ATTORNEY FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN STEVE CARTER
ATTORNEY AT LAW ATTORNEY GENERAL OF INDIANA
Indianapolis, IN Indianapolis, IN
LINDA I. VILLEGAS
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
HEART CITY CHRYSLER/ )
LOCKMANDY MOTORS, )
) Cause No. 49T10-9912-TA-232
DEPARTMENT OF LOCAL )
See footnote )
ON APPEAL FROM TWO FINAL DETERMINATIONS OF
THE STATE BOARD OF TAX COMMISIONERS
January 12, 2004
Heart City Chrysler/Lockmandy Motors (Heart City) appeals the State Board of Tax Commissioners
(State Board) final determinations valuing its real property for the 1990, 1991, and
1995 tax years. The issue for the Court to decide is whether
the State Board erred when it refused to award obsolescence depreciation to Heart
See footnote For the following reasons, the Court AFFIRMS the State Boards
FACTS AND PROCEDURAL HISTORY
Heart City owns and operates a car dealership located in Elkhart County, Indiana.
For the 1990, 1991, and 1995 property tax assessment years, Cleveland Township
assessing officials assigned zero obsolescence depreciation to Heart Citys improvements. Heart City
appealed its assessments to the Elkhart County Board of Review (BOR); the BOR
denied Heart Citys appeals. Heart City then appealed to the State Board.
On November 22, 1996, and October 29, 1997, the State Board issued
two final determinations in which it awarded Heart Citys improvements a 10% obsolescence
depreciation adjustment. Additionally, the State Board,
sua sponte, reduced the improvements physical
depreciation factor from 45% to 35%.
Heart City subsequently filed an original tax appeal. On June 24, 1999,
this Court reversed and remanded the State Boards final determinations with respect to
obsolescence and the physical depreciation adjustments.
See footnote The Court instructed Heart City, upon
remand, to quantify the obsolescence of the subject improvements with generally accepted appraisal
techniques consistent with this Courts opinion in
See Heart City Chrysler
v. State Bd. of Tax Commrs, 714 N.E.2d 329, 334 (Ind. Tax Ct.
On August 9, 1999, the State Board conducted a remand hearing. On
October 20, 1999, the State Board issued final determinations
See footnote in which it removed
Heart Citys 10% obsolescence adjustments and returned the physical depreciation factor to 45%.See footnote
See Stip. R. at 50, 61, 89.) On December 2, 1999, Heart
City filed another original tax appeal. On April 4, 2001, this Court
heard the parties oral arguments. Additional facts will be supplied as necessary.
ANALYSIS AND OPINION
Standard of Review
This Court gives great deference to the final determinations of the State Board
when it acts within the scope of its authority. Hamstra Builders, Inc.
v. Dept of Local Govt Fin., 783 N.E.2d 387, 390 (Ind. Tax Ct.
2003). Thus, this Court will reverse a final determination of the State
Board only when its findings are unsupported by substantial evidence, arbitrary, capricious, constitute
an abuse of discretion, or exceed statutory authority. Id. When appealing
to this Court from a State Board final determination, the taxpayer bears the
burden of showing that the final determination is invalid. Id.
Heart City claims that the State Board erroneously disregarded its evidence quantifying the
obsolescence depreciation present in its improvements. Specifically, Heart City requested a 25%
obsolescence adjustment to its 1990 and 1991 property tax assessments, and a 37%
adjustment to its 1995 assessment.
Obsolescence is the functional or economic loss of property value.
State Bd. of Tax Commrs, 694 N.E.2d 1230, 1238 (Ind. Tax Ct. 1998).
Functional obsolescence is caused by factors internal to the property; economic obsolescence
is caused by external factors. See id. See also Ind. Admin.
Code tit. 50, r. 2.1-5-1 (1992); Ind. Admin. Code tit. 50, r. 2.2-10-7(e)
(1996). Obsolescence is expressed as a percentage reduction in the remaining value
of an improvement. See 50 IAC 2.1-5-1; Ind. Admin. Code tit. 50,
r. 2.2-10-7(f) (1996).
When a taxpayer seeks an obsolescence adjustment, it must make a two prong
showing: 1) it must identify causes of the alleged obsolescence and 2)
it must quantify the amount of obsolescence to be applied to its improvement.
Clark, 694 N.E.2d at 1238. Each of these two prongs must
be tied to an improvements actual loss of value. Id. Thus,
although the only issue for the parties to consider on remand was the
quantification of obsolescence, Heart City was necessarily required to explain its causes of
obsolescence in order to translate its improvements loss in value (due to those
causes) into a quantifiable amount of obsolescence depreciation. See id. This
Heart City did not do.
At the administrative hearing, Heart City submitted an Assessment Review and Analysis (Analysis)
prepared by its property tax consultant, Mr. M. Drew Miller (Miller) of Landmark
See footnote In the Analysis, Miller quantified Heart Citys improvements obsolescence by deducting
the physical depreciation applied by the Cleveland Township Assessor from the total accrued
depreciation calculated using the economic age-life method of measuring property depreciation. (
Stip. R. at 98, 108.) In doing so, Miller concluded that Heart
Citys improvements suffered from 25% obsolescence in 1990 and 1991, and 37% obsolescence
in 1995. (Stip. R. at 98, 108.) However, Heart City did
not link those quantifications to the causes of its improvements obsolescence.
A taxpayer cannot quantify its obsolescence depreciation without relating the causes of obsolescence,
and the actual loss in value to the improvement incurred as a result
of those causes, to the amount of obsolescence it seeks. See Clark,
694 N.E.2d at 1238; see also Miller Structures, Inc. v. State Bd. of
Tax Commrs, 748 N.E.2d 943, 954 (Ind. Tax Ct. 2001). Heart City
was required to carefully, methodically, and in detail brief this Court as to
what the amount of obsolescence should be and why. Clark v. State
Bd. of Tax Commrs, 779 N.E.2d 1277, 1282 n.4 (Ind. Tax Ct. 2002)
(emphasis added). Instead, Heart City presented an Analysis concluding it was entitled
to obsolescence depreciation based on a mathematical calculation bearing no relationship to causes
of obsolescence depreciation alleged to exist. Without more, Heart Citys Analysis was
not sufficient to establish its prima facie case that it was entitled to
obsolescence depreciation. See Whitley Prods., Inc. v. State Bd. of Tax Commrs,
704 N.E.2d 1113, 1119 (Ind. Tax Ct. 1998), review denied. Thus, the
State Boards final determinations must stand.
For the aforementioned reasons, the Court AFFIRMS the State Boards final determinations.
The State Board of Tax Commissioners (State Board) was originally the Respondent
in this appeal. However, the legislature abolished the State Board as of
December 31, 2001. 2001 Ind. Acts 198 § 119(b)(2). Effective January
1, 2002, the legislature created the Department of Local Government Finance (DLGF),
Indiana Code § 6-1.1-30-1.1 (West Supp. 2003)(eff. 1-1-02); 2001 Ind. Acts 198 §
66, and the Indiana Board of Tax Review (Indiana Board). Ind. Code
§ 6-1.5-1-3 (West Supp. 2003)(eff. 1-1-02); 2001 Ind. Acts 198 § 95.
Pursuant to Indiana Code § 6-1.5-5-8, the DLGF is substituted for the State
Board in appeals from final determinations of the State Board that were issued
before January 1, 2002. Ind. Code § 6-1.5-5-8 (West Supp. 2003)(eff. 1-1-02);
2001 Ind. Acts 198 § 95. Nevertheless, the law in effect prior
to January 1, 2002 applies to these appeals. I.C. 6-1.5-5-8. See
also 2001 Ind. Acts 198 § 117. Although the DLGF has been
substituted as the Respondent, this Court will still reference the State Board throughout
In addition, Heart City raises various state and federal constitutional claims that
this Court has declined to reach in previous cases.
See, e.g., Barth,
Inc. v. State Bd. of Tax Commrs, 756 N.E.2d 1124, 1127 n.1 (Ind.
Tax Ct. 2001). Because Heart Citys claims and supporting arguments are identical
to those previously rejected by the Court, the Court will not address them.
The Court affirmed the State Boards final determination denying Heart Citys request
for a grade reduction.
See Heart City Chrysler v. State Bd. of
Tax Commrs, 714 N.E.2d 329, 333 (Ind. Tax Ct. 1999).
On April 24, 1998, this Court issued an opinion in
State Board of Tax Commissioners, 694 N.E.2d 1230 (Ind. Tax Ct. 1998).
In essence, Clark set forth what this Court expects from taxpayers and the
State Board in appeals involving issues of obsolescence. See Clark, 694 N.E.2d
The State Board held a consolidated remand hearing for all three tax
years; however, Heart City presented its evidence separately for the 1995 appeal.
Consequently, the State Board issued a joint final determination for 1990 and 1991,
and a separate final determination for 1995.
Footnote: Heart City did not discuss the issue of physical depreciation during its
oral argument, nor did it address it in its briefs to this Court.
Consequently, the Court considers the issue waived for review on this appeal.
Footnote: Two individual analysis reports, one for 1990 and 1991, and one for
1995, were prepared and submitted as exhibits during the administrative hearing. The
reports were essentially identical with respect to content, but for the differences in
numerical calculations specific to each year. (
See Stip. R. at 95-103, 106-111.)
Consequently, the Courts references to Millers Assessment Review and Analysis (Analysis) refer
to both submissions.
The Court notes that the State Board devoted four pages of each
final determination to discussing evidentiary credibility and relevancy factors in light of the
United States Supreme Court case of
Daubert v. Merrell Dow Pharmaceuticals. (See
Stip. R. at 45-49, 75-79); see also Daubert v. Merrell Dow Pharm., 113
S.Ct. 2786 (1993) (discussing issues of relevancy related to scientific evidence). The
State Board then concluded that Millers testimony [was] meant to be offered as
scientific evidence within the meaning of that term as defined by Daubert and
its credibility/reliability must therefore be evaluated in light of its contingent nature.
(See Stip. R. at 48, 77). This analysis is misplaced: this
Court has previously discussed how a contingently paid witnesss testimony is to be
evaluated. See Wirth v. State Bd. of Tax Commrs, 613 N.E.2d 874,
877 (Ind. Tax Ct. 1993). Thus, the Court saves its Daubert analysis
for another day.