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
EAGLE BOWL, INC., )
v. ) Cause No. 49T10-9701-TA-31
DEPARTMENT OF LOCAL )
ON APPEAL FROM A FINAL DETERMINATION OF
THE STATE BOARD OF TAX COMMISSIONERS
NOT FOR PUBLICATION
April 11, 2003
Eagle Bowl, Inc. (Eagle Bowl) appeals the final determination of the State Board
of Tax Commissioners (State Board) valuing its real property for the March 1,
1992 assessment date.
I. Whether the State Board erred in denying an economic obsolescence adjustment
to Eagle Bowls improvement; and
III. Whether Eagle Bowls property assessment violates the U.S. Constitution?
FACTS AND PROCEDURAL HISTORY
Eagle Bowl is a bowling alley located on the west side of Indianapolis,
Indiana. For the 1992 tax year, local assessing officials valued Eagle Bowls
improvement at $113,330. No economic obsolescence adjustment was granted to the improvement.
In November 1993, Eagle Bowl challenged the assessment by filing a Petition for
Review of Assessment (Form 131) with the State Board. In its Form
131, Eagle Bowl asserted that its improvement was entitled to a 50% economic
Following an administrative hearing, the State Board issued a final determination on Eagle
Bowls Form 131, lowering the assessed value of Eagle Bowls improvement to $92,030.
The lowered valuation resulted in part from the State Boards assignment of
a 20% economic obsolescence adjustment to the improvement.
Eagle Bowl appealed the State Boards final determination to this Court on January
3, 1997. On March 3, 1999, however, both Eagle Bowl and the
State Board moved to have the case remanded to the State Board for
further proceedings. On March 4, 1999, the Court issued an order remanding
It is hereby ORDERED that the issue of obsolescence is REMANDED to the
State Tax Board for further proceedings consistent with the provisions of Ind. Code
§ 6-1.1-15-8. The State Board shall have 180 days to issue its
revised Final Assessment Determination. The State Board shall issue a Final Assessment
Determination consistent with Clark v. State Board of Tax Commissioners, 694 N.E.2d 1230,
1238 (Ind. Tax [Ct.] 1998).
(See Ex. B at 1.)
The State Board conducted a remand hearing and, on May 28, 1999, issued
its final determination in which it removed Eagle Bowls 20% economic obsolescence adjustment.
The State Board concluded that because Eagle Bowl did not submit probative
evidence to either support the existence or quantification of obsolescence, the State Boards
initial granting of obsolescence can not [sic] stand[.] (Ex. B. at 25.)
Accordingly, the assessed value of Eagle Bowls improvement was returned to $113,330.
STANDARD OF REVIEW
Eagle Bowl now appeals the State Boards removal of its economic obsolescence adjustment.
In lieu of a trial, the parties agreed to argue this case
based on the administrative record presented to the State Board as well as
on their briefs. Accordingly, the Court heard oral argument on December 4,
2000. Additional facts will be supplied as necessary.
This Court accords great deference to the State Board when it 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, the
Court will reverse a State Board final determination only if it is unsupported
by substantial evidence, constitutes an abuse of discretion, exceeds statutory authority, or is
arbitrary and capricious. Id.
Furthermore, 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). In bearing this burden, 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. GTE North Inc. v. State Bd. of Tax Commrs,
634 N.E.2d 882, 887 (Ind. Tax Ct. 1994) (citations and internal quotation marks
omitted). To establish a prima facie case, the taxpayer must offer probative
evidence concerning the alleged assessment error. Miller Structures, Inc. v. State Bd.
of Tax Commrs, 748 N.E.2d 943, 947 (Ind. Tax Ct. 2001). Where
the taxpayer has failed to provide the State Board with probative evidence supporting
its position on the alleged assessment error, the State Boards duty to support
its final determination with substantial evidence is not triggered. Whitley Prods., Inc.
v. State Bd. of Tax Commrs, 704 N.E.2d 1113, 1119-20 (Ind. Tax Ct.
1998), review denied.
I. Economic Obsolescence
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. See also Ind. Admin Code tit. 50, r. 2.1-5-1 (1992).
Economic obsolescence is caused by factors external to the property. 50
IAC 2.1-5-1. The State Boards regulations cite a number of factors that
may cause economic obsolescence:
Location of structure unappropriate [sic] for its neighborhood[;]
A neighborhood that is in transition of use[;]
Inoperative of inadequate zoning ordinances or deed restrictions[;]
Building code requirements which set current acceptable construction standards[;]
Market acceptability of the product or devices for which the property was constructed
or is currently used[;]
Termination of the need of the property due to actual or probable changes
in economic or social conditions[;]
Insufficiency of utilities unpaved streets, inadequate fire protection, unreliable water, gas or
Hazards danger from floods or other special hazards[.]
50 IAC 2.1-5-1.
As this Court has previously noted, when a taxpayer seeks an economic obsolescence
adjustment, it must make a two-pronged showing: it must identify the causes
of the economic obsolescence and it must quantify the amount of economic obsolescence
to be applied. See Clark, 694 N.E.2d at 1238. It is
important to recognize, however, that each of these prongs requires a connection to
an actual loss in property value.
For example, when identifying causes of obsolescence, a taxpayer must provide probative evidence
that identifies the existence of specific factors that are causing economic obsolescence in
its improvement. Id. In other words, the taxpayer must show that
these external factors cause an actual loss of value to its property.
See Miller Structures, 748 N.E.2d at 954. In the commercial context, this
loss of value usually means a decrease in the propertys income generating ability.
See id. at 953.
Once this showing has been made,
the taxpayer proceeds to the second-prong: quantification
of obsolescence. This prong requires a taxpayer, through the use of professional
appraisal techniques, to convert the actual loss of value (shown in the first
prong) into a percentage reduction and apply it against the improvements overall value.
See Clark, 694 N.E.2d at 1238.
In this case, Eagle Bowl contends it presented both [the] causes and quantification
of its economic obsolescence. (Petr Post-Hearing Br., Findings of Fact and Conclusions
of Law at 4 (citing to Exs. A and C).) (See also
Oral Argument Tr. at 16.) The Court, however,
Exhibit A is the audio recording of the remand hearing. During the
hearing, Eagle Bowls tax representative, M. Drew Miller (Miller) of Landmark Appraisals, Inc.
provided the following testimony:
[I]n explaining some of the situations here, this bowling alley was built back
in 1960 and its kind of off, off the main thoroughfare in a
declining neighborhood, lacks high visibility and due to increased competition and people getting
away from the inner city the demand for bowling in the area has
fallen off tremendously. . . . Theres [sic] been several  tenants in
there since [December 1993] and again none of them have [sic] been able
to make it. At the time of this hearing, due to a
lot of deferred maintenance the roof was in need of substantial repair.
About 30% of the lanes were unusable due to water damage from the
In conjunction with his testimony, Miller prepared and presented an
Assessment Review and Analysis (review). (Ex. C.) The review contains a
map indicating Eagle Bowls general location to the west of Lafayette Road, as
well as several uncaptioned, photocopied photographs of the subject improvement. The fifth
page of the review states:
Obsolescence depreciation of 68.2% to the improvements due to the highlighted causes of
obsolescence listed in the manual. The following income statements clearly show the
poor economic performance of the property.
The subject is in a declining area of the city. The hearing
officer on the first hearing would not even go there after mid-afternoon.
The structure has received minimal maintenance over the years due to lack of
business and shortage of funds. Approximately 30% of the lanes were unusable,
due to water problems from a poorly maintained roof. After several attempts
with various tenants to operate the facility as a bowling alley, the lanes
were eventually removed from the building.
(Ex. C at 5.) The sixth page of the review states that
Eagle Bowl is entitled to an economic obsolescence adjustment of 68.2% and provides
a cursory mathematical calculation to arrive at that figure. The remaining pages
of the review contain what appears to be a photocopy of the State
Boards obsolescence depreciation rules, Eagle Bowls 1990, 1991, and 1992 income and expense
a copy of Eagle Bowls property record card, and a photocopy of
the Life Expectancy Guidelines and a depreciation schedule from the Marshall & Swift
Valuation Service. II. Federal Constitutional Claims
Millers hearing testimony is not probative as to the causes of economic obsolescence.
Indeed, statements that economic obsolescence is caused by factors such as off
the main thoroughfare, in a declining neighborhood, lacks high visibility and the demand
for bowling in the area has fallen off tremendously are nothing more than
unsupported, conclusory allegations. Eagle Bowl needed to submit factual evidence showing that
these external factors had caused an actual loss in its property value.
See Miller Structures, 748 N.E.2d at 954. Eagle Bowl needed to explain
what off the main thoroughfare meant and then link it, through factual evidence,
to how it caused Eagle Bowl to lose money.
It needed to
explain what a declining neighborhood meant, and then link it, through factual evidence,
to how it caused Eagle Bowl to lose money.
to explain what lacks high visibility meant and then link it, through factual
evidence, to how it has caused Eagle Bowl to lose money.
finally, it needed to explain what the demand for bowling in the area
has fallen off tremendously meant and then link it, through factual evidence, to
how it has caused Eagle Bowl to lose money.
Instead, Eagle Bowl
merely said here are the causes of obsolescence and here are our income
and expense statements. No explanation, no supporting factual evidence, no link.
Eagle Bowl hoped the State Board would make its case for it (the
metaphorical strike). Instead, Eagle Bowl bowled a gutter ball.
Likewise, Millers review does nothing to support Eagle Bowls claim that economic obsolescence
exists. The photocopied photographs lack any descriptive captions and were not accompanied
by an explanation as to how they identify causes of obsolescence. The
map, also lacking any description, caption or explanation, provides no insight as to
how location might affect Eagle Bowls revenue generating ability. The State Boards
depreciation rules, standing alone, constitute unsupported allegations and do not qualify as probative
evidence. See Herb v. State Bd. of Tax Commrs, 656 N.E.2d 890,
893 (Ind. Tax Ct. 1995) (stating that [a]llegations, unsupported by factual evidence, remain
All Eagle Bowl has done in this case is provide the State Board
with two things: 1) a laundry list of factors that may cause
economic obsolescence to its improvement; and 2) an income and expense statement that
reflects a loss in net operating income from 1990 to 1991 and 1992.
It was necessary for Eagle Bowl to link one with the other.
Because Eagle Bowl has not shown how or why its improvements value
is negatively impacted by the factors that generally cause economic obsolescence, it has
not satisfied the first-prong of the economic obsolescence test. Consequently, there is
economic obsolescence to quantify.
See Lake County Trust v. State Bd. of
Tax Commrs, 694 N.E.2d 1253, 1257 (Ind. Tax Ct. 1998), review denied.
Thus, the State Boards final determination on this issue is AFFIRMED.
In 1997, this Court determined that Indianas property tax system violated Article X,
section 1 of the Indiana Constitution (the Property Taxation Clause)
See footnote because it did
not accurately measure property wealth nor was it based on objectively verifiable data.
Town of St. John v. State Bd. of Tax Commrs, 690 N.E.2d
370, 382-83 (Ind. Tax Ct. 1997), revd in part on other grounds by
702 N.E.2d 1034 (Ind. 1998). The Court rejected the notion, however, that
the system violated a taxpayers rights to due process and equal protection as
guaranteed by the Fourteenth Amendment to the U.S. Constitution. See id. at
Despite the systems state constitutional infirmities, this Court declared that [r]eal property must
still be assessed, and, until  new regulations are in place, must be
assessed under the present system. Whitley Prods., 704 N.E.2d at 1121.
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). As a result, this Court has refused to
analyze the subsequent claims of taxpayers alleging that, on their face, their property
assessments violate either the state or federal constitutions, or both. See, e.g.,
Barth, Inc. v. State Bd. of Tax Commrs, 756 N.E.2d 1124, 1127 n.1
(Ind. Tax. Ct. 2001).
In this case, Eagle Bowl contends that because Indianas system
of taxing tangible property is not based upon objectively verifiable data, [it] condemns
any determination [thereunder] to federally impermissible vagueness, (Petr Post-Hearing Br. and Findings of
Fact and Conclusions of Law at 7), and thus its due process rights
under the Fifth and Fourteenth Amendments to the U.S. Constitution are violated.
As just mentioned, this Court has previously rejected legal arguments analogous to Eagle
Bowls. See Town of St. John, 690 N.E.2d at 38897. Eagle
Bowl attempts to convince the Court, however, that its argument is somehow different
than that which was decided in the Town of St. John case.
(Oral Argument Tr. at 32, 34-35.) Cf. Town of St. John, 690
N.E.2d at 388-97. Eagle Bowls attempt is unsuccessful.
In briefing the issue, Eagle Bowl does little more than quote the Fifth
and Fourteenth Amendments and then make the sweeping statement that the State Boards
failure to draft regulations that afford taxpayers fair warning of what is required
of them under the tax regulations violates the Federal Constitution. (Petr Post-Hearing
Br. and Findings of Fact and Conclusions of Law at 8.) Briefs
supplied to this Court in property tax appeals, however, should be prepared like
those in appellate cases -- so that [a] judge, considering the brief alone
and independent of the transcript, can intelligently consider each question presented. See
Pluard v. Patients Compensation Fund, 705 N.E.2d 1035, 1038 (Ind. Ct. App. 1999),
Here, Eagle Bowl has failed to show how its claim is different
from those decided in Town of St. John. Indeed, Eagle Bowl provides
the Court with no clear statement of the issue, no analysis or cogent
reasoning, and specifies no particular relief. Accord Ind. Appellate Rule 46(A)(8)(a) (stating
that a brief submitted to an appellate court must provide an argument supported
by cogent reasoning). This Court is not in the business of making
taxpayers cases for them. See Davidson Indus. v. State Bd. of Tax
Commrs, 744 N.E.2d 1067, 1071 (Ind. Tax Ct. 2001). Accordingly, it rejects
Eagle Bowls federal constitutional claim.
For the aforementioned reasons, the State Boards final
determination is AFFIRMED.
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. 198 Ind. Acts 2001 § 119(b)(2). Effective January
1, 2002, the legislature created the Department of Local Government Finance (DLGF),
Indiana Code § 6-1.1-30-1.1 (West Supp. 2001)(eff. 1-1-02); 198 Ind. Acts 2001 §
66, and the Indiana Board of Tax Review (Indiana Board). Ind. Code
§ 6-1.5-1-3 (West Supp. 2001)(eff. 1-1-02); 198 Ind. Acts 2001 § 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. 1-1-02);
198 Ind. Acts 2001, § 95. Nevertheless, the law in effect prior
to January 1, 2002 applies to these appeals. Id. See also
198 Ind. Acts 2001 § 117. Although the DLGF has been substituted
as the Respondent, this Court will still reference the State Board throughout this
Indeed, [w]here there is no cause of obsolescence, there is no
obsolescence to quantify.
Lake County Trust v. State Bd. of Tax Commrs,
694 N.E.2d 1253, 1257 (Ind. Tax Ct. 1998), review denied.
Eagle Bowl also provided testimony as to both the condition of
its improvement as well as its financial operations post 1992. (
Ex. A.) This testimony is irrelevant, however, to a determination of obsolescence
for the 1992 tax year. See Glass Wholesalers, Inc. v. State Bd.
of Tax Commrs, 568 N.E.2d 1116, 1124 (Ind. Tax Ct. 1991) (stating that
each tax year stands alone and evidence of previous or subsequent assessments are
Eagle Bowls income and expense statements show that, for the year
ending June 30, 1990, Eagle Bowl had a net operating income of $7,780.
For the year ending June 30, 1991, Eagle Bowls statement shows a
loss of $4,121. For the year ending June 30, 1992, Eagle Bowls
statement still shows a loss (of $2,500), but not as much as the
Footnote: For example: what main thoroughfare? Was it too hard
to drive to Eagle Bowl (because it was off the main thoroughfare) thereby
causing customers to go elsewhere?
Footnote: For example: how has the neighborhood declined? Are businesses
moving out? Are new businesses not moving in? How many vacant
buildings are in the area, and how does that affect potential-customer draw?
Footnote: For example: visibility off the road? Visibility within the bowling
Footnote: For example: why has demand fallen off? Has the
area undergone a change in demographics? If so, what are those changes?
Footnote: In the alternative, Eagle Bowl asserts that because the State Board
originally awarded a 20% economic obsolescence adjustment, it agreed as to the causes
of economic obsolescence. Therefore, Eagle Bowl posits that identification of economic obsolescence
is not an issue in this case and that only the quantification of
the agreed upon causes serves as the bone of contention between the parties.
Assuming that Eagle Bowl is correct, what it fails to recognize is the
quantification of economic obsolescence is intrinsically tied to the actual loss of value
suffered by the improvement from external factors.
See Miller Structures, 748 N.E.2d
at 954. See also 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). The record from
the remand hearing is devoid on the subject of Eagle Bowls actual loss
of value. Consequently, it is impossible for Eagle Bowl to convert that
loss of value into an obsolescence quantification.
Indianas Property Taxation Clause provides:
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.
Ind. Const. Art. X, § 1. See also Ind. Code § 6-1.1-2-2.