ATTORNEY 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
BISHOP, C. FRANKLIN AND SUZANNE H., )
v. ) Cause No. 49T10-9904-TA-37
STATE BOARD OF TAX COMMISSIONERS, )
ON APPEAL FROM A FINAL DETERMINATION OF THE
STATE BOARD OF TAX COMMISSIONERS
February 14, 2001
Petitioners C. Franklin and Suzanne H. Bishop appeal the final determination of
the State Board of Tax Commissioners (State Board) establishing the assessed value of
their condominium as of March 1, 1995. The Bishops present two issues
for the Courts consideration, which the Court restates as:
I. Whether, in assessing the Bishops condominium, the State Board applied its regulations in
an unconstitutional manner, resulting in an inequitable and unjust assessment in violation of
the Indiana Constitution, art. X, § 1;
II. Whether the State Board erroneously denied a grade adjustment for the Bishops condominium. FACTS AND PROCEDURAL HISTORY
The Bishops own a condominium in Elkhart County, Indiana, that was assessed at
$25,400, as of March 1, 1995 by the township assessor. The County
Board of Review affirmed this value on March 20, 1997. The Bishops,
via their tax representative Landmark Appraisals, Inc. (Landmark), filed a Form 131 petition
for review of assessment with the State Board on April 22, 1997.
In this petition, the Bishops stated that the State Boards assessment methodology was
unconstitutional and made the following assertions regarding the assessment of the condominium:
(1) an Obsolescence factor needs to be applied to correct assessment inequities when
compared to older homes; (2) the grade is overstated; (3) Neighborhood rating is
excessive; and (4) a Negative influence factor [is] needed for land value.
(Joint Ex. 1, State Bd. Tr. at 3-4.) On March 3, 1998,
the State Board conducted a hearing on the Bishops petition. The State
Board issued its final determination on February 23, 1999, declining to adjust the
condominiums assessed value.
The Bishops filed this original tax appeal on April 7, 1999. The
Court conducted a trial on September 9, 1999, and heard oral arguments from
the parties on May 5, 2000. Additional facts will be supplied where
ANALYSIS AND OPINION
Standard of Review
The Court gives great deference to the State Boards final determinations when the
State Board 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). 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. Id. The taxpayer
bears the burden of demonstrating the invalidity of the State Boards final determination.
Clark v. State Bd. of Tax Commrs, 694 N.E.2d 1230, 1233 (Ind.
Tax Ct. 1998).
I. Uniformity of Assessments
The Bishops claim that the State Board unconstitutionally applied its assessment regulations in
assessing their condominium. The Bishops contend that they presented significant testimony and
evidence establishing [that] the subject property suffers from a general over-assessment as a
newer residential property. (Petr Br. at 7.) The Bishops assert that
newer homes constructed within their township have been assessed at higher values than
older homes. This, the Bishops maintain, violates the Property Taxation Clause of
the Indiana Constitution, art. X., § 1, which provides that The 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 property, both real and personal.
As proof of this alleged discrepancy, the Bishops submitted at the administrative hearing
a sales ratio study (Study), among other items. (Respt Ex. 1.)
The Study was prepared and submitted by Steven M. Hay, an appraiser for
Landmark. The Study examined twenty-two older homes, finding that these homes had
an average ratio of assessed value to sales value of 14%. The
Study also examined twenty-four newer homes. The average ratio of assessed value
to sales value for these homes, the Study shows, is 22.9%. Hay
testified at trial that the Study demonstrates a vast disparity in equitableness and
uniformity [of assessments between] older homes and newer homes. (Trial Tr. at
31.) To remedy this alleged disparity, Landmark requested that the State Board
reduce the total assessment of the subject newer property by 38.9%. (Respt
Ex. 1.) Hay explained that the Form 131s requests for obsolescence, grade
and neighborhood rating adjustments, as well as for application of a negative influence
factor, were suggested means for meeting this 38.9% reduction. (Trial Tr. at
42-43). See also (Joint Ex. 1, Final Determination at 2-3, ¶¶ 8-14.)
Although the Court will not entertain facial challenges to the State Boards regulations,
it does consider as applied challenges. Dana Corp. v. State Bd. of
Tax Commrs, 694 N.E.2d 1244, 1247 (Ind. Tax Ct. 1998). In order
to succeed with an as applied challenge, a taxpayer must present specific evidence
that an assessment is unconstitutional as applied to him. Id. The
application of regulations in an unconstitutional manner constitutes an abuse of discretion by
the State Board. Bielski v. Zorn, 627 N.E.2d 880, 886 n.14 (Ind.
Tax Ct. 1994).
In Kemp v. State Board of Tax Commissioners, 726 N.E.2d 395 (Ind. Tax
Ct. 2000), the Court considered a challenge similar to the one at bar.
The taxpayers in Kemp presented a sales ratio study purporting to show
that newer homes in LaPorte, Indiana, were on average assessed at a higher
value than older homes. The Court observed that sales ratio studies are
designed to compare assessed value to market value [of] property and are undertaken
principally for evaluating assessment accuracy and achieving tax equalization. Kemp, 726 N.E.2d
at 403 (quoting Institute of Property Taxation, Property Taxation 154 (Jerrold F. Janata
ed., 2d ed. 1993)). See also Southern Bell Tel. and Tel. Co.
v. Markham, 632 So. 2d 272, 276 (Fla. Dist. Ct. App. 1994) (A
sales assessment ratio study is a scientific comparison of the assessments of properties
with the sales prices of a statistically reliable sample of properties that are
actually sold in the taxing jurisdiction.), review denied. Next, the Court noted
that Indiana does not value property based upon its market value; rather, a
propertys assessed value is based on its reproduction cost as determined by the
State Boards regulations. Kemp, 726 N.E.2d at 403 (citations omitted).
Given this fact, the Court reasoned that the taxpayers were obligated to show
how use of market information in their sales ratio study demonstrated that the
State Boards regulations, as applied, violated their right to an equal and uniform
The taxpayers in Kemp failed to persuade this Court that a study based
on market values can validly demonstrate the alleged inequity of assessments made under
Indianas system. Id. The taxpayers had asserted that a sales ratio
study does not establish a value but instead measures a deviation from a
standard. Id. However, the Court noted that this explanation missed the
point, because the deviations measured by the ratios in the [sales ratio study]
represent a comparison of two valuesa propertys market value and its assessed value.
Id. at 403-04. The taxpayers, the Court held, failed to sufficiently
explain how the sales ratio study demonstrated uniformity of assessments calculated using Indianas
true tax value system. Id. at 404. Accord Bernacchi v. State
Bd. of Tax Commrs, 727 N.E.2d 1133, 1138 (Ind. Tax Ct. 2000).
In light of Indianas true tax value system, the State Board in the
present case viewed the Bishops Study as immaterial to the propriety of the
[condominiums] assessment and concluded that no change in the condominiums assessed value was
warranted. (Joint Ex. 1, Final Determination at 9, ¶ 30.) Hay
disagreed with this determination. He stated that the purpose of the Study
was to establish a standard that determine[s] the equitableness and uniformity of the
residential class of assessments in the Indiana true tax value assessment system.
(Trial Tr. at 24.) In other words, Hay contends that use of
market data (i.e., sales information) establishes a standard against which deviations can be
measured, and the Study measures deviations between the various properties in a class
[of residential properties] from that standard. Id. In addition, Hay asserted
that use of sales ratio studies is a standard technique for measuring deviations
in assessment. Id.
The Bishops brief echoes Hays remarks, stating that the Study uses an established
baseline for comparisons and determinations of uniformity in general classifications. (Petr Br.
at 7.) In addition, the Bishops assert that the Indiana Supreme Court,
in State Board of Tax Commissioners v. Town of St. John, 702 N.E.2d
1034, 1042 (Ind. 1998) (St. John V), upheld the Tax Court finding [in
Town of St. John v. State Board of Tax Commissioners, 690 N.E. 370,
379 (Ind. Tax Ct. 1997) (St. John III), affd in part, reversed in
part, 702 N.E.2d 1034 (Ind. 1998)] that the only presented method for determining
[c]onstitutionally required uniformity and equality is with reference to market data. (Petr
Br. at 8.) Accordingly, the Bishops posit, It is only logical that
independent evidence of a lack of uniformity and equality within a general classification,
based in market data, can likewise be utilized in this matter. Id.
The Bishops thus maintain that because the State Board, as found in
St. John III and affirmed in St. John V, has measured equality and
uniformity of assessments by reference to market data and has identified no other
means to do so, they should be allowed to reference market information in
their Study to likewise measure the equality and uniformity of assessments within their
The taxpayers in the present case have not sufficiently explained how their Study
demonstrates a lack of equality and uniformity of residential assessments under Indianas true
tax value system. Kemp, 726 N.E.2d at 403-04; Bernacchi, 727 N.E.2d at
1138. The standard against which deviations are measured in a sales ratio
study is based upon market information, and the State Boards regulations for assessing
improvements generally do not allow for application of market information. See Ind.
Ann. Code § 6-1.1-31-6(c) (West 2000) (With respect to the assessment of real
property, true tax value does not mean fair market value. True tax
value is the value determined under the rules of the [State Board].).
Cf. Barker v. State Bd. of Tax Commrs, 712 N.E.2d 563, 572 (Ind.
Tax Ct. 1999) ([E]vidence of actual reproduction cost may have relevance in certain
cases.) (citations omitted). As noted by this Court in Kemp, a sales
ratio study, prepared using professionally acceptable standards, would measure the uniformity of assessments
under a market based assessment system. 726 N.E.2d at 404. See
also Institute of Property Taxation, supra at 154 (listing various uses of sales
ratio or assessment-ratio studies); Southern Bell Tel. and Tel., 632 So. 2d at
(Sales ratio studies are recognized as a valid means of determining assessment levels.).
However, the Bishops have not demonstrated the relevance of a sales ratio
study in measuring the accuracy of assessments under the true tax value system.
Moreover, the Bishops reliance upon St. John III & V is misplaced.
The Supreme Court in St. John V affirmed this Courts findings that the
State Boards cost schedules lack sufficient relation to objectively verifiable data to ensure
uniformity and equality based on property wealth and that there existed a significant
lack of uniformity and equality across property classifications. St. John V, 702
N.E.2d at 1043. Based on these findings, the Supreme Court agreed that
the State Boards cost schedules violate the Property Taxation Clause. Id.
However, the Supreme Court further held that the Property Taxation Clause does not
require the consideration of all property wealth evidence in individual assessments or appeals
therefrom and does not mandate the use of strict market value. Id.
In short, the Supreme Court in St. John V, although not prohibiting
it, did not require the State Board to consider sales information in the
assessment of property or as part of the assessment appeals process. Thus,
St. John V does not support the Bishops claim that their Studywhich relies
upon market informationshould be admissible to demonstrate a lack of uniformity and equality
of assessments in their township, where the assessments in question were made pursuant
to Indianas true tax value system.
The Study was the Bishops only evidence with respect to their as applied
constitutional challenge. The State Board did not abuse its discretion in declining
to reduce the assessed value of the Bishops condominium based upon the Study.
Without it, the Bishops lack any specific evidence of probative value showing
that the State Boards regulations were unconstitutionally applied in assessing their condominium.See footnote
Therefore, the Bishops constitutional claim fails.
The Bishops challenge the B grade assigned to their condominium, requesting application of
a C grade instead. (Petr Br. at 6-7; Petr Ex. 2; Trial
Tr. at 35.)
See also (Joint Ex. 1 at 8, Property Record
Card.) The regulations describe B grade homes in part as architecturally attractive
and constructed with good quality materials and workmanship. Ind. Admin. Code tit.
50, r. 2.2-7-6(d)(2) (1996). In addition, a B grade indicates a multiplier
of one hundred twenty percent (120%) that is applied to the improvements base
reproduction cost. Id., r. 2.2-7-6(e)(2). A C grade home is
moderately attractive and constructed with average quality materials and workmanship and has a
corresponding multiplier of one hundred percent. Id., r. 2.2-7-6(d)(3) & -6(e)(3).
When taxpayers contest the grade assigned an improvement, they must offer probative evidence
sufficient to establish a prima facie case concerning the alleged assessment error.
CDI, Inc. v. State Bd. of Tax Commrs, 725 N.E.2d 1015, 1019 (Ind.
Tax Ct. 2000); see also Western Select Properties v. State Bd. of Tax
Commrs, 639 N.E.2d 1068, 1075 (Ind. Tax Ct. 1994). Conclusory statements are
not probative evidence. CDI, 725 N.E.2d at 1019. Furthermore, mere references
to photographs or regulations, without explanation, do not qualify as probative evidence.
Sterling Mgmt.-Orchard Ridge Apartments v. State Bd. of Tax Commrs, 730 N.E.2d 828,
838 (Ind. Tax Ct. 2000). Similarly, marks on a grade specification table,
see Ind. Admin. Code tit. 50, r. 2.2-7-6 (1996), are not probative as
to an improvements grade. Kemp, 726 N.E.2d at 401; Sterling-Mgmt., 730 N.E.2d
On the issue of grade, the Bishops submitted the following evidence: (1)
a photograph of the front side of the condominium; (2) a copy of
pictures of sample C grade residential homes taken from the State Boards assessment
manual, with circles drawn around four of the homes, see Ind. Admin. Code
tit. 50, r. 2.2-7-10 (1996); (3) a sample property record card prepared by
Landmark that applies a C grade to the condominium; and (4) a copy of
the State Boards grade specification table, with check-marks and a few circles located
predominately by the descriptions in the C grade column. (Respt Ex. 1;
Petr Ex. 2.)
Hay testified at trial I presented [Landmarks] opinion of the grade specification table
along with photographs of what [Landmark] felt represented the subject property. (Trial
Tr. at 33.) Hay stated that he viewed the exterior of the
condominium and talked to its builder about specific aspects of the buildings construction.
(Trial Tr. at 34.) Further, he looked at the photographs in
the manual, and through [his] experience determined [the condominium] was a C grade
home. Id. Moreover, according to Hay, he did not merely count
the check-marks on the grade specification table to come up with a recommended
grade; rather, he reported that the check-marks would indicate that [the condominium is]
very possibly a C grade home. (Trial Tr. at 35.)
The Bishops evidence is not probative as to grade. The evidence presented
is conclusory in nature. Without further explanation, the photograph, circled grade examples
and opinion testimony from Hay provide the Court with no guidance whatsoever as
to what was the appropriate grade to assign to the condominium. The
Court will not engage in guesswork to ascertain how the evidence proffered demonstrates
the quality and workmanship of the subject improvement. See CDI, 725 N.E.2d
at 1020 (The Court refuses to do [the taxpayers] work for it.).
The check-marked grade specification table is likewise conclusory and thus non-probative on its
face. Hay explained the basis for the marks at trial, testifying that
his analysis was guided by descriptions provided by the condominiums builder. However,
these descriptions given at trial were limited to three items. The first
item was foundation, which he described as reinforced concrete with drain tiles.
(Trial Tr. at 38.) Concrete and Drain tile are both listed under
the B and C grade categories on the table. The second item
was ground slab, which was described as a four-inch concrete slab on a
gravel base; this specification is also found in both the B and C
grade columns. (Trial Tr. at 39.) However, the builder apparently felt
that the C column was appropriate. (Trial Tr. at 39.) The
third item was structural floors; in this category, the B grade category is
marked. (Trial Tr. at 39.) See also (Petr Ex. 2.)
Even if considered probative, this evidence does not establish a prima facie case
as to grade. The first two items, which are appropriate for both
B and C grades, are inconclusive as to the proper grade and the
third item favors a B grade finding. Cf. Freudenberg-NOK General Partnership v.
State Bd. of Tax Commrs, 715 N.E.2d 1026, 1030 (Ind. Tax Ct. 1999)
(noting that feelings neither constitute the requisite basis for upholding a final determination
nor qualify as substantial evidence), review denied.
The Bishops failed to submit probative evidence sufficient to establish a prima facie
case as to grade. Consequently, the State Board was under no obligation
to support its final determination with substantial evidence. CDI, 725 N.E.2d at
1021. The Bishops challenge of the of the State Boards grade determination
For the aforementioned reasons, the State Boards final determination in this matter is
AFFIRMED in all respects.
The Bishops also claim that the State Boards assessment regulations in general
violate both the United States Constitution and the Indiana Constitution. However, the
fact that the subject property was assessed 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. Therefore, the Court will not address the Bishops facial
The Court does not conclude that a properly conducted and verified sales
ratio study would not be a valid measure of uniformity when a taxing
authority considers preparation of an equalization order.
See Ind. Code Ann. §§
6-1.1-13-6 to -8 (2000) (equalization by county assessor of assessed values by
in and between various townships); Ind. Code Ann. §§ 6-1.1-14-4 to -9 (2000)
(equalization by State Board of assessed values within any county or state as
Along with their Study, the Bishops submitted to the State Board a
copy of page thirteen from the Report of the Indiana Fair Market Value
Study. (Respt Ex. 1.) This page, however, was not admissible as
proof that the Bishops condominium was incorrectly assessed. The fair market value
study was authorized by the General Assembly pursuant to Pub. L. No. 63-1993.
This act specifically provides that the report and data collected in the
study may not be used in a . . . review of assessment
under . . . IC 6-1.1-15. Therefore, the Bishops could not rely
upon the report to help establish their constitutional claim.
Accord Kemp v.
State Bd. of Tax Commrs, 726 N.E.2d 395, 404 n.11 (Ind. Tax Ct.
The State Boards final determination denies the Bishops claims with respect to
obsolescence, neighborhood rating and land value. (Joint Ex. 1, Final Determination at
11, 15, ¶¶ 42, 61 & 62.) The Bishops raised none of
these issues in their briefs and submitted no probative evidence on these issues
at trial. At trial, Hay testified that an obsolescence adjustment was warranted
for the condominium, because the inequitable assessments between older and newer homes in
the township qualified as an extreme circumstance. (Trial Tr. at 36.)
Hay is correct that an extreme circumstance must be present in order
to grant the condominium an obsolescence adjustment.
Indiana Admin. Code tit. 50,
r. 2.2-7-10 (1996) provides that there must be an extremely abnormal circumstance involved
with a residential dwelling before obsolescence depreciation applies. However, Hay neither demonstrated
a disparity of assessments in the township, see supra, section I, nor explained
how such a disparity, even if present, qualified as an extremely abnormal circumstance
under the applicable regulation. See Kemp v. State Bd. of Tax Commrs,
726 N.E.2d 395, 402-03 (Ind. Tax Ct. 2000) (affirming State Boards denial of
obsolescence adjustment for residential property, where taxpayers presented no evidence that property suffered
from an extremely abnormal circumstance). Furthermore, Hay admitted that he presented no
evidence as to neighborhood rating or negative influence factors at the administrative level;
he explained that these proposed adjustments were merely suggestions. (Trial Tr. at
43.) These suggestions, without further evidence, remain mere suggestions and thus do not
qualify as probative evidence. See Herb v. State Bd. of Tax Commrs,
656 N.E.2d 890, 893 (Ind. Tax Ct. 1995). The State Boards final
determinations on these issues must stand.