ATTORNEY FOR PETITIONERS: ATTORNEYS FOR RESPONDENT:
TIMOTHY J. VRANA STEVE CARTER
SHARPNACK BIGLEY ATTORNEY GENERAL OF INDIANA
DAVID & RUMPLE Indianapolis, IN
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
DON R. AND DALE R. LOWE, )
v. ) Cause No. 49T10-9902-TA-7
DEPARTMENT OF LOCAL )
ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
NOT FOR PUBLICATION
February 13, 2004
The Petitioners, Don R. and Dale R. Lowe (the Lowes), appeal the final
determination of the State Board of Tax Commissioners (State Board) valuing their real
property for the 1995 tax year. The Lowes present multiple issues on
Whether the State Board erred in grading one of the Lowes improvements;
Whether the State Board erred in assessing two of the Lowes improvements under
the General Commercial Industrial (GCI) Schedule;
Whether the State Board erred in denying a functional obsolescence adjustment to Lowes
For the reasons explained below, the Court AFFIRMS the State Boards final determination
on all issues.
FACTS AND PROCEDURAL HISTORY
In 1992, the Lowes purchased a grain elevator in Rush County. At
the time of assessment in 1995, the facility was used for grain storage
For the 1995 assessment, the Lowes property was assessed at $272,940.00. In
arriving at this value, the local assessing officials assigned one improvement a D
grade, assessed two improvements using the GCI schedule, and did not apply obsolescence
to any part of the facility.
Believing the assessment to be too high, the Lowes petitioned the Rush County
Board of Review (BOR) for relief. The BOR, however, denied all requested
relief. On appeal, the State Board affirmed the BORs determination.
The Lowes filed this original tax appeal on February 1, 1999. This
Court held a trial on January 21, 2001. 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. Wetzel Enters., Inc.
v. State Bd. of Tax Commrs, 694 N.E.2d 1259, 1261 (Ind. Tax Ct.
1998). This Court will reverse a final determination by the State Board
only when its findings are unsupported by substantial evidence, are arbitrary or capricious,
constitute an abuse of discretion, or exceed statutory authority. Id.
The Lowes claim that the State Board erroneously graded one of their
improvements a D. The Lowes contend the grade should be lowered to
D-2. (See Cert. Admin. R. at 3.) However, the Lowes failed
to provide evidence supporting their claim.
The grading of improvements is an important aspect of the True Tax Value
system. Whitley Prods., Inc. v. State Bd. of Tax Commrs, 704 N.E.2d
1113, 1116 (Ind. Tax Ct. 1998), review denied. Grades, ranging from A
to E, are assigned to improvements based on the quality of the materials
used, the design, and workmanship. Ind. Admin. Code tit. 50, r. 2.2-10-3(1996).
For instance, a D grade building is constructed with economy materials and
fair workmanship. These buildings are devoid of architectural treatment and have a
substandard quality interior finish with minimal built-in features, substandard quality electrical and plumbing
fixtures, and a substandard quality heating system. Ind. Admin. Code tit. 50,
r. 2.2-10-3(a)(4)(1996). Furthermore, because structures sometimes fall between major grade classifications, a
method of interpolation is built into the system. Ind. Admin. Code tit.
50, r. 2.2-10-3(c)(1996). Specifically, intermediate grade levels can be assigned by either
a plus or minus 2 indicating that a structure falls halfway between two
grade classes, or a plus or minus 1 indicating that structure falls 25%
above or below an assigned grade. Ind. Admin. Code tit. 50, r.
Because the Lowes are challenging the propriety of the State Boards final determination,
they must provide evidence sufficient to establish a prima facie case that the
State Board either improperly gave their property a D grade or improperly denied
it a D-2 grade. See Sollers Pointe Co. v. Dept of Local
Govt Fin., 790 N.E.2d 185, 191 (Ind. Tax Ct. 2003). At the
administrative hearing, the Lowes presented the testimony of their property tax consultant, Mr.
Were talking . . . grade, from the manual. [The BOR] already adjusted
it a grade down to a D. [The assessment regulation] calls for
forced hot and cold chilled water zoned for the type of heating and
cooling, and this one doesnt have any cooling, of course, and it was
taken off. Ive got a copy of a C grade building out of
the manual, and I know this is at D now, but this isnt
anything close to a C. I cant find a D grade picture
of an office in the manual. If there is one, Ive overlooked
it. Uh, its just an old building with, I feel, no architectural
design, and therefore, the grade should be lowered to D-2.
(Joint Ex. 1). Along with his testimony, Smith submitted a photocopy of
a page from the State Boards assessment regulations with photographs of various commercial
industrial offices that received grades ranging between C+2 to C. II. GCI Schedule
Testimony, even from a recognized appraisal expert, is conclusory, and therefore not probative,
when it does not link the evidence submitted to the requested relief.
See Inland Steel Co. v. State Bd. of Tax Commrs, 739 N.E.2d 201,
220 (Ind. Tax Ct. 2000), review denied. In other words, in order
to establish a prima facie case on grade, a taxpayer can provide specific
evidence tied to the descriptions of the various grade classifications. Sollers Pointe,
790 N.E.2d at 191 (footnote omitted). Consequently, the statement that its just
an old building with, I feel, no architectural design, is not probative evidence
on the issue of grade. See Freudenberg-Nok Gen. Pship v. State Bd.
of Tax Commrs, 715 N.E.2d 1026, 1030 (Ind. Tax Ct. 1999), review denied;
Whitley Prods., 704 N.E.2d at 1119. Rather, the Lowes should have provided
specific reasons as to why their building is devoid of architectural treatment.
See Lacy Diversified, Indus., Ltd. v. Dept of Local Govt Fin., 799 N.E.2d
1215, 1221 n. 5 (Ind. Tax Ct. 2003). See also 50 IAC 2.2-10-3(a)(4).
Moreover, the Lowes should have provided evidence showing how their improvement was
constructed with less than economy materials or less than substandard built-in features, interior
finish, or electrical/plumbing fixtures. See id. Therefore, this Court cannot say
that the application of a D grade to the Lowes improvement was an
abuse of discretion.
The Lowes contend that the State Board incorrectly valued two of their improvements
under the GCI schedule. The Lowes argue that one improvement should have
been valued under a combination of the GCI schedule and General Commercial Mercantile
(GCM) schedule, and another improvement should have been valued under the General Commercial
Kit (GCK) Schedule. The State Board counters that the Lowes failed to
present a prima facie case supporting their claims. The State Board is
Under Indianas property tax assessment system, cost schedules are used to determine the
base reproduction cost of a particular improvement. Whitley Prods., 704 N.E.2d
at 1116. See also Ind. Admin. Code tit. 50, r. 2.2-11-6(1996).
To help identify and define various classes of buildings, the assessment regulations have
categorized improvements into numerous models based upon their physical characteristics. Assessing officials
apply a cost schedule associated with the model that most closely resembles the
subject improvement physically. See Herb v. State Bd. of Tax Commrs, 656
N.E.2d 890, 893 (Ind. Tax Ct. 1995)(stating that while the model names are
reflective of use, the model specifications actually reflect the physical features that are
incorporated into the structure.)
Improvement # 1
The Lowes have a building that they use as office space and where
they sell livestock feed. While the State Board assessed the improvement using
the GCI industrial office model, the Lowes contend that a portion of the
building should be assessed using the GCM general retail model.
The GCI industrial office model presumes construction with concrete block walls, 10-foot high
ceilings, carpeted or terrazzo floors, framed interior partitions, average cost lighting fixtures typical
of divided office areas, zoned air conditioning, and gas-fired, forced air heating.
Ind. Admin. Code tit. 50, r. 2.2-11-2 (12)(1996). The GCM general retail
model, which the Lowes contend should be used to assess part of their
building, also presumes concrete block walls, tiled or carpeted floors, drywalled interior finish,
12-foot suspended ceilings, lighting typical of finished open areas, evaporative cooling, and gas-fired
forced air heating. Ind. Admin. Code tit. 50, r. 2.2-11-1 (34)(1996).
The Lowes must present evidence demonstrating that the GCM general retail model is
more representative of a portion of their improvement than the GCI model.
See CGC Enters. v. State Bd. of Tax Commrs, 714 N.E.2d 801,
804 (Ind. Tax Ct. 1999)(citing Whitley Prods., 704 N.E.2d at 1119). At
trial, the Lowes expert, Mr. Smith testified:
Its a concrete block building with a metal roof . . ..
When you walk into the building, its very apparent they have kind of
some wood up over the ceiling for ceiling finish . . . and
you can see that theres bat insulation in the attic, but the interior
walls are concrete block with no finish . . . there [are] two
space heaters and two window air conditioners, which have been deducted . .
. because it lacked central heat and central cooling.
(Trial Tr. 13-14.) Smith also stated that the building was incorrectly assessed
as GCI industrial office because it had a substandard floor finish, lack of
interior partitions, and a substandard interior finish. (See Trial Tr. at 14-15.)
Smith described the buildings interior as being comparable to a farm building.
(Trial Tr. at 15.) Smith provided no other evidence beyond his
observations. B. Improvement #2
To prevail on this issue, the Lowes should have demonstrated the absence of
features in their building that are present in the GCI industrial office model,
or shown how the presence of features in their building makes it more
like the GCM model. See Indianapolis Racquet Club, Inc. v. State
Bd. of Tax Commrs, 722 N.E.2d 926, 938-40 (Ind. Tax Ct. 2000), revd
on other grounds by 743 N.E.2d 247 (Ind. 2001) (stating that a taxpayer
established a prima facie case that its improvement was assessed with the wrong
model by pointing to several identifiable, objective differences between the model and subject
improvement). Instead, Smith merely discussed the subject improvement generally without specifically
relating what features made the GCI model inappropriate. Accordingly, this Court cannot
say that the State Boards application of the GCI industrial office model was
The Lowes also argue that the State Board abused its discretion when it
applied the GCI pricing schedule, rather than the GCK pricing schedule, to an
improvement on their property. The State Board argues that the GCK schedule
does not apply because the Lowes improvement is not a dealer distributed brand
name building whose major components are fabricated at the manufacturers factory and .
. . then assembled on the customers site. (See Cert. Admin. R.
at 53.) The State Board is correct.
The GCK pricing schedule
is used for valuing preengineered and predesigned pole buildings
which are used for commercial and industrial purposes. Ind. Admin. Code tit.
50, r. 2.2-10-6.1(a)(1)(D)(1996). Generally, [GCK] buildings are . . . fabricated at
central manufacturing facilities and shipped to the construction site ready for fast and
efficient assembly. [A reduced] base price is offered because of the low
cost and economical quality of materials used in [GCK] buildings. Damon Corp.
v. State Bd. of Tax Commrs, 738 N.E.2d 1102, 1111 (Ind. Tax Ct.
2000)(internal citation and quotation omitted).
The Lowes contend that their improvement should have been valued under the
GCK schedule. To support their claim, the Lowes provided testimony and photographs
indicating that the subject improvement has interior wood frame construction with a metal
roof and siding. (Trial Tr. at 17.) (See also Petr Exs. 3, 4,
5, 6.) The Lowes also submitted a document from the Indiana Assessors
Association stating [a]ll wooden pole frame buildings qualify as GCK. (Petr Ex.
10.) The Assessor countered that the metal roof and walls were added
many years after the construction of the building, which originally had wooden siding
and an asphalt roof.
(Joint Ex. 1.) Consequently, the Assessor argues
that this structure was never constructed as a GCK building as it was
neither preengineered nor predesigned. (Joint Ex. 1.) Mr. Smith, the Lowes
expert, even testified that the building looked like an old farm shed .
. . before they put siding on it. (Joint Ex. 1).
This Court has previously stated that evidence that a building has metal exterior
skin is a factor to consider in applying the GCK assessment model, but
alone it does not require application of that schedule. Barker v. State
Bd. of Tax Commrs, 712 N.E.2d 563, 567 (Ind. Tax Ct. 1999).
The Lowes evidence shows that their building has a wooden frame with
metal skin, but it does not show that it was constructed as a
preengineered or predesigned building. While the documents from the Indiana Assessors Association
state that [a]ll wooden pole frame buildings qualify as GCK, the regulations explain
that the structure must be preengineered and predesigned. (Petr Ex. 10); see also
Ind. Admin. Code tit. 50 r. 2.2-10-6.1(a)(1)(D). The Lowes building is not.
Accordingly, this Court cannot say that the State Board is incorrect in
applying the GCI pricing schedule over the GCK schedule.
Finally, the Lowes contend their facility is entitled to a 58% functional obsolescence
depreciation adjustment due to excess capacity in their grain storage bins. However,
the Lowes requested obsolescence adjustment must be denied for failure to identify a
cause of obsolescence.
When a taxpayer seeks an obsolescence deduction adjustment, a two-step inquiry must be
satisfied. See Clark v. State Bd. of Tax Commrs, 694 N.E.2d 1230,
1238 (Ind. Tax Ct. 1998). First, a cause of obsolescence must be
identified. Id. Then, the identified obsolescence must be quantified. Id.
While the Lowes quantified the amount of obsolescence they sought at 58%, the
State Board denied the claim, determining that they failed to first identify a
cause of the alleged obsolescence. (Cert. Admin. R. at 47, 54.)
Nevertheless, the Lowes propose that they do not need to identify a cause
of obsolescence because in an unpublished opinion regarding their 1994 assessment, this Court
stated that because the parties agreed that there was obsolescence, the only matter
to resolve was that of quantification. See Lowes Pellets and Grain, Inc.
v. State Bd. of Tax Commrs, Case No. 49T10-9702-TA-133 (Ind. Tax Ct. March
[I]n original tax appeals, each assessment and each tax year stands alone.
See Glass Wholesalers, Inc. v. State Bd. of Tax Commrs, 568 N.E.2d 1116,
1124 (Ind. Tax Ct. 1991)(quotation in original, citation omitted). Consequently, the Lowes
were required to identify a cause of obsolescence for each assessment they challenge.
In this case, the State Board found that the Lowes did not
identify any causes of obsolescence for the assessment year they challenge. The
Lowes chose to waive briefing in this case, and rely upon this Courts
previous decision. Unlike the previous case, there is no agreement here between
the parties as to the existence of obsolescence, and like the previous case
the Lowes did not present sufficient evidence identifying a cause of obsolescence.
Therefore, the State Boards decision is affirmed on this issue for failure to
identify a cause of obsolescence.
For the foregoing reasons, the State Boards final determination is AFFIRMED.
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), and
the Indiana Board of Tax Review (Indiana Board).
Ind. Code §§ 6-1.1-30-1.1;
6-1.5-1-3 (West Supp. 2003); 2001 Ind. Acts 198 §§ 66, 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); 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 this
The GCK cost schedule provides minimal detail in describing the essential characteristics
of a building that may be classified under it.
See Ind. Admin.
Code tit. 50, r. 2.2-11-6 (Schedule A.4) (1996). Before the State Board
amended its regulations to include a GCK cost schedule, certain light, pre-engineered buildings
were given a 50% reduction from the existing cost schedules to account for
their inexpensive construction. See Ind. Admin. Code tit. 50, r. 2.1-4-5 (Schedules
A.1 & A.2) (1992). Thereafter, the State Board issued Instructional Bulletins 91-8
and 92-1 to provide guidance to assessors in determining which light, pre-engineered buildings
qualified for the reduction. See Componx, Inc. v. State Bd. of Tax
Commrs, 741 N.E.2d 442, 444-45 (Ind. Tax Ct. 2000). Although these bulletins
have been superseded by the GCK cost schedule, they still offer guidance in
determining whether a building may be assessed under the GCK schedule.
Obsolescence is the functional or economic loss of property value, expressed as
a percentage reduction in the remaining value of the subject improvement.
v. State Bd. of Tax Commrs, 742 N.E.2d 46, 51 (Ind. Tax Ct.
2001), review denied. Functional obsolescence is caused by factors internal to
the property, while economic obsolescence is attributable to external factors. See Ind.
Admin. Code tit. 50, r. 2.2-10-7(e)(1), (2)(1996).