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ATTORNEY FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN JEFFREY A. MODISETT
DICKINSON & ABEL ATTORNEY GENERAL OF INDIANA
ANGELA L. MANSFIELD
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
MAGNATEK, INC., )
v. ) Case No. 49T10-9701-TA-00098
STATE BOARD OF TAX COMMISSIONERS, )
June 16, 1998
NOT FOR PUBLICATION
ON APPEAL FROM THE STATE BOARD OF TAX COMMISSIONERS
Magnatek, Inc. (Magnatek) appeals from a final determination of the State Board
of Tax Commissioners (State Board) denying it a 40% obsolescence depreciation
reduction. The facts are undisputed.
FACTS AND PROCEDURAL HISTORY
Magnatek owns land and improvements located in Huntington County, Indiana.
This property was valued as follows: land _ $10,830, improvements _ $302,430. On
September 8, 1992, Magnatek filed a Form 130 Petition for Review of Assessment with
the BOR. The BOR decided to award a 15% obsolescence depreciation deduction to
Magnatek's improvements. This reduced the assessed value of Magnatek's
improvements to $290,970. Unsatisfied with this result, Magnatek filed a Form 131
Petition for Review of Assessment with the State Board seeking a 40% obsolescence
depreciation deduction. A hearing on the Form 131 was held on December 18, 1995.
On November 22, 1996 the State Board issued a final determination denying
Magnatek's claim. Magnatek filed an original tax appeal on January 6, 1997, and a trial
was held before this Court on January 26, 1998. Additional facts will be supplied as
ANALYSIS AND OPINION
Standard of Review
This Court gives the final determinations of the State Board great deference
when it acts within the scope of authority. Indiana Sugars, Inc. v. State Bd. of Tax
Comm'rs, 683 N.E.2d 1383, 1385 (Ind. Tax Ct. 1997). 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 sole issue for this Court's review is whether Magnatek has shown that the
State Board failed to support its quantification of obsolescence with substantial
. That is, has Magnatek shown that the State Board has no basis for its
decision to award 15% obsolescence rather than 40%? The Court has recently
discussed virtually identical issues.
In Clark v. State Bd. of Tax Comm'rs, No. 49T10-9607-TA-00083
(Ind. Tax Ct.
Apr. 24, 1998), the Court was called on to determine whether two apartment buildings
were given the appropriate amount of obsolescence depreciation. The Court noted that
"the determination of obsolescence is a two-step inquiry. The assessor must identify
the causes of obsolescence and then quantify the amount of obsolescence to be
applied." Id. at 14. With respect to the second part of this inquiry, the Court held that
State Board had a responsibility to support its quantification of obsolescence. Id. at 17.
The Court found that the State Board's decision to award 5% obsolescence did not
have any evidentiary support. However, the Court also noted its frustration with the
result of the case.
The taxpayer in Clark retained a property tax consulting firm, Landmark
Appraisals, to represent him in his property tax appeal. The court noted that the
taxpayer made a "half-hearted" case of obsolescence at the administrative level. Id. at
20. This forced this Court to choose between holding for the taxpayer or the State
Board when neither party had presented evidence to support its position.
The same frustrations present in Clark are present here. In this case, Magnatek
retained the same property tax consulting firm. Landmark and the taxpayer have
presented a less than impressive case before the State Board and this Court. Once
again, the State Board has no evidence with which to support its decision to award 15%
The Court finds that Magnatek's and the State Board's handling of the issue of
obsolescence in this case suffers from the the same infirmities that were present in
Clark. For the reasons stated in Clark, this cause is REMANDED to the State Board for
further action consistent with this Court's opinion in Clark. The Court's admonitions
and standards put forth in Clark with respect to obsolescence will apply on remand.
For the foregoing reasons, this Court REMANDS this matter to the State Board
for further consideration consistent with this opinion.
The hearing officer in this case, Mr. Richard Schultz, testified that Huntington
County awarded Magnatek 15% obsolescence and Magnatek did not present evidence
to him that would "warrant [a] change in that percent . . . . It was not proven that the
percent that was applied by the county was in error." (Tr. at 10). However, when
asked whether he tested the county's figure for its accuracy and validity, Schultz
answered "No." (Tr. at 10-11). Moreover, when asked what facts aided him in
determining 15% was correct, Mr. Schultz replied that "15[%] basically agreed with
what the county did, and I didn't feel [Magnatek] presented a case that justified the
40%." (Tr. at 23-24).
These statements are indicative of the testimony and evidence presented by
both parties throughout this case and are insufficient to support either party's position.
Further, the Court is issuing a separate opinion that addresses the propriety of an
argument that the State Board's assessment is correct merely because the percentage
of obsolescence awarded by the county was accepted by the State Board. Therefore,
both parties are instructed to read this Court's opinion in Loveless Construction Co. v.
State Bd. of Tax Comm'rs, No. 49T10-9701-TA-00065 (Ind. Tax Ct. June 15, 1998) for
the Court's conclusions regarding such an argument.
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