ATTORNEYS FOR PETITONER:
ATTORNEYS FOR RESPONDENT:
KAREN M. FREEMAN-WILSON
ATTORNEY GENERAL OF INDIANA
DICKINSON & ABEL, P.C.
Deputy Attorney General
INDIANA TAX COURT
ALCOILS, INC., )
v. ) Cause Nos. 49T10-9606-TA-69
STATE BOARD OF TAX )
ON APPEAL FROM A FINAL DETERMINATION OF THE STATE BOARD OF TAX COMMISSIONERS
April 7, 2000
The petitioner, Alcoils,
Inc. (Alcoils), in Cause No. 49T10-9606-TA-69 (the Form 133 appeal) asks this Court
to review three Form 133 Petitions for Correction of Error that were allegedly
filed but never received by the State Board of Tax Commissioners (State Board)
for the 1989, 1990 and 1991 tax years. On those forms, Alcoils
alleged that an incorrect base rate was applied to its building. (Trial
Tr. at 12.) Alcoils also claimed that it was erroneously assessed for
certain heating, interior partitioning and windows that it did not possess. (Trial
Tr. at 14.) In Cause No. 49T10-9606-TA-71, (the Form 131 appeal),
Alcoils appeals a final determination of the State Board made on Alcoils Form
131 Petition for Review of Assessment that Alcoils submitted for the 1992 tax
year. In its final determination, the State Board denied Alcoils certain adjustments
for grade and obsolescence depreciation on its property. (Respt. Ex. B.)
For the reasons explained below, the Court affirms the State Board in the
133 appeal and affirms in part and reverses in part the State Boards
final determination in the 131 appeal, remanding it for further proceedings.
FACTS AND PROCEDURAL HISTORY
Alcoils property is
located in Whitley County, Indiana where it makes wire coils for use in
electric motors. On December 11, 1991, Alcoils mailed its Form 133 petitions
via certified mail to the Whitley County Auditor. On December 12, 1991,
a deputy auditor signed for and received delivery of a certified mail envelope
and receipt, on which was the notation Alcoils. This envelope that supposedly
contained the 133 petitions was subsequently lost, and was never found, despite a
search performed by both the Whitley County Auditor and Assessor. Thus, the
Whitley County Board of Review (BOR) never acted upon Alcoils Form 133 petitions.
Thereafter, on June 19, 1996, Alcoils filed its original tax appeal for
this case. After having filed the Form 133 appeal, the State Board
sent Alcoils a letter on April 15, 1997, in which it claimed to
have no record of Alcoils Form 133 petitions having been filed. (Respt.
With respect to the Form
131 appeal, the pertinent facts are as follows. On October 6, 1992,
the Whitley County BOR made no change to the alleged errors asserted in
Alcoils Form 131 petition. Thereafter, Alcoils appealed this decision to the State
Board, which held a hearing on January 16, 1996. On May 10,
1996, the State Board issued its final assessment determination, which granted most of
Alcoils proposed relief. However, the State Board declined to lower the grade
assigned to Alcoils building and did not grant Alcoils any obsolescence depreciation for
its property. On June 19, 1996, Alcoils filed its original tax appeal
in the Form 131 case. Both causes were tried together by the
Court on April 28, 1997, and oral arguments were heard from both parties
concerning these cases on September 25, 1997.
Additional facts will be supplied
ANALYSIS AND OPINION
Standard of Review
Board is given great deference when it acts within the scope of its
authority. See Barth, Inc. v. State Bd. of Tax Commrs, 699 N.E.2d
800, 801 (Ind. Tax Ct. 1997). Accordingly, this Court reverses State
Board final determinations only when those determinations are unsupported by substantial evidence, are
arbitrary or capricious, constitute an abuse of discretion, or exceed statutory authority.
See id. at 801-02.
1. The Form 133 appeal
Alcoils argues that the State Boards inaction on its Form 133 petitions constitutes
a final assessment determination that is appealable to this Court. In this
case, Alcoils claimed that the State Board did not possess the authority to
dismiss its claim, wherein the taxpayer allegedly filed three Form 133 petitions with
the Whitley County Auditor via certified mail that were never located. The
State Board contends first that the forms were never filed properly and
second that, even if the forms were filed properly, the Court still does
not possess jurisdiction to hear the case because there has been no final
assessment determination made by either the BOR or the State Board.
A. Proper Filing
In Indiana Sugars v. State Board of Tax Commissioners, 683 N.E.2d 1383 (Ind.
Tax Ct. 1997), the taxpayer filed its petition for the Enterprise Zone Business
Personal Property Tax Credit (EZ Credit) for the 1993 tax year via first
class mail, which was never received by the Lake County Auditor. There,
the Court pointed out that no statutes exist that deal with filing procedures
of the State Board.
See footnote However, the Court found that such statutes do
exist for the Department of Revenue (Department), so the Court drew an analogy
between the two agencies with respect to filing procedures.See footnote
See id. at
1385. Applying the Departments statutes, the Court reasoned that the Department considers
a document filed if it is deposited in the United States mail before
the filing deadline. See id. at 1386 (citing Ind. Code Ann. §
In Indiana Sugars, the Court stated that if the above-drawn analogy applies to
the State Board, then it appears that certified mail constitutes an appropriate filing
method. See Ind. Code Ann. § 6.8.1-6-3(b) (stating that filing a document
with the Department by first class or certified mail is acceptable.)
It would seem unjust to require more than filing via First Class U.S.
Mail . . . . To now require otherwise might set a technical
trap for . . . taxpayers. Until such time as statutes are
enacted or regulations promulgated requiring more, mailing forms to the State Board via
First-Class Mail constitutes filing. Id. at 1386. The Court further
discussed what evidence was needed to prove timely mailing. This Court believes
that the sworn testimony of a witness constitutes sufficient evidence to prove timely
mailing. Id. at 1387.
In the present
case, Alcoils tax representative, Mr. M. Drew Miller of Landmark Appraisals testified that
he mailed Alcoils Form 133 petitions, along with a cover letter requesting a
date stamp and return receipt, on December 11, 1991. (Trial Tr. at 10.)
The record reflects that on December 12, 1991, a deputy auditor in
the Whitley County Auditors office signed for the certified mail envelope. (Trial
Tr. at 75.) At the top of the certified mail receipt was
the notation Alcoils, which presumably referred to the taxpayer in this case.
(Petr. Ex. A).
See footnote Following receipt of the envelope, it was lost within
the Whitley County Auditors office. After a search was performed of both
the Whitley County Auditors and Assessors offices, neither the forms nor the cover
letter were located. (Trial Tr. at 74).
In support of Alcoils position, Mr. Miller testified as to the procedures
it employs when preparing certified mail. (Trial Tr. at 42.) According
to Mr. Miller, the postage was applied to the envelope after weighing it.
(Trial Tr. at 42.) In addition, Mr. Miller opined that since
the postage on the envelope was $0.52, it could not have been empty.
(Trial Tr. at 42.) Miller concluded that the only documents in
the envelope were the Form 133 petitions. (Trial Tr. at 41.)
Millers testimony leads this Court to conclude that, based on
Indiana Sugars, Alcoils
timely filed its Form 133 petition. Pursuant to Indiana Sugars, a taxpayer
merely needs to file via first class mail. The Court finds that
the Form 133 petitions were properly filed.
The legislature has stated that if a taxpayer fails to comply with any
statutory requirement for the initiation of an original tax appeal, this Court does
not have jurisdiction to hear the appeal. See Ind. Code Ann. §
33-3-5-11(a) (West 1989 & Supp. 1999). In addition, the Court has stated
the need for a taxpayer to exhaust his administrative remedies before filing an
original tax appeal. See Montgomery v. State Bd. of Tax Commrs, 708
N.E.2d 936, 937 (Ind. Tax Ct. 1999) (observing that exhaustion of remedies is
generally required before a court may exercise jurisdiction over matter conferred to a
state agency). In addition, the State Board may not cure a failure
on the part of lower taxation authorities to comply with the statutory prerequisites
of a valid assessment by way of its ability to correct any assessment
error in taxpayer-initiated petitions. See Joyce Sportswear Co. v. State Bd. of
Tax Commrs, 684 N.E.2d 1189, 1192 (Ind. Tax Ct. 1997).
The Indiana Supreme Court recently addressed this issue in two companion cases.
In State Board of Tax Commissioners v. Mixmill Manufacturing Co., 702 N.E.2d 701
(Ind. 1998), the Indiana Supreme Court held that when the BOR fails to
act upon a taxpayers Form 131 petition, this Court has no jurisdiction to
hear the case. The Tax Court does not have jurisdiction to hear
a direct appeal by a taxpayer against the State Board of Tax Commissioners
when a County Board of Review fails to act on a Petition for
Review of Assessment within the statutory time frame. Id. at 706. The
Supreme Court did state that taxpayers may bring a mandamus action in a
court of general jurisdiction to compel the BOR to act on the
petition. Id. at 705.
The Indiana Supreme Court reached the same conclusion as to Form 133 petitions
State Board of Tax Commissioners v. L.H. Carbide Corp., 702 N.E.2d 706
(Ind. 1998). In facts similar to the case at bar, the Supreme
Court held in L.H. Carbide that when a BOR fails to act on
a taxpayers Form 133 petition, the Tax Court does not have jurisdiction to
hear the case. See id. at 707. As in Mixmill, the
Court stated that a taxpayer may bring a mandamus action in a court
of general jurisdiction against the county officials to compel action on the petitions.
Although the Court finds that Alcoils timely filed its Form 131 petitions, based
on the holdings of the above-cited cases, the Court agrees with the State
Board that the Court does not possess jurisdiction to hear the case at
bar, since the BOR has not acted upon Alcoils Form 133 petitions.
The Court now dismisses Alcoils Form 133 case for lack of jurisdiction.
2. The Form 131 appeal
Alcoils also appeals the State Boards final assessment determination regarding the grade and
obsolescence of Alcoils building for the 1992 tax year. In its Form
131 petition, Alcoils argued that its property should have been given a C
rather than a B grade. Alcoils also claimed that its building suffers
from forms of functional and economic obsolescence and was therefore entitled to a
10% obsolescence adjustment.
Alcoils argues that the grade on its property should be lowered to a
C from a B. According to Alcoils, its building was constructed of
average materials that would warrant a C grade. The State Board claims
that the grade was proper because, although Alcoils building qualified for and received
a kit adjustment, the building was of above-average construction.
Buildings are graded according to the quality of their overall workmanship, materials and
See Barth, Inc., 699 N.E.2d at 808, n.12. The regulations
state that a C grade is given to a moderately attractive building that
conforms with the base specifications used to develop the pricing schedule. See
Ind. Admin. Code tit. 50, r. 2.1-4-3(f) (1992) (codified in present form at
id., r. 2.2-10-3(a)(3) (1996)). A grade of B is given to an
architecturally attractive building with good quality materials and workmanship throughout. See id.
(codified in present form at id., r. 2.2-10-3(a)(2) (1996)).
The State Board raised the grade of Alcoils building from a C to
a B to account for Alcoils use of above-average materials in its building.
The Court notes that slight additions to the basic kit model can
be accounted for by simply raising the grade. See Componx v. State
Bd. of Tax Commrs, 683 N.E.2d 1372, 1375 (Ind. Tax Ct. 1997).
This can be done because none of the variations affects the actual structure
of the building itself. See id. They are simply cosmetic features
that enhance the buildings aesthetic value, not its structural integrity. See id.
Most improvements, including kit buildings, will contain some degree of customization.
See Barker v. State Bd. of State Bd. of Tax Commrs, 712 N.E.2d
563, 570 (Ind. Tax Ct. 1999). As a result, the fact that
an improvement has some degree of customization, without more, is insufficient to disqualify
an improvement for a kit adjustment. See id. at 570. A
kit building can, however lose its status as such if it displays such
extant characteristics that the structure could no longer be considered economical. See
Alcoils claims that the materials used in construction of its kit building were
not of good quality. (Trial Tr. at 18.) In support of
this, Miller testified that, There isnt much more to tell. Its, I
think, clear that its not an architecturally attractive building, and its not built
with good-quality materials and workmanship. (Trial Tr. at 36.) Miller also
stated that, The kit-type portion of the property can in no way be
described as a B grade . . . under the current pricing, a
C grade more accurately reflects the quality of workmanship and materials. (Trial
Tr. at 36.) Alcoils presented no other evidence on this point.
In response, the State Board argued that the grade was raised because Alcoils
building had been enhanced beyond a basic kit building. (Trial Tr. at 54.)
The Court finds that Alcoils evidence is not enough to overcome the State
Boards final determination on this issue. Where a taxpayer alleges that its
building qualifies for the kit adjustment, the allegation itself . . . puts
the grade assigned to the building at issue. Consequently, it would be
nonsensical to refuse to allow the State Board to adjust the grade of
the buildings if the kit adjustment is deemed to be warranted. Barth, Inc.,
699 N.E.2d at 807. In this case, the State Board awarded Alcoils
a kit adjustment, but raised the grade to compensate for the modifications.
Alcoils was required to present probative evidence in support of this contention, which
it failed to do. See Whitely Prods. v. State Bd. of Tax
Commrs, 704 N.E.2d at 1119. (taxpayer must offer probative evidence concerning the alleged
error). Thus, the Court will uphold the State Boards final determination on
Alcoils claims that it should have been awarded a 10% obsolescence factor on
its building. In support of this, Alcoils presents the State Boards final
assessment determination of a similar property owned by Universal Coop (Universal) as well
as testimony from Miller identifying the various forms of obsolescence present in its
building. Universal Coops property
Alcoils claims that its property was assessed incorrectly when compared to Universals property.
The Court notes that it is the State Boards duty to assess
similar properties consistently. See Western Select Properties, L.P. v. State Bd. of
Tax Commrs, 639 N.E.2d 1068, 1075 (Ind. Tax Ct. 1994). However, Alcoils
must present a prima facie case showing that the two assessments were inconsistent.
See id. at 1074. The taxpayer also has the duty to
bring forth evidence of probative value to the State Board showing that similar
properties have been treated inconsistently. See North Park Cinemas, Inc. v. State
Bd. of Tax Commrs, 689 N.E.2d 765, 771 (Ind. Tax Ct. 1997).
At trial, Alcoils
admitted that while excessive wall height was at issue in Universals building, such
problems did not exist in Alcoils building. (Trial Tr. at 39.)
Alcoils also admitted that while Universals building suffered from corrosion, its property did
not. (Trial Tr. at 40.) In support of its position, Alcoils
claimed that both buildings were priced as light manufacturing buildings with similar-type industrial
uses. (Trial Tr. at 39.) Alcoils also stated that the two properties
suffered similar causes of obsolescence. (Trial Tr. at 39.) Alcoils failed,
however, to provide more detail as to these claims.
Such bare allegations do not constitute the prima facie case needed to trigger
the State Boards duty to refute the taxpayers evidence. See Herb v.
State Bd. of Tax Commrs, 656 N.E.2d 890, 893 (Ind. Tax Ct. 1995)
(Allegations, unsupported by factual evidence, remain mere allegations.) Based on this evidence alone,
Alcoils has not proven how the properties were similar. A taxpayer who
does not present evidence of similar properties assessed differently cannot complain to this
Court that the State Board failed to consider similar properties. North Park
Cinemas, 689 N.E.2d at 771-72. Alcoils has failed to establish a prima
facie case concerning its relationship to Universals property.
Identification of obsolescence factors
Alcoils finally argues that the State Board incorrectly denied its request for a
10% obsolescence depreciation after Alcoils allegedly identified forms of functional obsolescence present in
its building. In its final assessment determination, the State Board did not
grant any obsolescence to the subject property. (Respt. Ex. B.) Functional
obsolescence is defined as either something that buyers are unwilling to pay for
or a deficiency that causes the property to lose value when compared to
a more modern replacement. See Ind. Admin. Code tit. 50, r. 2.1-5-1
(1992) (codified in present form at id., r. 2.2-10-7(1996)); see also Michael D.
Larson, Identifying, Measuring and Treating Functional Obsolescence in an Appraisal, 10 J. Prop.
Tax Mgmt. 42, 44 (1999). Examples of functional obsolescence include inadequate parking,
excessive or deficient floor load capacity and poor proportion of office, rental or
manufacturing, and warehouse space. See Ind. Admin. Code tit. 50, r. 2.1-5-1.
In the present case, Alcoils identified that its truck docks were in need
of relocation and that its building suffers from excessive floor loads. (Trial
Tr. at 37-38; 40.) Alcoils, though, failed to quantify the reasons for
such obsolescence. The Court notes that this case is pre-Clark; See Clark,
694 N.E.2d at 1241. However, this does not excuse the fact that
Alcoils effort to identify obsolescence factors both at the administrative and trial levels
was half-hearted. See id. (noting that taxpayer made a half-hearted case at the
administrative level). Despite this poor showing, the Court finds that Alcoils has
identified the forms of functional obsolescence its building suffers and is thus entitled
to a remand on this issue. Upon remand, Alcoils will be required
to identify, quantify and support its determination of functional obsolescence with probative evidence.
See id. The State Board will then be required to deal
with Alcoils evidence in a meaningful manner. See Loveless Const. Co. v.
State Bd. of Tax Commrs, 695 N.E.2d 1045, 1049 (Ind. Tax Ct. 1998).
For the aforementioned reasons, the Court AFFIRMS the State Board in Cause No.
49T10-9606-TA-69. The Court further AFFIRMS in part, REVERSES in part and REMANDS
the State Boards final determination in Cause No. 49T10-9606-TA-71 for further proceedings consistent
with this opinion.
Although these cases were never formally consolidated, the parties have
treated the cases as such.
The Court also notes that no statutes or regulations delineate
filing procedures with the BOR.
Filling statutes for the Department can be found at Ind.
Code Ann. §§ 6-8.1-6-3(a)(1) and 3(b) (West 1989).
The record does not reflect who made the notation.
However, a lack of such evidence does not affect the Courts decision.
Blacks Law Dictionary 973 (7th ed. 1999) defines a mandamus
as A writ issued by a superior court to compel a lower court
or a government officer to perform mandatory or purely ministerial duties correctly. See
also Rader v. Burton, 122 N.E.2d 856, 857 (Ind. 1954)
These cases are not to be confused with Ind. Code
Ann. § 6-1.1-15-4(e)(1) (West 1989 and Supp. 1999), which states that a failure
by the State Board, not the BOR, to act upon the determination within
180 days shall be treated as a final determination. In these cases,
this Court possesses jurisdiction, since the statute treats the State Boards inaction as
a final assessment determination. See id.
The Court notes that Alcoils made little mention of economic
obsolescence both in its Brief and at trial and made no mention of
it all to the State Board during the administrative hearing. (Trial Tr.
at 37.) In Clark v. State Board of Tax Commissioners, 694 N.E.2d 1230
(Ind. Tax Ct. 1998), the Court determined that a taxpayer must identify and
quantify obsolescence depreciation. Since this case is pre-Clark, however, Alcoils was only
required to identify forms of economic obsolescence, which it failed to do.
See id. at 1241. Thus, the Court will not consider its claim
as regards economic obsolescence.
The State Board classified Alcoils building as a kit building,
which entitled Alcoils to a 50% reduction in its base rate.
See Ind. Admin. Code tit. 50, r. 2.1-4-5 (1992) (Schedules A1 and
A2) (codified in present form at id., r. 2.2-11-6 (1996)); see also Whitley
Prods. Inc. v. State Bd. of Tax Commrs, 704 N.E.2d 1113, 1121 (Ind.
Tax Ct. 1998).