ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
THOMAS H. BUSCH THOMAS M. ATHERTON
DAVID W. LUHMAN OFFER KORIN
Hoffman, Luhman & Busch, P.C. G. JOHN CENTO
Lafayette, IN Katz & Korin, P.C.
MARK J. COLUCCI
Kroger, Gardis, & Regas, LLP
ATTORNEY FOR AMICUS CURIAE
BRIAN P. POPP
Laszlo & Popp, P.C.
TIPPECANOE COUNTY, et al., )
Personal property returns are subject to audit, but by the year 2000, Tippecanoe
County had not scrutinized any of these returns for seventeen years due to
lack of staff expertise. In January 2000, the State Board of Tax
notified county assessors that it had reduced its personal property auditing efforts,
and encouraged local officials to undertake their own programs using either staff or
Tax Management Associates, Inc. (TMA) specializes in this service. The County hired TMA to audit 1999 and 2000 returns that reflected personal property greater than $50,000, for a fee of thirty-five percent of collections resulting from the audits. This fee covered TMAs expenses, including traveling to other states to examine accounting records as necessary.
Taxpayers selected for audit received letters signed by the county assessor, advising them
that TMA staff would be in touch to schedule audits and asking for
cooperation in providing relevant records. Certain Taxpayers asked the Tippecanoe Superior Court
to enjoin this procedure. On cross-motions for summary judgment, the trial court gave
the Taxpayers judgment in their favor on all claims. We accepted jurisdiction
of the resulting appeal under Indiana Appellate Rule 56(A).
Arriving here without any facts in dispute, this appeal presents only questions of
law, which we review
de novo. Carie v. PSI Energy, Inc., 715
N.E.2d 853 (Ind. 1999). We read statutes as a whole to determine
legislative intent. See Superior Const. Co. v. Carr, 564 N.E.2d 281 (Ind.
Municipal Corporations (1st ed. 1872) (emphasis in original).
Indiana embraced Judge Dillons views on this narrow approach to implied powers, with
its presumption against existence of powers not explicitly granted by statute, virtually from
the publication of his treatise until well into modern times.
v. City of Greencastle, 43 Ind. 574 (1873); Pittsburgh, C., C. &
St. L. Ry. Co. v. Town of Crown Point, 146 Ind. 421, 45
N.E. 587 (1896); City of South Bend v. Krovitch, 149 Ind. App. 438,
273 N.E.2d 288 (1971).
Indeed, this Court sometimes cited Judge Dillons treatise in voiding various arrangements local
officials used to audit or collect taxes.
See, e.g.. City of Ft.
Wayne v. Lehr, 88 Ind. 62, 65 (1882) (city cannot employ deputy to
collect taxes); Miller v. Embree, 88 Ind. 133 (1882) (county cannot pay attorney
to assist treasurer in collections). The legislature thereafter wrote new statutes to sanction
The legal regimes of municipal law today are completely different. In 1971, our General Assembly reversed the Dillon Rule when it adopted the Powers of Cities Act. Acts 1971, P.L. 250. In 1980, it put a stake through the heart of the Dillon Rule by adopting the Home Rule Act, Ind. Code §§ 36-1-3-1 to -9 (Burns 1981), which remains in effect today.
Under the Home Rule Act, [t]he policy of the state is to grant
[counties, municipalities and townships] all the powers that they need for the effective
operation of government as to local affairs. Ind. Code Ann. § 36-1-3-2
see also Ind. Code Ann. § 36-1-2-23 (West 1997). Such
entities possess, in addition to powers granted by statute, all other powers necessary
or desirable in the conduct of [their] affairs, even though not granted by
statute. Ind. Code Ann. § 36-1-3-4(b)(2) (West 1997) (emphasis added).
The traditional presumption regarding implied power has been reversed, so that now [a]ny
doubt as to the existence of a power of a [county, township, or
municipality] shall be resolved in favor of its existence. Ind. Code Ann.
§ 36-1-3-3(b) (West 1997). The most significant limitation is that these entities
must comply with any statutory provisions requiring that a power be exercised in
a specific manner.
See Ind. Code Ann. § 36-1-3-6(a) (West 1997).
Taxpayers therefore take too Dillonish an approach when they argue that Ind. Code
Ann. § 6-1.1-3-14 (West 2000)
gives township assessors exclusive power to audit personal
property tax returns. (Appellees Br. at 9.) A statute imposing responsibility
on township assessors to review personal property tax returns does not diminish the
presumed power of other local officials who share responsibility for personal property taxation
to conduct audits.
Moreover, Taxpayers argument ignores Ind. Code Ann. § 6-1.1-36-12 (West 2000), which explicitly
recognizes a countys auditing authority, as well as the power to delegate that
If a board of county commissioners enters into a contract for the discovery of property which has been omitted from assessment, the investigation and collection expenses shall be deducted from the gross amount of taxes collected on the omitted property which is so discovered. The remainder of the taxes collected on the omitted property shall be distributed to the appropriate taxing units.
Taxpayers interpret this section to mean that TMA may only audit for omitted,
not undervalued, property. (Appellees Br. at 12.) Again, this is too
Dillonish a reading. The express statutory power to contract out audits for
omitted personal property does not preclude the implied power to do the same
for undervalued property.
Moreover, public policy favors the power to audit for undervalued property. Prior
to the trial courts ruling in favor of the Taxpayers, TMA had discovered
$61 million in omissions and/or under-valuations by seventy-four taxpayers. (Pet. Trans. Exh.
A.) This translated into over $3.6 million in additional tax assessments for the
forty-two taxpayers billed before the trial courts ruling halted the process. (
(b) Confidential information may be disclosed to an official or employee of:
this state or another state;
the United States; or
an agency or subdivision of this state, another state, or the United States;
if the information is required in the performance of his official duties.
Taxpayers argue that this statute precludes disclosure to TMA of their personal property
tax returns and the charts of accounts, trial balances, and other records needed
to audit those returns. (Appellees Br. at 20-36.) Again, we find
this too narrow a reading, as it would effectively foreclose local officials from
exercising their implicit auditing power in a manner specifically contemplated by the legislature
in Ind. Code § 6-1.1-36-12.
Furthermore, Article 1.1 (Property Taxes) refers to employing such third parties as technical
advisors and professional appraisal firms.
See Ind. Code Ann. § 6-1.1-4-16 (West
2000) (county and township assessors may employ technical advisors to determine real property
values); § 6-1.1-33-4 (division of tax review may employ professional appraisal firms to
assist in making test checks of property valuations). We therefore conclude that
in the overall context of Article 1.1, and viewed against the backdrop of
our home rule scheme, disclosure of such information to a firm retained by
a county to audit property tax returns does not violate the confidentiality statute.
Taxpayers also assert that they should not be required to disclose confidential information
to firms such as TMA because those firms are not subject to the
same sanctions for improper disclosure as governmental employees. (Appellees Br. at 29-31.)
Under Indiana Code Ann. § 5-14-3-10 (West 2000), however, TMA employees could
commit class A misdemeanors by violating the confidentiality of records reviewed during the
course of Indiana personal property tax audits.
The Appellate Court elegantly addressed this public policy argument a century ago:
It is not only the policy, but the spirit, of the law that all property, both real and personal, which is subject to taxation, shall bear its proportionate share of the public burden, and public policy demands that every taxpayer contribute his just proportion to the expenses of government. . . . [I]f the law authorizes any method of discovering such property so it may be taxed, the efforts of public officers in securing that result should be encouraged and upheld. Though a percentage of the amount thus collected and covered into the public treasury is paid for ferreting out and discovering the property, still the public is benefited, and the burden of taxation is equalized to the amount remaining in the treasury after such payment; otherwise such property would wholly escape taxation, and nothing would be taken from the burden of the honest property owner who returns all of his property to be taxed.
Fleener v. Litsey, 30 Ind. App. at 404-05, 66 N.E. at 84.
As to the constitutional arguments, we conclude that TMAs role was not sufficiently
judicial in nature to render the commission arrangement impermissible. Tippecanoe County officials
selected which returns to audit, i.e., all those showing over $50,000 of personal
property. The county assessor retained and exercised the responsibility and authority to
make all significant judgment calls concerning potential adjustments noted by TMA, such as
whether a piece of equipment reported by a taxpayer as a special tool
qualified under guidelines provided by the State Board of Tax Commissioners.
All notices to taxpayers came from the county assessor. At the time
of this case, taxpayers could appeal assessment revisions to their local property tax
assessment board of appeals, then to the State Board of Tax Commissioners, and
then to the Indiana Tax Court. Ind. Code Ann. § 6-1.1-15-1 (West
2000) (appeal to county board); § 6-1.1-15-3 (review by state board of tax
commissioners); § 6-1.1-15-5 (appeal to tax court).
The central decisions affecting Taxpayers are sufficiently within the hands of local officials
that the commission arrangement does not violate due process.
United Natl Ins. Co. v. DePrizio, 705 N.E.2d 455, 460 (Ind. 1999) (citations
omitted). It is unclear whether the legislature viewed the amendment as clarifying
earlier provisions or changing substantive law. In any event, the contracts and
tax years in this case all pre-date the new law. We then
interpret the relevant statutes as they existed at the time this case arose.