ATTORNEY FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN STEVE CARTER
ATTORNEY AT LAW ATTORNEY GENERAL OF INDIANA
Indianapolis, IN Indianapolis, IN
LINDA I. VILLEGAS
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
FINE ART COMPANY, )
v. ) Cause No. 49T10-9812-TA-197
DEPARTMENT OF LOCAL )
ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
NOT FOR PUBLICATION
April 11, 2003
The Petitioner, Fine Art Company (Fine Art), appeals the final determination of the
State Board of Tax Commissioners (State Board) establishing the assessed value of its
property as of March 1, 1995. The Court restates the issues
Whether the State Boards final determination supports a 15% obsolescence depreciation adjustment to
Fine Arts improvement; and
Whether the State Board properly reviewed and determined Fine Arts challenge to its
See footnote FACTS AND PROCEDURAL HISTORY
For the reasons stated below, the Court REMANDS Issue I to the Indiana
Board of Tax Review (Indiana Board).
The Court AFFIRMS the State Boards
final determination on Issue II.
Fine Art owns land and an improvement in Warren Township, Marion County, Indiana.
Fine Art appealed its assessment to the State Board, arguing that it
was entitled to 50% obsolescence, and that its land value [was] excessive and/or
a negative influence factor should be applied[.] (Joint Ex. 2 at 11.)
The State Board held a hearing and issued its final determination October
28, 1998. The State Board applied a 15% obsolescence depreciation adjustment to
Fine Arts improvement and found that the land value was correct and that
no additional negative influence factor was warranted.
On December 10, 1998, Fine Art filed an original tax appeal. This
Court conducted a trial on July 22, 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 it
acts within the scope of its authority. Miller Structures, Inc. v. State
Bd. of Tax Commrs, 748 N.E.2d 943, 947 (Ind. Tax Ct. 2001).
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. Id. 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. Id. (citation and
internal quotation marks omitted). To establish a prima facie case, the taxpayer
must offer probative evidence concerning the alleged error. Id. Once the
taxpayer carries the burden of establishing a prima facie case, the burden shifts
to the State Board to rebut the taxpayers evidence and justify its decision
with substantial evidence. Id. (quoting Clark v. State Bd. of Tax Commrs,
694 N.E.2d 1230, 1233 (Ind. Tax Ct. 1998)). To carry its burden,
the State Board must do more than merely assert that it assessed the
property correctly. Miller Structures, 748 N.E.2d at 948. Instead, the State
Board must offer an authoritative explanation of its decision to rebut the taxpayers
prima facie showing. Id.
Obsolescence, which is a form of depreciation, is defined as a loss of
value and classified as either functional or economic. Freudenberg-NOK Gen. Pship v. State
Bd. of Tax Commrs, 715 N.E.2d 1026, 1029 (Ind. Tax Ct. 1999), review
denied. The determination of obsolescence is a two-step inquiry. Id.
The assessor must identify causes of obsolescence and then quantify the amount of
obsolescence to be applied. Id.
In this case, the State Board awarded a 15% obsolescence adjustment to Fine
Arts improvement. The State Board now concedes, however, that its final determination
is in error. (Respt Br. at 3; Trial Tr. at 4-5.)
Specifically, the State Board admits that it did not support its quantification of
15% obsolescence with substantial evidence, and therefore seeks to have the issue remanded
for further proceedings. On remand, the State Board contends that it will
review the causes and quantification of obsolescence. Fine Art argues that only
the quantification aspect should be reviewed on remand. The Court agrees with
By initially awarding 15% obsolescence to Fine Arts improvement, the State Board agreed
that the improvement suffered from obsolescence. See Freudenberg-NOK, 715 N.E.2d at 1031
n.7; Heart City Chrysler v. State Bd. of Tax Commrs, 714 N.E.2d 329,
333, n.13 (Ind. Tax Ct. 1999). When the State Board determines
that the property has obsolescence, it cannot be heard to complain that the
taxpayer did not show causes of obsolescence. Freudenberg-NOK, 715 N.E.2d at 1031
n.8. Thus, on remand, only the quantification of obsolescence will be at
See footnote The Court, therefore, REMANDS this issue to the Indiana Board.
II. Land Value
The next issue is whether the State Board properly reviewed and determined Fine
Arts land value challenge. Fine Art argues that the State Board did
not provide a meaningful review of its land value issue, including its challenge
of its base rate, influence factor, and acreage. The Court does not
A. Base Rate
First, the State Board properly determined First Arts base rate. In its
131 Petition for Review of Assessment (131 Petition), Fine Art argued that its
land value is excessive and/or a negative influence factor should be applied[.]
(Joint Ex. 2 at 11.) At the administrative hearing, Fine Art argued
that its property was not properly priced under the Marion County Land Valuation
Order (land order).
See footnote The portion of the land order submitted into evidence
contained the following designations and associated rates per square foot for commercial and
industrial property in Warren Township:
Low Value High Value
Low Value High Value
38th Street (A)
38th Street (B)
38th Street (C)
(Joint Ex. 3 at 7.) Fine Art contends that its land,
which was located on Arlington Avenue, should be assessed on an acreage basis
because there was no specific designation for Arlington Avenue in the land order.
Fine Art misses the obvious. Fine Arts land was assessed on
a square foot basis under the Other designation of the land order.
The Other designation serves as a catch-all category for geographic areas not otherwise
designated on the land order. The Precedent v. State Bd. of Tax
Commrs, 659 N.E.2d 701, 706 (Ind. Tax Ct. 1995). Because Fine Arts
land was not otherwise designated on the land order, it properly assessed under
the Other category of the land order. See Eastgate Pship v. Dept
of Local Govt Fin., 780 N.E.2d 435, 438-39 (Ind. Tax Ct. 2002); Precedent,
659 N.E.2d at 706.
B. Negative Influence Factor
Second, the State Board properly determined that Fine Art was not entitled to
a negative influence factor. An influence factor refers to a condition peculiar
to the land that dictates an adjustment, either positive or negative, to the
extended value to account for variations from the norm. Ind. Admin. Code
tit. 50, r. 2.2-4-10(a)(9) (1996). The State Board may use influence factors
to adjust values in a land order for properties that possess unique characteristics.
Phelps Dodge v. State Bd. of Tax Commrs, 705 N.E.2d 1099, 1105
(Ind. Tax Ct. 1999), review denied. In applying an influence factor, an
assessing official must first identify the deviations from the norm and then quantify
the variations as a percentage. Fleet Supply, Inc. v. State Bd. of
Tax Commrs, 747 N.E.2d 645, 652 (Ind. Tax Ct. 2001), review denied.
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 factors that influence the value. White Swan Realty v. State Bd.
of Tax Commrs, 712 N.E.2d 555, 562 (Ind. Tax Ct. 1999), review denied.
A taxpayer seeking the application of a negative influence factor has the
burden to produce probative evidence that would support an application of a negative
influence factor and a quantification of that influence factor. Phelps Dodge, 705
N.E.2d at 1106.
At the administrative hearing, Fine Art stated that it should receive a negative
influence factor because its property was in a blighted area that did not
have any other industrial or retail properties. Thus, it appears that Fine
Art is seeking a negative influence factor based on the misimprovement classification in
the State Boards regulations.
See 50 IAC 2.2-4-10(a)(9)(E). A negative influence
factor for a misimprovement is used when a parcel of land does not
have the same use as surrounding parcels. Fleet Supply, 747 N.E.2d at
653 (citing 50 IAC 2.2-4-10(a)(9)(E)). To properly identify a misimprovement, Fine Art
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. See Quality Farm and Fleet,
Inc. v. State Bd. of Tax Commrs, 747 N.E.2d 88, 91-92 (Ind. Tax
Ct. 2001); Fleet Supply, 747 N.E.2d at 653.
The only evidence Fine Art submitted to support its negative influence factor claim
was testimony that the State Board needed to give recognition to the fact
that Fine Arts property did not have the same use as surrounding parcels.
The State Boards regulations, however, do not require an automatic downward adjustment
in a parcels value simply because it is used differently than surrounding parcels.
Quality Farm and Fleet, 747 N.E.2d at 92 (emphasis in original).
Fine Arts evidence focuses exclusively on the identification of differing land uses and
ignores the need to identify a decrease in value. Because Fine Art
did not submit evidence to show how any alleged inconsistent usage decreased the
value of its property, it failed to make a prima facie case that
it was entitled to a negative influence factor. See Quality Farm and
Fleet, 747 N.E.2d at 92; Fleet Supply, 747 N.E.2d at 653.
Finally, Fine Art argues that the State Board erroneously failed to review its
challenge to its acreage as part of its land value issue. Again,
Fine Art is incorrect. At the administrative hearing, Fine Art argued that
it had been assessed with an excessive amount of acreage. To support
its argument, Fine Art introduced into evidence a survey of its property and
stated that it had only 6.144 acres of land but had been assessed
as having eight acres of land.
Although the State Boards final determination stated that it was not going to
consider the acreage issue because it was not specified on the 131 Petition,
it did apparently correct the amount of acreage and assessed Fine Art for
See footnote Thus, Fine Art cannot complain that the State Board did
not properly review its challenge to its acreage.
Because the State Board properly reviewed and determined Fine Arts challenges to its
land value issue, including its base rate, influence factor, and acreage. Thus,
this Court AFFIRMS the State Boards final determination as to Issue II.
For the aforementioned reasons, the Court REMANDS Issue I to the Indiana Board
for further proceedings consistent with this opinion. The Court AFFIRMS the State
Boards final determination on Issue II.
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. 2001 Ind. Acts 198 § 119(b)(2). Effective January
1, 2002, the Legislature created the Department of Local Government Finance (DLGF) and
the Indiana Board of Tax Review (Indiana Board).
Ind. Code §§ 6-1.1-30-1.1;
6-1.5-1-3 (West Supp. 2001); 2001 Ind. Acts 198 §§ 66, 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. 2002);
2001 Ind. Acts 198 § 95. Moreover, the law in effect prior
to January 1, 2002 applies to these appeals. I.C. § 6-1.5-5-8.
See also 2001 Ind. Acts 198 § 117. Although the DLGF has
been substituted as the Respondent, this Court will still reference the State Board
throughout this opinion.
Fine Art also argues that its assessment should be voided because
portions of Indianas regulations for taxing tangible property have been declared unconstitutional.
Indeed, in 1998, the Indiana Supreme Court affirmed this Courts determination that the
existing cost schedules . . . violate the Property Taxation Clause of the
State Bd. of Tax Commrs v. Town of St. John,
702 N.E.2d 1034, 1043 (Ind. 1998). That same year, however, this Court
declared 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.,
Inc. v. State Bd. of Tax Commrs, 704 N.E.2d 1113, 1121 (Ind. Tax
Ct. 1998), review denied; 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). The Court, therefore, will
not analyze Fine Arts constitutional claim in this opinion.
All cases that would have previously been remanded to the State Board
are now remanded to the Indiana Board of Tax Review (Indiana Board).
Ind. Code § 6-1.1-15-8. Final determinations made by the Indiana Board are
subject to review by this Court pursuant to Indiana Code § 6-1.1-15.
Ind. Code §§ 6-1.5-5-7; 33-3-5-2 (West Supp. 2002).
On remand, Fine Art has the burden to produce probative
evidence quantifying the amount of obsolescence to which its improvement is entitled.
See Freudenberg-NOK Gen. Pship v. State Bd. of Tax Commrs, 715 N.E.2d 1026,
1031 (Ind. Tax Ct. 1999), review denied. Thus, Fine Art will be
required to tie its evidence of quantification of obsolescence to any actual loss
of value suffered by the improvement. See Heart City Chrysler v. State
Bd. of Tax Commrs, 714 N.E.2d 329, 334 (Ind. Tax Ct. 1999) (stating
that attempts to quantify obsolescence must correlate to the causes of obsolescence).
Thereafter, the State Board is to deal with that evidence in a meaningful
manner and, if necessary, to support its decision with substantial evidence. See
Freudenberg-NOK, 715 N.E.2d at 1031.
A land order is a set of land values used
to assess real property.
Eastgate Pship v. Dept of Local Govt Fin.,
780 N.E.2d 435, 438 (Ind. Tax Ct. 2002). These land values are
expressed as ranges of base rates that are applied to various geographic areas
delineated within the land order. Id.
If Fine Art seeks the application of an influence factor
based on one of the types specified in the regulations,
see Ind. Admin.
Code tit. 50, r. 2.2-4-10(a)(9), it should specifically identify that type at the
administrative level and on appeal. See Clark v. Dept of Local Govt
Fin., 779 N.E.2d 1277, 1283 (Ind. Tax Ct. 2002) (requiring specificity in a
Originally, Fine Art was given a 10% negative influence factor
to account for the shape and size of its land.
Admin. Code tit. 50, r. 2.2-4-10(a)(9)(D). During the administrative hearing, the Township
Assessor stated that if Fine Art indeed had only six acres as alleged,
he would correct it but would remove the 10% negative influence factor because
land less than seven acres was not entitled to a negative influence factor
for shape and size. Although the property record card does not list
the exact amount of acreage assessed, it does reflect that the 10% influence
factor had been removed. Thus, it is reasonable to infer that Fine
Arts acreage amount had been corrected to reflect six acres.