Opinion ID: 2098942
Heading Depth: 1
Heading Rank: 2

Heading: Was the Board's Assessment Arbitrary and Capricious?

Text: An arbitrary and capricious administrative act is defined in South Shore I as one which is willful and unreasonable, without consideration and in disregard of the facts or circumstances in the case. 422 N.E.2d at 727. That opinion further explains that an arbitrary and capricious act is one without some basis which would lead a reasonable and honest person to the same conclusion. Id. The Tax Court found the Board's assessment to be arbitrary and capricious. We disagree. Jewell argues that the Board disregarded two facts: (1) Jewell cooperated with the Board's audit by supplying the necessary information upon request, making it possible for the Board to assess the owners before the statute of limitations ran, and (2) the Board's assessment did not take into account taxes that owners may have paid but that were improperly filed.
Jewell argues that it can not be liable for the tax unless the Board has no alternative. That assertion is not supported by law. Under the Ind. Code § 6-1.1-2-4 Jewell can avoid liability by establishing that the property is taxed to the owner. The regulations allow the holder to escape liability by doing even less. Under title 50, rule 1-2-1(b)(3) of the Indiana Administrative Code, Jewell only needed to file a 103-N to avoid tax liability. Jewell did not do either of these things. We know of no provision allowing one protection from tax liability merely because one's failure to file was in good faith. Jewell asserts that South Shore I and South Shore Marina v. Board of Tax Comm'rs (1988), Ind.Tax, 527 N.E.2d 738, aff'd, (1989), Ind., 543 N.E.2d 644 [ South Shore II ], prevent the Board from assessing the holder of stored property unless the conduct of the holder makes it impossible to assess the owner. Brief of Appellee at 15. In South Shore I, the marina refused to cooperate with the State Board's attempts to discover who owned the boats stored at the marina, and the Board assessed the marina for the value of the boats. The Court of Appeals held that once property is assessed to an individual, that person has the burden to establish he is not liable for the tax. 422 N.E.2d at 735. The court held that the Marina invited the error, and the Board's assessment was the natural consequence of the Marina's actions. Faced with Marina's refusal to supply the information, the Board was without alternative. Id. at 730. The court reinstated the Board's final assessment. Id. at 735. The Court of Appeals' decision in Empire Gas reiterates the holding of South Shore I, stating: Clearly, South Shore does not establish that assessing possessors of personal property is statutorily preferred over assessing the owners themselves. Only when the Board found it impossible to assess the owners did it assess the possessor. Empire Gas, 486 N.E.2d at 1041. The court further distinguished Empire Gas from South Shore I, pointing out that the identity of the owner of the LP gas tanks in Empire Gas was never in question. Jewell's business is more like the marina in South Shore in that both businesses involve the storage in one location of property belonging to several different people. However, Jewell's behavior can be distinguished from the marina's in that Jewell did cooperate with the Board and supplied the information required. The tax court spoke to this issue in South Shore II. The Tax Court concluded that since the marina failed to provide the hearing officer with the information needed to correlate particular boats with their owners, the hearing officer had no alternative but to make a summary assessment of the boats to the apparent owner, South Shore. South Shore II, 527 N.E.2d at 742. The Tax Court stated that the Board's assessment was not arbitrary and capricious because the marina did not present evidence of nonliability sufficient to allow the Board to determine the true owner. Id. at 743. The notion that South Shore imposes a minimum threshold of non-cooperation is erroneous. The South Shore cases do nothing to restrict the Board's use of Ind. Code § 6-1.1-2-4; they merely affirm the Board's decision to assess the holder. Jewell would also have us believe that the Board refused to accept from Jewell in November of the assessment year what it would have accepted from South Shore Marina in December of the assessment year. Jewell argues that there is no justification for this arbitrary change of position. Brief of Appellee at 11. We view this assertion by Jewell as mere speculation about what the Board might have done if South Shore had been decided under different circumstances. [3] It was not. This argument essentially asks the court to hold that a taxpayer's cooperation, which does not even amount to substantial compliance, [4] alters the Board's ability to collect on a lawfully made assessment. In light of the fact that all taxpayers are expected to cooperate, Jewell's cooperation does not make the Board's revised assessment arbitrary.
Jewell acknowledges that the State Board used the information provided by Jewell to cross-check for the owners that correctly reported their grain, but did not use the information to assess the owners who did not properly report their grain. Brief of Appellee at 13. The statute indicates where personal property should be reported: Personal property shall be assessed at the place where it is situated on the assessment date of the year for which the assessment is made if the property is: (1) regularly used or permanently located where it is situated; or (2) owned by a nonresident who does not have a principal office within this state. Ind. Code § 6-1.1-3-1(c)(West 1989). This principle has survived many incarnations. Indiana taxation principles have long followed the theory that personal property of non-residents of this State, having the protection of our laws, must bear its fair share of the burdens of taxation. 1891-92 Op.Att'y Gen. 41, 42 (1891). As early as 1896 this Court wrote of the wisdom of requiring personal property used in business in Indiana to be assessed here even though the owner may reside elsewhere. Otherwise, the Court mused: The property owner, to be sure, may have certain occasional twinges of conscience,  that he is sponging off the community, that he is receiving the benefits of the laws for the protection of his property, that the courts are open to him ... that all his personal property and business interests are as carefully guarded as if he were a citizen of and domiciled in the state; but that all these things are done for him at the expense of his neighbors, the citizens of the state, who pay their taxes regularly from year to year. Those twinges of conscience will, however, grow more dulled from year to year, and finally, perhaps cease altogether; and, in time, if he perseveres, he will come to regard it as his sacred right to bring all his ... business, without being at all hampered by local or state taxes, at the same time that he enjoys all the rights, privileges and protection of citizenship. Buck v. Miller (1897), 147 Ind. 586, 594-95, 47 N.E. 8, 9. While this discussion focuses on the evils of nonpayment by out-of-state owners of goods located within the state, it is easy to apply the same rational at the intrastate level. Indeed subsequent provisions specifically required all goods and chattels situated in some township, town or city other than where the owner resides be assessed in the township, town or city where situated. 1929-30 Op.Att'y Gen. 598 (1930). Another point of logic that we perceive in this chain of authority is that the assessor in the place where the goods are located stands the best chance of discovering goods which have not been properly reported. In other words, the goods are most easily found where they are in fact stored. Since it is clear that the grain owners who stored grain in Jewell's elevators should have filed returns in Steuben Township, we see no reason why the Board should be required to search for improperly filed returns. Jewell asserts the State may reap double taxes unless Jewell is exempt from paying taxes on goods owned by farmers who paid in other townships. This argument would be persuasive if double taxation was considered per se unlawful. It is not. When the purpose of a taxing act is plain, courts will not interfere. It is not permissible to ignore the words of the statute in order to avoid double taxation. Aluminum Co. of America v. United States, 67 F.2d 172, 175 (3d Cir.1933), cert. denied, 291 U.S. 666, 54 S.Ct. 441, 78 L.Ed. 1057 (1934). See also Estate of Renick v. United States, 687 F.2d 371, 374, 231 Ct.Cl. 457 (1982). We would not, however, expect Jewell to repay taxes on grain that it can prove has been assessed. See Nyce v. Schmoll (1907), 40 Ind. App. 555, 82 N.E. 539 (securities owner lived in one county, agent with possession and control of the securities lived in another county; owner who informed city treasurer that taxes on the securities had been assessed to and paid by agent, could not be required to pay the taxes again himself). Except for amounts Jewell proves were paid by owners, we order reinstatement of the State Board's assessment. DeBRULER, GIVAN, PIVARNIK and DICKSON, JJ., concur.