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
ROBERT and DORIS E. KESLER TRUST, )
v. ) Cause No. 49T10-9806-TA-64
DEPARTMENT OF LOCAL )
ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
NOT FOR PUBLICATION
May 19, 2003
The Petitioner, Robert and Doris Kesler Trust, appeals the final determination of the
State Board of Tax Commissioners (State Board) establishing the assessed value of its
property as of March 1, 1996. The Court restates the issues
Whether the State Board exceeded its legislative authority in conducting a hearing without
having issued a letter of appointment or a prescription of duties to its
Whether the State Board properly refused to apply a negative influence factor to
the Petitioners property;
Whether the State Board properly refused to apply the General Commercial Kit (GCK)
pricing schedule to Petitioners improvements, or in the alternative, whether the State Board
properly applied a D-1 grade to the Petitioners improvements.
For the reasons stated below, the Court AFFIRMS the State Boards final determination. FACTS AND PROCEDURAL HISTORY
Petitioner owns land and improvements in Kosciusko County, Indiana. Petitioners property is
used as a van conversion operation and consists of fifteen buildings. During
the 1996 assessment, some of Petitioners improvements were assessed using the General Commercial
Industrial (GCI) schedule and were given a grade of C.
Petitioner appealed its assessment to the State Board, arguing, among other things, that
its land should receive a 95% negative influence factor for a misimprovement and
that some of its improvements should be priced from the GCK schedule, or
in the alternative, should be assigned a grade of D-2. The State
Board held a hearing and issued its final determination June 5, 1998.
The State Board found that neither a negative influence factor nor a change
in the pricing schedule was warranted, but it did change the grade of
Petitioners buildings to a D-1.
On June 19, 1998, Petitioner filed an original tax appeal. This Court
conducted a trial and heard oral arguments. Additional facts will be supplied
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.
I. Hearing Officers Appointment
The first issue is whether the State Board exceeded its legislative authority in
conducting a hearing without having issued a letter of appointment or a prescription
of duties to its hearing officer. Petitioner contends that the State Board
conducted no lawful administrative hearing in this matter because the State Board never
issued a written order of appointment or any written prescription of duties to
its hearing officer, Mr. Steven C. Schultz, pursuant to Indiana Code §§ 4-22-5-1
There is no evidence in the record that Petitioner objected to the authority
of Schultz to hear its appeal. Petitioners silence constituted its acceptance of
Schultz's authority to conduct a hearing. See Quality Farm and Fleet, Inc.
v. State Bd. of Tax Commrs, 747 N.E.2d 88, 91 (Ind. Tax Ct.
2001); Kemp v. State Bd. of Tax Commrs, 726 N.E.2d 395, 399 (Ind.
Tax Ct. 2000). Thus, Petitioner has waived the issue and may not
now raise it for the first time in its original tax appeal.
See Quality Farm and Fleet, 747 N.E.2d at 91; Kemp, 726 N.E.2d at
II. Negative Influence Factor
The next issue is whether the State Board properly determined that Petitioner was
not entitled to a negative influence factor. Petitioner argues that its land
should receive a 95% negative influence factor for a misimprovement because its industrial
land was surrounded by agricultural land. Petitioner is incorrect.
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).
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 v. State Bd. of Tax Commrs, 705 N.E.2d
1099, 1106 (Ind. Tax Ct. 1999), review denied.
The State Boards regulations list seven factors that may be the basis for
an influence factor adjustment. See Ind. Admin. Code tit. 50, r. 2.2-4-10(a)(9)(A)-(G).
Petitioner claims that one of these, the misimprovement factor, applies to its
land. 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. See Fleet Supply, 747 N.E.2d at 653
(citing 50 IAC 2.2-4-10(a)(9)(E)). To properly identify a misimprovement, Petitioner 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, 747 N.E.2d
at 91-92; Fleet Supply, 747 N.E.2d at 653.
To support its negative influence factor claim, Petitioner merely argues that the State
Boards regulations require or mandate the application of the misimprovement influence factor because
its property did not have the same use as surrounding parcels. (Petr
Post-Hrg. Br. at 8; Oral Argument Tr. at 16.) 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). Petitioner focuses exclusively on
the identification of differing land uses and ignores the need to identify a
decrease in value. Because Petitioner 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 id.; Fleet Supply, 747 N.E.2d at 653. Accordingly, this
Court AFFIRMS the State Boards final determination on this issue.
III. GCK / Grade
The last issue is whether the State Board properly refused to apply the
GCK pricing schedule to Petitioners improvements, or in the alternative, whether the State
Board properly applied a D-1 grade to those improvements. The Court will
review both of Petitioners arguments in turn.
Petitioner contends that the State Board erred in valuing some of its improvements
under the GCI cost schedule, as opposed to the GCK cost schedule.
Petitioner is incorrect.
The State Boards regulations include a cost schedule for certain light, pre-engineered buildings,
i.e., kit buildings. See Ind. Admin. Code tit. 50, r. 2.2-11-6 (Schedule
A.4) (1996). The pricing for kit buildings under the GCK schedule is
reflective of the economical quality and low cost of materials used in constructing
these structures. Miller Structures, 748 N.E.2d at 949. It is important
to note, however, that a building does not qualify for pricing as a
kit building under the GCK cost schedule merely because it is a pre-engineered
See Damon Corp. v. State Bd. of Tax Commrs, 738 N.E.2d
1102, 1111 (Ind. Tax Ct. 2000).
In an attempt to meet its prima facie burden of showing that its
improvements should be priced from the GCK cost schedule, Petitioners tax representative, Stephen
M. Hay of Landmark Appraisals, Inc., testified that Petitioners improvements should be priced
from the GCK schedule merely because they were pre-engineered steel buildings. (Trial
Tr. at 13.) Petitioner also submitted several uncaptioned photographs: two aerial
photographs of its buildings and some photographs of the exterior of a few
of its buildings. In addition, Petitioner submitted a photocopy of a page
from the State Boards regulations that shows a graded photograph of a kit
None of this evidence, however, is probative of why the buildings should be
priced as kit buildings under the GCK cost schedule. Hays testimony that
the buildings should be priced from the GCK schedule is nothing more than
a conclusion. Conclusory statements do not qualify as probative evidence. Whitley
Prods., 704 N.E.2d at 1119. Furthermore, neither Petitioners uncaptioned photographs nor Hays
testimony explains how the photographs tend to prove that the buildings qualify as
kit-type buildings under the GCK schedule. See Quality Farm and Fleet, 747
N.E.2d at 93. Finally, the copy of the photograph of a kit
building from the State Boards regulations does nothing to help Petitioner meet its
burden. The State Boards 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 mere allegations.). Thus, Petitioner has failed to make
a prima facie case that its buildings should be priced under the GCK
In the alternative, Petitioner contends that the State Board improperly applied a D-1
grade to the Petitioners improvements. Specifically, Petitioner claims that it should have
received a D-2 grade. Again, Petitioner is incorrect.
Under Indianas true tax value system, improvements are assigned various grades based on
a buildings design and the quality of its materials and workmanship. See
Ind. Admin. Code tit. 50, rr. 2.2-1-30, 2.2-10-3 (1996). See also Miller Structures,
748 N.E.2d at 952. The grades, which range from A to E,
represent multipliers that are applied to the base rate of an improvement.
See 50 IAC 2.2-10-3;
Miller Structures, 748 N.E.2d at 952. In
determining grade, the assessor must distinguish significant variations in [an improvements] quality and
design. Ind. Admin. Code tit. 50, r. 2.2-10-3(a). The State Boards
regulations define the different characteristics that help assessors differentiate between grades. The
D grade is assigned when a building is constructed with economy materials and
fair workmanship. 50 IAC 2.2-10-3(a)(4). D grade buildings are devoid of
architectural treatment and have a substandard quality interior finish with minimal built-in features,
substandard quality electrical and plumbing fixtures, and a substandard quality heating system.
Intermediate grade levels may be assigned to a building to indicate that the
buildings grade falls between the major grade classifications. 50 IAC 2.2-10-3(c).
A plus or minus two (+/- 2) indicates that the grade falls halfway
between the assigned grade classification and the grade immediately above or below it.
50 IAC 2.2-10-3(c)(1). A plus or minus one (+/-1) indicates that
the grade falls slightly above or below the assigned grade classification, or at
a point approximately twenty-five percent (25%) of the interval between the assigned grade
classification and the grade immediately above or below it. 50 IAC 2.2-10-3(c)(2).
The burden was on Petitioner to submit probative evidence showing that the State
Board either improperly gave its buildings a D-1 grade or improperly denied its
buildings a D-2 grade.
See Deer Creek Developers, Ltd. v. Dept of
Local Govt Fin., 769 N.E.2d 259, 265-66 (Ind. Tax Ct. 2002). In
examining the evidence presented, the Court determines that Petitioner has not met its
burden of presenting a prima facie case on grade. At trial, Hay
testified that the buildings should receive a D-2 grade because they deviated from
the GCI model used to assess them. Indeed, the State Board agreed
that there was a deviation from the model and lowered Petitioners grade to
a D-1 from the C grade that the County had given it.
Nevertheless, at trial and in its post-hearing brief, Petitioner argues that it should
receive a D-2 grade because the State Board erroneously graded its buildings with
a C grade. (Petr Post-Hrg Br. at 9; Trial Tr. at 15-16.)
Hays testimony is nothing more than an conclusion that the grade should
be D-2 and does not constitute probative evidence. See Whitley Prods., 704
N.E.2d at 1119. Petitioner failed to provide any explanation whatsoever as
to why a D-2 grade is more appropriate than the D-1 grade the
State Board gave it. Thus, Petitioner has not shown that it is
entitled to a grade reduction. See Quality Farm and Fleet, 747 N.E.2d
Petitioner has not provided probative evidence to support its contentions that the State
Board erroneously applied the GCI pricing schedule or erroneously applied a D-1 grade
to Petitioners improvements. Thus, it has failed to make a prima facie
case. Accordingly, this Court AFFIRMS the State Boards final determination on this
For the aforementioned reasons, the Court AFFIRMS the State Boards final determination in
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.
Petitioner originally raised two additional issues before the State Board.
First, Petitioner raised an issue regarding obsolescence. Upon motion by the State
Board, the Court remanded the issue for further proceedings. Thus, the Court
need not review Petitioners obsolescence issue in this opinion.
Petitioner also argued that its assessment should be voided because portions of Indianas
regulations for taxing tangible property have been declared unconstitutional. However, the fact
that the subject property was assessed under an unconstitutional regulation does not mean
the assessment will be invalidated on that basis.
Whitley Prods., Inc. v.
State Bd. of Tax Commrs, 704 N.E.2d 1113, 1121 (Ind. Tax Ct. 1998)
(citations omitted), review denied. Real property must still be assessed, and, until
the new regulations are in place, must be assessed under the present system.
Id. 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 Petitioners constitutional claim in this opinion.
Petitioner has not specified which of its buildings it contends
should be assessed under the GCK cost schedule.
Footnote: The GCK cost schedule provides minimal detail in describing the
essential characteristics of a kit building that may be classified under it.
See Ind. Admin. Code tit. 50, r. 2.2-11-6 (Schedule A.4) (1996). Before
the State Board amended its regulations to include a GCK cost schedule, certain
light, pre-engineered or kit buildings were given a 50% reduction from the existing
cost schedules to account for the inexpensive construction. See Ind. Admin. Code
tit. 50, r. 2.1-4-5 (Schedules A.1 & A.2) (1992). Thereafter, the State
Board issued Instructional Bulletins 91-8 and 92-1 to provide guidance to assessors in
determining which light, pre-engineered buildings qualified for the reduction. See Componx, Inc.
v. State Bd. of Tax Commrs, 741 N.E.2d 442, 444-45 (Ind. Tax Ct.
2000). For example, these bulletins provide that the key elements used in
identifying a kit building are, simply, the types of interior column and roof
beam support used in the building, which include cold form cee channel supports,
tapered columns, H-columns, and steel pole or post columns. Id. at 447.
Although these bulletins have been superseded by the GCK cost schedule, they
still offer guidance in determining whether a building may be assessed as a
kit building under the GCK schedule.
Petitioner contends that it met its prima facie burden of
showing that its improvements should be priced from the GCK cost schedule because
the hearing officer agreed that Petitioners buildings were light, pre-engineered buildings. While
this may be probative evidence, alone it is insufficient to establish a prima
facie case that the buildings should be assessed as kit buildings.
Quality Farm and Fleet, Inc. v. State Bd. of Tax Commrs, 747 N.E.2d
88, 93 (Ind. Tax Ct. 2001). Furthermore, a building does not qualify
for pricing as a kit building under the GCK cost schedule merely because
it is a pre-engineered building. See Damon Corp. v. State Bd. of
Tax Commrs, 738 N.E.2d 1102, 1111 (Ind. Tax Ct. 2000).
The C grade is assigned a multiplier of 100% (i.e., 100%
of the reproduction cost as determined under the State Boards regulations).
Ind. Admin. Code tit. 50, r. 2.2-10-3(b)(3); King Indus. Corp. v. State Bd.
of Tax Commrs, 699 N.E.2d 338, 340 n.7 (Ind. Tax Ct. 1998).
The remaining multipliers are 160% for an A grade, 120% for a B
grade, 80% for a D grade, and 40% for an E grade.
50 IAC 2.2-10-3(b).
Note, however, that a taxpayer who presents a grade issue
to the Indiana Board of Tax Review after December 17, 2002, will be
required to submit probative evidence of
what his grade should have been in
order to meet his prima facie burden. See Clark v. Dept of
Local Govt Fin., 779 N.E.2d 1277, 1282 (Ind. Tax Ct. 2002) (emphasis in