ATTORNEYS FOR PETITIONER:
RONALD M. SOSKIN
ROBERT B. CLEMENS
DAVID A. SUESS
BOSE McKINNEY & EVANS LLP
Indianapolis, IN
ATTORNEY FOR AMICI CURIAE:
LARRY J. STROBLE
BARNES & THORNBURG
Indianapolis, IN
CHARLES C. MEEKER
PARKER POE ADAMS & BERNSTEIN, LLP
Raleigh, NC
DOCK McDOWELL, JR.
THE McDOWELL LAW FIRM
Merrillville, IN
BRIAN POPP
LASZLO & POPP
Merrillville, IN
JOHN DULL
DULL & DUGGAN
Merrillville, IN
_____________________________________________________________________
IN THE
INDIANA TAX COURT
_____________________________________________________________________
U.S. STEEL CORP. )
formerly U.S. STEEL, LLC, )
)
Petitioner, )
)
v. ) Cause No. 49T10-0209-TA-106
)
THE LAKE COUNTY PROPERTY TAX )
ASSESSMENT BOARD OF APPEALS, )
et al.,
See footnote
)
)
Respondents . )
_____
FOR PUBLICATION
April 1, 2003
FISHER, J.
U.S. Steel Corp. (U.S. Steel) appeals the final determination of the Indiana Board
of Tax Review (Indiana Board) dismissing its Petitions for Correction of Error (133
Petitions) for the 1994–1996 tax years (years at issue). The case is
currently before the Court on the Respondents’ Motions To Dismiss under Indiana Trial
Rule 12(B)(6).
ISSUES
I. Whether the Indiana Board erred when it dismissed U.S. Steel’s 133 Petitions for
lack of subject matter jurisdiction; and
II. Whether the Indiana Board erred when it found that U.S. Steel improperly brought
its claim in a 133 Petition.
For the following reasons, the Court DENIES the Respondents’ motions.
FACTS AND PROCEDURAL HISTORY
U.S. Steel is a steel manufacturing plant in Lake County, Indiana, where it
owns real and personal property. On May 5, 1998, U.S. Steel filed
more than 100 Form 133 Petitions in which it claimed that the property
taxes it paid for the years at issue were illegal as a matter
of law because Lake County tax officials had improperly removed more than $210
million in assessed value from the County’s tax rolls and, as a result,
the County’s tax rate was overstated, causing U.S. Steel to overpay its taxes.
See footnote
The Lake County Property Tax Assessment Board of Appeals (PTABOA) denied the
petitions. U.S. Steel appealed the PTABOA’s determination to the State Board of
Tax Commissioners. On August 6, 2002, the Indiana Board of Tax Review
(Indiana Board)See footnote issued a final determination dismissing U.S. Steel’s 133 Petitions for lack
of subject matter jurisdiction. In the alternative, the Indiana Board held that
U.S. Steel should have first appealed its tax rate under Indiana Code Section
6-1.1-17
et seq., and that U.S. Steel’s claim was improper for a 133
Petition because it implicated the subjective discretion of tax officials.
On September 5, 2002, U.S. Steel initiated an original tax appeal. The
Respondents filed several motions to dismiss U.S. Steel’s appeal, which, on October 30,
2002, the Court converted to motions for summary judgment.
See footnote The Court held
a hearing on the Respondents’ motions on February 7, 2003. Additional facts
will be supplied as needed.
ANALYSIS AND OPINION
Standard of Review
This Court gives great deference to final determinations of the Indiana Board when
it acts within the scope of its authority. Wittenberg Lutheran Vill. Endowment
Corp. v. Lake County Prop. Tax Assessment Bd. of Appeals, 782 N.E.2d 483,
486 (Ind. Tax Ct. 2003). Consequently, the Court will reverse a final
determination of the Indiana Board only if it is arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law; contrary to constitutional right,
power, privilege, or immunity; in excess of statutory jurisdiction, authority, or limitations, or
short of statutory jurisdiction, authority, or limitations; without observance of procedure required by
law; or unsupported by substantial or reliable evidence. Id. at 486–87 (citing
Ind. Code § 33-3-5-14.8(e)(1)–(5) (Supp. 2001) (quotation marks omitted)). Summary judgment is
proper only when no genuine issues of material fact exist and the moving
party is entitled to judgment as a matter of law. Ind. Trial
Rule 56(C).
Discussion
I. The Indiana Board’s subject matter jurisdiction
The first issue is whether the Indiana Board erred when it dismissed U.S.
Steel’s claim for lack of subject matter jurisdiction.See footnote Pursuant to Indiana Code
Section 6-1.5-4-1, the Indiana Board has jurisdiction over all appeals concerning: “(1)
the assessed valuation of tangible property; [] (2) property tax deductions; [] (3)
property tax exemptions; [and] (4) property tax credits [] that are made from
a determination by an assessing official or a county property tax assessment board
of appeals to the Indiana [B]oard under any law.” Ind. Code §
6-1.5-4-1(a) (Supp. 2002) (previously codified at Ind. Code § 6-1.1-30-11(c) (1998)). The
Indiana Board determined that the basis of U.S. Steel’s claim concerned the assessed
value of tangible personal property, but nevertheless disclaimed subject matter jurisdiction because U.S.
Steel’s claim also involved Lake County’s tax rate, which it concluded was beyond
its statutory jurisdiction as set forth in Indiana Code Section 6-1.5-4-1 (Pet. for
Judicial Review, App. A at 5–6.) The Indiana Board, however, is incorrect.
In general, property taxes are either rate-driven or budget-driven. Int’l Ass’n of
Assessing Officers, Standard on Property Tax Policy § 5.2.1 (1997). In a
rate-driven system, a taxing unit’s assessed value is multiplied by a pre-determined tax
rate to arrive at the budget; although assessed value in the taxing unit
may change, the tax rate does not. Id. In a budget-driven
system, a budget is publicly agreed upon and then divided by the taxing
unit’s assessed value; the resulting quotient is the tax rate. Id.
“In this case, the rate is merely a mathematical result and floats upward
or downward, depending on the assessed value in the unit of government.”
Id. (emphasis added). Hence, in a budget-driven system, two types of appeals
necessarily implicate the tax rate: (1) appeals that concern assessed value (i.e.,
the denominator in the tax rate formula), and (2) appeals that concern a
budget or tax levy (i.e., the numerator in the tax rate formula).
See generally Standard on Property Tax Policy at § 5.2.1.
Lake County is a budget-driven system. (Amended R. at 20.) When
U.S. Steel challenged the removal of assessed value from Lake County’s tax rolls,
it necessarily implicated the issue of Lake County’s tax rate. This implication,
the Indiana Board maintains, was enough to strip it of subject matter jurisdiction
under Indiana Code Section 6-1.1-4-1. To read Indiana Code Section 6-1.5-4-1(a)(1) so
narrowly, however, would render it a nullity because the Indiana Board could disclaim
subject matter jurisdiction over all appeals concerning assessed valuation on grounds that they
necessarily implicate a tax rate. This Court presumes that the Legislature did
not intend to enact a nullity when it gave the Indiana Board jurisdiction
over appeals concerning “the assessed valuation of tangible property.” See I.C. 6-1.5-4-1(a)(1);
Walker Mfg. Co. v. Dep’t of Local Gov’t Fin., 772 N.E.2d 1, 6
(Ind. Tax Ct. 2002) (rejecting an interpretation of the law that would nullify
a jurisdictional statute). Instead, when a taxpayer’s appeal implicates a budget-driven system’s
tax rate (as U.S. Steel’s appeal does), then the Indiana Board must determine
whether the appeal concerns assessed value or whether it concerns a budget or
tax levy. If the Indiana Board determines that the taxpayer’s appeal concerns
assessed value, then Indiana Code Section 6-1.5-4-1 gives the Indiana Board subject matter
jurisdiction over the appeal. I.C. § 6-1.5-4-1(a)(1).
Here, the Indiana Board admitted that U.S. Steel’s appeal concerned assessed value; thus,
the Indiana Board has subject matter jurisdiction over U.S. Steel’s 133 Petition despite
the fact that its claim implicates Lake County’s tax rate. See id.
The Indiana Board’s reason for disclaiming subject matter jurisdiction therefore fell “short
of [its] statutory jurisdiction[.]” I.C. § 33-3-5-14.8(e)(3). Hence, the Court DENIES
the Respondents’ motions for summary judgment. The Court GRANTS summary judgment to
U.S. Steel on this issue.
See footnote
II. Whether U.S. Steel’s claim was properly brought in a 133 Petition
The Respondents argue that even if the Indiana Board has subject matter jurisdiction
over U.S. Steel’s claim, U.S. Steel’s appeal must still fail because U.S. Steel
did not first appeal Lake County’s tax rate under Indiana Code Section 6-1.1-17
et seq.
See footnote In the alternative, the Respondents argue that U.S. Steel cannot
bring its claim in a 133 Petition because it challenges the subjective discretion
of the tax officials. The Respondents are wrong on both counts.
A. Whether U.S. Steel should first have
appealed under I.C. § 6-1.1-17
et seq.
The Respondents argue that before U.S. Steel filed its 133 Petitions, it should
have appealed Lake County’s tax rate pursuant to Indiana Code Section 6-1.1-17 et
seq. Indiana Code Section 6-1.1-17-5 does not, however, grant taxpayers a right
to appeal a tax rate. Rather, the law merely provides that ten
or more taxpayers may object to the “tax rate . . . of
a political subdivision[.]”
See footnote
Ind. Code § 6-1.1-17-5(b) (1998). Once an objection has
been made, tax officials simply must adopt a “finding,” which is presented along
with the budget to the County Board of Tax Adjustment (County Board).
See Ind. Code §§ 6-1.1-17-5(b), (c), & (d) (1998). The County Board
is without authorization to even address the taxpayers’ objection. See Ind. Code
§ 6-1.1-17-6 (1998). Thus, Indiana Code Section 6-1.1-17-5 is merely a mechanism
for ten or more taxpayers to place their objection on record.
See footnote
The right of appeal afforded to ten or more taxpayers is “to initiate
an appeal . . . on a political subdivision’s
budget[.]” Ind. Code
§ 6-1.1-17-13 (1998). U.S. Steel’s claim, however has nothing to do with
Lake County’s budget.
See footnote Therefore, to require U.S. Steel to object to its
tax rate under Indiana Code Section 6-1.1-17
et seq. would not result in
a final determination that it could have appealed to the then-State Board.
Consequently, the procedures available to U.S. Steel under Indiana Code Section 6-1.1-17 et
seq. are irrelevant to U.S. Steel’s 133 Petitions.
See footnote
B. Subjectivity and 133 Petitions
In the alternative, the Respondents argue that U.S. Steel improperly brought its claim
in a 133 Petition because the removal of assessed value from Lake County’s
tax rolls involved subjective judgment on the part of tax officials, and the
only errors reviewable by a 133 Petition are those which can be corrected
without resort to subjective judgment.
See footnote Again, the Respondents are incorrect.
A taxpayer may file a 133 Petition to request a correction of errors
that result from one or more of the following reasons:
(1) The description of the real property was in error.
(2) The assessment was against the wrong person.
(3) Taxes on the same property were charged more than one (1) time in
the same year.
(4) There was a mathematical error in computing the taxes or penalties on the
taxes.
(5) There was an error in carrying delinquent taxes forward from one (1) tax
duplicate to another.
(6) The taxes, as a matter of law, were illegal.
(7) There was a mathematical error in computing an assessment.
(8) Through an error of omission by any state or county officer the taxpayer
was not given credit for an exemption or deduction permitted by law.
Ind. Code § 6-1.1-15-12(a) (1998). U.S. Steel brings its claim under “[t]he
taxes, as a matter of law, were illegal” provision of subdivision (6).
When a taxpayer files a 133 Petition, it “must be able to show
with probative evidence that the error is an objective error, and not a
subjective error.” Barth, Inc. v. State Bd. of Tax Comm’rs, 756 N.E.2d
1124, 1128 (Ind. Tax Ct. 2001) (emphasis added). Thus, taxpayers cannot use
the 133 Petition to challenge any part of their assessment that implicates an
official’s exercise of lawful subjective discretion, i.e., discretion that is authorized by law.
See King Indus. Corp. v. State Bd. of Tax Comm’rs, 699 N.E.2d
338, 340 n.4 (Ind. Tax Ct. 1998) (noting that “a certain amount of
. . . subjective judgment must be included in the assessment process”).
In this case, however, U.S. Steel challenges the allegedly unlawful subjective discretion—i.e., discretion
that is not authorized by law—of Lake County in removing assessed value from
its tax rolls. The Indiana Board cannot, then, invoke the “subjective”
discretion of those tax officials as a reason to deny U.S. Steel’s 133
Petitions, because no tax official is vested with discretion to act unlawfully.
See Ind. Code § 6-1.1-2-3 (1998) (providing that “[the] total tax rate
. . . shall be determined in the manner provided by law” (emphasis
added)); Hennel v. Bd. of Comm’rs of Vanderburgh County, 31 N.E. 462, 463
(Ind. 1892) (holding that when an assessor levies a tax without authority to
do so, the assessment, is void); Newsom v. Bd. of Tax Comm’rs of
Bartholomew County, 92 Ind. 229, 233 (1883) (indicating that an illegal tax is
one not levied and collected “in the manner prescribed by law”); Board of
Comm’rs of Howard County v. Armstrong, 91 Ind. 528, 536 (1883) (holding that
illegal taxes are “without authority of law as to the manner in which
they were made”); State v. McGinnis, 34 Ind. 452, 454 (1870) (voiding the
acts of an unlawfully constituted board of equalization); Donch v. Bd. of Comm’rs
of Lake County, 30 N.E. 204, 206 (Ind. App. 1892) (holding that “[w]hen
the amount which shall be paid for the support of government . .
. has been fixed by a method prescribed by law, that must be
regarded as the amount demanded by the law; and it cannot be considered
as otherwise than unjust and wrongful for an officer, without authority . .
., to assume to change the requirement of the law, and thereupon to
collect a larger amount”). Accordingly, the Indiana Board’s dismissal of U.S. Steel’s
133 Petitions because they involve a subjective determination is baseless.
Indiana Code Section 6-1.1-15-12(a)(6) provides taxpayers with a remedy when their “taxes, as
a matter of law, [are] illegal.” I.C. § 6-1.1-15-12(a)(6) (emphasis added). To
determine something “as a matter of law” simply means to apply the law
to undisputed, material facts. See Central Realty, Inc. v. Hillman’s Equipment, Inc.,
246 N.E.2d 383, 389 (Ind. 1969); Young v. Citizens’ St. R. Co., 47
N.E. 142, 143 (Ind. 1897); Union Sch. Tp. v. First Nat. Bank of
Crawfordsville, Ind., 2 N.E. 194, 197 (Ind. 1885). Here, U.S. Steel and
the Respondents do not dispute that assessed value was removed from Lake County’s
tax rolls; hence, the parties do not dispute any material facts.
See footnote The
only question is whether Lake County’s removal of assessed valuation from its tax
rolls (and, hence, the resulting tax rate) was, as a matter of law,
illegal—a question that falls squarely within the ambit of the 133 Petition.
See I.C. § 6-1.1-15-12(a)(6). Thus, it is appropriate for U.S. Steel to
claim in its 133 Petitions that its taxes, as a matter of law,
were illegal. The Indiana Board acted “without observance of procedure required by
law” when it declined to hold a hearing on and reach the merits
of U.S. Steel’s claim. See Ind. Code § 33-3-5-14.8(e)(4). The Court,
therefore, DENIES the Respondents’ motions for summary judgment on this issue and GRANTS
summary judgment to U.S. Steel.
See footnote
The Court REMANDS U.S. Steel’s 133 Petitions to the Indiana Board. On
remand, the Indiana Board shall hold a hearing pursuant to the provisions of
Indiana Code Section 6-1.1-15-12(e).
See Ind. Code § 6-1.1-15-12(e) (providing that a
133 Petition is subject to the appeals procedure under sections 4 through 8
of Indiana Code Section 6-1.1-15). After such hearing, the Indiana Board shall
reach the merits of U.S. Steel’s claim.
CONCLUSION
The Court DENIES the Respondents’ motions for summary judgment and GRANTS summary judgment
to U.S. Steel. The Court REMANDS U.S. Steel’s 133 Petitions to the
Indiana Board. On remand, the Court ORDERS the Indiana Board to reach
the merits of U.S. Steel’s claims in a manner consistent with this opinion.
Footnote:
The Respondents include the Lake County Property Tax Assessment Board of Appeals;
Paul Karras, Lake County Assessor; Peter Benjamin, Lake County Auditor; Peggy Holinga Katona,
Lake County Treasurer; and Booker Blumenberg, Calumet Township Assessor. The Court refers
to them collectively as “the Respondents.”
Footnote: In conjunction with filing its 133 Petitions, U.S. Steel also filed Claims
for Refund (Forms 17T) under Indiana Code Section 6-1.1-26-1. U.S. Steel requested
a refund of more than $20 million.
Footnote: On December 31, 2001, the Legislature abolished the State Board. 2001
Ind. Acts 198 § 119(b)(2). Effective January 1, 2002, the Legislature created the
Indiana Board of Tax Review (Indiana Board) as “successor” to the State Board.
Ind. Code §§ 6-1.5-1-3; 6-1.5-4-1 (Supp. 2001); 2001 Ind. Acts 198 §
95. Consequently, when a final determination was issued on U.S. Steel’s 133
Petitions in August 2002, it was issued by the Indiana Board.
Footnote:
The Court determined that the motions went “to the basis of the
Indiana Board of Tax Review’s denial of the petition because it did not
have jurisdiction.” (Order of Oct. 30, 2002.) Additionally, the Respondents referred
to matters outside the pleadings.
See Ind. Trial Rule 12(B).
Footnote:
The parties do not dispute, however, that the Court has jurisdiction over
this and all other issues raised with respect to the Respondents’ motions.
Footnote: “When any party has moved for summary judgment, the court may grant
summary judgment for any other party upon the issues raised by the motion
although no motion for summary judgment is filed by such party.” Ind.
Trial R. 56(B).
Footnote: The Indiana Board termed this issue as one of “exhaustion” of administrative
remedies. However, “exhaustion” in this case is a misnomer because the exhaustion
of administrative remedies is a common law doctrine invoked by
courts to facilitate
judicial review of administrative actions. See Myers v. Bethlehem Shipbuilding Corp., 303
U.S. 41, 50–51 (1938) (referring to the exhaustion doctrine as a “long-settled rule
of judicial administration”). See also Ind. Code § 4-21.5-5-4(a) (1998) (providing that
“[a] person may file a petition for judicial review under this chapter only
after exhausting all administrative remedies available” (emphasis added)).
Footnote:
An objection is distinguishable from an appeal. An objection is “[a]
formal statement opposing something that has occurred or is about to occur[.]”
Black’s Law Dictionary 1101 (7th ed. 1999). An appeal, on the other
hand, is “[a] proceeding undertaken to have a decision reconsidered by bringing it
to a higher authority[.]” Id. at 94.
Footnote:
Furthermore, only
political subdivisions, not taxpayers, are granted a right to appeal
a tax rate—and then only if they are seeking to increase it.
Ind. Code § 6-1.1-17-15 (1998).
Footnote:
Even if it did, U.S. Steel has no apparent remedy under Indiana
Code Section 6-1.1-17
et seq. because the then-State Board’s review of a budget
that had been appealed was purely discretionary. See Ind. Code § 6-1.1-17-16(b)
(1998) (providing that the State board “may review . . . the budget
. . . of any of the political subdivisions . . . whose
budget . . . is the subject of an appeal initiated under this
chapter” (emphasis added)).
Footnote:
Furthermore, nothing in Indiana Code Section 6-1.1-15
et seq., which governs 133
Petitions, requires a taxpayer who files a 133 Petition to first appeal under
Indiana Code Section 6-1.1-17 et seq. See generally Ind. Code § 6-1.1-15
et seq. See also State Bd. of Tax Comm’rs v. Montgomery, 730
N.E.2d 680, 684 (Ind. 2000) (holding that Indiana Code Section 6-1.1-17 et. seq.
“is not . . . an administrative remedy required to be exhausted before
a taxpayer may challenge an unlawfully collected tax”).
Footnote:
Instead, the Respondents argue that U.S. Steel should have appealed under the
130/131 appeals procedure.
See generally Thousand Trails, Inc. v. State Bd. of
Tax Comm’rs, 757 N.E.2d 1072, 1076 (Ind. Tax Ct. 2001) (discussing the 130/131
appeals procedure).
Footnote:
While there are questions as to who removed the assessed value, they
are not material to the legal issue of whether such removal was in
any way lawful.
Footnote: In the alternative, U.S. Steel argues that its taxes resulted from a
mathematical error under Indiana Code Section 6-1.1-15-12(a)(7). Given this Court’s holding, it
need not address this issue.