ATTORNEYS FOR PETITIONER:
BAKER PITTMAN PAGE
ATTORNEY AT LAW
ATTORNEYS FOR RESPONDENT:
ATTORNEY GENERAL OF INDIANA
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
AUTOLIV NORTH AMERICA, )
COMPANY, Successor in Merger with
v. ) Cause No. 49T10-9710-TA-188
DEPARTMENT OF LOCAL GOVERNMENT )
ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
March 6, 2003
Autoliv North America (Autoliv) appeals the final determination of the State Board of
Tax Commissioners (State Board) valuing its business personal property for the 1996 assessment.
The Court finds that the dispositive issues in this case are:
I. Whether the State Board properly denied Autolivs deduction for special tools;
See footnote and
II. Whether the State Board properly denied Autolivs deduction for application software.
FACTS AND PROCEDURAL HISTORY
For the reasons stated below, the Court AFFIRMS the State Boards final determination.
Autoliv, located in Marion County, Indiana, manufactures locking wheels for seatbelt assemblies.
To manufacture the locking wheels, Autoliv uses three interrelated tools (the tools) that
are run by application software: a track-fed vibratory bowl, a picking station,
and a storage pallet. First, the track component feeds locking wheels into
the vibratory bowl. Next, the picking station removes the locking wheels from
the bowl. The picking station then places the locking wheels on a
pallet that has been specially designed to hold nested locking wheels securely in
place. The tools are all specifically designed to manufacture and accommodate locking
wheels of one size only.
For the March 1, 1996 assessment date, Autoliv filed its Business Tangible Personal
Property Return, in which it claimed that its tools were special tools.
Autoliv deducted both the cost of the tools and the application software from
the total assessed value of its business personal property. As a result,
Autoliv reported a total assessed value of $2,094,650.
On January 14, 1997, a State Board field auditor audited Autolivs property tax
return and concluded that Autolivs tools were not special tools and that Autoliv
was not entitled to deduct either the cost of the tools or the
cost of its application software. The auditor recommended that the State
Board increase Autolivs total assessed value by $427,030. The auditor also recommended
that an underassessment penalty of twenty percent be levied against the taxes due
on the $427,030.
Autoliv requested a hearing on the assessment, which was held on August 13,
1997. On September 24, 1997, the State Board issued a final determination
in which it affirmed the assessment. Specifically, the State Board determined that
because Autoliv had not shown with probative evidence the cost of its tools
and application software, it was not entitled to deduct them from the total
assessed value of its business personal property.
ANALYSIS AND OPINION
On October 31, 1997, Autoliv initiated an original tax appeal. On June
18, 1999, this Court conducted a trial. On August 18, 2000, the
parties presented oral arguments. Additional facts will be supplied as needed.
Standard of Review
The Court gives great deference to the State Boards final determinations when it
acts within the scope of its authority. Standard Plastic Corp. v. Dept
of Local Govt Fin., 773 N.E.2d 379, 382 (Ind. Tax Ct. 2002).
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. at 383.
The taxpayer bears the burden of demonstrating the invalidity of the State Boards
final determination. Id. To do so, the taxpayer must present a
prima facie case by submitting probative evidence, i.e., evidence sufficient to establish a
given fact that, if not contradicted, will remain sufficient. Damico v. Dept
of Local Govt Fin., 769 N.E.2d 715, 719 (Ind. Tax Ct. 2002).
Once the taxpayer presents a prima facie case, the burden shifts to the
State Board to rebut the taxpayers evidence and support its findings with substantial
I. Special Tools
Autoliv first challenges the State Boards final determination regarding the valuation of its
See footnote Specifically, Autoliv contends that it submitted to the State Board
estimated costs of the special tools and the State Board arbitrarily ignored them.
The State Board, on the other hand, argues that Autolivs evidence was
not probative of the total cost of producing or acquiring the special tools
as required by its rules. The State Board is correct.
Indianas personal property tax system is a self-assessment system, which relies primarily upon
full disclosure and accurate reporting by the taxpayer.
Standard Plastic, 773 N.E.2d
at 383. In completing a personal property return for a year, a
taxpayer shall make a complete disclosure of all information, required by the state
board of tax commissioners, that is related to the value, nature, or location
of personal property[.] Ind. Code § 6-1.1-3-9 (1998). The taxpayer is
responsible for reporting personal property on its personal property tax return for assessment
and taxation. Ind. Admin. Code tit. 50, r. 4.2-2-5 (1996). Special
tools, whether or not owned by the taxpayer, must be reported on a
Form 103-T and attached to the taxpayers business personal property tax return.
Ind. Admin. Code tit. 50, r. rr. 4.2-6-2(c); 4.2-6-2(d)(1); 4.2-6-2(d)(2) (1996). The
State Boards rules provide the method for assessing special tools owned by a
taxpayer: The total cost of producing or acquiring special tools regardless of
the nature, whether capitalized or expensed, must be reported on Form 103-T (50
IAC 4.2-2-9), and attached to Form 103 (50 IAC 4.2-2-9). 50 IAC
4.2-6-2(d)(1) (emphasis added).
At the State Board hearing, Autoliv submitted a copy of a letter from
Jack Reismiller, Autolivs Manager of Manufacturing, as evidence of the cost of its
See footnote In the letter, Reismiller provided an opinion as to the
projected and estimated costs of Autolivs special tools, which Reismiller stated were based
on [his] experience and training as an engineer. (Petr Exs. 4 at
2.) However, the State Boards rule plainly requires a taxpayer to report
the total cost of producing or acquiring special tools, not estimates or projections.
See 50 IAC 4.2-6-2(d)(1). Because Reismillers estimated and projected costs of
Autolivs special tools did not comply with the State Boards rule, it was
not probative evidence. Accordingly, the Court AFFIRMS the State Boards final determination
on this issue.
II. Application Software
Autoliv next challenges the State Boards final determination regarding the valuation of its
See footnote Specifically, Autoliv contends that it submitted the approximate cost of
its application software to the State Board, which arbitrarily ignored it. The
State Board, on the other hand, argues that Autolivs evidence was not probative
of the actual acquisition cost of its software. Again, the State Board
The State Boards rules require a taxpayer to record the actual cost of
its application software as a separate item on its books and records.
Standard Plastic, 773 N.E.2d at 387 (citing Ind. Admin. Code tit. 50, r.
4.2-4-3(g) (1996)). Autoliv submitted a letter from an Autoliv France employee in
which he provided certain approximate software costs. (Petr Ex. 4 at 8.)
However, it is irrelevant what anyone says the cost of Autolivs software
is, because the State Boards rule on valuing application software unambiguously required Autoliv
to record the actual acquisition cost of its software, not an approximate cost.
See Ind. Admin. Code tit. 50, r. 4.2-4-3(f) (1996); Standard Plastic, 773
N.E.2d at 387. Because Autoliv did not show that it had recorded
the actual acquisition cost of its application software as a separate item on
its books and records, its attempt to deduct that cost must fail.
See Standard Plastic, 773 N.E.2d at 387. Accordingly, the Court AFFIRMS the
State Boards final determination on this issue.
Because Autoliv did not submit probative evidence in support of its contentions, it
is not entitled to deduct the costs of its special tools and application
software. Therefore, the Court AFFIRMS the State Boards final determination.
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) (eff. 2002); 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. 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 opinion.
Typically, a taxpayer seeking to deduct the cost of special tools must
first prove that its tools satisfy the State Boards definition of special tools.
See Standard Plastic Corp. v. Dept of Local Govt Fin., 773 N.E.2d
379, 385 (Ind. Tax Ct. 2002). However, given the Courts holding in
this case, it need not address the issue. Instead, it assumes without
deciding that Autolivs tools are special tools.
If the total assessed value that a person reports on a personal
property return is less than the total assessed value that the person is
required by law to report and if the amount of the undervaluation exceeds
five percent (5%) of the value that should have been reported on the
return, then the county auditor shall add a penalty of twenty percent (20%)
of the additional taxes finally determined to be due as a result of
Ind. Admin. Code tit. 50, r. 4.2-2-10(d) (1996).
The State Board defines special tools as tools, dies, jigs, fixtures, gauges,
molds, and patterns acquired or made for the production of products or product
models which are of such specialized nature that their utility generally ceases with
the modification or discontinuance of such products or product models.
Code tit. 50, r. 4.2-6-2(b) (1996).
The letter was addressed to Autolivs tax representative, Dale Armbruster of True
Tax Management Corporation and was dated the day before Autolivs hearing before the
Footnote: The State Boards rules define application software as a written sequence of
instructions which details the operations the equipment is to perform in order to
achieve a specific objective of the user.
Ind. Admin. Code tit. 50,
r. 4.2-4-3(g)(3) (1996).
Autoliv argues that it should not be assessed a twenty percent undervaluation
penalty because it complied with all the requirements for claiming an exemption for
special tools and application software. (Petr Trial Br. at 1213.) However,
compliance with the State Boards requirements must be based on facts, not opinions
See Ind. Admin. Code tit. 50, rr. 4.2-6-2(d)(1); 4.2-4-3(f) (1996);
Standard Plastic, 773 N.E.2d at 387. Because Autoliv has submitted opinions and
estimates instead of facts, the Court will not address Autolivs contention regarding its