ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN STEVE CARTER
ATTORNEY AT LAW ATTORNEY GENERAL OF INDIANA
Indianapolis, IN Indianapolis, IN
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
DAVIDSON INDUSTRIES, )
v. ) Cause No. 49T10-9804-TA-29
INDIANA STATE BOARD OF )
TAX COMMISSIONERS, )
ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
February 1, 2001
Davidson Industries (Davidson) appeals the State Board of Tax Commissioners (State Board) final
determination that assessed its property as of the March 1, 1995 assessment date.
Davidson presents the following issues for this Courts review on appeal:
whether the State Boards final determination of Davidsons case should be reversed because
the State Boards Regulations are unconstitutional; and
whether Davidson presented a prima facie case that its property suffers from obsolescence.
FACTS AND PROCEDURAL HISTORY
Davidson owns property located in Johnson County, Indiana.
See footnote On February 5, 1996,
Davidson filed a form 131 petition for review of assessment (131 Petition) with
the State Board seeking review of the March 1, 1995, assessment of its
improvements claiming among other things that its building should have 25% functional and
economic obsolescence applied to it. (Joint Ex. 1 at 3.) Thereafter, the
State Board held a hearing on the petition. On February 18, 1998,
the State Board issued its final determination concluding that the base prices previously
calculated were correct,See footnote the property was not entitled to obsolescence depreciation, and the
assessment did not violate the Indiana Constitution. In addition, the State Board
concluded that the depreciation table used by the county board was incorrect and
changed it to a 20-year table. On March 31, 1998, Davidson filed
its original tax appeal in this Court. The parties stipulated to the
evidence and thereafter an oral argument was held on June 17, 1999.
Additional facts will be provided as necessary.
ANALYSIS AND OPINION
Standard of Review
This Court gives final determinations of the State Board great deference when the
State Board acts within the scope of its authority.
Freudenberg-NOK General Partnership
v. State Bd. of Tax Commrs, 715 N.E.2d 1026, 1028-29 (Ind. Tax Ct.
1999). Accordingly, this Court reverses final determinations of the State Board only
when they are unsupported by substantial evidence, are arbitrary or capricious, constitute an
abuse of discretion, or exceed statutory authority. Id. at 1029.
In addition, a taxpayer challenging the validity of the State Boards final determination
bears the burden of demonstrating the invalidity of the final determination. Clark
v. State Bd. of Tax Comm'rs, 694 N.E.2d 1230, 1233 (Ind. Tax
Ct. 1998). The taxpayer must present a prima facie case, that is
a case in which the evidence is "sufficient to establish a given fact
and which if not contradicted will remain sufficient. GTE North Inc. v.
State Bd. of Tax Comm'rs, 634 N.E.2d 882, 887 (Ind. Tax Ct. 1994)
(citations and internal quotation marks omitted). To establish a prima facie case,
the taxpayer must offer probative evidence concerning the alleged error. King Indus.
v. State Bd. of Tax Comm'rs, 699 N.E.2d 338, 343 (Ind. Tax Ct.
1998); Whitley Prods., Inc. v. State Bd. of Tax Comm'rs, 704 N.E.2d
1113, 1119 (Ind. Tax Ct. 1998), review denied. Once the taxpayer carries
the burden of establishing a prima facie case, the burden shifts to the
State Board to rebut the taxpayer's evidence and justify its decision with substantial
evidence. Clark, 694 N.E.2d at 1233. To carry its burden, the
State Board must do more than merely assert that it assessed the property
correctly. Loveless Const. Co. v. State Bd. of Tax Comm'rs, 695 N.E.2d
1045, 1049 (Ind. Tax Ct. 1998), review denied. Instead, the State Board
must offer an authoritative explanation of its decision to rebut the taxpayer's prima
facie showing. Id.
The first issue is whether the State Boards final determination of Davidsons case
should be reversed because the State Boards Regulations are unconstitutional. Davidson seems
to argue that because the current regulations are unconstitutional they should not be
applied to its assessment. This Court has recognized that the fact that
the subject improvement was assessed under an unconstitutional regulation does not mean that
the assessment will be invalidated on that basis. Whitley Prods., 704 N.E.2d
at 1121; See also White Swan Realty v. State Bd. of Tax Comm'rs,
712 N.E.2d 555, 559 (Ind. Tax Ct. 1999), review denied; Phelps Dodge v.
State Bd. of Tax Comm'rs, 705 N.E.2d 1099, 1104 (Ind. Tax Ct. 1999),
review denied. Real property must still be assessed, and, until the new
regulations are in place, must be assessed under the present system. Whitley
Prods., 704 N.E.2d at 1121; See also Town of St. John v. State
Bd. of Tax Comm'rs, 729 N.E.2d 242, 250-251 (Ind. Tax Ct. 2000).
This means that a taxpayer cannot come into court, point out the inadequacies
of the present system and obtain a reversal of an assessment. Whitley
Prods., 704 N.E.2d at 1121. Instead, the taxpayer must come forward with
probative evidence relating to the issue the taxpayer raises. Id. Therefore,
Davidsons argument that the final determination should be reversed simply because the regulations
are unconstitutional cannot prevail.
The second issue is whether Davidson presented a prima facie case that its
property suffers from obsolescence. The True Tax Value of a commercial improvement
is determined by calculating the reproduction cost of the improvement (as determined by
an application of the State Board regulations) and subtracting any physical and obsolescence
depreciation. Loveless Const., 695 N.E.2d at 1047. The regulations define obsolescence
as a functional and economic loss of value. Ind. Admin. Code tit.
50, r. 2.1-5-1 (1992) (codified in present form at id., r. 2.2-10-7(e) (1996)).
Functional obsolescence is caused by factors internal to the property and is
"evidenced by conditions within the property." Id. Economic obsolescence is caused
by factors that are external to the property. Id. In the
commercial context, a loss of value usually represents a decrease in the improvement's
income generating ability. Loveless Const., 695 N.E.2d at 1047. See also
Damon Corp. v. State Bd. of Tax Commrs, 738 N.E.2d 1102, 1108 (Ind.
Tax Ct. 2000).
In Clark v. State Board of Tax Commissioners, this Court concluded that as
a prerequisite for this Court to review a taxpayers case, during its hearing
before the State Board the taxpayer must follow a two-step process whereby a
taxpayer must first identify causes of obsolescence and then quantify the amount of
obsolescence to be applied. Clark, 694 N.E.2d at 1241. However, as
this case arose before Clark, Davidson was not required to quantify its evidence,
but simply to identify it. See id. Davidson is required to
present probative evidence sufficient to establish a prima facie case regarding its asserted
causes of economic obsolescence. White Swan Realty, 712 N.E.2d at 560 (stating
when challenging the State Board's determination denying an obsolescence adjustment, the taxpayer has
to offer evidence tending to prove causes of obsolescence).
Davidson asserts that it presented substantial evidence and testimony establishing the fact that
the subject properties suffer causes of obsolescence. (Petr Br. at 7.)
More specifically, Davidson argues that the property at issue has no room for
growth, does not have sufficient storage, consists of multiple and heavily columned buildings
when a single building design would be more efficient, lacks an emphasis on
economy and safety that is present in current codes because most of the
buildings were constructed in 1961, and that economic and social conditions indicated a
need for more depreciation than was applied. (Petr Br. at 7.)
Davidson also submitted photographs of its facility and provided what it asserts were
comparable properties in the Assessment Review and Analysis that it prepared. (Joint
Ex. 2.) Davidson asserts that its major structure and exterior yard improvements
constructed in 1961 should receive 50% obsolescence and its exterior yard items constructed
in 1981 should receive 25% obsolescence. (Joint Ex. 2 at 2.)
Davidson contends that the State Board did not meaningfully address its evidence.
Davidson misunderstands its burden here. Davidson has the burden of establishing a
prima facie case of obsolescence before the burden shifts to the State Board
to deal with Davidsons evidence in a meaningful manner. See Canal Square
Ltd. Partnership v. State Bd. of Tax Comm'rs, 694 N.E.2d 801, 805 (Ind.
Tax Ct. 1998). Conclusory statements do not constitute probative evidence. Sterling
Management-Orchard Ridge Apartments v. State Bd. of Tax Comm'rs, 730 N.E.2d 828, 839
(Ind. Tax Ct. 2000). [T]his Court has also rejected attempts by taxpayers
to put forth evidence such as photographs without explanations. Heart City Chrysler
v. State Bd. of Tax Comm'rs, 714 N.E.2d 329, 333 (Ind. Tax Ct.
1999). A hearing officer does not have an affirmative duty to make
a case on behalf of a party. A party who stands to
be adversely affected by a petition for review has an obvious responsibility to
appear before the State Board and present evidence and argument in support of
its position. North Park Cinemas, Inc. v. State Bd. of Tax Comm'rs,
689 N.E.2d 765, 769 (Ind. Tax Ct. 1997). Moreover, this Court will
not make a taxpayers case for it. See CGC Enters v. State
Bd. of Tax Commrs, 714 N.E.2d 801, 803 (Ind. Tax Ct. 1999).
Here, in Davidsons brief and Assessment Review and Analysis it presented only conclusory
statements that its property suffered from obsolescence. See Sterling Management-Orchard Ridge Apartments,
730 N.E.2d at 839. Davidson did not explain how its assertions showed
a loss in value that would be indicative of obsolescence. See Ind.
Admin. Code tit. 50, r. 2.1-5-1. Moreover, at trial, Davidsons presentation of
photographs of its property and allegedly comparable properties lacked any explanation. See
Heart City Chrysler, 714 N.E.2d at 333. Davidson did not even designate
what kind of obsolescence was allegedly demonstrated by its evidence. Davidsons presentation
of evidence without showing how that evidence demonstrates that its property has suffered
from obsolescence is not probative evidence. It is not this Courts place
to sift through Davidsons evidence and make its arguments for it. See
CGC Enterprises, 714 N.E.2d at 803. Because Davidson has failed to present
probative evidence to the State Board regarding obsolescence, the Court AFFIRMS the final
determination of the State Board.
For the foregoing reasons, the Court hereby AFFIRMS the State Boards final determination
that Davidson is not entitled to obsolescence.
Davidson also argues that the State Boards findings of fact were
insufficient in its case. It is true that the State Boards decision
will be reversed if it fails to make any findings as to evidence
rebutting the taxpayer's prima facie case.
Canal Square Ltd. Partnership v. State
Bd. of Tax Comm'rs, 694 N.E.2d 801, 805 (Ind. Tax Ct. 1998).
However, in order to invoke this requirement, the taxpayer must first present a
prima facie case. Id. As discussed infra, Davidson has not presented
a prima facie case with regard to obsolescence in order to trigger the
State Boards duty to support its decision with substantial evidence. See infra
part II. Therefore, this contention by Davidson is without merit.
This property is parcel number 5100-03-01-035/00.
Footnote: Davidson does not appear to raise the base price issue on
appeal. Therefore, this Court will not address it.