ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
FRED M CUPPY STEVE CARTER
KEVIN E. STEELE ATTORNEY GENERAL OF INDIANA
BURKE COSTANZA & CUPPY, LLP Indianapolis, IN
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
PETER ZAKUTANSKY, )
v. ) Cause No. 45T10-9812-TA-175
DEPARTMENT OF LOCAL )
ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
NOT FOR PUBLICATION
June 6, 2003
Peter Zakutansky appeals the final determination of the State Board of Tax Commissioners
(State Board) establishing the assessed value of his real
property as of March
1, 1989. The Court restates the issues as:
Whether the State Board erred in grading Zakutanskys retaining wall and two pole
Whether the State Board erred in valuing Zakutanskys land.
FACTS AND PROCEDURAL HISTORY
For the reasons stated below, the Court REMANDS Issue I to the Indiana
and AFFIRMS the State Boards final determination on Issue II.
Zakutansky owns a marina located in Porter County, Indiana. The marina sits
on a waterway known as Burns Ditch Waterway. The marina consists of
several buildings, a boat storage area, and a series of docks. Adjacent
to the docks is a sloped, concrete retaining wall with stairs built into
For the 1989 assessment, the County assessed Zakutanskys retaining wall on a square
foot basis and assigned it a grade of A. Furthermore, the County
assessed Zakutanskys buildings using the General Commercial Mercantile (GCM) cost schedule as well
as assessed Zakutanskys land at $15,000 per acre pursuant to the Porter County
land order. Zakutansky appealed to the State Board via a Form 131
Petition for Review, challenging, among other things, the assessment of his retaining wall,
pole buildings, and land value. The State Board issued its final determination,
denying relief on these three issues.
On September 20, 1996, Zakutansky appealed to this Court. On July 7,
1998, this Court remanded the case to the State Board. Zakutansky v. State
Bd. of Tax Commrs, 696 N.E.2d 494, 498 (Ind. Tax Ct. 1998).
Specifically, this Court found that Zakutansky had demonstrated that the quality of
the wall [was] not as high as the State Boards A grade would
indicate and that the State Board failed to support its assignment of an
A grade with substantial evidence.
Id. at 496. The Court also
held that the State Board improperly used the GCM cost schedule to assess
Zakutanskys buildings and that the agricultural cost schedule for pricing pole buildings should
have been used. Id. at 497. Finally, this Court remanded the
land valuation issue in light of Talesnick v. State Bd. of Tax Commrs,
693 N.E.2d 657 (Ind. Tax Ct. 1998) so that the State Board could
determine if it had accurately valued Zakutanskys property when compared to surrounding properties.
Zakutansky, 696 N.E.2d at 498.
The State Board conducted a remand hearing and issued its final determination on
October 13, 1998. The State Board again graded Zakutanskys retaining wall with
an A grade. Per this Courts order, the State Board reassessed Zakutanskys
buildings as pole buildings under the agricultural cost schedule, and it raised the
grade of the shop building to C+2 and the storage building to B.
Finally, the State Board did not reduce the $15,000 per acre land
value or grant Zakutansky a negative influence factor adjustment.
On November 23, 1998, Zakutansky filed an original tax appeal. On September
27, 1999, this Court conducted a trial. The Court heard oral arguments
on July 28, 2000. 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.
The first issue is whether the State Board properly graded Zakutanskys retaining wall
and two pole buildings. Under Indianas property assessment system, assessors use improvement
models and cost schedules to determine the base reproduction cost of a particular
improvement. See Whitley Prods., Inc. v. State Bd. of Tax Commrs, 704
N.E.2d 1113, 1116 (Ind. Tax Ct. 1998), review denied. Improvements are then
assigned various grades based on their materials, design, and workmanship. Id.
See also Ind. Admin. Code tit. 50, r. 2.1-4-3(f) (1988). The grades,
which range from A to E, 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 model and associated cost schedule used to
assess the improvement, the deviation often has an effect on the reproduction cost
of the improvement. Id. at 1117. Therefore, when an improvement deviates
from the model, an assessor may account for that deviation by adjusting the
grade of the improvement.
See id. The burden was on Zakutansky
to submit probative evidence showing that the State Board either improperly graded his
retaining wall and buildings or improperly denied the grade which he sought.
See Deer Creek Developers, Ltd. v. Dept of Local Govt Fin., 769 N.E.2d
259, 265-66 (Ind. Tax Ct. 2002).
A. Retaining Wall
Zakutansky argues that the State Board improperly assessed his retaining wall with an
A grade. In examining the evidence presented, the Court determines that Zakutansky
has met his burden of presenting a prima facie case on grade by
showing an error in the A grade assigned by the State Board to
the retaining wall.
Zakutansky presented an estimate from a construction company that estimated the retaining wall
could be built for $7,313. While the actual cost of reproducing the
wall is not determinative of its value under a true tax value system,
it is probative of the quality of materials, construction, and design used to
make the wall. See Zakutansky, 696 N.E.2d at 496. Zakutansky also
presented photographs of the wall accompanied by testimony to show that the wall
had no foundation, was not reinforced with footings or posts, and had to
be constantly maintained.
As this Court explained in its prior opinion, Zakutanskys evidence demonstrates that the
quality of the walls materials and workmanship are not as high as the
State Boards A grade would indicate. Id. Thus, Zakutansky has made
a prima facie case that the State Board improperly assessed his retaining wall
with an A grade. Consequently, the burden then shifted to the State
Board to rebut Zakutanskys evidence and to explain why the A grade was
appropriate. Clark, 694 N.E.2d at 1233.
The State Board argues that its A grade is justified by values from
the Marshall Valuation Service, which the State Board used to determine that the
reproduction cost should be increased to at least 160%. (Joint Ex. 17
at 17-19.) However, the Marshall Valuation Service is based on fair market
value, and Indiana does not value property based on a fair market value
system. Ind. Code § 6-1.1-31-6(c). Instead, it values property according to
the true tax value, which is defined as the values contained in the
State Boards regulations and cost schedules. Because the State Board has pointed
to nothing in its regulations to support its A grade, it has not
met its burden of rebutting Zakutanskys prima facie case by showing why the
A grade was appropriate. Accordingly, this Court REVERSES the State Boards final
determination grading the retaining wall and REMANDS it to the Indiana Board.
B. Pole Buildings
Zakutansky also argues that the State Board improperly graded his pole buildings, especially
because it did not notify him that the grade of the buildings was
Previously, this Court remanded this case to the State Board
to assess Zakutanskys buildings as pole buildings from the agricultural cost schedules instead
of from the GCM cost schedules. Zakutansky, 696 N.E.2d at 497.
In doing so, this Court stated that [t]he taxpayer is entitled to have
his property assessed using the correct cost schedule [and o]nly after this is
done may adjustments for quality be made. Id. Thus, upon remand,
it was up to the State Board and Zakutansky to discuss the correct
cost schedule and any adjustments to the assessment of the buildings.
Upon remand, the State Board did indeed assess the buildings as pole buildings.
However, it also raised the grade of the store building to a
C+2 and the storage building to a B to account for a number
of features that it believed were atypical of pole buildings and that increased
the value of the pole buildings. Zakutansky argues that the State Boards
sua sponte grade assessment was an abuse of discretion because the grade of
the pole buildings had not been raised as an issue at the hearing
and because he did not have an opportunity to rebut the State Boards
evidence. Zakutansky is correct.
The State Board may address and correct errors in an assessment, even if
those errors were not raised in the taxpayers petition for review. Castello
v. State Bd. of Tax Commrs, 638 N.E.2d 1362, 1364 (Ind. Tax Ct.
1994). However, if the State Board does address issues not raised by
a taxpayer, the taxpayer is constitutionally empowered to respond to the State Boards
disposition of those issues. Id. (citing Wirth v. State Bd. of Tax
Commrs, 613 N.E.2d 874, 879 (Ind. Tax Ct. 1993)).
Here, the hearing officer did not notify Zakutansky during the remand hearing that
the grade of the pole buildings was at issue. The hearing officer
inspected Zakutanskys buildings and made recommendations to the State Board for reassessment of
the buildings, including the grade issue not raised by Zakutansky in his appeal.
Without holding an additional hearing, the State Board adopted the hearing officers
recommendations and included the increased grade assessment of the pole buildings in its
final determination. The State Board did not provide Zakutansky an opportunity to
rebut the evidence on the buildings grade. It is well settled that
an opportunity to meet and rebut adverse evidence is one of the minimum
requirements of due process in an administrative hearing. Castello, 638 N.E.2d at
1365. [T]he appropriate arena for [Zakutanskys] initial rebuttal of the [grade] reassessment
of [his buildings] is at the administrative level.
Id. Thus, this
Court REMANDS this issue of the grade of the pole buildings to the
II. Land Value
The last issue is whether the State Board properly determined Zakutanskys land value.
Zakutansky contends that the State Board improperly determined his base rate under
the land order, erroneously denied the application of a negative influence factor, and
improperly assessed him with excess acreage. The Court does not agree.
A. Base Rate
Zakutansky argues that his base rate of $15,000 under the Porter County land
order should be reduced to $5,000. Specifically, he contends that his base
rate should be changed because: (1) his land was assessed under the
wrong section of the land order and should be assessed with a similar
base rate as the recreational parks and campgrounds section of the land order;
and (2) land adjacent to his was assessed at $5,000 per acre.
Under Indianas true tax value system, commercial, residential, and industrial land values are
compiled into a land order. See Ind. Code § 6-1.1-4-13.6 (West 1989).
The land values are typically expressed in ranges of base rates that
assessing officials apply to various geographic areas, subdivisions, or neighborhoods based on their
distinguishing characteristics or boundaries. Ind. Admin. Code tit. 50, r. 2.1-2-1(a) (1988).
To challenge the base rate applied to its land, a taxpayer must present
probative evidence showing that either: (1) comparable properties were assessed and taxed
differently than his own under the land order or (2) his land was
improperly assessed under the wrong section of the land order. See Park
Steckley I v. Dept of Local Govt Fin., 779 N.E.2d 1270, 1273 (Ind.
Tax Ct. 2002); Blackbird Farms Apartments v. Dept of Local Govt Fin., 765
N.E.2d 711, 714 (Ind. Tax Ct. 2002). Accordingly, when a taxpayer challenges
its assessment under a land order, it is essential for the Court to
have an opportunity to read and analyze the relevant portion of the applicable
land order. In particular, the Court must be able to evaluate the
application of the land order to the taxpayers property or comparable propertiesor bothso
that it may determine if a remedy is warranted and, if so, its
nature and extent. See Goodhost v. Dept of Local Govt Fin., 786 N.E.2d
813, 815 (Ind. Tax Ct. 2003); Blackbird Farms, 765 N.E.2d at 711
n.4. See also Eastgate Pship v. Dept of Local Govt Fin., 780
N.E.2d 435, 43839 (Ind. Tax Ct. 2002) (evaluating different portions of a disputed
land order); Park Steckley, 779 N.E.2d at 1273 (same).
Zakutansky, having the burden of proof in this case, has not provided the
Court with a copy of the land order that is the subject of
See footnote This Court does not have its own copies of land
orders, nor is it able to infer what may or may not be
in the land order.
See Goodhost, 786 N.E.2d at 815; Davidson Indus.
v. State Bd. of Tax Commrs, 744 N.E.2d 1067, 1071 (Ind. Tax Ct.
2001) (stating that the Court will not make a partys case for it).
Consequently, without the opportunity to read and evaluate the land order, this
Court is unable to reach the merits of Zakutanskys base rate claim.
Thus, Zakutansky has not made a prima facie case.
B. Negative Influence Factor
Zakutansky also argues that the State Board erroneously declined to apply a negative
influence factor to his property to account for the pipeline easement on his
land. The State Board does not dispute the presence of the easement,
but it argues that Zakutansky failed to make a prima facie showing that
the value of his land was more adversely affected than any of the
other properties around Burns Ditch Waterway that had the easement.
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. 2.1-2-1(g) (1988).
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.
Zakutansky contends that he should receive a negative influence factor adjustment because the
presence of the easement restricts the use of his property. At the
administrative hearing, however, Zakutansky testified that all the properties around Burns Ditch Waterway
were subject to the same restrictions and easement. He did not present
any evidence that the easement encumbered his property to a greater extent than
the other waterway properties. Because Zakutansky did not submit evidence to show
how his property deviates from the norm or how the easement caused any
decrease in the value of his property, he failed to make a prima
facie case that he was entitled to a negative influence factor. See
Talesnick v. State Bd. of Tax Commrs, 756 N.E.2d 1104, 1108 (Ind. Tax
Ct. 2001) (finding prima facie case on negative influence factor met where taxpayer
presented evidence that his water flowage easement encumbered more of his property than
it does his neighbors and that the easement encroached his land to a
greater extent than it does the other land surrounding the reservoir); Fleet
Supply, 747 N.E.2d at 652.
Zakutansky also argues that the State Board assessed his property with an excessive
amount of acreage because his total assessed acreage includes property that runs to
the middle of Burns Ditch Waterway and to the middle of Maine Avenue.
He argues that, under Indiana Code § 6-1.1-4-14, this property should not
be assessed to him because it is used as a public drainage ditch
and a public highway, respectively. To support his claim that this property
was included in his total assessed acreage, Zakutansky points to his property record
card. The card, however, does not indicate that he has been assessed
for the land under the ditch or road. (See Joint Ex. 17
at 23-27.) Thus, Zakutansky has failed to make a prima facie case
that his acreage was erroneously assessed.
In summary, because Zakutansky has not met his burden of presenting a prima
facie case on the base rate, negative influence factor, and acreage, this Court
AFFIRMS the State Boards final determination on the land value issue.
For the aforementioned reasons, the Court REVERSES the State Boards final determination on
Issue I and REMANDS it to the Indiana Board for further proceedings consistent
with this opinion
and 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.
In his original tax petition, Zakutansky also claimed that his
due process rights under the United States and Indiana Constitutions were violated because
the hearing officer, who was required to testify in the previous trial before
this Court (
see Zakutansky v. State Bd. of Tax Commrs, 696 N.E.2d 494
(Ind. Tax Ct. 1998)), served as his hearing officer at his remand hearing.
Zakutansky, however, did not include this issue in his briefs nor did
he argue the issue during the trial or oral argument. As a
result, Zakutansky has provided the Court with no clear statement of the issue,
no analysis or cogent reasoning, and specifies no particular relief. This Court
will not make a taxpayers case for him. See Davidson Indus. v.
State Bd. of Tax Commrs, 744 N.E.2d 1067, 1071 (Ind. Tax Ct. 2001).
Accordingly, the Court will not review this claim.
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.
The State Board conceded that the retaining wall should have been
assessed on a linear foot basis and agreed to reassess the wall on
However, the preferred method of accounting for an improvements deviation
from the model is to use the separate schedules that show the costs
of certain components and features present in the model.
Inc. v. State Bd. of Tax Commrs, 704 N.E.2d 1113, 1117 (Ind. Tax
Ct. 1998). Because the use of a grade adjustment requires an assessors
subjective judgment, the Court generally discourages a grade adjustment to account for deviations
from the model. See id. Nonetheless, a grade adjustment is sometimes
Note, however, that a taxpayer who presents a grade issue
to the Indiana Board after December 17, 2002, will be required to submit
probative evidence of
what his grade should have been in order to meet
his burden. See Clark v. Dept of Local Govt Fin., 779 N.E.2d
1277, 1282 (Ind. Tax Ct. 2002) (emphasis in original).
Zakutansky also contends that State Board improperly assessed one of
his pole buildings with a mezzanine. Specifically, he argues that because this
Courts remand order instructed the State Board to assess his building as a
pole building, the mezzanine should be assessed as a loft. He bases
his argument on the fact that the agricultural cost schedule does not include
pricing information for the assessment of a mezzanine but does have pricing for
a loft, and he contends that a building can be assessed with a
mezzanine only if the GCM cost schedule is used to assess the building.
The regulations show that mezzanines and lofts are structurally different. Indeed, a
mezzanine is a low story formed by placing a floor between what would
ordinarily be the floor and ceiling of a high story[,] while a loft
is an unpartitioned or relatively unpartitioned upper story of a building[.]
Admin. Code tit. 50, r. 2.1-6-1 (1988). Furthermore, there are times when
the State Board may refer to a different cost schedule to price features
not found in the models schedule. See Wirth v. State Board of
Tax Commrs, 613 N.E.2d 874, 879 (Ind. Tax Ct. 1993) (affirming the State
Boards use of the residential cost schedules to assess a stoop on a
commercial improvement). Zakutansky, however, did not provide any evidence to show that
the mezzanine was indeed a loft. Thus, Zakutansky has failed to meet
his burden of showing that the State Board improperly assessed the mezzanine.
The State Board is the appropriate arena is most cases, but
it is not the only one.
See Canal Realty-Indy Castor v. State
Bd. of Tax Commrs, 744 N.E.2d 597, 605 n.12 (Ind. Tax Ct. 2001).
There would not be a denial of due process if the taxpayer
would be given an opportunity to challenge a sua sponte assessment before this
Giving Zakutansky the opportunity to rebut, however, does not imply
the State Boards assessment was in error, and the Court expresses no opinion
on the propriety of the grade assessment. Todays ruling simply returns the
parties to their respective positions prior to the State Boards entry of final
determination, and the burden lies with Zakutansky to avail himself of the opportunity
to challenge the State Boards grade assessment.
See Castello v. State Bd.
of Tax Commrs, 638 N.E.2d 1362, 1365 (Ind. Tax Ct. 1994).
During oral argument, Zakutanskys counsel referred to the Porter County
land order and stated that it was before the Court, (
see Oral Argument
Tr. at 13) but Zakutansky failed to include it in any exhibits to
the State Board or to this Court. (See Joint Exs. 1-19.)
Zakutansky submitted evidence of nearby properties that he claims are:
(1) comparable to his own and (2) have a base rate of $5,000
under the land order. Assuming
arguendo that the properties are comparable to
Zakutanskys, this Court cannot determine whether the same portion of the land order
that applies to Zakutanskys land also applies to these properties without reading the
land order. See Blackbird Farms Apartments, LP v. Dept of Local Govt
Fin., 765 N.E.2d 711, 711 n.4 (Ind. Tax Ct. 2002). The fact
that Zakutanskys putative comparables are only a short distance from his own land
is of no moment. Indeed, properties that are literally across the street
from each other can receive different assessments under a land order. See,
e.g., Park Steckley I v. Dept of Local Govt Fin., 779 N.E.2d 1270,
1274 (Ind. Tax Ct. 2002). Thus, mere proximity does not give rise
to a reasonable inference that different properties were assessed under the same portion
of a land order.
While this issue was not part of this Courts remand
order to the State Board,
see Zakutansky, 696 N.E.2d at 497-98, the Court
will decide it because Zakutansky argued the acreage issue at the remand hearing
without objection by the State Board. See Two Market Square Associates Ltd.
Pship v. State Bd. of Tax Commrs, 656 N.E.2d 308, 309 n.1 (Ind.
Tax Ct. 1995), revd on other grounds by 679 N.E.2d 882 (Ind. 1997)
(citing Yunker v. Porter County Sheriffs Merit Bd., 382 N.E.2d 977, 981 (Ind.
Ct. App. 1978)) (finding that when an issue not raised in the administrative
pleading is actually litigated at the hearing, the failure to object at the
hearing to the introduction of that issue has the same effect as amending
the pleading to include that issue).
Zakutansky is reminded that when he argues the grade issue
of the retaining wall and pole buildings to the Indiana Board on remand,
he has the burden to submit probative evidence of
what his grade should
have been. See Clark, 779 N.E.2d at 1282 (emphasis in original).