Indiana Administrative Code › Title 50 - DEPARTMENT OF LOCAL GOVERNMENT FINANCE › Article 4.2 - ASSESSMENT OF TANGIBLE PERSONAL PROPERTY › Rule 9 - Obsolescence › Section 9-3 - "Abnormal obsolescence" defined

Current through July 10, 2024
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-31-7
Sec. 3.
(a) "Abnormal
				obsolescence" means that obsolescence which occurs as a result of factors over
				which the taxpayer has no control and is unanticipated, unexpected, and cannot
				reasonably be foreseen by a prudent businessman prior to the occurrence. It is
				of a nonrecurring nature and includes unforeseen changes in market values,
				exceptional technological obsolescence, or destruction by catastrophe that has
				a direct effect upon the value of the personal property of the taxpayer at the
				tax situs in question on a going concern basis.
(b) An example of unforeseen change in market
				value is a government ban on the sale of a drug or chemical due to a new
				discovery or determination may cause that item or the production equipment used
				to produce it to be abnormally obsolete. A specific example of this would be
				cyclamate. In this case the equipment used to produce it may be eligible for
				abnormal obsolescence.
(c) An
				example of exceptional technological obsolescence is abnormal obsolescence due
				to exceptional technological obsolescence should be recognized to the extent
				that it causes the subject property to be incapable of use for current
				production or adaption to a different use. The invention of a newer, more
				productive piece of equipment which would produce a better quality item or
				utilization of state of the art technology that produces more efficiently at a
				lower cost of production does not cause an older, currently used asset to be
				considered abnormally obsolete. If the asset is still capable of performing the
				function for which it was acquired, and is producing both on and before the
				assessment date, no adjustment shall be allowed. The use of historical cost,
				short useful life, and accelerated depreciation in developing the prescribed
				true tax value percentages result in an equitable assessment on the property in
				question.
(d) An example of
				destruction by catastrophe is abnormal obsolescence due to catastrophe should
				be recognized to the extent that it has a direct effect on the value of a
				particular item. Property which has been destroyed or damaged by catastrophe as
				of the assessment date would qualify for such an adjustment. A chemical or
				production process which, due to an irreparable malfunction, emits a toxic gas
				or deadly chemical into the outside atmosphere, would qualify for such an
				adjustment to the extent the property is incapable of use.
(e) An example of abnormal obsolescence due
				to government action is a government order to shut down certain production
				equipment due to improper emission levels may result in abnormal obsolescence
				if the cost to cure the delinquent equipment results in incurable obsolescence,
				that is, the cost-to-cure exceeds the contribution or increase in value of the
				impaired item or the impairment cannot be corrected.