ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
LARRY J. STROBLE STEVE CARTER
JENNIFER A. DUNFEE ATTORNEY GENERAL OF INDIANA
BARNES & THORNBURG Indianapolis, IN
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
SOLLERS POINTE COMPANY, )
v. ) Cause No. 49T10-0101-TA-19
DEPARTMENT OF LOCAL )
ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
February 19, 2003
Sollers Pointe Company (Sollers Pointe) appeals the final determination of the State Board
of Tax Commissioners (State Board) establishing the assessed value of its real property
as of March 1, 1995. Sollers Pointe raises two issues, which the
Court restates as:
Whether the State Board properly denied a reduction to the base rate of
Sollers Pointes improvement for its partitioning; and
Whether the State Board properly applied a B+2 grade to Sollers Pointes improvement.
For the reasons stated below, the Court REVERSES the State Boards final determination
on Issue I and REMANDS it to the Indiana Board of Tax Review
The Court AFFIRMS the State Boards final determination on Issue
II. FACTS AND PROCEDURAL HISTORY
Sollers Pointe owns the eighteen-story Old National Bank Building in Vanderburgh County, Indiana.
The building consists of office space in the basement, a bank on
the first floor, a parking garage on floors one through five, office space
on floors six through sixteen, and a private club on the seventeenth and
On January 2, 1996, Sollers Pointe appealed its 1995 assessment to the Vanderburgh
County Board of Review (BOR). Sollers Pointe argued, among other things, that
its building should receive a base rate reduction because each of the buildings
floors had fewer partitions than were assumed by the General Commercial Mercantile (GCM)
models used to assess it.
Sollers Pointe also argued that the buildings
grade of B+2 was excessive. The BOR made an adjustment to the
assessment of the buildings first floor but denied all other relief.
Sollers Pointe then appealed the BORs determination to the State Board via a
Form 131 Petition for Review of Assessment. Sollers Pointe again argued that
it should receive a base rate reduction because each floor of its building
had fewer partitions than were assumed by the GCM models and that its
grade of B+2 was excessive. The State Board held a hearing and
issued its final determination on December 21, 2000, affirming the BOR.
On February 1, 2001, Sollers Pointe filed an original tax appeal. In
lieu of a trial, the parties agreed to argue this case based on
the administrative record compiled before the State Board. This Court heard oral
arguments on July 11, 2002. Additional facts will be supplied as needed.
ANALYSIS AND OPINION
Standard of Review
The Court gives great deference to the State Boards final determinations 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).
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). To do so, the taxpayer must present
a prima facie case, i.e., 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 Commrs, 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 assessment error. Miller Structures, Inc. v. State Bd. of Tax
Commrs, 748 N.E.2d 943, 947 (Ind. Tax Ct. 2001).
Sollers Pointe argues that its building should receive a reduction to its base
rate because it contains less partitioning than was assumed in the GCM models
used to assess it. The State Board, however, argues that Sollers Pointe
did not meet its burden of proof because the regulations do not specify
the exact quantity of partitioning assumed in the models.
Instead, the State
Board contends that the GCM models presume typical partitioning and that Sollers Pointe
failed to show that its partitioning was not typical.
Under Indianas property tax assessment system, assessors use cost schedules to determine the
base reproduction cost of a particular improvement. Inland Steel Co. v. State
Bd. of Tax Commrs, 739 N.E.2d 201, 223 (Ind. Tax Ct. 2000), review
denied. See also Ind. Admin. Code tit. 50, r. 2.2-11-6 (1996).
To help identify and define various classes of buildings, the State Board has
categorized improvements into several models. Ind. Admin. Code tit. 50, r. 2.2-11-1
to 3 (1996). A model is a conceptual tool used to replicate
reproduction cost of a given structure using typical construction materials. The model
assumes that there are certain elements of construction for a given use type.
Ind. Admin. Code tit. 50, r. 2.2-10-6.1(a)(1) (1996). The State Boards
regulations also provide for adjustments to be made to the base price when
the improvement varies from the model. 50 IAC 2.2-10-6.1(c).
The offices in Sollers Pointes building were assessed using the GCM office models.
These GCM models assume that offices have partitioning typical of finished divided
office buildings. See 50 IAC 2.2-11-1(25) (providing that partitions in the GCM
General Office model are typical of finished divided office buildings); 50 IAC 2.2-11-1(24)
(providing that partitions in the GCM General Office-Basement model are typical partitions found
in office buildings). Thus, one way Sollers Pointe could establish a prima
facie case would be to present probative evidence showing that the partitioning in
its building is not typical of finished divided areas in office buildings.
See Deer Creek Developers, Ltd. v. Dept of Local Govt Fin., 769 N.E.2d
259, 264 (Ind. Tax Ct. 2002).
While Sollers Pointe maintains that the quality of its partitioning is typical of
the GCM office use types, it argues that the quantity of its partitioning
is not. Although the regulations do not state the typical quantity of
partitioning in linear feet, they do speak in terms of typical cost of
partitioning. Indeed, the GCM model assumes that typical partitioning in an office
has a cost $9.00 per square foot of floor space and the unit
cost adjustment table shows that the cost per square foot of partitioning space
(or wall space) is $3.30. See 50 IAC 2.2-11-6 (Sched. C).
Thus, a taxpayer could meet its burden of showing that its partitioning is
not typical by converting this information to the typical linear footage of partitioning
assumed by the model and comparing that to its actual linear footage of
partitioning present on the improvement. Likewise, the taxpayer could convert it to
the cost of partitioning per square foot of floor space actually present on
the improvement and comparing it to the typical cost of partitioning per square
foot of floor space assumed by the model. Sollers Pointe did the
Sollers Pointe submitted evidence that the floors in its building contained varying amounts
of partitioning, ranging from 136 linear feet to 1,221 linear feet.
converting its linear footage of partitioning contained on the office floors into the
cost of partitioning per square foot of floor space, Sollers Pointe showed that
it should receive a reduction to its base rate because its partitioning cost
per square foot of floor space was less than the $9.00 per square
foot of floor space presumed in the models.
For example, using the office on floor 7, Sollers Pointe showed there is
9,498 square feet of floor space on floor 7. The GCM model
presumes that the typical partitioning for this floor would cost $85,482 ($9.00 x
9,498). See 50 IAC 2.2-11-6 (Sched. C). Floor 7 has 1,018
linear feet of partitioning with an effective height of 10 feet, resulting in
10,180 square feet of partitioning space (1,018 x 10). The unit cost
adjustment table shows that the cost per square foot of partitioning space is
$3.30. Therefore, the total cost of partitioning space on floor 7 would
be $33,594 ($3.30 x 10,180). Sollers Pointe then converted this amount into
the cost per square foot of floor space and showed that the cost
of its partitioning actually cost $3.54 per square foot of floor space ($33,594
divided by 9,498). Thus, Sollers Pointe has shown that the cost of
its partitioning per square foot of floor space is $5.46 less than the
$9.00 per square foot of floor space of typical partitioning assumed in the
regulations ($9.00 minus $3.54). Because Sollers Pointe has shown that the partitioning
in its building is not typical of finished divided areas in office buildings
pursuant to the regulation, it has met its burden of showing that it
is entitled to a reduction to its base rate for its partitioning.
Accordingly, this Court REVERSES the State Boards final determination on this issue and
REMANDS it to the Indiana Board.
Sollers Pointe also contends that the State Board erroneously graded its property.
Specifically, Sollers Pointe argues that its current grade of B+2 is excessive
and that its grade should instead be C+1. The State Board argues
that Sollers Pointe did not meet its prima facie burden because it did
not present any evidence of similarly situated properties.
Under Indianas true tax value system, improvements are assigned various grades based on
a buildings design and the quality of its materials and workmanship. See
Ind. Admin. Code tit. 50, rr. 2.2-1-30, 2.2-10-3 (1996). See also Miller Structures,
748 N.E.2d at 952. The grades, which range from A to E,
represent multipliers that are applied to the base rate of an improvement.
See 50 IAC 2.2-10-3;
Miller Structures, 748 N.E.2d at 952. The
C grade, which is the norm, is assigned when a building is moderately
attractive and constructed with average quality materials and workmanship. 50 IAC 2.2-10-3(a)(3);
see also 50 IAC 2.2-10-3(b). A building with a C grade has
an average quality interior finish with adequate built-ins, standard quality fixtures, and mechanical
features. 50 IAC 2.2-10-3(a)(3). The B grade is given to buildings
that are architecturally attractive and constructed with good quality materials and workmanship.
These buildings have a high quality interior finish with abundant built-in features, very
good lighting and plumbing fixtures, and a custom heating and air conditioning system.
50 IAC 2.2-10-3(a)(2).
Intermediate grade levels may be assigned to a building to indicate that the
buildings grade falls between the major grade classifications. 50 IAC 2.2-10-3(c).
A plus or minus two (+/- 2) indicates that the grade falls halfway
between the assigned grade classification and the grade immediately above or below it.
50 IAC 2.2-10-3(c)(1). A plus or minus one (+/-1) indicates that
the grade falls slightly above or below the assigned grade classification, or at
a point approximately twenty-five percent (25%) of the interval between the assigned grade
classification and the grade immediately above or below it. 50 IAC 2.2-10-3(c)(2).
[T]he determination of grade is subjective and involves a qualitative judgment[.]
Clark, 694 N.E.2d at 1236 (citation omitted).
The burden was on Sollers Pointe to submit probative evidence showing that the
State Board either improperly gave its building a B+2 grade or improperly denied
its building a C+1 grade.
See Deer Creek, 769 N.E.2d at 265-66.
In examining the evidence presented at the administrative hearing, the Court determines
that Sollers Pointe has not met its burden of presenting a prima facie
case on grade. At the administrative hearing, Sollers Pointe presented the testimony
of its tax representative, Rex Hume. Hume generally described the outside of
the building and then stated what he thought about the interior finish.
(See Amended Tr. at 97.) Hume also offered a chart in which
he listed his conclusions about what he believed the grade should be for
each individual floor, concluding that the buildings overall grade should be C+1.
This testimony, however, amounts to nothing more than conclusory statements that Sollers Pointes
grade was incorrect.
In order for a taxpayer to meet his burden of establishing a prima
facie case on grade, he needs to do more than merely offer conclusory
statements. See Whitley Prods., Inc. v. State Bd. of Tax Commrs, 704
N.E.2d 1113, 1119 (Ind. Tax Ct. 1998), review denied. Instead, a taxpayer
can offer specific evidence tied to the descriptions of the various grade classifications.
Id. at 1119 n.12. Of course, that specific evidence offered by
the taxpayer to show that his improvement has certain grade characteristics must be
probative evidence concerning the alleged error in grade. See Id. at 1119.
Here, however, Sollers Pointes evidence consisted of conclusory statements; thus, it was
Sollers Pointe nonetheless contends that it met its burden of showing an error
in grade because Hume presented evidence that 14¼ floors out of 18 floors
of its buildingshould have been assigned a C grade.
This evidence, however,
consisted merely of Humes conclusions that these floors should be a C grade.
Because Humes evidence did not provide an adequate explanation of why these
floors should be assigned a C grade, it does not constitute probative evidence.
See Inland Steel, 739 N.E.2d at 220 (finding that testimony from a
appraisal expert, without explanation, is merely conclusory and lacks probative value); Wirth v.
State Bd. of Tax Commrs, 613 N.E.2d 874, 878 (Ind. Tax Ct. 1993)
(finding expert witness opinion regarding application of negative influence factor, without additional evidence,
to be insufficient to overcome State Boards discretion).
The State Board determined that the grade of Sollers Pointes building should be
B+2. Sollers Pointe seems to be asking this Court to substitute its
subjective determination of grade for that of the State Board. This the
Court cannot do. See Clark, 694 N.E.2d at 1236 (holding that [t]his
Court affords subjective determinations made by the State Board a great deal of
deference, and this Court will not substitute its judgment for that of the
State Board); see also State Bd. of Tax Commrs v. Garcia, 766 N.E.2d
341, 348 (Ind. 2002). Sollers Pointe did not provide specific evidence that
was probative as to the alleged error in grade; therefore, it did not
make a prima facie case. Accordingly, this Court AFFIRMS the State Boards
final determination on this issue.
For the aforementioned reasons, the Court REVERSES the State Boards final determination on
Issue I and REMANDS it to the Indiana Board with instructions to reduce
the cost of partitioning per square foot of floor space. The Court,
however, AFFIRMS the State Boards final determination on Issue II.
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. 2001); 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. 2001) (eff. 2002);
2001 Ind. Acts 198 § 95. Moreover, 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 opinion.
All cases that would have previously been remanded to the State Board
are now remanded to the Indiana Board of Tax Review (Indiana Board).
Ind. Code § 6-1.1-15-8. Final determinations made by the Indiana Board are
subject to review by this Court pursuant to Indiana Code § 6-1.1-15.
Ind. Code §§ 6-1.5-5-7; 33-3-5-2 (West Supp. 2002).
Sollers Pointe building was assessed using the General Commercial Mercantile office,
bank, and parking models.
See Ind. Admin. Code tit. 50, r. 2.2-11-1
The State Board also argued that Sollers Pointe was not
entitled to a base rate
adjustment for partitioning because such a determination would
require subjective judgment. However, a determination of whether components, such as partitioning,
are present in the taxpayers building is an objective determination. See Wareco
Enters., Inc. v. State Bd. of Tax Commrs, 689 N.E.2d 1299, 1302 (Ind.
Tax Ct. 1997). Moreover, Sollers Pointe filed a Form 131 Petition, which
is not limited to objective errors only. See Barth, Inc. v. State
Bd. of Tax Commrs, 705 N.E.2d 1084, 1086 (Ind. Tax Ct. 1998).
The State Board also argued that Sollers Pointe is not entitled
to a reduction in its base rate because a taxpayer cannot expect absolute
and precise exactitude in its assessment. (Respt Br. at 10-11 (citing
Bd. of Tax Commrs v. Town of St. John, 702 N.E.2d 1034 (Ind.
1998)).) The Court, however, finds this argument unpersuasive and notes that a
taxpayer is entitled to a fair application of the regulations in assessing his
or her property. Barth, Inc. v. State Bd. of Tax Commrs, 756
N.E.2d 1124, 1132 n.12 (Ind. Tax Ct. 2001).
The Court will not discuss the first floor bank area
of the building because Sollers Pointe already received a partitioning adjustment for the
Footnote: Each floor of the building had the following linear footage of
partitioning: basement 416; floor 1 440; floor 6 620;
floor 7 1,018; floor 8 339; floor 9 1,085; floor
10 407; floor 11 814; floor 12 1,221; floor 13
136; floor 14 1,153; floor 15 1,085; and floor 16
678. (Petr Br. at 4.)
Footnote: A taxpayer might also meet its burden by determining the
typical linear footage of partitioning assumed in the model. Again, using the
office on floor 7 as an example, the model presumes that the cost
of typical partitioning would be $85,482 (
$9.00 x 9,498). The unit cost
adjustment table show the cost of partitioning per square foot of partition space
is $3.30 or $33.00 per linear foot of partitioning ($3.30 x 10 foot
partitioning height). Dividing the total cost of assumed typical partitioning per square
foot of floor space ($85,482) by the total cost of partitioning per linear
foot ($33.00) results in the assumed quantity of typical linear feet of partitioning
of 2,590 linear feet. The actual linear footage of partitioning on floor
7 is 1,018 linear feet. Based on the comparison of the 2,590
linear feet of typical partitioning assumed by the model to the 1,018 linear
feet of actual partitioning on floor 7, the Court would conclude that the
amount of partitioning on floor 7 is not typical of the model used
to assess it. Therefore, this would be an alternative method for a
taxpayer to show that it is entitled to an adjustment to its base
rate for partitioning.
The State Board also stated that Sollers Pointe did not meet
its burden because it
did not provide any construction costs that would allow
the State Board to make a calculation regarding the cost of the building.
At the time of the State Board hearing, actual construction costs were
generally not used because property was assessed according to State Boards regulations for
determining true tax value, not market value. See Dawkins v. State Bd.
of Tax Commrs, 659 N.E.2d 706, 709 (Ind. Tax Ct. 1995); Mahan v.
State Bd. of Tax Commrs, 622 N.E.2d 1058, 1063 (Ind. Tax Ct. 1993)
(citing Ind. Code § 6-1.1-31-6(c)). The Court notes, however, that that proscription against
using construction costs has now been modified. See State Bd. of Tax
Commrs v. Garcia, 766 N.E.2d 341, 346-47 (Ind. 2002) (finding that State Boards
use of adjusted construction costs appropriate in determining grade factor above an A).
The C grade is assigned a multiplier of 100% (i.e., 100%
of the reproduction cost as determined under the State Boards regulations).
Ind. Admin. Code tit. 50, r. 2.2-10-3(b)(3); King Indus. Corp. v. State Bd.
of Tax Commrs, 699 N.E.2d 338, 340 n.7 (Ind. Tax Ct. 1998).
The remaining multipliers are 160% for an A grade, 120% for a B
grade, 80% for a D grade, and 40% for an E grade.
50 IAC 2.2-10-3(b).
Note, however, that a taxpayer who presents a grade issue
to the Indiana Board after December 17, 2002, will be required to submit
probative evidence of
what his grade should have been in order to meet
his prima facie burden. See Clark v. Dept of Local Govt Fin.,
779 N.E.2d 1277, 1282 (Ind. Tax Ct. 2002) (emphasis in original).
Hume concluded that each floor should have the following grade
assigned to it: office in basementC+2; bank on floor 1A; garage on
floors 1-5C; office on floor 6B; offices on floors 7-16C; and private club
on floors 17-18B+2. (Amended Tr. at 6.) Hume stated that the
basement offices were nicely finished, nothing outlandish, but nice. (Amended Tr. at
98.) He testified that the first floor bank lobby is certainly above
normal, above model, finish except for the ceiling[.] (Amended Tr. at 98.)
Hume also stated that the sixth floor office has an expensively finished
reception area[,] is designed to impress visitors[,] has a little more wood trim
and some, a lot of glass in [the] office walls[,] and the carpet
may be a little thicker than normal, but Im not positive about that.
(Amended Tr. at 99.) Hume described the private club on floors
17-18 as having fairly expensive finish and lighting features. (Amended Tr. at
The Court recognizes that it may be difficult to conclusively establish
the characteristics used in the grade classifications due to their subjective nature.
See Whitley Prods., Inc. v. State Bd. of Tax Commrs, 704 N.E.2d 1113,
1119 n.12; Ind. Admin. Code tit. 50, r. 2.2-10-3(a)(3). Nevertheless, a taxpayer
is not precluded from offering evidence tending to demonstrate that a given improvement
has [the] characteristics listed in the grade classifications. Whitley Prods., 704 N.E.2d
at 1119 n.12. For example, Sollers Pointe could have identified or described
specific instances where the State Board has given a similar or comparable building
the grade Sollers Pointe seeks. See Deer Creek Developers, Ltd. v. Dept
of Local Govt Fin., 769 N.E.2d at 265-66 n. 10 (Ind. Tax Ct.
2002) (citations omitted); Aboite Corp. v. State Bd. of Tax Commrs, 762 N.E.2d
254, 259 (Ind. Tax Ct. 2001), review denied; Fleet Supply, Inc. v. State
Bd. of Tax Commrs, 747 N.E.2d 645, 651 (Ind. Tax Ct. 2001), review
Hume proposed that the 4¼ floors of parking garage (floors
1-5) and the 10 floors of office space (floors 7-16) should receive a
C grade. Hume testified that the garage was a basic garage and
was not particularly good, not particularly bad, but theres no reason to think
of the parking floors as being graded at anything other than C.
(Amended Tr. at 6, 97.) Hume concluded that the offices on floors
7-16 were basic office, and he stated that they had no deviations that
I can identify. Suspended acoustic tile ceilings, carpet on pad on the
floors . . . . (Amended Tr. at 6, 99.)