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
DATA LABELING, INC., )
v. ) Cause No. 49T10-9811-TA-139
DEPARTMENT OF LOCAL )
ON APPEAL FROM A FINAL DETERMINATION OF
THE STATE BOARD OF TAX COMMISSIONERS
NOT FOR PUBLICATION
March 7, 2003
Data Labeling, Inc. (Data) appeals the final determination of the State Board of
Tax Commissioners (State Board) valuing its real property for the March 1, 1995
assessment (year at issue).
I. Whether the State Board erred in grading
II. Whether the State Board erred in determining that Datas improvement was
not entitled to an obsolescence adjustment; and
III. Whether Datas assessment should be invalidated on the basis that
Indianas property tax system is unconstitutional?
FACTS AND PROCEDURAL HISTORY
Data owns a small manufacturing facility in Terre Haute, Indiana. On May
9, 1997, Data filed a Petition for Review of Assessment (Form 131) with
the State Board challenging the assessment of its property for the year at
issue. In its Form 131, Data claimed that its improvement was graded
improperly, that it was entitled to an obsolescence adjustment, and that its assessment
was unconstitutional. On September 15, 1998, after conducting an administrative hearing, the
State Board issued its final determination on Datas Form 131, denying relief on
all Datas claims.
Data filed an original tax appeal on October 30, 1998. The Court
conducted trial on July 26, 1999. Additional facts will be supplied as
STANDARD OF REVIEW
This Court accords great deference to 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). Accordingly, the
Court will reverse a State Board final determination only if it is unsupported
by substantial evidence, constitutes an abuse of discretion, exceeds statutory authority, or is
arbitrary and capricious. Id.
A taxpayer who challenges the propriety of a State Board final determination bears
the burden of demonstrating its invalidity. 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).
Where the taxpayer has failed to provide the State Board with probative
evidence supporting its position on the alleged assessment error, the State Boards duty
to support its final determination with substantial evidence is not triggered. Whitley
Prods., Inc. v. State Bd. of Tax Commrs, 704 N.E.2d 1113, 1119-20 (Ind.
Tax Ct. 1998), review denied.
In its Form 131, Data alleges that the State Board erred in grading
See footnote Data contends that the State Board should have reduced the
grade on the building to an E+1. In the alternative, Data contends
that the State Board erred in valuing its building under the General Commercial
Industrial (GCI) cost schedule as opposed to the General Commercial Kit (GCK) cost
schedule. Data is incorrect on both counts.
Pursuant to the State Boards regulations, improvements are assigned various grades based on
their materials, design, and workmanship.
Ind. Admin. Code tit. 50, r. 2.2-10-3;
Whitley Prods., 704 N.E.2d at 1116. In determining grade, the assessor must
distinguish significant variations [in an improvements] quality and design. Ind. Admin. Code
tit. 50, r. 2.2-10-3(a). The State Boards regulations define the different characteristics
that help assessors differentiate between grades. For instance, C grade buildings are
moderately attractive and constructed with average quality materials and workmanship. These buildings
have minimal to moderate architectural treatment . . . an average quality interior
finish with adequate built-ins, standard quality fixtures, and mechanical features. Ind. Admin.
Code tit. 50, r. 2.2-10-3(a)(3). On the other hand, E grade buildings
are constructed with sub-standard grade materials . . . and very poor quality
workmanship resulting from unskilled, inexperienced, do-it-yourself labor. They have low grade mechanical
features and fixtures. Ind. Admin. Code tit. 50, r. 2.2-10-3(a)(5). The
grading system also has a method of interpolation built into it:
Plus or minus two (+/- 2) indicates that the grade falls halfway between
the assigned grade classification and the grade immediately above or below it.
For example, a grade of C+2 indicates that the quality and design grade
classification is estimated to fall halfway between C and B or average to
good construction. . . .
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. For example, a grade of C+1 indicates that
the quality and design grade classification is estimated to be slightly better than
average or approximately halfway between a C grade and a C+2 grade.
Ind. Admin. Code tit. 50, r. 2.2-10-3(c).
The State Boards regulations also include a cost schedule for certain light, pre-engineered
buildings, i.e., kit buildings. See Ind. Admin. Code tit. 50, r. 2.2-11-6
(Schedule A4). The pricing for kit buildings under the GCK schedule is
reflective of the economical quality and low cost of materials used in these
Miller Structures, 748 N.E.2d at 949. See also Williams Indus.
v. State Bd. of Tax Commrs, 648 N.E.2d 713, 717 n.4 (Ind. Tax
Ct. 1995). The key elements used to identify a kit building are,
simply, the types of interior column and roof beam support used in the
building. Componx, Inc. v. State Bd. of Tax Commrs, 683 N.E.2d 1372,
1374 (Ind. Tax Ct. 1997). Kit building interior columns and roof beam
supports may include cold form cee channel supports, tapered columns, H-columns, and steel
pole (or post) columns. Miller Structures, 748 N.E.2d at 950. Consequently,
it should not be difficult for taxpayers to identify those characteristics in an
improvement alleged to [be a kit building]. Whitley Prods., 704 N.E.2d at
1121. Indeed, a taxpayer meets its burden with regard to a kit
building where the taxpayer shows that its improvements type of column and roof
beam support meet the criteria for a kit building. See Componx, 683
N.E.2d at 1374.
Occasionally, the State Board uses grade factors in conjunction with the kit building
pricing. In other words, it applies grade factors to adjust for various
additional building features that are included in a kit building. See King
Indus. Corp v. State Bd. of Tax Commrs, 699 N.E.2d 338, 340 (Ind.
Tax Ct. 1998). However . . . if the additional features of
the kit building result in the building no longer being economical, then it
cannot quality for the kit adjustment. If the building does not qualify
for the kit adjustment, the assessor may apply a low grade and design
factor to account for the lower cost of construction. Id. at 340-41
(footnotes, internal citations, and internal quotation marks omitted).
At the State Board hearing, Datas tax representative, M. Drew Miller (Miller) of
Landmark Appraisals, Inc., testified:
As far as the grade goes, we would like that adjusted as it
does not conform with the C grade model that is listed in the
manual and there are very few guidelines that determine what degree it varies.
We would recommend that it be priced from the GCK pricing [inaudible]
and or a grade of E+1.
(Jt. Ex. 1.) (See also Jt. Ex. 3 at 3.)
This evidence is not probative at all.
First, with respect to the grade issue, Millers testimony is nothing more than
an assertion that the grade is this and it should be that.
He failed to provide any explanation whatsoever as to why the grade should
be an E+1: he neither explains how he calculated his suggested grade
of E+1, nor does he identify any specific instances where a similarly structured
improvement was assigned a grade of E+1. Because Millers statement is nothing
more than a conclusion, it does not constitute probative evidence. Whitley Prods.,
704 N.E.2d at 1119. Thus, Data has not shown that it is
entitled to a grade reduction.
With respect to the kit building pricing, Millers testimony is not indicative as
to the types of interior columns and roof supports used in the building
at issue. The testimonial statement that the subject facility is a pre-engineered
building and should be priced from the GCK model is also nothing more
than a conclusion. See id. Thus, Data has not shown that
its building is a kit building.
Because Data has failed to provide the State Board with any
probative evidence to support its position on this issue, it has failed to
make a prima facie case. Consequently, the State Boards determination as to
the issue of grade and pricing is AFFIRMED.
The second issue in this case is whether the State Board erred in
denying Datas improvement an obsolescence adjustment. Data argues that the State Board
ignored the evidence it presented establishing causes of obsolescence, namely the improvements add-on
construction and its location in a residential neighborhood. While the State Board
admits that Data has established possible causes of obsolescence, it argues that Data
has not established that its improvement suffers from obsolescence. The State Board
The State Boards regulations define obsolescence as a functional and economic loss of
value. Ind. Admin. Code tit. 50, r. 2.2-10-7(e). Functional obsolescence is
caused by factors internal to the property and is evidenced by conditions within
the property itself. Id. Economic obsolescence is caused by factors external
to the property. Id. The State Boards regulations cite a number
of examples of causes of obsolescence, such as limited use or excessive material
and product handling costs caused by an irregular or inefficient floor plan (functional)
and location of the building is inappropriate for the neighborhood (economic). Id.
It is important to keep in mind, however, that the obsolescence of
a given improvement must be tied to a loss of value. In
the commercial context, that loss of value usually means the loss of income
generated by the property. Miller Structures, 748 N.E.2d at 953.
In its presentation to the State Board, Data (via Miller) argued that its
building suffered from obsolescence because it had an irregular floor plan and it
was located in a residential neighborhood. However, Data did not present any
evidence whatsoever demonstrating that these two factors caused the subject improvement to experience
a loss in value. See Loveless Constr. Co. v. State Bd. of
Tax Commrs, 695 N.E.2d 1045, 1047 (Ind. Tax Ct. 1998) (stating that under
the State Boards regulations, obsolescence causes a loss in value), review denied.
Therefore, Datas obsolescence claim is fatally deficient. See White Swan Realty v.
State Bd. of Tax Commrs, 712 N.E.2d 555, 560 (Ind. Tax Ct. 1999),
review denied. Accordingly, the Court AFFIRMS the State Boards final determination with
respect to obsolescence.
Data also makes a number of arguments concerning the constitutionality of the property
tax system. The thrust of these arguments is that because the system
has been declared unconstitutional, see State Board of Tax Commissioners v. Town of
St. John, 702 N.E.2d 1034, 1043 (Ind. 1998), any assessment of property thereunder,
including its own, is void and should be reversed. However, the mere
fact that the system is flawed does not entitle the taxpayer to a
reversal of an assessment. See id. Indeed, this Court has stated
that [r]eal property must still be assessed, and, until the new regulations are
in place, must be assessed under the present system. Whitley Prods., 704
N.E.2d at 1121; see also Town of St. John v. State Bd. of
Tax Commrs, 729 N.E.2d 242, 246 & 251 (Ind. Tax Ct. 2000) (ordering
real property in Indiana to be reassessed under constitutional regulations as of March
1, 2002 and providing that until then, real property tax assessments shall be
made in accordance with the current system). Thus, the Court need not
analyze Datas constitutional claims in this opinion.
For the aforementioned 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. 198 Ind. Acts 2001 § 119(b)(2). Effective January
1, 2002, the legislature created the Department of Local Government Finance (DLGF),
Indiana Code § 6-1.1-30-1.1 (West Supp. 2001)(eff. 1-1-02); 198 Ind. Acts 2001 §
66, and the Indiana Board of Tax Review (Indiana Board). Ind. Code
§ 6-1.5-1-3 (West Supp. 2001)(eff. 1-1-02); 198 Ind. Acts 2001 § 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. 1-1-02);
198 Ind. Acts 2001, § 95. Nevertheless, the law in effect prior
to January 1, 2002 applies to these appeals. Id. See also
198 Ind. Acts 2001 § 117. Although the DLGF has been substituted
as the Respondent, this Court will still reference the State Board throughout this
At the State Board hearing and at trial, Data attempted to
raise two issues that were not stated on its Form 131: first,
that the State Board had improperly calculated its improvements perimeter-to-area ratio, and second,
that the State Board utilized the wrong depreciation schedule. (
See Jt. Ex.
3 at 3.) (See also Trial Tr. at 7-8.) Data contends
that the State Board abused its discretion when it ignored the evidence and
failed to determine those issues. (See Petr Post-Hearing Br. at 9-10.)
Data is incorrect.
When a taxpayer petitions the State Board for a review of an assessment,
the State Board may limit its inquiry to only those errors raised by
the taxpayer. Whitley Prods. v. State Bd. of Tax Commrs, 704 N.E.2d
1113, 1119 (Ind. Tax Ct. 1998), review denied. This means that all
other constituent parts of the assessment, if the State Board declines to review
them, will not be changed, and as far as the law is concerned,
will be deemed to be correct. Id. Consequently, because the two
issues were not originally raised on Datas Form 131 (see Jt. Ex. 2
at 3), the State Board did not abuse its discretion when it declined
to review those issues at the hearing. See Whitley Prods., 704 N.E.2d
Furthermore, the two additional issues were not even discussed at the State Board
hearing. (Jt. Ex. 1.) Rather, the only mention of these two
issues was in a document entitled Assessment Review and Analysis, which was presented
to the State Board hearing officer by Datas tax consultant, M. Drew Miller
(Miller). (Jt. Ex. 3 at 3.) Miller, however, never offered any
explanation regarding the two additional issues, let alone verbally communicate to the hearing
officer that there were two additional issues he wanted to raise. In
his silence, Miller did not make a prima facie case, and it was
not up to the State Board hearing officer to make his case for
him. See Hoogenboom-Nofziger v. State Bd. of Tax Commrs, 715 N.E.2d 1018,
1024 (Ind. Tax Ct. 1999).
The State Board assigned the office portion of the building a
C-2 grade, and the remainder of the building a D grade.
Footnote: [K]it buildings are made of light weight and inexpensive materials and
are fabricated at central manufacturing facilities and shipped to the construction site ready
for fast and efficient assembly.
Miller Structures, Inc. v. State Bd. of
Tax Commrs, 748 N.E.2d 943, 949 (Ind. Tax Ct. 2001) (citation and quotes
Data attempts to rely on a previous State Board final determination
in which the subject improvement was assessed under the GCK schedule. Nevertheless,
each tax year stands alone, and evidence of a prior assessment will not
be considered as probative evidence of the property tax assessment for a later
Glass Wholesalers, Inc. v. State Bd. of Tax Commrs, 568 N.E.2d
1116, 1124 (Ind. Tax Ct. 1991).