those differences impacted the properties’ relative values. The comparable lots were in the same neighborhood and thus presumed comparable. Slip op. at 5. And the Assessor’s evidence, including testimony and exhibits, “was sufficient to demonstrate that the [Homeowners’] lot and the other lots within [the neighborhood] were comparable.” Slip op. at 6. The record included “ample evidence” supporting the land’s assessment, so the Board had not abused its discretion in upholding the Assessor’s value. Id. In affirming the Board’s ruling, the Court declined to reweigh the evidence. Id. at 6-7.
The Assessments of Big Box Stores. The Indiana General Assembly created two new provisions regarding the assessments of commercial property. Indiana Code § 6-1.1-4-43 is effective for the March 1, 2014 and prospective assessment dates. It applies only to real property that is both “a limited market or special purpose property that would commonly be regarded as a big box retail building under standard appraisal practices and is at least fifty thousand (50,000) square feet” and that is “occupied by the original owner or by a tenant for which the improvement was built.” Section 43 applies only to improvements with an effective age that is 10 years or less under the rules of the Department of Local Government Finance (the DLGF, which is the state agency responsible for Indiana’s assessment rules). For qualifying properties, assessing officials must value the property under the cost approach to value, less depreciation and obsolescence, under the DLGF’s rules and guidelines. Land shall be separately assessed, and land values may be challenged based on the market value of comparable land. For assessment appeals filed on or after May 1, 2015, taxpayers must provide the assessing official with information on the property’s actual construction costs. The county appeals board (the PTABOA) may not review the appeal until the information is provided. If the information is provided and supports a value higher than the value under the DLGF’s rules and guidelines, then depreciation and obsolescence shall be deducted from the actual construction costs.
Was not sold in an arm's length transaction.
In Peters v. Boone County Assessor (May 14, 2015), Taxpayers challenged the assessment of land supporting an office building for the March 1, 2010 assessment date. The land was .16 acre, but the Assessor previously had only assessed one-half of the lot. Assessing the entire lot doubled the land’s value.
The Court reverses the IBTR’s burden-of-proof determination. Indiana’s “burden-shifting rule,” Ind. Code § 6-1.1-17.2, assigns the burden of proof on appeal to the assessor, if the assessed value of the contested property increased by more than 5% year-over-year and the property’s physical status and use did not materially changed. See my prior blog post here. The Board assigned the burden of proof to the Taxpayers, even though the property’s assessed value had increased by more than 5%. The Indiana Board of Tax Review (IBTR) concluded that the property was not the “same” in 2010 as it was in 2009 – even though nothing had changed – because in 2010 the Assessor assigned value to the entire .16 acre. The Tax Court reversed on this point, reasoning that the Board’s determination “not only ignores the fact that the [Taxpayers] have always owned the same 0.16 acres of land but that the Assessor never created a new parcel identification number when she incorporated the ‘new’ property into their assessment.” Slip op. at 5 n.2. The Assessor had the burden of proof.
But the Court affirms the assessment based on the Indiana Guidelines. The Assessor added the omitted .08 acre to the property’s assessment and assigned the same base rate as applied to the original assessment, doubling the land’s value. The Assessor also supported her increase by pointing to the sales of four allegedly comparable properties in Zionsville. In response, Taxpayers argued in part “that the best use of their land was to bulldoze the improvement because it had no value, as it was not ADA-compliant and its heating system was ‘soon to go belly up.’" Slip op. at 7. Taxpayers also submitted evidence of sales of commercial property sales, relying in part on the same sales presented by the Assessor.
The Assessor’s and Taxpayers’ arguments regarding comparable sales suffered the same fatal flaw; neither party provided the Board “with any explanation as to how the properties from which that data was culled were comparable to the subject property and how any differences between the properties affected their market values-in-use.” Slip op. at 10. Taxpayers failed to shift the burden of production back to the Assessor. Consequently, the assessment stood.
Indiana allows taxpayers to correct certain property tax assessment mistakes using a Form 133 Petition for Correction of an Error. In Muir Woods, Inc. v. Marion County Assessor (June 18, 2015), the Indiana Tax Court held that Taxpayers could not use a Form 133 Petition to correct the assessments of their common area land. The opinion was a consolidation of five cases with identical issues. Taxpayers challenged their 2004 and 2005 assessments using Form 133 Petitions, claiming the assessments were illegal as a matter of law. Taxpayers also claimed the Assessor failed to adjust the base rates of the land. After ordering Taxpayers to show cause why the petitions were properly brought before it and holding a hearing, the Indiana Board of Tax Review (IBTR) dismissed the petitions. The Board found that Taxpayers had alleged errors that were not correctable using Form 133 Petitions.
Taxpayers challenged the IBTR’s ruling on various procedural and substantive grounds.
IBTR had authority to compel Taxpayers to show cause. Taxpayers claimed the IBTR could not sua sponte require it show cause as to the propriety of its petitions. The Board’s regulations, however, expressly allow it to “issue an order of default or dismissal on motion of a party or on its own motion.” Slip op. at 6 (quoting 52 IND. ADMIN. CODE 2-10-2(a)(1), emphasis in original). Because it had this authority, the IBTR “necessarily had the authority to determine whether it should dismiss [the] case by issuing” the show cause order.
IBTR was not required to conduct an evidentiary hearing to dismiss petitions. The appeals statute requires a hearing before the Board can “correct any errors” in the assessment. But a dismissal stops a case from proceeding on the merits. Even if a hearing was required, however, that requirement was met; the Board had permitted Taxpayers to present evidence and argument before and at the show cause hearing. Slip op. at 7.
The errors asserted were not correctable with a Form 133 Petition. Taxpayers raised several arguments as to why they could use a Form 133 Petition to challenge the common area assessments. The Court first concluded that Taxpayers could not rely upon a 2006 administrative ruling to support their allegation that the assessments were illegal as a matter of law. Slip op. at 8. And a determination as to whether the contested land was so encumbered that it had no value requires subjective judgment, which cannot be addressed using a Form 133 Petition. Slip op. at 9. Taxpayers offered no evidence supporting their conclusory statements that all other common area land in the County had been assessed at no value since the 2006 administrative ruling was issued. Slip op. at 10. Moreover, guidance from the Department of Local Government Finance did not mandate a zero assessment for common area land. It only identified factors to consider in valuing such land. By not raising it at the administrative level, Taxpayers waived the argument that the property was being assessed more than once. Id. Finally, Taxpayers’ claim that the Assessor misapplied the land order failed because a copy of the land order was not in the record. Slip op. at 11.
The Court affirmed the IBTR’s final determinations.
The 2015 session of the Indiana General Assembly created a new exemption for common area land. Effective May 4, 2015, the legislature added Ind. Code § 6-1.1-10-37.5 to provide an exemption for a “common area,” which is a parcel of land, including improvements, in a residential development that (a) is legally reserved for the exclusive use and enjoyment of all lot owners, occupants and their guests (regardless of whether the owner actually uses the property), (b) is owned by the developer, its assignee, each lot owner within the development, or a person, trust, or entity that holds title to the land for the benefit of all lot owners, (c) cannot be transferred for value to another party without approval of lot owners, and (d) does not include and is not designed or approved for construction of “Class 2 structures” under Ind. Code § 22-12-1-5 (which includes townhouses). The term includes a lake, pond, street, sidewalk, park, green area, trail, wetlands signage, swimming pool, clubhouse, or other features or amenities that benefit all lot owners within the residential development.
The common area is exempt provided appropriate notice is provided to the assessor. If the assessor determines that an area is not a common area, it must provide notice to the owner stating the basis for the decision and giving the owner thirty (30) days to respond. If the assessor fails to provide notice, the area shall be considered a common area. Once a common area is designated, a subsequent refiling is not required unless the area fails to meet the definition. An owner may obtain review by the County Board (PTABOA) of the assessor’s determination. Indiana Code § 6-1.1-15(a)(3) also has been added to give the PTABOA authority to review the assessor’s decision.
The Indiana Board of Tax Review (“Board”) recently determined that solar electric generating facilities should be centrally assessed as utilities for property tax purposes. In Middlebury Solar, LLC v. Indiana Dep’t of Local Gov’t Finance, Pet. No. 20-032-14-9-2-00001 et al. (IBTR Feb. 4, 2015), four owners of solar electric generating facilities sold electricity to a public utility through a feed-in tariff program. The companies argued that they were not traditional public utilities and should not be assessed by the Department of Local Government Finance (“Department”). While it may be true that the companies were not “traditional” public utilities, the Board cited Ind. Code § 6-1.1-8-3(a), noting that “[e]ach company which is engaged in the business of selling or distributing electricity, gas, steam, or water” shall be taxed as a utility. That definition is “intended to apply to the property of a wider variety of companies that are not necessarily similar to a traditional public utility company.” Because the Department’s authority under the statute “expressly applies to the property of a company that sells electricity,” the solar companies were assessable by the Department.
Nevertheless, a 2013 amendment – Ind. Code § 6-1.1-8-3(c)(7) – allows companies “participating . . . in a feed-in tariff program” to file personal property tax returns for their property with the local assessor. Following the amendment, “the company has the option to file locally” but the “default provision is that the company files with the Department.” The amendment was effective after the 2013 assessment and filing dates, so the Board concluded that the Department had authority to assess the solar companies for 2013. For 2014, the companies filed returns both with the Department and the local assessors, but the Department had issued its tentative assessments before the local returns were filed. Accordingly, the Board held that the Department had authority to assess the companies. Finally, because the solar companies failed to show that the Department’s assessments were erroneous as a matter of law, the assessments were affirmed.
The Indiana Tax Court recently reiterated its rules regarding the deference it gives to Indiana Board of Tax Review (IBTR) decisions, as well as clarifying how appraisal evidence is used. In Howard County Assessor v. Kokomo Mall LLC, 14 N.E.3d 895 (Ind. Tax Ct. 2014), the Assessor appealed a decision of the IBTR finding in favor of the taxpayer, a regional shopping mall. At the IBTR hearing, the taxpayer presented a USPAP-compliant appraisal performed by an MAI appraiser, as well as the testimony of that appraiser. In response, the Assessor argued that the taxpayer’s evidence “was riddled with errors and therefore unreliable,” but did not present her own evidence. The IBTR issued a final determination explaining that, despite certain errors, the taxpayer’s evidence was probative, and therefore the taxpayer had presented a prima facie case that the assessments were incorrect.
Second, the Assessor asked the Court to reconsider its “policy” that the mere presentation of a USPAP-compliant appraisal establishes a prima facie case. According to the Assessor, this policy “eviscerates the [IBTR’s] discretion to assess the reliability of appraisals,” improperly shifts the burden of proof to assessing officials, and “effectively compels assessing officials to hire their own appraisers despite the prevailing financial constraints.” The Court found instead that the decision to hire an appraiser or submit a USPAP-compliant appraisal “is more likely a litigation strategy, not the latent result of a purportedly inequitable policy.” Indiana law provides that a taxpayer can rebut the correctness of an assessment by introducing relevant market data, such as evidence of actual construction costs, certain sales or assessment data, or any other data compiled in accordance with generally accepted appraisal principles. Because the presentation of an appraisal is not the only way to rebut the presumption that an assessment is correct, it follows that the same type of evidence may be used to impeach the accuracy of an appraisal or lend support to the accuracy of an assessment. Accordingly, the Court denied the Assessor’s request.
Indiana Tax Court rules on taxpayers’ challenges regarding uniformity of assessments, the credibility of comparable sales, and evidence of obsolescence.
1. Indiana homeowner failed to prove lack of uniformity in the assessment of his property. Indiana’s burden-shifting statute doesn’t apply to uniformity claims, the Tax Court ruled in a recent decision in which it also held the Owner failed to show that the assessment of his home was non-uniform with those of other homes in the community. In Thorsness v. Porter County Assessor, Cause No. 49T10-1102-TA-14 (Jan. 23, 2014), Owner bought a home on January 31, 2007, for $1.65 Million, in Dune Acres. Located on the southern shore of Lake Michigan, Dune Acres included approximately 155 homes. For the March 1, 2007 assessment, the Assessor assigned a value of $1,647,800 to the property.
Owner’s constitutional challenge. Before the Indiana Board of Tax Review, Owner argued that the assessment of his property – at almost 100% of its purchase price – violated Indiana’s constitutional mandate under Article X, Section 1, for uniform and equality of assessments, because six other homes in the community were on average assessed at 79.5% of their recent sales prices. Owner supported his claim with a one-page spreadsheet that showed the addresses, sales dates, sales prices, assessed values, and sales-to-assessed value ratios for the six properties. Owner requested an assessment of $1,311,750 for his property, reflecting 79.5% of its purchase price. The Indiana Board rejected his claim, reasoning that Owner’s ratio analysis was not demonstrably sophisticated or reliable enough to prove his claims.
Owner had the burden of proof. Under Indiana’s burden-shifting rule, the Assessor has the burden of proof in appeals where the assessed value of the property under appeal increased by more than 5% over its prior year’s value. (The version of the statute effective at the time of Owner’s 2010 administrative hearing has been repealed and replaced with a similar, yet broader, version found at Ind. Code § 6-1.1-15-17.2.) While the home’s assessment had increased by more than 5% over its 2006 assessed value, the Tax Court concluded that, based on its plain language, the burden-shifting statute “(and it progeny) applies only to valuation challenges, not to uniform and equal constitutional challenges.” Slip op. at 7 (emphasis added). The statute applies only when a taxpayer claims his property’s assessment doesn’t reflect its market value-in-use, not when a taxpayer such as Owner seeks to reduce an “otherwise correct property assessment . . . so that it is on par with the assessment to market value ratios of other properties” in the community. Slip op. at 8.
Ratio study relevant, but not probative. Owner claimed his ratio study supported a reduction because it contained virtually every sale in Dune Acres for the two years preceding the 2007 assessment date, was therefore statistically reliable, and proved that residential properties in the community were systematically under-assessed. The Court noted that Indiana’s agency overseeing the administration of property taxes, the Department of Local Government Finance (DLGF), had incorporated into law the International Association of Assessing Officers’ Standard on Ratio Studies, which states that a “valid assessment ratio study must be based on data that has been both appropriately stratified and statistically analyzed.” Slip op. at 9. A “statistical measurement of assessment uniformity must be calculated for the entire taxing district and each stratum therein.” Id. According to the DLGF, the “coefficient of dispersion [is] the yardstick by which assessment uniformity is measured in Indiana’s townships.” Slip op. at 10. Owner’s evidence was “no doubt relevant,” the Court explained. Id. Nevertheless, the Indiana Board did not err in finding that the study “was not probative in demonstrating that [Owner’s] property was assessed and taxed at a level that exceeded the common level” within the property’s township overall. Id.
2. Homeowners’ evidence failed to show property was overvalued; their comps were not shown to be comparable. McKeeman v. Steuben County Assessor, Cause No. 02T10-1104-TA-31 (May 28, 2014). The Tax Court affirmed the Indiana Board’s denial of Owners’ 2006 assessment appeal of their residential property. Owners argued that the Indiana Board erroneously disregarded or rejected their claims regarding the establishment of their neighborhood and base rate for land. Owners also asserted that the Board wrongly found their sales comparison approach laced probative value.
A. Neighborhood. Indiana’s Guidelines instruct assessing officials to consider nine factors when establishing neighborhoods within townships for use in assessing property. Owners claimed that the Assessor must have ignored the Guidelines because of differences in properties located within their assigned neighborhood. The Court noted that, under the Guidelines, a neighborhood “may contain properties that vary with respect to road access, size, and use type.” Slip op. at 4-5 (citation omitted). Such “differences are not per se indicators of an improperly constituted neighborhood.” Slip op. at 5.
B. Base rate for land. According to Owners, the Assessor’s evidence shows that several properties used to establish their land’s base rate were not comparable to the land. The administrative record lacked evidence of what properties were actually used to establish the contested property’s base rate. Accordingly, Owners failed to show the base rate was improper. Slip op. at 5.
C. Sales comparison approach. At the administrative hearing, Owners presented a sales comparison analysis comprised of seven sales transactions in which ten properties (“comps”) were conveyed. The Indiana Board rejected the analysis because, it concluded, six of the comps not reliable indicators of value. For example, Owners failed to provide information about the court ordered sales of two comps. Two sales of comps were indicative of those properties market value-in-use, but they failed to show the subject land was assessed too high. To the extent that the Board may have relied upon the Assessor’s mistaken claim as to one comp’s location, the Court found that the Board’s final determination explained why the majority of comps for other reasons lacked probative value. Slip op. at 7-8.
3. Condominium owners failed to show their unit suffered from obsolescence or was valued higher than comparable properties. Kamenova v. Marion County Assessor, Cause No. 49T10-1108-TA-49 (June 4, 2014). Owners of a condominium unit argued the unit’s 2006 assessment was too high due to the negative impact of excessive noise, foul odors, and persistent crime on the property’s value. The unit was located in a six-story, mixed-use building with two bars in downtown Indianapolis. To support their claim, Owners submitted several photographs of the building, a fire incident report, a newspaper article, and a surveillance printout.
Taxpayers claiming obsolescence – described by the Court as a form of depreciation that is “either the functional or economic loss of value to property” – must identify the cause of the loss in value and quantify its impact on the property. Slip op. at 4 (citing Meadowbrook N. Apartments v. Conner, 854 N.E.2d 950, 954 (Ind. Tax Ct. 2005)). The Indiana Board had concluded that even if “the undesirable view, odor problems, excessive noise, and crime issues had diminished the value of their property, [Owners] did not present evidence that showed what a more accurate assessment would be.” Slip op. at 5. Because Owners had not quantified the unit’s loss in value, the Court held that the Indiana Board had not abused its discretion in denying their obsolescence claim.
Evidence of the values of three other units in the building also did not support an assessment reduction. Slip op. at 6. The Indiana Board had concluded that Owners had “not provide[d] any meaningful analysis as to the comparability of those properties” with the unit under appeal. Id. Owners had compared the units’ sizes, but that wasn’t sufficient to prove their similarity. Nor had Owners described the subject unit’s characteristics or explained how similarities or differences between the subject and purportedly comparable units impacted a determination of the subject unit’s market value-in-use.
Finally, the Court found that Owners had waived their argument that the unit’s assessment was based on an erroneous classification. Slip op. at 7-8. The argument had not been raised at the administrative hearing, and no facts in the record showed that the Assessor had used the classification in question. “It is well-settled that this Court generally cannot review an issue or argument raised for the first time on appeal because there would be no written findings in the record for the Court to review.” Slip op. at 7.
Owners appeared without counsel before the Indiana Board and Tax Court. The Court observed that their presentations “reflect some of the challenges taxpayers have in understanding the complexities of our property tax system.” Slip op. at 8. While “sympathetic to their plight,” the Court explained that “it is bound to apply the laws as written because pro se litigants are held to the same rules and standards as licensed attorneys.” Id.
The Court affirmed the Indiana Board’s final determination. Slip op. at 8.
The annual adjustment process will remain in place for the March 1, 2014 assessment date in Indiana. County Assessors will annually adjust (“trend”) values based on changes in the market as in the past.
Beginning with the March 1, 2015 assessment date (for taxes payable in 2016), the “general reassessment” every four years is replaced with a “cyclical reassessment”. That means reassessment of 25% of the tax parcels in each County for each year of the four year cycle. Counties must divide properties into four groups. The reassessment begins July 1 of a year and must be completed on or before March 1 of the following year (e.g. for the March 1, 2015 assessment date (for taxes payable in 2016) reassessment begins July 1, 2014 and must be completed by March 1, 2015). Counties can divide properties by class, location, etc. but for consistency and uniformity, counties will likely divide properties by class.
During a cyclical reassessment, each County Assessor will mail the required Notice of Assessment for the 25% of the properties being reassessed.
Since 1889, the City of Indianapolis (City) financed sewer improvements using Indiana's "Barrett Law", which equally divided costs among all affected homeowners and allowed homeowners to pay in either a lump sum or installments over a period of years. In 2005, the City implemented a new method for sewer financing in which each homeowner was charged a flat fee and the remainder of the costs were financed by bonds paid by all taxpayers. In connection with this change, the City chose to forgive all outstanding Barrett Law installment payments. Certain homeowners who had paid their Barrett Law assessments in a lump sum sought refunds contending that the decision to keep their full payments while forgiving outstanding installment payments violated the Equal Protection Clause. The Indiana Supreme Court held in favor of the City, holding that the disparate treatment did not violate the Equal Protection Clause because it was rationally related to legitimate governmental purposes. On June 4, 2012, the U S Supreme Court agreed, finding a rational basis for the City's decision. The Court ruled that the administrative burdens that would have been placed on the City justified the disparate treatment that arose from forgiving outstanding Barrett Law assessments. Concluding that the City's system needed only to be rational, not ideal. This Court's opinion is adverse to the well established law in Allegheny Pittsburgh Coal Co. v. Commission of Webster County, 488 U.S. 336 (1989), where the Court found that a property tax scheme in West Virginia violated the Equal Protection Clause.
All real property in the State of Indiana will be revalued as part of the statewide general reassessment in 2012. Assessing officials are actively inspecting properties in preparation for revaluing all Indiana properties next year. With depressed markets in many sectors of the economy, and the reduction in government budgets, it is difficult to predict the effect of the statewide reassessment on assessments, and ultimately, taxpayer's annual real estate tax bills.
A Notice of Assessment will be issued for each property for the March 1, 2012 assessment date. Once that Notice is issued, the taxpayer will have 45 days from the date the Notice is issued to file an appeal contesting the revaluation. It is imperative that taxpayers closely monitor any mailings, notices or tax bills received from assessing officials over the next few months.
Some Indiana Counties have begun mailing the March 1, 2010 assessment notices. These notices affect real estate taxes payable in 2011. A significant change from the past is that beginning with the 2010 assessments, and going forward, the valuation date will no longer be January 1 st of the prior year. The valuation date will now be the same as the assessment date. For example, the valuation date for the March 1, 2010 assessment date, will be March 1, 2010. Counties are to use sales of properties that occurred during a time period no more than fourteen (14) months before the March 1 assessment date to establish the annual assessments. This change should result in the use of more recent sales and cost data to establish assessments, and assessed values that more accurately reflect current market conditions. This should reduce past confusion during the appeal process where the valuation date was one year prior to the assessment date.
Unlike in the past, Notices of New Assessments will not be mailed in most Counties throughout Indiana this year. Although some taxpayers may receive Notices alerting them to changes in the assessed value for their property, it is more likely that any assessment changes will appear on the taxpayer's 2010 tax bill issued this Spring. Once the tax bill is issued, showing a change in an assessed value, the taxpayer will have 45 days from the date the tax bill is issued to file an appeal contesting the new assessment. It is imperative that taxpayers closely monitor the Spring tax bills, and be aware of appeal deadlines from those bills.
In a decision issued by the Indiana Tax Court on July 24, 2009, the court found that a not-for-profit church leasing space from a for-profit corporation was entitled to a tax exemption. Traditionally, under Indiana law, real property must be both owned and used by a not-for-profit entity to qualify for a property tax exemption. The court's decision in this particular case, Oaken Bucket Partners, LLC v. Hamilton County Property Tax Assessment Board of Appeals and Hamilton County Assessor, deviates from the general rule. This case may open doors for not-for-profit tenants in centers owned by for-profit corporations. However, this case is specific in its ruling. The not-for-profit tenant in this case was a church and the court found that the lease to the church was below market rent, concluding that leasing space below market rent signifies a charitable purpose. This charitable purpose to assist the church with the furtherance of its religious purposes confers a benefit to both the public and private sectors. Thus, the exemption was granted as a charitable purpose. The Indiana Tax Court's decision has been appealed. This is a case to watch as it could affect many not-for-profit non-owners in Indiana.
Unlike in the past, Notices of New Assessments will not be mailed in most Counties throughout Indiana this year. Although some taxpayers may receive Notices alerting them to changes in the assessed value for their property, it is more likely that any assessment changes will appear on the taxpayer's spring 2009 tax bill issued in June. Once the tax bill is issued, showing a change in an assessed value, the taxpayer will have 45 days from the date the tax bill is issued to file an appeal contesting the new valuation. So it is imperative that taxpayers closely monitor the tax bills received this month, and be aware of appeal deadlines from those bills.
The second installment 2007 (pay 2008) tax bills are in the mail. The taxpayer will have 45 days from the date the tax bill is issued to file an appeal contesting the March 1, 2007 assessment. Appeals are due in July.
Indiana's property tax system continues to change due to the legislated tax reform last year. Unlike in the past, Notices of New Assessments will not be mailed in most Counties throughout Indiana this year. Although some taxpayers may receive Notices alerting them to changes in the assessed value for their property, it is more likely that any assessment changes will appear on the taxpayer's Spring 2009 tax bill. Once the tax bill is issued, showing a change in an assessed value, the taxpayer will have 45 days from the date the tax bill is issued to file an appeal contesting the new valuation. So it is imperative that taxpayers closely monitor the Spring 2009 tax bills, and be aware of appeal deadlines from those bills.
Much chaos remains in Indianapolis (Marion County) as the result of the State-ordered reassessment in 2007. Annual tax bills are delayed, new assessment notices are delayed, and uncertainty continues. The second installment 2007 (pay 2008) tax bill scheduled to be issued in June 2009 commences the deadline to file an appeal contesting the March 1, 2007 assessment. The taxpayer will have 45 days from the date the tax bill is issued to file an appeal contesting the March 1, 2007 assessment.
Indiana's property tax system continues to change due to the legislated tax reform earlier this year. Unlike in the past, Notices of New Assessments will not be mailed in most cases next year. Although some taxpayers may receive Notices alerting them to changes in the assessed value for their property, it is more likely that any assessment changes will appear on the taxpayer's annual tax bill. Once the tax bill is issued, showing a change in an assessed value, the taxpayer will have 45 days from the date the tax bill is issued to file an appeal contesting the new valuation. So it is imperative that taxpayers closely monitor future tax bills, and be aware of appeal deadlines from those bills.
Much chaos remains as a result of the tax reform in Indiana. Annual tax bills are delayed, new assessment notices are delayed, and uncertainty amongst the 92 counties throughout the State continues. For most counties throughout the State, 2007 (pay 2008) tax bills are being mailed with due dates in October or November. These bills are normally issued in April and due May 10. Since there are so many irregularities and uncertainties, it is imperative that the Taxpayers monitor due dates for their properties. The first installment 2007(pay 2008) tax bill also commences the deadline to file an appeal contesting the March 1, 2007 assessment, so the issuance of the bills is critical.
Pursuant to the 2008 legislative action, there is a referendum on the November ballot this year for Taxpayers to determine whether the local township assessing officials should be removed and all assessing duties transferred to the county level. There are only 42 township assessors remaining in the State. Taxpayers should be aware of the referendum on the ballot and vote accordingly.
In August the Indiana Department of Local Government Finance ordered a reassessment of all real property in Indianapolis (Marion County) after taxpayers protested the significant increases in both assessed values and tax dollars. During the last three months, the County has retained a private assessment firm to assist with the reassessment. The new assessments should be available in March 2008 and tax bills reconciling the 2006 (pay 2007) tax year issued in April 2008. Taxpayers will have a window of only 45 days within which to file an appeal contesting the new assessment. Taxpayers should be aware of changes and new procedures in Indiana and closely review new assessments.
Real property values were reassessed in Indiana this year. This reassessment resulted in significant increases in both assessed values and tax dollars. Taxpayers protested throughout the City of Indianapolis as many residential tax bills increased by as much as 200%. Protesters rallied at the Governor's home, the Mayor's home, and groups of taxpayers formed to file class action lawsuits to protest the bills and the system. In Indiana, it's war on property taxes. As a result of this taxpayer revolt, the Governor of the State ordered a reassessment of the City of Indianapolis and Marion County, the largest county in the State. During the last 60 days there have been many questions as to how the reassessment will be handled, what the result of the reassessment will be and how the property tax system will change. One constant has been the continuous protesting among taxpayers. Tax bills have been significantly delayed throughout the State; in some areas, the taxing authorities have not issued tax bills since November 2006. Much confusion still exists throughout the State. An Indiana taxpayer should be aware of the most current changes and new procedures in each County before filing a property tax appeal.

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