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
QUALITY FARM AND FLEET, INC., )
v. ) Cause No. 49T10-9803-TA-17
STATE BOARD OF TAX COMMISSIONERS, )
ON APPEAL FROM A FINAL DETERMINATION OF THE
STATE BOARD OF TAX COMMISSIONERS
March 13, 2001
The Petitioner, Quality Farm and Fleet (Fleet), appeals the Final Determination of
the State Board of Tax Commissioners (State Board) establishing the assessed value of
Fleets property as of March 1, 1995. Fleet presents various issues for
the Courts consideration, which the Court restates as:
I. Whether the State Board exceeded its legislative authority in conducting a
hearing in this matter without having issued a letter of appointment or a
prescription of duties to its hearing officer;
II. Whether the State Board erroneously denied the application of a negative
influence factor to Fleets land;
III. Whether the State Board improperly refused to apply the General Commercial
Kit (GCK) pricing schedule to two areas of Fleets improvements;
IV. Whether the State Boards application of a D grade to the
Main Building was invalid; and
V. Whether the State Boards decision to award no obsolescence adjustment to
the Main Building was erroneous.
See footnote FACTS AND PROCEDURAL HISTORY
Fleet owns the subject property, a retail outlet in Warsaw, Indiana. The
Kosciusko County Board of Review (BOR) valued Fleets land at $47,470 and its
improvements at $123,200. Disagreeing with this valuation, Fleet filed a Form 131
Petition for Review of Assessment, which the State Board received on August 23,
1996. On October 20, 1997, the State Board conducted an administrative hearing.
The State Board issued its Final Determination on January 13, 1998, making
no change in the value of Fleets land and lowering the value of
its improvements to $122,500. Fleet filed this original tax appeal on February
27, 1998. The Court conducted a trial on January 29, 1999 and
heard oral arguments from the parties on August 6, 1999. Additional facts
will be supplied where necessary.
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. Hearing Officers Appointment
Fleet contends that the State Board conducted no lawful administrative hearing in this
matter, because the State Board never issued a written order of appointment or
any written prescription of duties to its hearing officer, Mr. Steven C. Schultz,
pursuant to Ind. Code §§ 4-22-5-1 & 6-1.1-30-11. Schultz testified at trial
that he received no written order from the State Board assigning him to
hear Fleets administrative appeal. (Trial Tr. at 8.) However, there is
no evidence in the record that Fleet objected to the authority of Schultz
to hear its appeal. Fleets silence constituted its acceptance of Schultzs authority
to conduct a hearing; it has waived the issue and may not now
raise it for the first time on appeal. Hoogenboom-Nofziger v. State Bd.
of Tax Commrs, 715 N.E.2d 1018, 1022 (Ind. Tax Ct. 1999).
II. Negative Influence Factor
Fleet claims that the State Board erroneously declined to apply a negative influence
factor to its parcel. An influence factor refers to a condition peculiar
to the acreage tract that dictates an adjustment to the extended value to
account for variations from the norm. Ind. Admin. Code tit. 50, r.
2.2-4-17(c)(8) (1996). See also id., r. 2.2-4-12 (1996); 2.2-4-1 (Supp. 2000).
An influence factor is expressed as a percentage increase or decrease in the
subject lands assessed value, with the percentage representing the composite effect of the
factor that influences the value. Id., 2.2-4-17(c)(8); White Swan Realty v. State
Bd. of Tax Commrs, 712 N.E.2d 555, 562 (Ind. Tax Ct. 1999), review
denied. The decision whether to apply an influence factor calls for subjective
judgment. Wirth v. State Bd. of Tax Commrs, 613 N.E.2d 874, 878
(Ind. Tax Ct. 1993). In applying an influence factor, an assessing official
must first identify the deviations from the norm and then quantify the variations
as a percentage. White Swan Realty, 712 N.E.2d at 562.
The regulations list seven factors that may be the basis for an adjustment.
Ind. Admin. Code tit. 50, r. 2.2-4-10(a)(9)(A)-(G) (1996). Fleet
claims that one of these, the misimprovement factor, applies to its land.
Id., r. 2.2-4-10(a)(9)(E). According to the regulations, a misimprovement indicates that a
negative adjustment in value to the land in question is warranted. Id.
This factor is used when the parcel does not have the same
use as surrounding parcels. The base rate is computed based on the
predominant use of the surrounding parcels. Id.
The State Boards Final Determination states that After inspecting the parcel . .
. , it is determined the land is not misimproved. [Fleet] failed
to submit evidence to substantiate the assessment is incorrect. (Joint Ex. 1
at 18.) In order to prove the invalidity of this determination, Fleet
was obligated to first identify the alleged deviation from the norm or peculiar
condition of the land. To establish a prima facie case that the
subject parcel was misimproved, Fleet needed to submit probative evidence sufficient to show
that (1) its parcel did not have the same use as surrounding parcels
and (2) the inconsistent usage negatively impacted the subject parcels value. Ind.
Admin. Code tit. 50, r. 2.2-4-10(a)(9)(E). Cf. Talesnick v. State Bd. of
Tax Commrs, 693 N.E.2d 657, 661 (Ind. Tax Ct. 1998) (observing that where
taxpayers presented evidence that water flowage easement encroached upon their land to a
greater extent than it did to other land surrounding reservoir, State Board should
have considered whether taxpayers land was encumbered by the easement to an extent
that application of a negative influence factor is warranted).
As evidence that a negative influence factor should be applied to the subject
parcel, Fleet, via its tax representative Landmark Appraisals (Landmark), submitted an Assessment Review
and Analysis (Review) at the administrative hearing. (Joint Ex. 2.) Landmarks
Review stated that the BOR failed to apply a negative influence factor to
the land as required by [Ind. Admin. Code tit. 50, r. 2.2-4-10] and
that the use of surrounding properties is different than the use of the
subject property[;] therefore, a decrease based on a misimprovement to the land should
be applied. Id. at 3. The Review then provides copies of
regulations. Id. at 5-8. At trial, Landmarks M. Drew Miller
testified that the regulations require a decrease in the [subject parcels] rate based
on a misimprovement. (Trial Tr. at 25) (emphasis added.) Miller then
testified that the parcels immediately surrounding Fleets parcel had different uses than the
subject parcel. Id.
Millers interpretation of the regulations is mistaken. Indiana Admin. Code tit. 50,
r. 2.2-4-10(a)(9)(E) requires an assessor to indicate on the property record card a
decrease [in the subject parcels value] based on a misimprovement to the land.
See also Ind. Admin. Code tit. 50, r. 2.2-4-17(c)(8). Thus, contrary
to Millers understanding, the regulations do not require an automatic downward adjustment in
a parcels value simply because it is used differently than surrounding parcels.
Fleet submitted no evidence demonstrating how any alleged inconsistent usage negatively impacted the
subject parcels value. Fleets argument focuses exclusively on the identification of differing
land uses and ignores the need to identify a decrease in value.
See Ind. Admin. Code tit. 50, r. 2.2-4-10(a)(9)(E). Assuming, without concluding, that
Fleets land use is different from that of surrounding parcels, Fleet was still
obligated to produce probative evidence showing how the inconsistent usage decreased the value
of its parcel. It did not do so. Therefore, the Court
holds that Fleet did not make a prima facie case that the State
Board improperly declined to assign a negative influence factor to the subject parcel.
III. Kit Building
Fleet maintains that the State Board improperly refused to apply the GCK pricing
schedule to two areas of its improvements. The areas in question include
a 6100 square foot addition (Addition) to the Main Building valued at $95,160
and a 2120 square foot area (Small Shop Area) valued at $43,780.
(Joint Ex. 1 at 12 & 13.) The Small Shop Area is
part of a larger, 4346 square foot building, and the 2226 square feet
(Storage Area) of this second building that is not at issue was apparently
priced using the GCK schedule. (Trial Tr. at 17.)
The GCK pricing schedule is used for valuing preengineered and predesigned pole buildings
which are used for commercial and industrial purposes. Ind. Admin. Code tit.
50, r. 2.2-10-6.1(a)(1)(D) (1996). Moreover, the GCK schedule value[s] the base building
on a perimeter area ratio basis and adjust[s] the value based on the
various individual components of the building. Id. The GCK base rates
are located on Schedule A.4 of Ind. Admin. Code tit. 50, r. 2.2-11-6
Landmarks Review asserts that the Addition was assessed as a kit building during
the 1989 general reassessment. (Joint Ex. 2 at 3.) However, even
if correct, this fact is not probative as to how the Addition should
be assessed for the tax year under review. This is because each
assessment and each tax year stands alone. Glass Wholesalers, Inc. v. State
Bd. of Tax Commrs, 568 N.E.2d 1116, 1124 (Ind. Tax Ct. 1991) (citation
omitted). Thus, the State Board was not bound by its prior assessment
of the Addition. Schultz stated that the Addition had a metal exterior
skin which is typical of GCK buildings. (Trial Tr. at 18.)
While this is probative evidence, alone it is insufficient to establish a
prima facie case that the Addition should be assessed as a kit building.
Cf. Damon Corp. v. State Bd. of Tax Commrs, 738 N.E.2d 1102,
1111 (Ind. Tax Ct. 2000) (holding that evidence showing that subject building had
tapered columns, Cee channels and cross bracing, per Instructional Bulletin 91-8, established prima
facie case that building was eligible for kit building adjustment under prior regulations).
Also, the Review has a photograph allegedly showing part of the Additions
exterior. (Joint Ex. 2 at 2.) The photographs caption simply reads
PHOTO OF SUBJECT PROPERTY. Id. Miller testified that this bottom photograph
. . . shows the extension to the rear of the building.
(Trial Tr. at 28.) Neither the photographs caption nor Millers testimony explains
how the photograph tends to prove that the Addition qualifies as a kit-type
building. Heart City Chrysler v. State Bd. of Tax Commrs, 714 N.E.2d
329, 333 (Ind. Tax Ct. 1999) ([T]his Court has rejected attempts by taxpayers
to put forth evidence such as photographs without explanations.).
B. Small Shop Area
With respect to the Small Shop Area, the Review offers the conclusory statement
that the BOR incorrectly priced [the Small Shop Area] from the GCI schedule,
and that it should be priced from the GCK [schedule]. (Joint Ex.
2 at 3.) Conclusory statements are not probative evidence. CDI, Inc.
v. State Bd. of Tax Commrs, 725 N.E.2d 1015, 1019 (Ind. Tax Ct.
2000). Because the Small Shop Area allegedly is the same type construction
as the Storage Area and because the Small Shop Areas exterior walls .
. . meet the GCK requirements, Fleet asserts that the GCK pricing schedule
would be properly applied to the Small Storage Area. (Petr Br. at
9.) Schultz testified that the Small Shop Area had a metal exterior
wall finish, which is somewhat typical of [the State Boards] GCK model.
(Trial Tr. at 18) (emphasis added.) Contrary to Fleets contention in its
brief, this statement does not show that the exterior walls of the Small
Shop Area meet the requirements of the GCK model. While it may
have probative value, it does not establish a prima facie case that the
Small Shop Area should be assessed using the GCK pricing schedule. Cf.
Damon Corp., 738 N.E.2d at 1111.
Fleet was required to submit probative evidence sufficient to establish a prima
facie case that the areas in question deserved to be assessed as kit
buildings. See King Indus. v. State Bd. of Tax Commrs, 699 N.E.2d
338, 343 (Ind. Tax Ct. 1998). It has not done so here,
with respect to either the Addition or Small Shop Area.
Fleet asserts that the State Boards assignment of a D grade to its
Main Building was invalid. Grade refers to the classification of an improvement
based on certain construction specifications and quality of materials and workmanship. Ind.
Admin. Code tit. 50, r. 2.2-1-30 (1996). To meet its burden of
production on this issue, Fleet had to produce probative evidence sufficient to establish
a prima facie case as to its claim. CDI, 725 N.E. at
1019. The Review contains the following statement as to grade:
The BOR failed to properly account for the significant inferiorities and lack of
features in the subject building when compared with the general retail model.
The subject lacks the interior finish that is described in the General
Retail model, lacks any kind of exterior windows and lacks exterior attractiveness.
A grade of D - 1 should be applied to account for these
(Joint Ex. 2 at 3.) At the administrative hearing, Miller testified that
the Main Building differed from the General Retail model, see Ind. Admin. Code
tit. 2.2-11-1(34) (1996), with respect to its interior finish, exterior windows, and exterior
tracking. (Joint Ex. 3.) This was the extent of his testimony
before the State Board on the grade issue. Although Fleet presented additional
evidence at trial, the Court may not consider evidence that was not presented
at the administrative hearing. Whitley Prods., Inc. v. State Bd. of Tax
Commrs, 704 N.E.2d 1113, 1119 (Ind. Tax Ct. 1998), review denied; State Bd.
of Tax Commrs v. Gatling Gun Club, Inc., 420 N.E.2d 1324, 1328 (Ind.
Ct. App. 1981).V. Obsolescence
Fleet wants to account for its buildings alleged deviations from the General Retail
model by lowering the Main Buildings grade from a D to a D
- 1, which would lower the buildings base value by ten percent.
Ind. Admin. Code tit. 50, r. 2.2-11-7 (1996) (Schedule F). Under some
circumstances, an improvements deviation from the model used to assess it may be
accounted for via a grade adjustment. Whitley Prods., 704 N.E.2d at 1117.
Cf. Clark v. State Bd. of Tax Commrs, 742 N.E.2d 46 (Ind.
Tax Ct. 2001) (Use of objective adjustments [for grade] is preferable and must
be done where the base rate adjustment and/or unit-in-place tables permit the deviations
values to be reasonably calculated.). However, Fleets testimony and exhibits do not
explain how or to what extent the Main Buildings features deviate from the
model, why the alleged deviations justify a ten percent downward adjustment in the
buildings base value or why a subjective (as opposed to objective) adjustment is
This evidence is insufficient to establish a prima facie case as to grade.
The Review is not helpful. Its statements as to the Main
Buildings interior finish and level of attractiveness are conclusory and therefore not probative
as to grade. CDI, 725 N.E.2d at 1019. Millers testimony before
Schultz at the administrative hearing was likewise conclusory. His three examples of
deviations do not tend to show whether a D - 1 grade is
more appropriate than a D grade. The only evidence that may be
considered probative as to grade is the Reviews statement that the Main Building
lacked exterior windows. However, even this fact works against Fleet. The
GCM General Retail model lists the following for Openings: 1% 1 ¾
[inch] hollow metal service doors. Ind. Admin. Code tit. 50, r. 2.2-11-1(34).
The model mentions nothing about windows; therefore, a lack of windows in
the Main Building actually comports with the model used to assess it.
Finally, Fleet contends that the State Boards decision to award its Main Building
no obsolescence adjustment was erroneous. (Joint Ex. 1 at 18.) Pursuant
to the State Boards regulations, obsolescence, which is a form of depreciation, means
a diminishing of a propertys desirability and usefulness brought about by either functional
inadequacies or overadequacies inherent in the property itself, or adverse economic factors external
to the property. Ind. Admin. Code tit. 50, r. 2.2-1-40 (1996).
Functional obsolescence is defined as obsolescence caused by factors inherent in the property
itself. Id., r. 2.2-1-29 (1996). Economic obsolescence is described as obsolescence
caused by factors extraneous to the property. Id., r. 2.2-1-24 (1996). See
also Ind. Admin. Code tit. 50, r. 2.2-10-7(e) (1996) (listing causes of functional
and economic obsolescence). Obsolescence is expressed in terms of a percentage reduction from
the subject propertys value; the obsolescence deduction can range from 0% to 95%.
Ind. Admin. Code tit. 50, r. 2.2-10-7(f) (1996).
The determination of obsolescence is a two-step inquiry. Freudenberg-NOK v. State Bd.
of Tax Commrs, 715 N.E.2d 1026, 1029 (Ind. Tax Ct. 1999), review denied.
Assessing officials must first identify the causes of obsolescence and then quantify
the amount of obsolescence to be applied. Id. To clear the
first hurdle, a taxpayer must provide the State Board with probative evidence sufficient
to establish a prima facie case as to the causes of obsolescence.
White Swan Realty, 712 N.E.2d at 560. However, Fleet stumbles in its attempt
to overcome this barrier. With respect to obsolescence, the Review provides:
The BOR failed to properly apply obsolescence depreciation to account for the loss
in value due to various causes of obsolescence including, but not limited to,
the obsolete flat composition roof construction problems and inefficiencies caused by the add-on
construction. To properly adjust for this loss in value, 20% obsolescence depreciation
(Joint Ex. 2 at 3.) Millers testimony before the State Board is
virtually identical to this statement. (Joint Ex. 3.) Fleet highlights these
two purported causes of obsolescence, i.e., the add-on construction and  flat roof
design, in its brief to the Court. (Petr Br. at 11.)
Fleet argues that that these features would not be rebuilt today. Id.
(citing Trial Tr. at 19, 34 & 35.)
Fleet does not explain how either the add-on construction or a flat roof
design qualifies as a cause of obsolescence in the present case. While
Schultz did testify that builders constructing a new improvement would not typically immediately
add on to it, he stated that some [structures are added on to]
more effectively than others. (Trial Tr. at 19.) Thus, add-on construction
does not automatically equate with a structures loss in value. Likewise, the
presence of a flat roof, whether or not it would be reproduced in
a building today, does not automatically qualify as a cause of obsolescence.
Conclusory statements such as Fleets lack probative value. CDI, 725 N.E.2d at
1019. Fleet identified no other purported causes of obsolescence. Fleet has
failed to make a prima facie case that its improvements suffer from either
functional or economic obsolescence.
Fleet has failed to present probative evidence sufficient to establish a prima facie
case as to any of the issues that it has raised in this
original tax appeal. Consequently, its challenges on these issues fail. Furthermore,
because no prima facie case was made, the State Board was not obligated
to support its Final Determination as to the challenged issues with substantial evidence.
Whitley Prods., 704 N.E.2d at 1019-20. For the aforementioned reasons, the
State Boards final determination is AFFIRMED in all respects.
Fleet raises an additional issue: whether the State Boards assessment regulations
violate the Indiana Constitution. The fact that the subject property was assessed
under an unconstitutional regulation does not mean the assessment will be invalidated on
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. See also Town
of St. John v. State Bd. of Tax Commrs, 729 N.E.2d 242, 246
& 250-51 (Ind. Tax Ct. 2000) (ordering that all real property in Indiana
shall be reassessed under new, constitutional rules as of March 1, 2002, and
stating that, until then, real property tax assessments shall be made in accordance
with the current system). Therefore, the Court will not address this issue.