ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
ROBERT R. FAULKNER JEFFREY A. MODISETT LESLIE C. SHIVELY Attorney General of Indiana
FINE & HATFIELD Indianapolis, Indiana Evansville, Indiana
JEFFREY S. McQUARY
Deputy Attorney General
WORD OF HIS GRACE FELLOWSHIP, INC., ) ) ) Petitioner, ) ) v. ) Cause No. 82T10-9805-TA-00045 ) STATE BOARD OF TAX COMMISSIONERS, ) ) Respondent. ) _____________________________________________________________________COMMISSIONERS _____________________________________________________________________
ON APPEAL FROM A FINAL DETERMINATION OF THE STATE BOARD OF TAX
arbitrary or capricious. See Clark v. State Bd. of Tax Comm'rs, 694 N.E.2d 1230, 1233
(Ind. Tax Ct. 1998). Summary judgment is only appropriate where no genuine issue of
material fact exists and the moving party is entitled to judgment as a matter of law. See
Ind. T.R. 56(C); Hyatt Corp. v. Department of State Revenue, 695 N.E.2d 1051, 1053
(Ind. Tax Ct. 1998), review denied. Cross-motions for summary judgment do not alter
this standard. See Hyatt Corp., 695 N.E.2d at 1053.
under subsections 6-1.1-10-16(a) and (c), the property was exempt from property
(Oral Arg. Tr. at 11).
Notwithstanding this concession, however, the State Board contends its final determination should be affirmed because Word was not the proper party to apply for the property tax exemption. According to the State Board, Blankenberger, as the legal title holder, should have applied for the exemption. As a result, in the State Board's view, Word has waived any entitlement to the exemption for the 1996 tax year. See Ind. Code Ann. § 6-1.1-11-1 (West 1989); PPG Indus., Inc. v. State Bd. of Tax Comm'rs, 706 N.E.2d 611, 613 (Ind. Tax Ct. 1999); Dav-Con, Inc. v. State Bd. of Tax Comm'rs, 644 N.E.2d 192, 198 (Ind. Tax Ct. 1994).
As the State Board correctly observes, the legal title holder was required to apply for the exemption in this case . Under Ind. Code Ann. § 6-1.1-11-3 (West 1989) (amended 1997), the owner of the property must apply for the property tax exemption. The owner of real property is defined (with some exceptions not applicable here) by Ind. Code Ann. § 6-1.1-1-9 (West 1989) as the holder of the legal title to that real property in fee. It is undisputed that Blankenberger was the legal title holder. Consequently, Blankenberger should have been the one to file for the exemption.See footnote 2
State Board is attempting to raise this issue for the first time in this original tax appeal.
It is well-settled that the State Board, in general, may not support a final determination
by referring to reasons that were not previously ruled upon, but that are offered as post
hoc rationalizations. See 20th Century Fiberglass v. State Bd. of Tax Comm'rs, 683
N.E.2d 1376, 1377 (Ind. Tax Ct. 1997); see also Motor Vehicle Mfrs. Ass'n v. State
Farm Mut. Auto Ins. Co., 463 U.S. 29, 50, 103 S. Ct. 2856, 2870 (1983) (agency
decision will only be upheld, if at all, on the basis of reasons articulated by agency
This rule emanates from the limited nature of the scope of judicial review of administrative agency decisions in general and the limited nature of this Court's review of State Board final determinations in particular. See Ind. Code Ann. § 33-3-5-14 (West 1996); State Bd. of Tax Comm'rs v. Gatling Gun Club, Inc., 420 N.E.2d 1324, 1328-29 (Ind. Ct. App. 1981); see also Kosciusko County Rural Elec. Membership Corp. v. Public Serv. Comm'n, 77 N.E.2d 572, 575-76 (Ind. 1948) (court cannot uphold agency decision on basis for which there were no findings made). In addition, the Court notes that this rule fosters the issuance of well-considered and thorough decisions by administrative agencies and is in keeping with the expertise presumed to be possessed by those agencies. Furthermore, if administrative agencies could issue decisions confident in their ability to offer post hoc rationalizations, the quality of the decisionmaking would likely suffer, thus placing a more difficult burden on courts exercising judicial review. Lastly, this rule can prevent parties from suffering unnecessary legal expense and at the same time promote judicial economy. If an
administrative agency is permitted to save a winning legal argument in support of its
decision until judicial review of its decision rather than articulating that argument
contemporaneously with its decision, then parties may embark on lawsuits that would
not have been undertaken had the administrative agency articulated that argument in
the first place. In an era where judicial resources are scarce, any rule that promotes
fewer lawsuits is particularly compelling.
The State Board's attempt to support its final determination by referring to the fact that Word was not the proper party to apply for the exemption must fail. It is a post hoc rationalization for the State Board's decision to deny the exemption in this case and as such will not be considered by the Court. Moreover, the State Board has offered no reasons why an exception to the rule, see Scheid v. State Bd. of Tax Comm'rs, 560 N.E.2d 1283, 1285 (Ind. Tax Ct. 1990) (discussing exceptions to the general rule), should apply to this case. Consequently, any arguments along those lines are waived.
As a result, the fact that Word was not the proper party to apply for the exemption is irrelevant in this case. Accordingly, Word's entitlement to the exemption for the 1996 tax year is based solely on the substantive question of whether the subject property was owned, occupied, and used for religious purposes during the tax year at issue. The State Board concedes that the subject property was owned, occupied, and used for religious purposes, and was therefore exempt. (Oral Arg. Tr. at 11). Consequently, the Court finds that Word has demonstrated its entitlement to the
In that case, the Indiana Supreme Court declared:
The Court, in effect, views a conditional land contract as a sale with a security interest in the form of legal title reserved by the vendor. Conceptually, therefore, the retention of title by the vendor is the same as reserving a lien or mortgage.
Realistically, vendor-vendee should be viewed as mortgagee-mortgagor. To conceive of the relationship in different terms is to pay homage to form over substance.
Id. at 646. It is true that in this case requiring Blankenberger to file the exemption application is exalting form over substance, especially in light of the fact that Word, as a possessor, can be responsible for the property taxes at issue. See Ind. Code Ann. § 6-1.1-2-4(b) (West 1989) (amended 1997); see also Skendzel, 301 N.E.2d at 646 (citing Stark v. Kreyling, 207 Ind. 128, 188 N.E. 680 (1934)) (vendee in land sale contract liable for property taxes). However, because the legislature has stated in unmistakable terms that only a legal title holder may be an owner for purposes of this case, the Court has no choice but to follow that legislative command. Consolidated Coal Co. v. Department of State Revenue, 583 N.E.2d 1199, 1201 (Ind. 1991) (where legislature defines a term, that definition is binding upon the courts); compare Kaghann's Korner v. Brown & Sons Fuel Co., 706 N.E.2d 556, 560-61 (Ind. Ct. App. 1999) (evaluating another statutory definition of owner), modified, 1999 WL 240353 (Ind. Ct. App. Apr. 26, 1999). Although the general rule in this state is that the substance not the form of a transaction governs its taxability, see Maurer v. Department of State Revenue, 607 N.E.2d 985, 987 (Ind. Tax Ct. 1993), when the legislature chooses to exalt form over substance in a particular case, that is its prerogative, and if, from a public policy perspective, such a choice is unwise, relief may be sought with the Indiana General Assembly, not the courts.
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