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
RAY ENVELOPE COMPANY, )
v. ) Cause No. 49T10-9904-TA-99
DEPARTMENT OF LOCAL )
ON APPEAL FROM A FINAL DETERMINATION OF
THE STATE BOARD OF TAX COMMISSIONERS
NOT FOR PUBLICATION
April 29, 2003
Ray Envelope Company (Ray Envelope) appeals the final determination of the State Board
of Tax Commissioners (State Board) valuing its real property for the March 1,
1995 assessment date.
I. Whether the State Board erred in assigning a grade of C-1
to Ray Envelopes improvement;
II. Whether the State Board erred in denying Ray Envelopes improvement an obsolescence adjustment;
III. Whether Ray Envelopes property assessment violates the U.S. Constitution?
FACTS AND PROCEDURAL HISTORY
Ray Envelope owns a commercial building in Warren Township, Marion County, Indiana.
For the 1995 assessment, the Marion County Board of Review (BOR) assessed Ray
Envelopes improvement with a value of $242,700. In so doing, the BOR
assigned Ray Envelopes improvement a grade of C-1 and did not grant a
functional obsolescence adjustment.
In December 1997, Ray Envelope challenged its assessment by filing a Petition for
Review of Assessment (Form 131) with the State Board. In its Form
131, Ray Envelope asserted that the grade of C-1 was excessive and that
its improvement was entitled to an obsolescence adjustment.
Following an administrative hearing, the State Board issued a final determination on Ray
Envelopes Form 131 in which it upheld the grade and obsolescence determinations of
Ray Envelope appealed the State Boards final determination to this Court on April
26, 1999. In lieu of a trial, the parties argued this case
based on the administrative record as well as on their briefs. Accordingly,
the Court heard oral argument on December 6, 2000. Additional facts will
be supplied as necessary.
STANDARD OF REVIEW
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. See Whitley Prods.,
Inc. v. State Bd. of Tax Commrs, 704 N.E.2d 1113, 1119-20 (Ind. Tax
Ct. 1998), review denied.
Ray Envelope alleges that the State Board erred in assigning its improvement a
grade of C-1. Ray Envelope contends that the State Board should
have graded its improvement D+1. Ray Envelope is incorrect.
Under Indianas property assessment system, assessors use improvement models and cost schedules to
determine the base reproduction cost of a particular improvement. See id. at
1116. Improvements are then assigned various grades based on their materials, design,
and workmanship. Id. See also Ind. Admin. Code tit. 50, r.
2.2-10-3(a) (1996). The grades represent multipliers that are applied to the subject
improvements base reproduction cost. Whitley Prods., 704 N.E.2d at 1116.
When an improvement deviates from the applicable improvement model or cost schedule, it
impacts the improvements base reproduction cost. Id. at 1117. As
this Court has previously explained, there are two methods by which to account
for such deviations:
The preferred method . . . is to use separate schedules that show
the costs of certain components and features present in the model. This
allows an assessor to adjust the base reproduction cost of the improvement objectively.
The other means of accounting for an improvements deviation from the model used
to develop the cost schedule is via an adjustment to the grade of
the improvement. This type of adjustment requires the assessors subjective judgment.
Where possible, this type of an adjustment should be avoided. However, because
the component (base rate adjustment) schedules are not comprehensive, this type of adjustment
may be necessary.
Id. (internal citations, quotations, and footnotes omitted.)
Ray Envelope alleges
that its improvement lacks certain features presumed in the applicable model, and therefore
its grade of C-1 must be adjusted downward. As evidence, Ray Envelopes
tax representative, M. Drew Miller of Landmark Appraisals, Inc., prepared and presented an
Assessment Review and Analysis at the State Board administrative hearing. Millers review
contains the following statement:
The C-1 grade applied by the county overstates the overall quality of construction
and workmanship. The subject lacks the amount of partitioning that is assumed
present in the base model, as [well as] the amount of vented steel
sash windows. It also has an inferior heating system (unit heaters), lighting
and office finish. The subject is void of architectural treatment and has
substandard quality interior finish with minimal built-in features, substandard quality electrical and plumbing
fixtures. A grade no higher than a D+1 should be applied to
(Jt. Ex. C at 5.) Millers testimony at the administrative hearing did
nothing to elaborate on this statement he essentially read it into the
record. (Jt. Ex. B.)
Ray Envelope bears the burden of proof on this issue and must offer
probative evidence concerning the alleged grading error. Clark, 694 N.E.2d at 1233;
Miller Structures, 748 N.E.2d at 947. Millers review and testimony are nothing
more than conclusions that the grade is this and it should be that.
A taxpayers conclusory statements do not constitute probative evidence concerning the grading
of the subject improvement. Sterling Mgmt-Orchard Ridge Apartments v. State Bd. of
Tax Commrs, 730 N.E.2d 828, 838 (Ind.Tax Ct. 2000).
Instead, Ray Envelope should have explained how it calculated its suggested grade of
D+1. Indeed, it should have compared the features in the applicable improvement
model(s) with the features (or lack thereof) in its own improvement. Ray
Envelope should have then attempted to calculate the value of the features in
the model and translate that lack of value into a grade adjustment.
A taxpayer cannot simply point to alleged deficiencies in a building and expect
to make a prima facie case as to grade (or any other issue,
for that matter). See Miller Structures, 748 N.E.2d at 953. Ray
Envelope made no comparisons, made no calculations, and, consequently, made no case.
The State Boards final determination on this issue is therefore AFFIRMED.
Ray Envelope also contends that its improvement is entitled to at least a
60% functional obosolescence adjustment. The State Board, on the other hand, argues
that Ray Envelope failed to make a prima facie case with respect to
this issue. The State Board is correct.
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. 2.2-10-7(e) (1996).
Functional obsolescence is evidenced by conditions inherent within the property itself.
Id. The State Boards regulations cite a number of factors that may cause
Limited use or excessive material and product handling costs caused by an irregular
or inefficient floor plan[;]
Inadequate or unsuited utility space[;]
Excessive or deficient floor load capacity.
In cases (such as this one) where the State Board held its administrative
hearing prior to this Courts decision in Clark, a taxpayer can make its
prima facie case for functional obsolescence merely by identifying the cause or causes
of the obsolescence. Louis D. Realty Corp. v. State Bd. of Tax
Commrs, 743 N.E.2d 379, 385-86 (Ind. Tax Ct. 2001), review denied.
it is important to keep in mind that the functional obsolescence of a
given improvement must be tied to a loss of value. See Miller
Structures, 748 N.E.2d at 953-54. In the commercial context, this loss of
value usually means a decrease in the propertys income generating ability. See
id. at 953. Thus, in making its prima facie case, Ray Envelope
was required to show that factors inherent in the property itself have adversely
affected its ability to generate income. See id.
Ray Envelope contends that it is entitled to at least a 60% functional
obsolescence adjustment. To support its claim, Ray Envelope again relies on both
Millers Assessment Review and Analysis and testimony from the administrative hearing. However,
Millers review and testimony are nothing more than unsupported allegations.
Indeed, Millers review provides the following explanation of Ray Envelopes obsolescence challenge:
The subject building was originally constructed in 1951. This age of construction
and design create inefficiencies of material handling, utilities and maintenance. Causes of
obsolescence include, but are not limited to[:] conversion of use from a single
occupant to a multi-ten[a]nt, single pane windows and lack of insulation, out[-]dated dock
floor, was not built to meet current building codes and limited ceiling heights.
These causes of obsolescence are best measured by analyzing the markets reaction
to there [sic] observed condition. The sales comparison method has been used
in estimating first the total accrued depreciation, then deducting the physical depreciation to
arrive at the obsolescence depreciation. The following data and analysis supports total
accrued depreciation of 80%. After deducting for the physical depreciation that has
already been applied by the county the indicated obsolescence depreciation of the subject
is no less than 60%.
(Jt. Ex. C at 5.) Millers testimony at the administrative hearing did
nothing to elaborate on his statement contained in his review like the
grade issue, supra, Miller essentially read the statement into the record. (Jt.
Ex. B.) II. Federal Constitutional Claims
Millers review and hearing testimony are not probative as to the causes of
functional obsolescence. Indeed, all Miller presented was a laundry list of factors
that may be causing functional obsolescence to its improvement. Ray Envelope needed
to submit factual evidence showing that these factors had caused an actual loss
in its property value. See Miller Structures, 748 N.E.2d at 953-54.
Indeed, causes of obsolescence are irrelevant if a taxpayer cannot show actual loss
in value. See Clark, 694 N.E.2d at 1238; Miller Structures, 748 N.E.2d
at 954. Accordingly, Ray Envelope has not made a prima facie case
showing that it is entitled to functional obsolescence, and 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, Ray Envelope 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 9), 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 Ray
Envelopes. See Town of St. John, 690 N.E.2d at 38897. Ray
Envelope nonetheless 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 16.) Cf. Town of St. John, 690
N.E.2d at 388-97. Ray Envelopes attempt is unsuccessful.
In briefing the issue, Ray Envelope 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 10.) 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, Ray Envelope has failed to show how its claim is different
from those decided in Town of St. John. Indeed, Ray Envelope 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
Ray Envelopes 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. 2001 Ind. Acts 198 § 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); 2001 Ind. Acts 198 §
66, and the Indiana Board of Tax Review (Indiana Board). Ind. Code
§ 6-1.5-1-3 (West Supp. 2001)(eff. 1-1-02); 2001 Ind. Acts 198 § 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);
2001 Ind. Acts 198 § 95. Nevertheless, the law in effect prior
to January 1, 2002 applies to these appeals. Id. 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
Throughout Ray Envelopes grade argument, it asserts that the State Board
failed to provide a basis or support for its grade determination. (
Petr Post-Hearing Br., Findings of Fact and Conclusions of Law at 4.)
Ray Envelope, however, is mistaken as to which party had the burden of
proof in this case. Indeed, the taxpayer who challenges a State Board
final determination bears the burden of proving its invalidity. Clark v. State
Bd. of Tax Commrs, 694 N.E.2d 1230, 1233 (Ind. Tax Ct. 1998).
Because Ray Envelope failed to provide the State Board with probative evidence supporting
its position on the alleged grading error in the first place, the State
Boards duty to support its final determination with substantial evidence is not triggered.
See Whitley Prods., Inc. v. State Bd. of Tax Commrs, 704 N.E.2d
1113, 1119-20 (Ind. Tax Ct. 1998), review denied.
In cases where the State Board held its administrative hearing
after this Courts opinion in
Clark, the taxpayer must not only identify the
cause of obsolescence to make its prima facie case, but it must also
quantify the amount of obsolescence to which it believes it is entitled.
Louis D. Realty Corp. v. State Bd. of Tax Commrs, 743 N.E.2d 379,
385-86 (Ind. Tax Ct. 2001), review denied.
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.