Court Opinion

ID: 4079874
Source: CourtListenerOpinion
Date Created: 2016-10-05 17:04:58.287993+00
Date Added: 2024-06-11T14:27:20.479488
License: Public Domain

ATTORNEYS FOR PETITIONERS:            ATTORNEYS FOR RESPONDENT:
PHILIP A. WHISTLER                    ANNE L. COWGUR
MARK J. RICHARDS                      TODD C. LADY
MATTHEW J. EHINGER                    NATHAN J. HAGERMAN
ICE MILLER LLP                        TAFT STETTINIUS & HOLLISTER LLP
Indianapolis, IN                      Indianapolis, IN
______________________________________________________________________
                                                                            FILED
                               IN THE                                  Oct 05 2016, 12:32 pm

                                                                            CLERK
                         INDIANA TAX COURT                              Indiana Supreme Court
                                                                           Court of Appeals
                                                                             and Tax Court
______________________________________________________________________

SPENCER COUNTY ASSESSOR and           )
GRASS TOWNSHIP ASSESSOR,              )
                                      )
      Petitioners,                    )
                                      )
                   v.                 )   Cause No. 49T10-1306-TA-00057
                                      )
 AK STEEL CORPORATION,                )
                                      )
      Respondent.                     )
______________________________________________________________________

                  ON APPEAL FROM A FINAL DETERMINATION OF
                      THE INDIANA BOARD OF TAX REVIEW

                                   FOR PUBLICATION
                                    October 5, 2016

FISHER, Senior Judge

       Indiana Code § 6-1.1-3-23 provides integrated steel mills with the option of using

“Pool 5” to value their personal property for purposes of taxation. The statute defines

an “integrated steel mill” as “a person . . . that produces steel by processing iron ore and

other raw materials in a blast furnace in Indiana[.]” See IND. CODE § 6-1.1-3-23(a)(3)

(2008) (amended 2011).      On appeal, the parties have asked the Court to examine

whether the “in Indiana” language contained in that definition is constitutional. The

Court finds that AK Steel has not shown a constitutional infirmity.
                                             FACTS

                           THE STEEL INDUSTRY IN GENERAL

       Carbon steel is produced at either an integrated steel mill or a “minimill.” (See,

e.g., Cert. Admin. R. at 481-84.) At an integrated mill: (1) coal is purified into a high-

carbon fuel called coke; (2) the coke is then combined with iron ore and limestone in a

blast furnace to produce pig iron; (3) the molten pig iron is combined with some steel

scrap in a basic oxygen furnace to produce liquid steel; (4) the liquid steel is then cast

into slabs; and (5) the slabs are processed, or “finished,” into a variety of end products.1

(See Cert. Admin. R. at 378-80, 383-90, 1009, 2024-2028.) At a minimill, however,

liquid steel is made by melting scrap steel or scrap substitutes in an electric arc furnace.

(See Cert. Admin. R. at 1009, 2029.) The liquid steel produced at a minimill is then cast

into slabs that are finished into a variety of end products, just like the liquid steel

produced at an integrated mill. (See Cert. Admin. R. at 2029.)

       While integrated steel mills produce a higher quality carbon steel than minimills,

they are no longer the more prevalent carbon steel producers. (See Cert. Admin. R. at

481, 1009.)     Indeed, during the 1970’s, 90% of all carbon steel was produced at

integrated steel mills; now, however, only 40% of carbon steel is produced at integrated

steel mills. (Cert. Admin. R. at 481.) That change in production resulted from the fact

that the older technology utilized at an integrated steel mill (i.e., the blast furnace

process) took “more steps (i.e., coke batteries, blast furnaces), [was] more capital

1
   The finishing of carbon steel slabs is, itself, a multi-step process. For instance, the slabs are
first hot-rolled to a desired thickness and then coiled. (Cert. Admin. R. at 386-88.) The coils
might then advance to an acid bath for “pickling.” (Cert. Admin. R. at 389.) After that, the steel
might then be cold-rolled, annealed, and galvanized. (Cert. Admin. R. at 389-90.) (See also
Cert. Admin. R. at 250-51 ¶¶ 42-48.)

                                                 2
intensive, and traditionally require[d] more man-hours per ton” than the newer

technology used to produce carbon steel at minimills (i.e., the electric arc furnace

process). (Cert. Admin. R. at 2029.)

                                         AK STEEL

       AK Steel, headquartered in West Chester, Ohio, produces carbon steel. (Cert.

Admin. R. at 377, 629.)       AK Steel produces its steel at multiple facilities located

throughout the Midwest.       For instance, it has two blast furnace facilities, one in

Middletown, Ohio and the other in Ashland, Kentucky. (Cert. Admin. R. at 378.) AK

Steel also has a finishing facility in Rockport, Indiana (Grass Township, Spencer

County), known as “Rockport Works.” (Cert. Admin. R. at 632.)

       Rockport Works opened in 1998. (Cert. Admin. R. at 1359 ¶ 44.) AK Steel

constructed and equipped Rockport Works, at a cost of nearly $1.1 billion, because it no

longer could finish all of its carbon steel, post hot-rolling, at its blast furnace facility in

Middletown, Ohio. (See Cert. Admin. R. at 390-99, 1356 ¶ 17.) Consequently, AK

Steel designed Rockport Works to receive, by rail, coils of its hot-rolled steel from the

Middletown facility for final finishing. (Compare generally supra note 1 with Cert. Admin.

R. at 392-98 and 1356-58 ¶¶ 21-31.)          AK Steel received a significant property tax

abatement/incentive package from Spencer County for locating Rockport Works in

Rockport.   (See Cert. Admin. R. at 1356 ¶ 16, 2845-49 (indicating that AK Steel’s

package was worth over $100,000,000 over a ten year period).)

                        THE BACKSTORY – WHY WE ARE HERE

                                       The Legislation

       In 2003, the Legislature enacted Indiana Code § 6-1.1-3-23. See P.L. 120-2003,

                                              3
§ 1 (2003). That statute provided that:

      1) beginning with the March 1, 2003 assessment, an integrated steel
         mill could elect to value its “special equipment,”2 for purposes of
         Indiana’s personal property tax, in accordance with a particular
         valuation table designated as “Pool 5”;

      2) an integrated steel mill was “a person that produces steel by
         processing iron ore and other raw materials in a blast furnace”; and

      3) if an integrated steel mill elected to use Pool 5, it agreed to not seek
         additional abnormal obsolescence adjustments on its personal
         property.

See generally P.L. 120-2003, § 1 (2003). AK Steel reported the 2004 value of its

personal property located at Rockport Works using Pool 5. (See Cert. Admin. R. at 255

¶ 69 (finding that AK Steel did so because it produced steel “by processing iron ore and

other raw materials in a blast furnace”).)

       In 2005, the Legislature amended its statutory definition of “integrated steel mill”

twice. Those two amendments, which were given retroactive effect to January 1, 2004,

altered the definition of an integrated steel mill to read “a person, including a subsidiary

of a corporation, that produces steel by processing iron ore and other raw materials in a

2
  “Special integrated steel mill equipment” was, and continues to be, defined as “depreciable
personal property, other than special tools and permanently retired depreciable personal
property[ ] that: (i) is owned, leased, or used by an integrated steel mill or an entity that is at
least fifty percent (50%) owned by an affiliate of an integrated steel mill; and (ii) falls within
Asset Class 33.4 as set forth in IRS Rev. Proc. 87-56, 1987-2, C.B. 647[.]” Compare IND. CODE
§ 6-1.1-3-23(a)(7)(A) (2003) with IND. CODE § 6-1.1-3-23(b)(7) (2016). In its final determination,
the Indiana Board explained that the assets covered by IRS Rev. Proc. 87-56, 1987-2, C.B. 647,
Asset Class 33.4 included:

       assets used in the smelting, reduction, and refining of iron and steel from ore,
       pig, or scrap; the rolling, drawing and alloying of steel; the manufacture of nails,
       spikes, structural shapes, tubing, wire, and cable. Includes assets used by steel
       service centers, ferrous metal forges, and assets used in coke production,
       regardless of ownership. Also includes related land improvements and all
       special tools used in the above activities.

(Cert. Admin. R. at 254 ¶ 66.)

                                                4
blast furnace in Indiana[.]” See P.L. 228-2005, § 2 (2005); P.L. 246-2005, § 59 (2005).

Even though it did not have any blast furnaces in Indiana, AK Steel continued to report

the value of its personal property at Rockport Works using Pool 5. (See, e.g., Cert.

Admin. R. at 257-58 ¶ 83 (indicating that AK Steel had initiated personal property tax

appeals prior to 2008, the year at issue in this case).)

       In 2008, the Legislature enacted a comprehensive non-code provision3 that

stated:

          In enacting [Indiana Code §] 6-1.1-3-23, the general assembly finds
          the following:

          (1) The economy of northern Indiana has historically been heavily
          dependent upon:
             (A) the domestic steel industry, particularly the integrated steel
             mill business, which produces steel from basic raw materials
             through blast furnace and related operations . . .
          (2) Northern Indiana is the only area of Indiana with integrated
          steelmaking facilities.
          (3) During the last thirty (30) years the domestic steel industry has
          experienced significant financial difficulties. More than one-half ( ½ )
          of the integrated steel mills in the United States were shut down or
          deintegrated, with the remainder requiring significant investment and
          the addition of new processes to make the facilities economically
          competitive with newer foreign and domestic steelmaking facilities
          and processes.

                                              *****

          (5) Given the economic conditions affecting older integrated
          steelmaking facilities, integrated steel mills claimed abnormal
          obsolescence in reporting the assessed value of equipment located
          at the integrated steelmaking facilities that began operations before
          1970, thereby reporting the equipment’s assessed value at far below
          thirty percent (30%) of the equipment’s total cost (far below the “thirty
          percent (30%) floor” value generally applicable to equipment

3
 A non-code provision “‘is one which, though enacted with a piece of legislation, is not codified
within the Indiana Code. Such . . . provisions[, however,] are appropriately considered by a
court when interpreting [] statute[s].’” Izaak Walton League of Am. V. Lake Cnty. Prop. Tax
Assessment Bd. of Appeals, 881 N.E.2d 737, 741 n.3 (Ind. Tax Ct. 2008) (citation omitted).

                                               5
exhibiting only normal obsolescence under the current department of
local government finance rules).
(6) Current law existing before [January 1, 2003,] obligates the
taxpayers making abnormal obsolescence claims to pay personal
property taxes based only on, and permits communities to determine
property tax budgets and rates based only on, the reported personal
property assessed values until the personal property appeals are
resolved. Consequently, as a result of abnormal obsolescence
claims, the property tax base of communities in northern Indiana is
severely reduced for an indeterminate period (if not permanently).
The prospect of future appeals and their attendant problems on an
ongoing basis must be addressed.
(7) A new, optional method for valuing the equipment of integrated
steel mills and entities that are at least fifty percent (50%) owned by
an affiliate of an integrated steel mill (“related entities”) . . . in
northern Indiana is needed. That optional method:
   (A) recognizes the loss of value and difficulty in valuing
   equipment at integrated steelmaking facilities . . . that
   commenced operations decades ago and at the facilities of
   related entities;
   (B) recognizes that depreciable personal property used in
   integrated steelmaking . . . and by related entities is affected by
   different economic and market forces than depreciable
   personal property used in other industries and certain other
   segments of the steel industry and therefore experiences
   different amounts of obsolescence and depreciation; and
   (C) can be used to simply and efficiently arrive at a value
   commensurate with that property’s age, use, obsolescence,
   and market circumstances instead of the current method and its
   potentially contentious and lengthy appeals. Such an optional
   method would benefit the communities where these older
   facilities are located.
(8) Such an optional method would be to authorize a fifth pool in the
depreciation schedule for valuing the equipment of integrated steel
mills[ and] related entities . . . that reflects all adjustments to the
value of that equipment for depreciation and obsolescence, including
abnormal obsolescence, which precludes any taxpayer electing such
a method from taking any other obsolescence adjustment for the
equipment, and which applies only at the election of the taxpayer.
(9) The purpose for authorizing the Pool 5 method is to provide a
more simplified and efficient method for valuing the equipment of
integrated steel mills . . . that recognizes the loss of value and
unusual problems associated with the valuation of the equipment or
facilities that began operations before 1970 in those industries in
northern Indiana, as well as for valuing the equipment of related
entities, to stabilize local property tax revenue by eliminating the

                                  6
          need for abnormal obsolescence claims, and to encourage th[at]
          industr[y] to continue to invest in northern Indiana, thereby
          contributing to the economic life and well-being of communities in
          northern Indiana, the residents of northern Indiana, and the state of
          Indiana generally.
          (10) The specific circumstances described in this section do not exist
          throughout the rest of Indiana.

P.L. 131-2008, § 76 (2008). This non-code provision was given retroactive effect to

January 1, 2003.        P.L. 131-2008, § 76.         The non-code provision was formally

incorporated into Indiana Code § 6-1.1-3-23 in 2011.4              See P.L. 220-2011, § 119

(2011).

                                      Procedural Posture

       For the 2008 assessment, AK Steel again reported the value of its personal

property at Rockport Works using Pool 5.5 (See, e.g., Cert. Admin. R. at 765-68.) The

Spencer County Assessor rejected AK Steel’s valuation, stating that its personal

property “d[id] not qualify for Pool 5 filing[.]”       (Cert. Admin. R. at 27.)        AK Steel

subsequently appealed to the Spencer County Property Tax Assessment Board of

Appeals (PTABOA). (See Cert. Admin. R. at 60-61.) After conducting a hearing on AK

Steel’s appeal on October 11, 2010, the PTABOA issued a decision upholding the

4
  When the Legislature codified this provision’s language, it placed it at the beginning of Indiana
Code § 6-1.1-3-23 and designated it as a “new” paragraph (a); all existing paragraphs were then
redesignated sequentially. Compare P.L. 131-2008, § 76 (2008) with IND. CODE § 6-1.1-3-23
(2011). For purposes of this opinion, the definition of integrated steel mill will be cited as
Indiana Code § 6-1.1-3-23(a)(3). See IND. CODE § 6-1.1-3-23(a)(3) (2008). But see IND. CODE
§ 6-1.1-3-23(b)(3) (2011) (indicating that once the non-code provision was codified in 2011, the
definition was redesignated as paragraph (b)(3)). Moreover, the Court will generically refer to
the language first contained in the non-code provision and then later incorporated into Indiana
Code § 6-1.1-3-23(a) as the “Preamble.”

5
 At the same time, AK Steel also filed paperwork claiming entitlement to various abatement
deductions. (See, e.g., Cert. Admin. R. at 798.)

                                                7
Assessor’s action.6 (See Cert. Admin. R. at 19-21.)

       On December 9, 2010, AK Steel filed an appeal with the Indiana Board of Tax

Review claiming that to the extent Indiana Code § 6-1.1-3-23 allowed only those

integrated steel mills with blast furnaces in Indiana to use Pool 5, it was

unconstitutional. (See, e.g., Cert. Admin. R. at 4-13.) The Indiana Board conducted a

hearing on AK Steel’s appeal on December 10, 2012.7

       On June 7, 2013, the Indiana Board issued a final determination on AK Steel’s

appeal. In that final determination, the Indiana Board explained that “except for the ‘in

Indiana’ language[,]” AK Steel was, in all other respects, entitled to use Pool 5 under

Indiana Code § 6-1.1-3-23. (See Cert. Admin. R. at 260-61 ¶¶ 7, 10-11 (stating that: 1)

AK Steel was a person that produced steel by processing iron ore and other raw

materials in a blast furnace; and 2) the personal property located at Rockport Works

was special equipment pursuant to IRS Rev. Proc. 87-56, 1987-2, C.B. 647, Asset

Class 33.4).) The Indiana Board further explained, however, that as an administrative

agency, it did not have the authority to resolve AK Steel’s constitutional challenge. (See

Cert. Admin. R. at 261-62 ¶¶ 15-17.)          As a result, the Indiana Board found itself

“compelled” to affirm the PTABOA’s decision that AK Steel was not eligible to claim the

6
  Before the PTABOA conducted its hearing, the Spencer County Assessor issued a notice that
further increased the assessed value of AK Steel’s personal property at Rockport Works. (See
Cert. Admin. R. at 26.)
7
  Prior to the Indiana Board’s hearing, AK Steel, the Spencer County Assessor, the Grass
Township Assessor, and the Spencer County Redevelopment Commission entered into a
comprehensive settlement agreement that resolved the personal property tax disputes between
AK Steel and Spencer County for all years other than 2008. (See Cert. Admin. R. at 1426-
1431.) The settlement agreement also provided that if it was ultimately determined that AK
Steel was not eligible to use Pool 5 for purposes of the 2008 assessment, the parties stipulated
to both an assessed value and a permitted abatement deduction for AK Steel. (See Cert.
Admin. R. at 1427.)

                                               8
benefits of Pool 5. (Cert. Admin. R. at 262 ¶ 17.)

       AK Steel subsequently initiated an original tax appeal, as did the Spencer County

and Grass Township Assessors. After consolidating the two appeals, the Court heard

the parties’ oral arguments on May 23, 2014.         Additional facts will be supplied as

necessary.

                                STANDARD OF REVIEW

       Indiana Board final determinations are subject to review by this Court.          See

generally Ind. Tax Court Rule 2(A); IND. CODE § 6-1.1-15-5(b) (2016). Indiana Code §

33-26-6-6 sets out the scope and standard of the Court’s review: the Court shall find an

Indiana Board final determination invalid when it is arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law; contrary to constitutional right,

power, privilege, or immunity; in excess of or short of statutory jurisdiction, authority, or

limitations; without observance of procedure required by law; or unsupported by

substantial or reliable evidence. IND. CODE § 33-26-6-6(e)(1)-(5) (2016).

       When reviewing an Indiana Board final determination, the Court defers to the

Indiana Board’s factual findings as long as they are supported by substantial evidence;

the Court, however, reviews all questions of law arising from the Indiana Board’s factual

findings de novo. Stinson v. Trimas Fasteners, Inc., 923 N.E.2d 496, 498 (Ind. Tax Ct.

2010). This case presents questions regarding the construction to be afforded to – and

constitutionality of – Indiana Code § 6-1.1-3-23. Because those are questions of pure

law, they are matters reserved exclusively for judicial determination. See id. See also,

e.g., Paul Stieler Enters., Inc. v. City of Evansville, 2 N.E.3d 1269, 1272 (Ind. 2014); Bd.

of Comm’rs of Howard Cnty. v. Kokomo City Plan Comm’n, 330 N.E.2d 92, 95 (Ind.

                                             9
1975); Emmis Pub. Corp. v. Indiana Dep’t of State Revenue, 612 N.E.2d 614, 623 (Ind.

Tax Ct. 1993).

                                           ANALYSIS

       On appeal, AK Steel argues that the “in Indiana” language contained in Indiana

Code § 6-1.1-3-23’s definition of an integrated steel mill is unconstitutional.              (See

generally Resp’t Br. Supp. Mot. Summ. J. (“AK Steel’s Br.”) at 21-36.)8 The Assessors

contend, however, that AK Steel’s constitutional claims are moot because even without

the “in Indiana” restriction, AK Steel does not qualify to use Pool 5 under Indiana Code

§ 6-1.1-3-23. (See generally Pet’rs’ Br. Resp. Resp’t Br. Supp. Mot. Summ. J. & Br.

Supp. Pet’rs’ V. Pet. Judicial Review of a Final Determination of the Indiana Bd. Tax

Review (“Assessors’ Br.”) at 2-3, 11-12.)            Accordingly, the Court will address the

Assessors’ argument first. See generally Harlan Sprague Dawley, Inc. v. Indiana Dep’t

of State Revenue, 605 N.E.2d 1222, 1232 (Ind. Tax Ct. 1992) (explaining that the Court

has the duty to refrain from deciding constitutional questions if there are other grounds

on which to base its holding).

                                                I.

       As previously stated, Indiana Code § 6-1.1-3-23 defines an integrated steel mill,

for purposes of Pool 5, as “a person, including a subsidiary of a corporation, that

produces steel by processing iron ore and other raw materials in a blast furnace in

Indiana[.]”   I.C. § 6-1.1-3-23(a)(3).     The Assessors argue that even without the “in

8
  When it filed its written brief in this case, AK Steel moved for summary judgment but did not
designate any evidence in support of that motion as required by Indiana Trial Rule 56(C).
(Compare Resp’t Mot. Summ. J., Resp’t Br. Supp. Mot. Summ. J. (“AK Steel’s Br.”) with Ind.
Trial Rule 56(C).) Later, AK Steel explained to the Court that it was relying on the contents of
the certified administrative record to support its position. (See, e.g., Resp’t Surreply Supp. Mot.
Summ. J. at 2.) Accordingly, the Court will perform its standard record review in this case. See
supra pp. 9-10.

                                                10
Indiana” restriction, AK Steel does not qualify to use Pool 5 under Indiana Code § 6-1.1-

3-23. (See Assessors’ Br. at 11-12.) More specifically, they explain that when the

Legislature defined an integrated steel mill as a “person,” it intended that term to mean

“facility”; thus, because Rockport Works the facility does not “produce steel by

processing iron ore and other raw materials in a blast furnace,” it is not an integrated

steel mill and AK Steel therefore cannot use Pool 5 to value the personal property

located there.9      (See Assessors’ Br. at 2-3, 12-16.)           The Court does not find this

argument persuasive for the following reasons.

         First, for purposes of Indiana’s property tax scheme, a “person” is defined as “a

sole proprietorship, partnership, association, corporation, limited liability company,

fiduciary, or individual.” IND. CODE § 6-1.1-1-10 (2003). The Legislature’s definition of

an integrated steel mill as a “person” in Indiana Code § 6-1.1-3-23 is therefore in

harmony with this statute. See Blood v. Poindexter, 534 N.E.2d 768, 771 (Ind. Tax Ct.

1989) (explaining that it is presumed that in enacting a statute, the Legislature has full

knowledge of existing legislation on the same subject matter).

         Second, if the Legislature intended the word “person” to mean “facility,” then how

is the next phrase in the definition of an integrated steel mill, i.e., the “including a

9
    The Assessors explain that they arrived at this conclusion because:

     1) Indiana Code § 6-1.1-3-23’s Preamble repeatedly uses the phrase “integrated
        steel mill facilities”;
     2) by stating in the Preamble that “Northern Indiana is the only area of Indiana with
        integrated steelmaking facilities,” the Legislature explicitly recognized that
        Rockport Works, which is located in Southern Indiana, was not an “integrated
        steel mill”;
     3) “[a] reference to a ‘steel mill,’ applied logically and given its ordinary meaning, is a
        reference to property”; and
     4) the tax at issue in this case is a property tax.

(See Pet’rs’ Br. Resp. Resp’t Br. Supp. Mot. Summ. J. & Br. Supp. V. Pet. Judicial Review of a
Final Determination of the Indiana Bd. Tax Review (“Assessors’ Br.”) at 12-15.)

                                                  11
subsidiary of a corporation,” to be interpreted? Indeed, while that phrase makes sense

in describing a “person,” see I.C. § 6-1.1-1-10, it makes no sense in describing a

“facility.” See City of Carmel v. Steele, 865 N.E.2d 612, 618 (Ind. 2007) (stating that

courts will not presume the Legislature intended statutory language to be applied

illogically or in a way that would bring about an absurd result).

       Third, the Legislature amended Indiana Code § 6-1.1-3-23 three times after its

enactment in 2003. If the Assessors are correct in their contention that the Legislature

made those amendments to clarify its intent more explicitly, (see, e.g., Assessors’ Br. at

2, 4, 12, 15-16), then why did the Legislature not take advantage of those three

opportunities to change the word “person” to “facility?”

       For the three reasons above, the Assessors have not persuaded the Court that

the word “person,” as used in the definition of an integrated steel mill, means “facility.”

Thus, the Assessors have not succeeded in their argument that even without the “in

Indiana” restriction, AK Steel does not qualify to use Pool 5 under Indiana Code § 6-1.1-

3-23.10 The Court must therefore address AK Steel’s constitutional claims.

                                               II.

       AK Steel claims that the “in Indiana” language contained in Indiana Code § 6-1.1-

3-23’s definition of an integrated steel mill violates numerous provisions of both the U.S.

and Indiana Constitutions. AK Steel bears an extremely high burden of proof on this

claim, however, as that statutory language is presumed constitutional until clearly

shown otherwise. See Sims v. U.S. Fid. & Guar. Co., 782 N.E.2d 345, 349 (Ind. 2003);

10
  This point is further supported by the fact that the parties have stipulated that the personal
property located at I/N Tek and I/N Kote, two “stand-alone” steel finishing facilities in northern
Indiana (i.e., neither has a blast furnace on the premises), was valued using Pool 5. (See, e.g.,
Cert. Admin. R. at 244-45 ¶¶ 1-7.)

                                               12
UACC Midwest, Inc. v. Indiana Dep’t of State Revenue, 629 N.E.2d 1295, 1299 (Ind.

Tax Ct. 1994).

                                   A. EQUAL PROTECTION

       AK Steel claims that the “in Indiana” language contained in Indiana Code § 6-1.1-

3-23 is unconstitutional under the equal protection clause of the Fourteenth Amendment

to the U.S. Constitution.11 More specifically, it argues that

          there is no material functional or economic difference between AK
          Steel’s personal property at Rockport Works and the equipment of
          other integrated steelmakers in the state that qualify for Pool No. 5.
          There is no rational basis for denying Pool No. 5 valuation to AK
          Steel – an integrated steelmaker – on grounds that its blast furnace
          is out-of-state, while concurrently . . . extending Pool No. 5 eligibility
          to entities that do not own a blast furnace anywhere, i.e.[,] I/N Tek
          and I/N Kote. . . . Pool No. 5’s statutory purpose is to determine the
          depreciated value of steelmaking equipment for tax purposes. . . .
          [T]he location of a blast furnace has no rational bearing on this
          valuation question. The in-state classification . . . is [therefore]
          arbitrary and irrational and . . . invalid[.]

(AK Steel’s Br. at 30-31.) See also supra note 10.

       The Fourteenth Amendment to the U.S. Constitution provides that “[n]o State

shall . . . deny to any person within its jurisdiction the equal protection of the laws.” U.S.

CONST. amend XIV, § 1. This provision “does not forbid classifications. It simply keeps

11
   AK Steel also claims that the “in Indiana” language violates Article 1, § 23 of the Indiana
Constitution. (See AK Steel’s Br. at 29-31.) That provision states that “[t]he General Assembly
shall not grant to any citizen, or class of citizens, privileges or immunities, which, upon the same
terms, shall not equally belong to all citizens.” IND. CONST. art. 1, § 23. AK Steel’s argument
regarding this claim, however, merely quotes the text of Article 1, § 23 and then states, in
conclusory fashion, that the equality provisions of both the federal and state constitutions have
been violated. (See AK Steel’s Br. at 29-31; Resp’t Reply Supp. Mot. Summ. J. & Resp. to
Pet’rs’ Br. at 25-30.)
        While the rights guaranteed under Article 1, § 23 are identical to those guaranteed under
the federal equal protection clause, Article 1, § 23 claims are subject to a different analysis than
those under the federal equal protection clause. See Collins v. Day, 644 N.E.2d 72, 75 (Ind.
1994); Haas v. South Bend Cmty. Sch. Corp., 289 N.E.2d 495, 501 (Ind. 1972). To the extent
AK Steel has not provided the Court with any such analysis, the Court will not undertake that
task now.

                                                13
governmental decisionmakers from treating differently persons who are in all relevant

respects alike.”     Nordlinger v. Hahn, 505 U.S. 1, 10 (1992) (citation omitted).

Consequently, under federal equal protection analysis, absent a showing that the

challenged classification involves a suspect class or trammels on fundamental rights,

the classification is presumed valid and will be upheld as long as it is rationally related

to a legitimate state interest. City of Cleburne, Tex. v. Cleburne Living Ctr., 473 U.S.
432, 440 (1985).

       The Preamble to Indiana Code § 6-1.1-3-23 explicitly provides the Legislature’s

rationale for creating Pool 5. Indeed, it explains that Indiana’s integrated steel mills had

been filing abnormal obsolescence claims12 on their property, wreaking economic havoc

on the local communities and their property tax bases. See supra pp. 5-7. (See also,

e.g., Cert. Admin. R. at 1811-21.) The Legislature therefore created Pool 5 as a means

to lessen the negative impact of such claims by eliminating the often contentious,

protracted, and expensive process involved in adjudicating them.               Pool 5 enables

Indiana’s integrated steel mills to receive immediate obsolescence adjustments on their

personal property in exchange for waiving their rights to file and litigate larger abnormal

obsolescence claims later; the local taxing units, in turn, are able to maintain more

stable and consistent cash flows. Because all of the integrated steel mills that had been

filing these abnormal obsolescence claims were located in northern Indiana and had

their blast furnaces within the state, the “in Indiana” language was not arbitrary, but

rationally related to Legislature’s purpose for creating Pool 5. See supra pp. 5-7.

12
   An abnormal obsolescence claim may be granted when a taxpayer shows, among other
things, an “impairment of desirability and usefulness [of its personal property] brought about by
new inventions and improved processes for production[.]” 50 IND. ADMIN. CODE 4.2-4-8(a)
(2008) (see http://www.in.gov/legislative/iac/) (emphasis added).

                                               14
       AK Steel makes much of the fact that I/N Tek and I/N Kote, two “stand-alone”

steel finishing facilities located in northern Indiana, have been able to claim the benefit

of Pool 5 despite the fact that neither has a blast furnace in Indiana. (See, e.g., AK

Steel’s Br. at 9, 26, 30.)         Both of those entities, however, are owned by

ArcelorMittal/Nippon Steel, which has a blast furnace in Indiana.        (See, e.g., Cert.

Admin. R. at 244-45 ¶¶ 1-7.) As such, I/N Tek and I/N Kote fall within Indiana Code § 6-

1.1-3-23(a)(3)’s definition of an integrated steel mill: they are subsidiaries of a person

that produces steel by processing iron ore and other raw materials in a blast furnace in

Indiana. (Cert. Admin. R. at 244-45 ¶¶ 1-7.) See also I.C. § 6-1.1-3-23(a)(3). AK Steel

is therefore not similarly situated to either I/N Tek and I/N Kote.

       The Court finds that the “in Indiana” language is rationally related to the State’s

legitimate purpose for creating Pool 5 and that AK Steel has not demonstrated that it is

being treated differently than similarly-situated taxpayers.     Consequently, it finds no

violation of AK Steel’s federal equal protection guarantees.

                                 B. COMMERCE CLAUSE

        The Commerce Clause of the United States Constitution authorizes Congress

“[to] regulate Commerce . . . among the several states[.]” U.S. CONST. art. I, § 8, cl. 3.

The purpose of the Commerce Clause “was to create an area of free trade among the

several States.” McLeod v. J. E. Dilworth Co., 322 U.S. 327, 330 (1944).

       The Commerce Clause also prohibits taxation by a state in a manner that

discriminates against or unduly burdens the interstate flow of articles of commerce,

even when Congress has failed to legislate on the subject. Oklahoma Tax Comm’n v.

Jefferson Lines, Inc., 514 U.S. 175, 179 (1995); Oregon Waste Sys., Inc. v. Dep’t of

                                             15
Envtl. Quality of Or., 511 U.S. 93, 98 (1994). This negative aspect of the Commerce

Clause is referred to as the dormant Commerce Clause. See Jefferson Lines, 514 U.S.

at 179. See also, e.g., H. P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 535 (1949)

(explaining that the dormant Commerce Clause is designed to prohibit a state from

attempting to advance its own commercial interests by curtailing the movement of

articles of commerce, either into or out of the state).

       A state tax will not be permitted under the dormant Commerce Clause if it 1) is

not applied to an activity that has a substantial nexus with the taxing state; 2) is not

fairly apportioned to activities within the taxing state; 3) discriminates against interstate

commerce; or 4) is not fairly related to services provided by the taxing state. See

Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977). AK Steel has confined

its argument to the third of these factors. (See AK Steel’s Br. at 21-27.) Specifically, it

argues that the “in Indiana” language contained in Indiana Code § 6-1.1-3-23

discriminates against interstate commerce on its face because “[t]he sole factor for

[determining whether an entity can use Pool 5] – the location of [its] blast furnace – is [ ]

based solely on state lines.” (AK Steel’s Br. at 25-26.) See also Amerada Hess Corp.

v. Dir., Div. of Taxation, N.J. Dep’t of Treasury, 490 U.S. 66, 75 (1989) (explaining that

when challenging a state statute that imposes a tax, a taxpayer may claim that it is

either discriminatory on its face, in its intent, or in its effect). This argument, however,

misses the mark for the following reasons.

       First, with the “in Indiana” language, Indiana Code § 6-1.1-3-23 does not

expressly distinguish between entities that serve a principally interstate market/clientele

and those that serve an intrastate market/clientele. See, e.g., Oregon Waste Sys., 511
16
U.S. at 99 (stating that discrimination against interstate commerce is the “differential

treatment of in-state and out-of-state economic interests that benefits the former and

burdens the latter”); Boston Stock Exchange v. State Tax Comm’n, 429 U.S. 318, 329

(1977) (stating that a state tax discriminates against interstate commerce when it

provides a direct commercial advantage to local business).                   Indeed, under the

unambiguous terms of the statute, both domestic and foreign integrated steel mills can

claim the benefit of Pool 5 provided they have blast furnaces in Indiana.13 Moreover,

AK Steel has neither developed an argument, nor pointed the Court to any evidence in

the administrative record, that indicates that entities like AK Steel who do not have their

blast furnaces in Indiana have somehow suffered a “diminishment in the marketplace”

as a result of the “in Indiana” language – for example, a reduction in production or a lack

of access to interstate products, vendors, and consumers. (See AK Steel’s Br. at 21-27;

Resp’t Reply Supp. Mot. Summ. J & Resp. to Pet’rs’ Br. (“AK Steel’s Reply Br.”) at 14-

20; Resp’t Surreply Supp. Mot. Summ. J.)14

       Second, while the “in Indiana” language may preclude entities like AK Steel from

using Pool 5, it does not preclude them from seeking and receiving the tax benefit that

is ultimately rewarded through Pool 5, i.e., abnormal obsolescence adjustments on their

personal property located within the state. Instead, they must simply go through a

13
   In fact, the evidence in the administrative record reveals that none of Indiana’s integrated
steel mills are domestic companies. (See, e.g., Cert. Admin. R. at 6683, 8361-62, 9568
(indicating that U.S. Steel, Inspat Inland, Inc., and ArcelorMittal USA Steel, Inc. are all Delaware
corporations).)

14
   The administrative record in this case contains over 10,000 pages. If there is evidence in the
record that supports AK Steel’s claim, it was up to AK Steel to call it to the Court’s attention.
See Scopelite v. Indiana Dep’t of Local Gov’t Fin., 939 N.E.2d 1138, 1145 (Ind. Tax. Ct. 2010)
(explaining that the Court does not bear the burden of searching the administrative record to
find evidence that supports a litigant’s argument).

                                                17
different channel to seek that benefit:        an assessment appeal where they bear the

burden of demonstrating that their personal property suffers from abnormal

obsolescence. See, e.g., supra note 12; IND. CODE § 6-1.1-15-5 (2008). This difference

accounts for the fact that the Legislature has recognized that Indiana’s integrated steel

mills are using a process and related equipment – the process that uses blast furnaces

– that is antiquated and less desirable than newer processes, such as the electric arc

furnace process. Compare supra pp. 2-3, 5-7 with supra note 12. See also City of

Philadelphia v. New Jersey, 437 U.S. 617, 626-27 (1978) (explaining that differential

treatment is permissible when “there is some reason, apart from . . . origin, to treat

[entities] differently” (emphasis added)). For these reasons, AK Steel has not shown

that the “in Indiana” language facially discriminates against interstate commerce. AK

Steel’s Commerce Clause challenge therefore fails.15

                                          C. DUE PROCESS

       The Fourteenth Amendment to the U.S. Constitution not only guarantees equal

protection under the law, but that no state shall “deprive any person of life, liberty, or

property, without due process of law[.]” U.S. CONST. amend. XIV, § 1. Due process

contains both procedural and substantive elements. Procedural due process requires

that taxpayers be provided with notice and a meaningful opportunity to be heard before

a tax liability is finally fixed. Nickey v. State of Mississippi, 292 U.S. 393, 396 (1934);

15
   AK Steel claims “[i]t is undisputed that [it] is being assessed higher property taxes on its
special integrated steel mill equipment than its similarly situated competitors merely because its
blast furnaces are not located in Indiana[ which] is precisely the form of interstate discrimination
the Commerce Clause [is designed to] prevent[].” (AK Steel’s Br. at 27.) This is nothing more
than a repackaging of AK Steel’s equal protection claim, which has already been rejected.
Compare supra pp. 13-15 with Gen. Motors Corp. v. Tracy, 519 U.S. 278, 298 (1997) (indicating
that any notion of discrimination against interstate commerce assumes a comparison of
substantially similar entities).

                                                18
Turner v. Wade, 254 U.S. 64, 67 (1920). Substantive due process requires that taxation

not be arbitrary, oppressive, or unjust. Great N. Ry. Co. v. Weeks, 297 U.S. 135, 152

(1936); Lawrence v. State Tax Comm’n Miss., 286 U.S. 276, 282 (1932); Davidson v.

City of New Orleans, 96 U.S. 97, 107 (1877) (Bradley, J., concurring).

       AK Steel claims that denying it the use of Pool 5 solely on the basis that its blast

furnace is not in Indiana violates its right to substantive due process. It states:

          Pool No. 5 ties the measure of personal property tax on special
          integrated steel mill equipment to the location of the steel company’s
          blast furnace. For a steel manufacturer that otherwise qualifies
          under the statute, but with an out-of-state blast furnace, the limitation
          is a de facto tax on the out-of-state blast furnace. . . . There is no
          rational relationship between the measurement of the tax under the
          statute as limited by the “in Indiana” restriction and the value of AK
          Steel’s personal property located in Indiana. . . . There was no
          rational legislative purpose for the “in Indiana” limitation other than to
          impermissibly measure the tax on Indiana-based personal property
          on the basis of an interstate characteristic entirely irrelevant to the
          tax base.

(AK Steel’s Br. at 28-29.)

       In order to claim that its substantive due process rights have been violated, AK

Steel must demonstrate to the Court that the “in Indiana” language 1) infringes upon

“fundamental rights [or] liberties which are, objectively, ‘deeply rooted in this Nation's

history and tradition[]’ and ‘implicit in the concept of ordered liberty,’ such that ‘neither

liberty nor justice would exist if they were sacrificed[]’” or 2) is “arbitrary and

unreasonable, having no substantial relation to the public health, safety, morals, or

general welfare.” Washington v. Glucksberg, 521 U.S. 702, 720-21 (1997) (citations

omitted); Vill. Of Euclid, Ohio v. Ambler Realty Co., 272 U.S. 365, 395 (1926) (citations

omitted). AK Steel seeks to have its claim resolved on the “arbitrary and unreasonable”

showing. (See, e.g., AK Steel’s Br. at 28; AK Steel’s Reply Br. at 21 (stating that the

                                             19
Legislature’s “economic protectionist goal” in adopting the “in Indiana” language is

“invidious and irrational”).) See also Coniston Corp. v. Vill. of Hoffman Estates, 844
F.2d 461, 467 (7th Cir. 1988) (explaining that “arbitrary and unreasonable” has been

interpreted to mean invidious or irrational).

       “[G]overnmental action passes the rational basis test if a sound reason may be

hypothesized. The government need not prove the reason to a court’s satisfaction.”

Northside Sanitary Landfill, Inc. v. City of Indianapolis, 902 F.2d 521, 522 (7th Cir. 1990)

(citations omitted). As previously explained, the reason the Legislature created Pool 5

was to specifically address and remedy the detrimental effects that Indiana’s integrated

steel mills’ abnormal obsolescence claims had on the local property tax bases and

communities. See supra p. 14-15. This reason is neither arbitrary nor unreasonable.

Consequently, AK Steel’s substantive due process claim fails.

                                     D. SPECIAL LAW

       AK Steel also claims that Indiana Code § 6-1.1-3-23’s “in Indiana” language

violates Article 4, Section 22 of the Indiana Constitution. (See AK Steel’s Br. at 31-34.)

That provision prohibits the enactment of special laws regarding, among other things,

“the assessment and collection of taxes for State, county, township, or road purposes[.]”

IND. CONST. art. 4, § 22.     A special law “‘pertains to and affects a particular case,

person, place, or thing, as opposed to the general public.’” Mun. City of South Bend v.

Kimsey, 781 N.E.2d 683, 689 (Ind. 2003) (citation omitted).

       AK Steel asserts that with its “in Indiana” language, Indiana Code § 6-1.1-3-23 is

a special law because it concerns the assessment of property and it affects only AK

Steel, i.e., “the only integrated steel producer in Indiana that has a blast furnace located

                                                20
outside of Indiana.” (AK Steel’s Br. at 31 (citation omitted).) The Court disagrees.

       “A statute is ‘general’ if it applies ‘to all persons or places of a specified class

throughout the state.’”     Kimsey, 781 N.E.2d at 689 (citation omitted and emphasis

added). Although Indiana Code § 6-1.1-3-23 was enacted in response to the financial

turmoil that was occurring in northern Indiana, the Legislature drafted the statute to

apply generally to a specified class throughout the state: any person that has a blast

furnace in Indiana – regardless of where in Indiana – is eligible to use Pool 5 to value its

property.

       For purposes of Indiana Code § 6-1.1-3-23, AK Steel is not a member of the

specified class (i.e., a person that produces steel by processing iron ore and other raw

materials in a blast furnace in Indiana). Because the specified class is reasonably

related to carrying out the Legislature’s legitimate purpose for creating Pool 5, supra pp.

14-15, AK Steel’s Article 4, Section 22 claim also fails.16

                       E. UNIFORMITY AND EQUALITY IN ASSESSMENT

       Finally, AK Steel claims that the “in Indiana” language of Indiana Code § 6-1.1-3-

23 violates Article 10, § 1 of the Indiana Constitution, which states that “[t]he General

Assembly shall provide, by law, for a uniform and equal rate of property assessment

and taxation and shall prescribe regulations to secure a just valuation for taxation of all

16
   AK Steel claims that the “in Indiana” language was “intentionally crafted” as the means to
specifically exclude AK Steel from using Pool 5. (See AK Steel’s Br. at 32.) As support for that
claim, AK Steel points to a statement made by the Indiana Legislative Services Agency in one of
its Fiscal Impact Statements that at the time the “in Indiana” language was adopted, “[t]here
[was] . . . one taxpayer, in Spencer County, that ha[d] its blast furnace in another state[.]” (AK
Steel’s Br. at 32-33 (citing Cert. Admin. R. at 991).) AK Steel also refers to a statement made
by the Indiana Economic Development Corporation in its 2005 annual report that the “in Indiana”
language “applies to only one steel mill in Indiana: AK Steel’s plant in Spencer County, which
has its blast furnace out of state.” (See AK Steel’s Br. at 33 (citing Cert. Admin. R. at 1011).)
The Court, however, does not find that either of these statements supports AK Steel’s claim.

                                               21
property, both real and personal.” IND. CONST. art. 10, § 1. AK Steel’s entire argument

and analysis as to this claim is that the “in Indiana” language “cause[s] substantially

identical steel mill equipment to be taxed non-uniformly based on a factor which is

entirely irrelevant to the physical or economic character of the equipment or its value –

namely, the location of the property owner’s blast furnace.” (See AK Steel’s Br. at 35-

36.) (See also AK Steel’s Reply Br. at 33-36.) This argument fails, however, because it

is simply another restatement of AK Steel’s equal protection claim which has already

been rejected. See supra pp. 13-15.

                                     CONCLUSION

       AK Steel has not shown that the “in Indiana” language contained in Indiana Code

§ 6-1.1-3-23’s definition of an integrated steel mill is unconstitutional. Accordingly, the

Indiana Board’s final determination is AFFIRMED in result.

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