ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN KAREN M. FREEMAN-WILSON
Attorney at Law ATTORNEY GENERAL OF INDIANA
Indianapolis, IN Indianapolis, IN
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
GERALD AND JOAN BERNACCHI, )
v. ) Cause No. 49T10-9804-TA-31
STATE BOARD OF TAX )
ON APPEAL FROM A FINAL DETERMINATION OF THE
STATE BOARD OF TAX COMMISSIONERS
March 29, 2000
Petitioners Gerald and Joan Bernacchi (collectively Bernacchi) appeal the final determination of the
State Board of Tax Commissioners (State Board) denying their request to lower the
assessed value of their residence for the 1995 assessment year. In this
original tax appeal, Bernacchi presents the following three issues for the Courts review:
I. Whether the State Board exceeded its legislative authority in conducting a hearing
in this matter without having issued a letter of appointment to its hearing
II. Whether the State Board improperly assigned Bernacchis residence a B plus two grade;
III. Whether the State Boards regulations, as applied to the assessment of Bernacchis property,
produced an inequitable and unjust assessment in violation of the Indiana Constitution, art.
X, § 1.
FACTS AND PROCEDURAL HISTORY
Bernacchi owns residential real estateparcel number 04-06-33-301-012 (Parcel 12)in LaPorte, Indiana.
On or about June 6, 1996, Bernacchi filed a Form 131 RP petition
for review of assessment with the State Board, alleging improper grade and neighborhood
The State Board conducted a hearing on the petition on December
16, 1996. On February 18, 1998, the State Board issued its final
determination, making no changes to the assessed value of Parcel 12.
Bernacchi filed an original tax appeal with this Court on April 6, 1998.
The Court conducted a trial in this matter on December 7, 1998.
Oral argument was heard on June 3, 1999. 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 the
State Board acts within the scope of its authority. See 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. See id.
The taxpayer bears the burden of demonstrating the invalidity of the State Boards
final determination. See Clark v. State Bd. of Tax Commrs, 694 N.E.2d
1230, 1233 (Ind. Tax Ct. 1998).
The Court will consider each of Bernacchis issues in turn.
I. Hearing Officers Appointment
Bernacchi asserts that the State Board issued no written order appointing its hearing
officer in this matter, Ms. Ellen Yuhan (Yuhan), and that Yuhan never received
a prescription of duties. Therefore, according to Bernacchi, the State Boards actions
exceeded its legislative authority. However, there is no evidence in the record
that Bernacchi objected to Yuhans authority at the administrative level, either at the
hearing or during the physical inspection of the subject property, to hear Bernacchis
appeal on behalf of the State Board. Bernacchis silence at the administrative
level on this issue constituted consent to the hearing. See Hoogenboom-Nofziger v.
State Bd. of Tax Commrs, 715 N.E.2d 1018, 1022 (Ind. Tax Ct. 1999).
Thus, Bernacchi waived the issue and may not now raise it for
the first time in this original tax appeal. See id.
Bernacchi challenges the B plus two grade assigned the Parcel 12 residence.
Bernacchi basically asserts that the State Boards final determination on the issue of
grade is not supported by substantial evidence. When contesting the grade assigned
an improvement, a taxpayer must offer probative evidence concerning the alleged assessment error.
See Herb v. State Bd. of Tax Commrs, 656 N.E.2d 890, 894
(Ind. Tax Ct. 1995); Whitley Prods., 704 N.E.2d at 1119; see also CDI,
Inc. v. State Bd. of Tax Commrs, No. 49T10-9701-TA-84, 2000 WL 257211, at
*2-4 (Ind. Tax Ct. Feb. 8, 2000) (discussing need for probative evidence in
context of grade and kit building adjustments). A taxpayers conclusory statements do
not constitute probative evidence concerning the grading of the subject improvement. See
Whitley Prods., 704 N.E.2d at 1119. Mere references to photographs or regulations,
without explanation, do not qualify as probative evidence. See Heart City Chrysler
v. State Bd. of Tax Commrs, 714 N.E.2d 329, 333 (Ind. Tax Ct.
1999). Furthermore, State Board hearing officers are not obligated to make a
case for the taxpayer. See Whitley Prods., 704 N.E.2d at 1118.
Where the taxpayer fails to submit probative evidence supporting his position on
the issue of grade, the State Boards duty to support its final determination
with substantial evidence is not triggered. See id. at 1119-20.
The following evidence was presented at the administrative hearing: (1) property record
card; (2) grade specification table from Rule 7, Page 12 of Regulation 17;
(3) representative grade photographs from the Indiana Real Property Assessment Manual, see Ind.
Admin. Code tit. 50, r. 2.2-7-10 (Supp. 1995); and (4) photographs of the
subject property. (Joint Exs. 1, 4-5.) The grade specification table contained checks
by descriptions in the A, B and C grade columns of the table.
(Joint Ex. 4.) Two audiotapes were also provided to the Court;
they were recordings of Bernacchis administrative hearing and a related hearing held by
the State Board on the same day. (Joint Ex. 3A & 3B.)
A copy of the State Boards transcript of proceedings was also admitted
into evidence. (Joint Ex. 2.)
Yuhan testified at trial. She conducted a physical inspection of the subject
property. (Trial Tr. at 12.) Her opinions regarding the assessment of
Parcel 12 were based upon both the evidence presented at trial and information
gathered during the physical inspection of the property. (Trial Tr. at 12.)
In assessing the subject property, Yuhan reviewed and considered the grade specification
table submitted by Bernacchi. (Trial Tr. at 28-35.) Yuhan applied Regulation
17 in making her determinations. (Trial Tr. at 23.)
Mr. Stephen M. Hay (Hay) also testified at trial. Hay was a
consultant for Landmark Appraisals, Inc., the company representing Bernacchi before the State Board.
(Trial Tr. at 36, 52.) Hay sought a grade of B
minus two for the Parcel 12 residence. (Trial Tr. at 53.)
He had not attended Yuhans physical inspection of the subject property.
Tr. at 50, 57.)
According to Yuhan, Hay gave her the grade specification table, with the check
marks on it, and gave her photographs of the residence. (Trial Tr.
at 54.) However, Hay identified no specific error regarding the grade of
the residence. (Trial Tr. at 53-54.) Until the trial in this
matter, He offered no explanation as to the relevance of any item on
the grade specification table. (Trial Tr. at 29-30, 47-50, 54.)
Bernacchi did not submit probative evidence on the issue of grade to the
State Board. As Bernacchis representative, Hay presented Yuhan with no evidentiary foundation for
applying a B minus two grade to the residence. Without further explanation
provided to the State Board at the time of the administrative hearing, the
photographs of the residence and the check marked grade specification table were merely
conclusory statements. Conclusory statements do not qualify as probative evidence, and Yuhan
had no duty to develop the case for Bernacchi. With no probative
evidence presented, Gerald and Joan Bernacchi fell short of meeting their burden of
production. Thus, the State Boards duty to substantiate its final determination on
the issue of grade was never triggered. Accordingly, Bernacchis challenge to the
assigned grade fails.
III. Uniformity of Assessments
Bernacchi alleges that the State Board ignored evidence demonstrating a lack of uniformity
in the assessments of residential properties in LaPorte. As evidence, Bernacchi submitted to
the State Board a sales ratio study (Study) developed by Hay. (Petr
Ex. 1; Trial Tr. at 13, 37.) The Study purportedly shows that
newer homes in LaPorte are assessed on average 57.5% higher than older homes.
(Petr Ex. 1.) Bernacchi essentially contends that the State Boards regulations, as
applied, violate Article X, Section 1 of the Indiana Constitution, which provides in
part: The General Assembly shall provide, by law, for a uniform and
equal rate of property assessment and taxation and shall prescribe regulations to secure
a just valuation for taxation of all property, both real and personal.
To rectify this alleged discrepancy in assessments, the Study asserts that the assessments
of the six [newer] homes which have been appealed require a downward adjustment
of 36.5%. (Petr Ex. 1.) See also (Trial Tr. at 40.)
At the administrative hearing, Hay requested that the State Board award the
Parcel 12 residence a twenty percent obsolescence depreciation adjustment. (Joint Ex. 3A;
Trial Tr. at 15.) The State Board refused to grant Bernacchi
an obsolescence adjustment. In its final determination, the State Board reached the
After reviewing 50 IAC 2.2-7-9, it is determined [that] obsolescence depreciation is seldom
applied to residential dwellings. There must be an extremely abnormal circumstance involved
with a residential dwelling before obsolescence depreciation applies. Furthermore, the State of
Indiana uses the Cost Approach method for assessing improvements rather than the Market
Approach, so a ratio based on the Market Approach can not be addressed.
No change in assessment is made as a result of this issue.
(Joint Ex. 2 at 15.) A. Obsolescence Adjustment
The Court will not entertain facial challenges to the State Boards regulations.
See Dana Corp. v. State Bd. of Tax Commrs, 694 N.E.2d 1244, 1247
(Ind. Tax Ct. 1998). However, the Court does consider as applied challenges.
See id. In order for such a challenge to succeed, a
taxpayer must present specific evidence that an assessment is unconstitutional as applied to
him. See id.
As noted supra, Bernacchi requested a twenty percent obsolescence adjustment for the Parcel
12 residence. According to the State Boards regulations, Obsolescence depreciation is seldom
applied to residential dwellings. There must be an extremely abnormal circumstance involved
with a residential dwelling before obsolescence depreciation applies. Ind. Admin. Code tit.
50, r. 2.2-7-9(d) (1996). To obtain an obsolescence adjustment, Bernacchi had a
burden to produce evidence showing that the Parcel 12 residence suffered from an
extremely abnormal circumstance. See Kemp v. State Bd. of Tax Commrs, No.
49T10-9804-TA-32, 2000 WL 279275, at *4 (Ind. Tax Ct. Mar. 14, 2000).
Bernacchi provided no such evidence. At trial, the following exchange took place
between Yuhan and Counsel for the State Board:
Q. Did the petitioner identify any extremely abnormal circumstance justifying the application of obsolescence
A. No . . . .
Q. Did you find any extremely abnormal circumstance justifying the application of obsolescence depre[ciation]
to this property?
A. No, none.
Q. Was there any basis for obsolescence shown to you [at the administrative hearing]?
(Trial Tr. at 58-59.) Hay offered no testimony of an extremely abnormal
circumstance involving the Parcel 12 residence. Therefore, the State Board correctly denied
Bernacchi an obsolescence adjustment for the residence. B. Sales Ratio Study
That the Parcel 12 residence did not qualify for an obsolescence adjustment does
not mean that Bernacchis constitutional claim fails. The obsolescence adjustment was merely
a proposed remedy to an alleged unconstitutional inequity. Thus, the Court must
ascertain whether Bernacchi offered specific evidence showing that the State Boards regulations, as
applied to the assessment in question, were unconstitutional.
As evidence of assessment inequities, Bernacchi offered the Study into evidence as Petitioners
Exhibit 1. This was the same Study considered by the Court in
Kemp, 2000 WL 279275 at *5. At oral argument, Counsel for Bernacchi
explained that the Study measures deviations from a standard. (Oral Argument Tr.
at 26.) According to Counsel, market data provides the only available or
recognized standard of measurement for assessments. (Oral Argument Tr. at 27.)
Counsel contends that the Study shows deviations from this standard, and the resulting
deviations demonstrate the disparate treatment in assessments between older and newer homes in
LaPorte. (Oral Argument Tr. at 26-27.)
Counsels argument is not probative evidence. While argument of Counsel in briefs
and during oral argument, inter alia, explains how evidence fits together and supports
the taxpayers position, an evidentiary basis for Counsels argument must still be provided.
Here, all Counsel did was present the Study and then make the
unsupported conclusion as to what the Study shows. See CDI, 2000 WL
257211 at *3-4 & 5 nn.5 & 6 (discussing probative evidence in context
of witness conclusory statements and noting that Counsels questions as to definitions and
methodology of assessment do not constitute probative evidence).
For the same reasons explained in Kemp, 2000 WL 279275 at *5-6, Bernacchi
has not persuaded the Court that the Study validly demonstrates the alleged inequity
of assessments made under Indianas property taxation system. Therefore, the State Board
did not abuse its discretion in refusing to consider the Study.
See footnote The
Study was the only evidence supporting Bernacchis constitutional challenge. Without it, there
was no specific evidence showing that the State Boards regulations, as applied, violated
Bernacchis rights to a uniform and equal assessment under the Indiana Constitution.
Therefore, Bernacchis claim fails.
For the aforementioned reasons, the Court hereby AFFIRMS the State Boards final determination
in this matter.
Bernacchi raises two additional issues not considered by the Court: (1)
whether the State Boards property assessment system, on its face, violates the Indiana
Constitution; and (2) whether the State Boards final determination was supported by sufficient
findings of fact. As to the issue of constitutionality, the fact that
the subject improvement was assigned a grade under an unconstitutional regulation does not
mean that the assessment will be invalidated on that basis. See 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. Furthermore, because of the Courts resolutions of
the remaining issues, the Court need not consider whether the State Board supported
its final determination with sufficient findings.
Bernacchi does not raise the issue of improper neighborhood rating in this
original tax appeal. Thus, the Court will not consider it.
A review of Yuhans testimony indicates that the taxpayer was present at
the propertys physical inspection. (Trial Tr. at 64; Oral Argument Tr. at
8.) However, the record does not reflect that the taxpayer provided Yuhan
with any probative evidence as to grade at the inspection.
The State Board was not permitted to consider the copy of page
thirteen from the Report of the Indiana Fair Market Value Study submitted as
part of the Study. See Kemp, 2000 WL 279275 at *6 n.11
(citing Ind. P.L. No. 63-1993).