ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
CURTIS J. DICKINSON JEFFREY A. MODISETT
DAVID L. PIPPEN Attorney General of Indiana
DICKINSON & ABEL Indianapolis, Indiana Indianapolis, Indiana
VINCENT S. MIRKOV
Deputy Attorney General
HOOGENBOOM-NOFZIGER, ) ) ) Petitioner, ) ) v. ) Cause No. 49T10-9610-TA-00128 ) STATE BOARD OF TAX COMMISSIONERS, ) ) Respondent. ) _____________________________________________________________________COMMISSIONERS _____________________________________________________________________
ON APPEAL FROM A FINAL DETERMINATION OF THE STATE BOARD OF TAX
II) whether the State Board erred in assigning a C-1 grade to the subject
III) whether the State Board erred in determining that the subject
improvement did not warrant an obsolescence adjustment; and
IV) whether the assesment of the subject improvement should be
invalidated on the basis that Indiana's property tax system is unconstitutional.
determination on this basis. In HN's view, the failure of the State Board to appoint Mr.
Schultz in writing and its failure to prescribe his duties in writing invalidates the hearing
upon which the final determination was based. With no valid hearing, HN continues,
there can be no valid final determination.
As HN correctly notes, the State Board derives its authority from the General Assembly and only has those powers granted by statute. See State Bd. of Public Welfare v. Tioga Pines Living Ctr., 622 N.E.2d 935, 939 (Ind. 1993), cert. denied, 510 U.S. 1195, 114 S.Ct. 1302, 127 L.Ed.2d 654 (1994); Matonovich v. State Bd. of Tax Comm'rs, 705 N.E.2d 1093, 1096 (Ind. Tax Ct. 1999), review denied. As a result, the State Board may only appoint a hearing officer to conduct a hearing on the State Board's behalf if the State Board follows the statutory prerequisites for a valid appointment. The State Board is not permitted to ignore the command of the General Assembly.
In this case, as noted above, there is no evidence that the State Board complied with the statutory provisions for the appointment of Mr. Schultz as a hearing officer. However, this issue was raised for the first time in this original tax appeal. Accordingly, the Court must decide whether HN's failure to raise the issue below constitutes a waiver of the issue. The Court concludes that it does and therefore holds that the State Board's final determination will not be reversed on the basis that Mr. Schultz was not properly appointed to conduct the hearing regarding HN's petition for review.
The general rule in original tax appeals is that the Court is bound by the evidence and issues raised at the administrative level. 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 (Ind. Ct. App. 1981). Therefore, where a taxpayer fails to raise an issue at the
administrative level, the issue is waived and may not be considered by the Court. In
this case, HN could have challenged Mr. Schultz's authority to conduct the hearing
required by subsection 6-1.1-15-4(a) at the administrative level. HN did not. Instead,
HN chose to remain silent and participate in the hearing. By its silence, HN consented
to the hearing, despite the irregularities in Mr. Schultz's appointment.
HN cannot now
complain that the hearing was not valid due to those irregularities.
See Wetzel Enters.
v. State Bd. of Tax Comm'rs, 694 N.E.2d 1259, 1262 (Ind. Tax Ct. 1998) (procedural
protections for benefit of taxpayer may be waived by taxpayer).
The Court's conclusion is buttressed by an examination of analogous law. Where a judge pro tempore is appointed to decide a case or act in a case, a litigant must lodge an objection to the authority of the judge pro tempore to preserve his rights on appeal. See Floyd v. State, 650 N.E.2d 28, 32 (Ind. 1994); Pope v. Pope, 701 N.E.2d 587, 591-92 (Ind. Ct. App. 1998) (discussing a timely objection to the authority of a judge pro tempore); Catellier v. Depco, Inc., 696 N.E.2d 75, 77 (Ind. Ct. App. 1998). Although State Board hearing officers do not act in a judicial capacity, see Gatling Gun Club, 420 N.E.2d at 1328, there is no reason why the reasoning behind the rule with regard to judges pro tempore cannot be applied to State Board hearing officers. In addition, the Court notes that this rule will force taxpayers to object at the administrative level and thereby allow the State Board the opportunity to correct any irregularities before the State Board goes through the time and expense of conducting
a hearing and issuing a final determination.
HN's Form 131 petition presented testimony,See footnote
a document entitled Assessment Review
and Analysis (Joint Ex. 3) and photographs of the subject improvement.See footnote
testimony on the grade issue before the State Board, Mr. Miller stated, Basically, the
subject property is [a] wood frame structure more of a residential type construction and
varies substantially from the office base model described in the manual [regulations].
To adjust for these differences we would ask for a D grade to be applied. (Joint Ex. 4).
The Assessment Review and Analysis makes a similar statement about the grading of
the subject improvement, and the only substantive difference between Mr. Miller's
testimony and the document was the mention of the small amount of concrete block in
the subject improvement. Because this was the only evidence presented at the
administrative level, this is the only evidence the Court will consider.
In its final determination with respect to the grade issue, the State Board concluded, After inspection and in consideration of 50 IAC 2.1-4-3(f), it is determined the grade of the building is best described as 'C-1.' No change is made as a result of this issue. (State Bd. Final Determination ¶ 4). This falls well short of what is typically required of the State Board in explaining how it arrived at the grade of an improvement.
See Clark, 694 N.E.2d at 1237-38. This explanation is nothing more than a
conclusory statement, and it is difficult to see how the State Board's determination of
grade in this case is based on anything more than the say-so of the State Board and its
However, this is by no means the end of the inquiry. Recently, this Court upheld a deficient State Board final determination because this Court determined that the taxpayer's failure to present evidence at the administrative level meant that the requirement that the State Board support its final determination with substantial evidence was not triggered. See Whitley Prods., Inc., 704 N.E.2d at 1116-21. As a result, due to the taxpayer's failure, the State Board was not required to support its final determination as it normally would have.
The Court sees no reason to rehash its reasoning in Whitley Products here. However, the Court notes that there were two main concerns behind that decision. First and foremost, the Court was concerned with the possibility that the State Board could be forced to make a case for a taxpayer. See generally North Park Cinemas, Inc. v. State Bd. of Tax Comm'rs, 689 N.E.2d 765, 769 (Ind. Tax Ct. 1997). Therefore, the Court adopted the rule that the taxpayer must offer probative evidence relating to the error the taxpayer asserts in its petition for review. Whitley Prods., Inc., 704 N.E.2d at 1119-20. The second concern of this Court in Whitley Products was the waste of time and resources that would inevitably occur if taxpayers could simply attack the State Board's methodology in an original tax appeal without first making a factual presentation to the State Board.
with no accompanying explanations and only conclusory statements.See footnote
Of Mr. Miller's
statements concerning the grade issue, the only statement that could reasonably be
construed as a relevant factual observation concerns the amount of concrete block in
the subject improvement. According to Mr. Miller, the subject improvement, unlike the
model (GCM Office, see Ind. Admin. Code tit. 50, r. 2.1-4-7(a) (1992) (codified in
present form at id. r. 2.2-11-1(24)-(25) (1996)) being used to assess it, contains a small
amount of concrete block.See footnote
In its final determination, the State Board did not discuss how much the subject improvement deviated from the model in that regard. This would ordinarily mandate reversal. However, in this case it does not. Mr. Miller's statement concerning the amount of concrete block is nothing more than a mere invitation for the Mr. Schultz to inspect the subject improvement and examine the subject improvement for evidence to support Mr. Miller's allegation of error. This was improper: State Board hearing officers do not have the duty to make a taxpayer's case. See North Park Cinemas, Inc., 689
N.E.2d at 769; see also Clark, 694 N.E.2d at 1237 n.10 (State Board hearing officer
may assume that specific problems with an assessment will be brought to his attention
by taxpayer). Mr. Miller did not state how much of the improvement did not contain
concrete block; Mr. Miller did not attend the hearing officer's inspection of the subject
improvement so that he could show Mr. Schultz the lack of concrete block in the subject
improvement. Instead, Mr. Miller thought that he could provide some pictures, make a
general observation and thereby force the State Board to make HN's case.
This Court will not allow such tactics to succeed. As this Court has noted, The administration of this state's property tax system is best served by having taxpayers make detailed factual presentations . . . to the State Board, the acknowledged property tax experts. Clark, 694 N.E.2d at 1241. Reversing the State Board's final determination with respect to grade in this case would not serve that goal. In addition, to allow HN to prevail after it made such a cursory showing at the administrative level would result in a tremendous workload increase for the State Board, an administrative agency that already bears a difficult burden in administering this State's property tax system. If taxpayers could make a de minimis showing and then force the State Board to support its decisions with detailed factual findings, the State Board would be overwhelmed with cases such as this one. This would be patently unfair to other taxpayers who do make detailed presentations to the State Board because resolution of their appeals would necessarily be delayed.
Mr. Miller's lack of preparation for the administrative hearing in this case is appalling. At trial, as noted above, HN offered Mr. Miller's response to interrogatories
to the State Board. In those interrogatories, Mr. Miller made a number of factual
assertions that were not presented at the administrative level. These assertions, if true
and if properly presented to the State Board with reference to the regulations, would
have conclusively demonstrated errors in the assessment. For example, Mr. Miller
asserts that the windows contained by the subject improvement were different from
those contained in the model. Mr. Miller could have used the unit-in-place tables
(which contain the reproduction costs of numerous types of windows, see Ind. Admin.
Code tit. 50, r. 2.1-4-10(11.02) (1992) (codified in present form at id. r. 2.2-15-1(11.02)
(1996)) to determine the difference in reproduction cost of the windows possessed by
the subject improvement and those possessed by the model. As another example, Mr.
Miller also referred to the fact that the subject improvement had wood furring instead of
metal furring. Once again, the unit-in-place cost tables show the reproduction costs of
different types of furring, see id. r. 2.1-4-10(12.01), and Mr. Miller could have easily
presented this evidence to the State Board.
The only inference from Mr. Miller's failure to present this evidence is that Mr. Miller failed to make a thorough inspection of the property before the administrative hearing. Yet despite his failure, Mr. Miller expected Mr. Schultz to diligently search the subject improvement to find evidence in support of HN's claims. Although the real property tax system is not a self-assessment system and State Board hearing officers (at least before January 1, 1999, amendments effective on that date have radically altered the property tax appeal process) perform an inquisitorial function, such an expectation is ludicrous. In this case, Mr. Miller's modus operandi is transparent: Mr.
Miller thought that he could do the bare minimum and place the burden on the State
Board to make HN's case. The Court will not allow Mr. Miller to abuse the
administrative and judicial process in such a manner.
In this case, Mr. Miller has done a real disservice to his client. Instead of diligently pursuing his client's petition for review, Mr. Miller gave his client's case the short shrift. Apparently, Mr. Miller thought that no matter how poor his preparation for the administrative hearing in this case was, this Court would bail him out because of the flawed property tax system under which this state labors. Mr. Miller could not have been more mistaken, and the Court does not look favorably on such a presumptuous attitude. The flaws in this state's property tax system often make it extremely difficult and time-consuming for this Court to resolve property tax disputes. This puts the Court's resources at a premium, and the Court sees no reason why its already scarce resources should be wasted on cases where the taxpayer made such a poor showing at the administrative level.
For the above stated reasons, the Court AFFIRMS the final determination of the State Board with respect to the grade issue.
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