ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
CURTIS J. DICKINSON JEFFREY A. MODISETT
DICKINSON & ABEL ATTORNEY GENERAL OF INDIANA
Indianapolis, IN Indianapolis, IN
DAVID L. PIPPEN JEFFREY S. McQUARY
Attorney at Law DEPUTY ATTORNEY GENERAL
Indianapolis, IN Indianapolis, IN
INDIANA TAX COURT
CDI, INC., )
v. ) Cause No. 49T10-9701-TA-84
STATE BOARD OF TAX )
ON APPEAL FROM A FINAL DETERMINATION OF THE
STATE BOARD OF TAX COMMISSIONERS
February 8, 2000
Petitioner CDI, Inc. (CDI) appeals the final determination of the State Board of
Tax Commissioners (State Board) denying CDIs request to lower the assessed value of
its warehouse for the 1991 assessment year. In this original tax appeal,
CDI presents the following issues for the Courts review:
I. Whether the State Board exceeded its legislative authority in conducting a hearing in
this matter without having issued a letter of appointment to its hearing officer;
II. Whether the State Board improperly denied CDIs warehouse grading and kit building adjustments;
III. Whether the State Board erred in using the forty-year economic life table in
determining the warehouses physical depreciation.
FACTS AND PROCEDURAL HISTORY
CDI owns a truck warehouse in Vigo County. CDI filed a Form
130 petition for review of assessment with the Vigo County Board of Review
(BOR) on or about December 9, 1991, challenging the assessment of its property
(parcel number 06-07-32-300-013) as of the March 1, 1991 assessment date. The
BOR conducted a hearing on the petition on November 18, 1992 and issued
its determination on November 19, 1993. Thereafter, on December 15, 1993, CDI
filed a Form 131 petition for review of assessment with the State Board.
On February 22, 1996, the State Board held a hearing on the
petition. The State Board issued its final determination on November 22, 1996.
CDI filed an original tax appeal with this Court on January 6,
1997. A trial in this matter was conducted on December 14, 1998.
Additional facts will be supplied where necessary.
ANALYSIS AND OPINION
Standard of Review
This Court gives the final determinations of the State Board great deference when
the State Board acts within the scope of its authority. See Wetzel
Enters., Inc. v. State Bd. of Tax Commrs, 694 N.E.2d 1259, 1261 (Ind.
Tax Ct. 1998). Accordingly, this Court reverses final determinations of the State
Board only when those decisions are unsupported by substantial evidence, are arbitrary or
capricious, constitute an abuse of discretion, or exceed statutory authority. See id.
The Court will consider each of CDIs issues in turn.
I. Hearing Officers Appointment
CDI asserts that the State Board issued no written order appointing Hearing Officer
Stephen King (King). To support its position, CDI points to Kings testimony
at trial, where King admitted to not having received any written prescription of
duty for CDIs specific appeal. (Trial Tr. at 7.) Therefore, CDI
contends that the State Boards actions exceeded its legislative authority. However, there
is no evidence in the record that CDI objected to Kings authority at
the administrative level, either at the hearing or during the physical inspection of
the warehouse, to hear CDIs appeal on behalf of the State Board.
Therefore, the Court finds that CDIs silence at the administrative level on the
issue of Kings authority to conduct the hearing constituted consent to the hearing.
CDI thus waived the issue and may not now raise the issue
for the first time in its original tax appeal. See Hoogenboom-Nofziger v.
State Bd. of Tax Commrs, 715 N.E.2d 1018, 1021-22 (Ind. Tax Ct. 1999);
see also State Bd. of Tax Commrs v. Gatling Gun Club, Inc., 420
N.E.2d 1324, 1328 (Ind. Ct. App. 1981).
II. Grade & Kit Adjustments
CDI argues that the State Board did not support its final determination
with substantial evidence, as regards its decisions assigning the warehouse a grade of
D plus two, see Ind. Admin. Code tit. 50, r. 2.1-4-3 (1992) (codified
in present form at Ind. Admin. Code tit. 50, r. 2.2-10-3 (1996)) and
denying the warehouse a kit building adjustment, see Ind. Admin. Code tit. 50,
r. 2.1-4-5 (1992)
(codified in present form at Ind. Admin. Code tit. 50,
r. 2.2-11-6 (1996)). CDI contends that the warehouses physical structure deviates from
the model used to determine its base reproduction cost and that a kit
building or grade adjustment could account for such deviations. While the State
Board did lower the buildings grade, CDI maintains that the State Boards grade
adjustment was arbitrary. According to CDI, the State Board lacked any lawful
basis for [its] determination of pricing adjustment. (Petr Br. at 9.)
The Court need not discuss whether the State Boards decision is supported by
substantial evidence, because CDI points to no probative evidence of record indicating what
the correct grade should be or whether the structure is a kit building.
When a taxpayer contests the grade assigned an improvement, he must offer
probative evidence concerning the alleged assessment error. See Meridian Hills Country Club
v. State Bd. of Tax Commrs, 512 N.E.2d 911, 914 (Ind. Tax Ct.
1987) (finding taxpayers evidence, standing alone, that like golf course facility received lower
grade, even though it hosted a major tournament, was insufficient to prove violation
of the uniform and equal mandate); see also Whitley Prods., Inc. v. State
Bd. of Tax Commrs, 704 N.E.2d 1113, 1119 (Ind. Tax Ct. 1998) ([T]he
taxpayer must offer probative evidence concerning the alleged error.) (citations omitted); White Swan
Realty v. State Bd. of Tax Commrs, 712 N.E.2d 555, 559 (Ind. Tax
Ct. 1999) ([T]he taxpayer must offer probative evidence relating to the grade issue.).
A taxpayers conclusory statements do not constitute probative evidence concerning the grading
of the subject improvement. See Whitley Prods., 704 N.E.2d at 1119.
Where the taxpayer fails to provide the State Board with probative evidence supporting
its position on the grade issue, the State Boards duty to support its
final determination with substantial evidence is not triggered. See id. at 1119-20.
Also, a taxpayer must provide the State Board with probative evidence as to
whether an improvement qualifies as a kit building. As this Court recently
When a taxpayer seeks a kit adjustment, it is incumbent upon the taxpayer
to offer evidence tending to show the improvement qualifies for the kit adjustment.
If the taxpayer fails to do so, the taxpayers claim fails. This
is not an onerous burden. . . . Instructional Bulletin 91-8
outlines a large number of specific characteristics of kit buildings. Accordingly, it
should not be difficult for taxpayers to identify those characteristics in an improvement
alleged to qualify for the kit adjustment.
Whitley Prods., 704 N.E.2d at 1121 (citation omitted).
See also King Indus.
Corp. v. State Bd. of Tax Commrs, 699 N.E.2d 338, 343 (Ind. Tax.
Ct. 1998) (The kit building adjustment is one example of a case where
the taxpayer must attempt to offer . . . a competing view of
the assessment. The taxpayer must first offer probative evidence tending to prove
it is entitled to the kit adjustment.). See generally Clark v. State
Bd. of Tax Commrs, 694 N.E.2d 1230, 1234 (Ind. Tax Ct. 1998) (citing
examples where taxpayer must provide evidence supporting a competing view of the assessment).
As with the issue of grade, the State Board is not required
to support its denial of the kit building adjustment until the taxpayer comes
forward with probative evidence demonstrating it is entitled to the adjustment. See
King Indus., 699 N.E.2d at 343.III. Economic Life Table
CDI failed to provide probative evidence as to either the grading of the
warehouse or the classification of the improvement as a kit building. CDIs
chief witness, Mr. Mark Drew Miller (Miller), observed that the warehouse was basically
a pre-engineered structure, with steel framing, metal walls, minimal heat, [and] numerous doors.
(Trial Tr. at 19.) When asked how he determined the improvement
was pre-engineered, Miller responded You can see that . . . its more
along a kit-type, where you order the parts and put them together.
There isat least thats my opinion, anyway. That you can see certain
modifications if its not a pre-engineered structure. (Trial Tr. at 19.)
He added that he was not aware of any structural modifications. (Trial
Tr. at 20.) Miller did indicate that roof supports were basically
steel framing with tapered columns. (Trial Tr. at 21.) He
indicated that the roof supports could thus be considered low cost or economical.
(Trial Tr. at 21.) When asked if the warehouse qualified as
a kit building under Instructional Bulletin 91-8, Miller answered Given the vagueness of
the definition, I would say yes, it would qualify. I cant see
anything that would make it not qualify. (Trial Tr. at 20.)
Further, Miller opined that, given the State Boards past grading of other truck
terminals in similar situations, equity required that CDIs warehouse be assigned a grade
of D minus one. (Trial Tr. at 20.)
Millers testimony does not constitute probative evidence as to the issues at hand.
His comments were conclusory in nature. He provides the Court with
absolutely no insight as to why the structure should be classified as a
kit building. Miller stated that the warehouse was basically a pre-engineered structure
having certain basic features, i.e. steel framing and metal walls, without explaining how
these features qualify the warehouse as a kit building. Miller appeared to
make a feeble attempt to apply the standards found in Instructional Bulletin 91-8
by pointing out that the roof supports consist of basically low cost, economical
metal framing with tapered columns. He never referenced the bulletin, which calls
on assessors to identify the type of interior column and roof beam support
in a purported kit building.
See footnote (Joint Ex. 3 at 4.) Rather,
he expects the Court to link up and compare the appropriate standard from
the bulletin with his vague description. The Court refuses to do CDIs
work for it. Moreover, Miller informed the Court that he could find
no reason why the kit adjustment could not apply. However, he provided
virtually no evidence as to why it should apply. Millers testimony is
gravely insufficient to support his conclusion that the warehouse qualified for the kit
In like fashion, Miller offered no probative evidence as to the proper grading
of the warehouse. He fails to explain how he calculated his suggested
grade of D minus one. According to Miller, other truck terminals in
similar situations have been afforded this grading. However, Miller neither identifies nor
describes any specific instance where a similarly structured warehouse facility was assigned a
grade of D minus one. Conclusory observations of this type do not
constitute probative evidence. The Court will not and, indeed, cannot rely upon
his unsupported opinion.See footnote
See Heart City Chrysler v. State Bd. of Tax
Commrs, 714 N.E.2d 329, 333 (Ind. Tax Ct. 1999) ([T]his Court will not
substitute conclusory statements for probative evidence.)
CDI failed to come forward with probative evidence regarding grade or kit building
adjustments for the warehouse. Thus, the State Board had no duty to
refute CDIs arguments with a competing view. See Whitley Prods., 704 N.E.2d
at 1119-20; King Indus., 699 N.E.2d at 343. Therefore, the Court need
not consider whether substantial evidence supports the State Boards grading of the warehouse
or its refusal to grant the warehouse a kit building adjustment.
CDIs final point of contention is that the State Board selected and applied
the wrong economic life table in calculating the physical depreciation assigned to the
warehouse. In its final determination, the State Board described the warehouse as
a medium duty fire resistant structure that must be depreciated from the 40
year table. (Joint Ex. 1.); See also Ind. Admin. Code tit. 50,
r. 2.1-5-1 (1992) (codified in present form at Ind. Admin. Code tit. 50,
r. 2.2-11-7 (1996)). CDI believes that the building is appropriately described as
a light pre-engineered building, which structure is depreciated under the thirty year economic
life table. See Ind. Admin. Code tit. 50, r. 2.1-5-1 (1992).
According to CDI, the State Boards regulations fail to define the terms medium
duty and light pre-engineered, which definitions are crucial to a proper application of
physical depreciation. (Petr Br. at 10.) CDI argues that the State
Boards reference to terms nowhere defined or elaborated upon by their regulations cannot
be found anything but arbitrary and capricious. (Petr Reply Br. at 5.)
Essentially, CDI complains that the regulations governing the selection of the appropriate
economic life table lack ascertainable standards.
As with issue II, supra, the Court need not address the merits of
CDIs argument. A taxpayer may not secure the reversal of a State
Board final determination regarding a structures physical depreciation simply by pointing out the
inadequacy of the regulations governing physical depreciation in general and specifically governing the
selection of the appropriate economic life table. See Phelps Dodge v. State
Bd. of Tax Commrs, 705 N.E.2d 1099, 1104 (Ind. Tax Ct. 1999) (challenging
rules governing condition), review denied; White Swan Realty, 712 N.E.2d at 559-60 (challenging
rules governing grading and condition); Whitley Prods., 704 N.E.2d at 1121 (challenging rules
governing grading). Rather, the taxpayer must offer probative evidence regarding the purported
error it has raised. See Phelps Dodge, 705 N.E.2d at 1104; White
Swan Realty, 704 N.E.2d at 559-60; Whitley Prods., 704 N.E.2d at 1121.
CDI failed to come forward with probative evidence regarding the appropriate economic life
table to apply in determining physical depreciation for the warehouse. At trial,
Miller testified that the State Boards regulations do not describe what constitutes medium
duty. (Trial Tr. at 19.) He remarked that the regulations do
have separate descriptions for light and heavy, but the models for truck warehouses
do not distinguish between heavy duty or light features. (Trial Tr. at
19.) Miller described the warehouse as a pre-engineered structure. (Trial Tr.
at 19.) He stated that the warehouse should be characterized as light
pre-engineered. (Trial Tr. at 20.) When asked how this determination is
made, Miller replied, Its basically a warehouse. . . . Its
not set up for heavy loadscraneways, heavy machinery. . . . There
is no need for it to be of heavy construction. And .
. . in looking at it, it appears fairly light. (Trial
Tr. at 20.)
Millers remarks do not assist the Court in determining whether the warehouse was
a light pre-engineered structure or whether it was a medium duty fire-resistant building.
He does not explain how the warehouse is not set up for
heavy loads or why this is important as to what constitutes a light
pre-engineered structure. Moreover, that there is no need for a building to
be made of heavy construction tells the Court nothing as to whether it
is in fact made of heavy construction. In addition, the appearance of
being lightweight provides the Court with no evidentiary foundation for determining whether the
structure should be deemed lightweight. Cf. Whitley Prods., 704 N.E.2d at 1122
(Testimony that a given improvement resembles a kit building is not sufficient to
show that the subject improvement is a kit building.) (emphasis in original).
Millers testimony does not constitute probative evidence on the issue of the physical
depreciation, especially as regards the selection of the appropriate economic life table for
the warehouse. As a result, the State Boards duty to develop and
support a competing view of the proper assessment was never triggered. See
Whitley Prods., 704 N.E.2d at 1119-20; King Indus., 699 N.E.2d at 343.
For all of the aforementioned reasons, the Court hereby AFFIRMS the State Boards
final determination in all respects.
CDI raises two additional issues not considered by the Court: (1)
whether the State Boards assessment regulations violate the Indiana Constitution; and (2) whether
the State Boards final determination was not supported by sufficient findings of fact.
As to the issue of constitutionality, the fact that the subject improvement
was graded under an unconstitutional regulation does not mean the assessment will be
invalidated on that basis. Whitley Prods., Inc. v. State Bd. of Tax
Commrs, 704 N.E.2d 1113, 1121 (Ind. Tax Ct. 1998) (citations omitted), review denied.
Real property must still be assessed, and, until the new regulations are
in place, must be assessed under the present system. Id. Furthermore,
because of the Courts resolutions of issues II & III, infra, the Court
need not consider whether the State Board supported its final determination with sufficient
Following Schedule A.1, this regulation provides Deduct 50% of base price (1st
floor) for pre-engineered kit-type structure.
Instructional Bulletin 91-8, issued in 1991 by the State Board, was admitted
into evidence as Joint Exhibit 3. (Trial Tr. at 3.) The
bulletin instructs assessors on how to determine which buildings qualify for the kit
building adjustment; it provides examples of kit buildings and outlines several characteristics of
these buildings. See Barth, Inc. v. State Bd. of Tax Commrs, 699
N.E.2d 800, 803-04 (Ind. Tax Ct. 1998), rehg denied.
This standard is not limited to the issues of grade and kit
building adjustments. See White Swan Realty, 712 N.E.2d at 560-61 (observing that
a taxpayer must offer probative evidence regarding an improvements condition and the classification
Buildings that qualify for the kit adjustment are, by definition, light
pre-engineered buildings. Barth, 699 N.E.2d at 808 n.20.
The bulletin states that the only type of structures qualifying as kit
buildings are the low cost economical version[s] of pre-designed and pre-engineered structures.
(Joint Ex. 3 at 3.) The bulletin provides four examples of column
and beam systems found in kit buildings. (Joint Ex. 3 at 4-5.)
One example is the tapered column, which uses columns that are made
of low cost, light weight steel and only offer a slight upgrade to
the structure. (Joint Ex. 3 at 5.)
At trial, the Court admitted into evidence Joint Exhibit 2, an Assessment
Review and Analysis of the warehouse prepared by Miller. Unfortunately for CDI,
the documents title is a misnomer, as it provided no thorough review or
analysis of its facility. The first page of the document consisted of
a copy of the State Boards notice of hearing on the Form 131
petition for review. The second page shows a picture of two sides of
the warehouse, with what appears to be two loading docks at one corner
of one side and a series of overhead doors running the viewable length
of the other side. The photograph is of little assistance. In
Whitley Products, the taxpayer provided photographs of the subject improvement as proof that
it qualified as a kit building. The Courts observation in Whitley Products,
704 N.E.2d at 1122, that the photographs did not show any characteristics that
distinguished the subject improvement from any other light pre-engineered structure is applicable to
the instant case. The picture of the warehouse lacked any explanatory information
as to how the warehouse qualified as a kit building. By itself, the
picture was not probative evidence. See Heart City Chrysler v. State Bd.
of Tax Commrs, 714 N.E.2d 329, 333 (Ind. Tax Ct. 1999) ([T]his Court
has rejected attempts by taxpayers to put forth evidence such as photographs without
The third page of the document, titled Issues and Contentions, addresses, among other
things, the issues of grade and kit building adjustments. Specifically, it asserts
The building is a light pre-engineered structure or kit-type and varies dramatically from
the model described in the assessment manual. A grade of D
1 or 70% should be applied to adjust for those differences. This
conclusory statement is essentially identical to Millers trial testimony. It does not
constitute probative evidence warranting reversal of the State Boards final determination.
Counsel for CDI at trial questioned Hearing Officer King at some length
as to whether Instructional Bulletin 91-8 or the State Boards regulations define or
describe various terms, such as medium duty, structurally modified, light pre-engineered, economy quality,
fair workmanship, cheap quality, substandard, and low-cost steel. (Trial Tr. at 10-12, 14-15
& 35.) Questions as to definitions do not constitute probative evidence on
the issues presented by CDI. See generally Phelps Dodge, 705 N.E.2d at
1104-05 (providing examples of probative evidence that taxpayer could submit regarding physical depreciation).
The Court observes that, where specific words or phrases used in the statutes,
regulations or documents like the bulletin in question are not defined, it will
strive to give those words or phrases their plain, ordinary and usual meanings.
See Dalton Foundries, Inc. v. State Bd. of Tax Commrs, 653 N.E.2d
548, 553 (Ind. Tax Ct. 1995). Where a taxpayer asserts that a word
or phrase has a unique or contextual meaning, it is generally helpful if
the taxpayer at least attempts to provide a definition for the word or
phrase. See North Park Cinemas v. State Bd. of Tax Commrs, 689
N.E.2d 765, 769 (Ind. Tax Ct. 1997) (A party who stands to be
adversely affected by a petition for review has an obvious responsibility to .
. . present evidence and argument in support of its position.).
A myriad of dictionaries and thesauriboth general and specializedare available to assist the
taxpayer in ferreting out a word or phrases meaning. See Precedent v.
State Bd. of Tax Commrs, 659 N.E.2d 701, 705 (Ind. Tax Ct. 1995)
(The plain, ordinary, and usual meaning of a word is usually found in
a dictionary.). For example, Websters Third New International Dictionary 1403 (1981) defines
medium as intermediate in amount, quality, position, or degree. This same source
defines light as having little weight or not heavy or massive in construction
or appearance. See id. at 1308. It defines low as being
beneath a rate, amount, or value considered normal, standard, or adequate by some
criteria and assigns the following definition to low-cost: obtainable at a low
cost. See id. at 1341. Also, Rogets II The New Thesaurus
595 (1980) states that medium is synonymous with average and means [s]omething as
a type, number, quality, or degree that represents a midpoint between extremes on
a scale of valuation. It further gives the synonym lightweight and weightless
to the word light, describing the term as [h]aving little weight; not heavy.
See id. at 563. Finally, the thesaurus states that a synonym
for low-cost is cheap and means low in price. See id. at
574. The Court also reminds Counsel for CDI that todays word processing
programs often have a thesaurus feature for ease of reference in assisting the
writer in fleshing out the meaning of a word or phrase.
In addition, Counsel for CDI questioned King as to his general methodology and
his specific instructions for applying the bulletin and regulations assessment standards. (Trial
Tr. at 8-16, 33-38.) Questions as to methodology and instruction do not
constitute probative evidence on the issues presented by CDI.
King did indicate that the warehouse deviated from the truck warehouse model in
that the subject improvement had metal walls and not concrete block. (Trial
Tr. at 35.) Deviations from the model used by assessing officials and
the State Board are relevant in considering whether the appropriate grade was applied.
See Whitley Prods., 704 N.E.2d at 1117 (noting two ways to account for
improvements deviation from the modeluse of separate cost schedules to subtract missing components
and application of grade adjustments, with the former being the preferred method).
The deviations may provide clues as to the proper model. However, CDI
failed to elaborate upon the extent or the effect of this specific deviation
in its briefs to this Court. Thus, Kings testimony did not constitute
probative evidence sufficient to trigger the State Boards burden of production on the
issue of grade. See id. at 1119-20.