ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
CURTIS J. DICKINSON JEFFREY A. MODISETT
DAVID L. PIPPEN Attorney General of Indiana
Dickinson & Abel
VINCENT S. MIRKOV Deputy Attorney General
Heart City Chrysler (Heart City) appeals the final determinations of the State Board of Tax Commissioners (State Board) fixing the assessed value of one parcel of real estate it owned located in Elkhart County, Indiana as of March 1, 1990, 1991 and
II. Whether the State Board's final determinations with respect to the grade assigned
to the subject properties lacked substantial evidentiary support.
III. Whether the State Board's final determinations with respect to obsolescence depreciation lacked substantial evidentiary support.
Elkhart County. The State Board issued its final determinations with respect to the
Form 131 petitions on November 22, 1996 and October 29, 1997. In its final
determinations, the State Board made adjustments to the earlier assessments.
Deeming the adjustments made by the State Board to be erroneous, Heart City filed
this original tax appeal on January 3, 1997. On May 18, 1998, the parties tried this
case before this Court. Additional facts will be supplied as necessary.
were violated as a result of not having the opportunity to rebut the findings provided in
the State Board's final determination regarding the sua sponte assessment. See
Castello v. State Bd. of Tax Comm'rs, 638 N.E.2d 1362, 1364 (Ind. Tax Ct. 1994).
However, the Court need not reach this issue because the Court finds another issue dispositive: Whether the State Board complied with Ind. Code Ann. § 6-1.1-30-12 (West 1989) (amended 1997, effective Jan. 1, 1999) in issuing its final determination. Section 6-1.1-30-12 states:
Sec. 12. With respect to a review conducted by a field representative or supervisor under section 10 of this chapter or a hearing conducted by a hearing officer under section 11 of this chapter, the field representative, supervisor, or hearing officer shall submit a written report of his findings to the state board of tax commissioners. After reviewing the report, the board may take additional evidence or hold additional hearings. The board shall base its final decision on the report, any additional evidence taken by the board, and any records that the board considers relevant.
In the case at bar, Heart City contended at the administrative hearing that one of
the subject improvements, the 1,248 square foot used car sales office (built in 1986)
should receive 10% for physical depreciation. (Pet'r Ex. 1). Subsequent to the
hearing, the State Board's hearing officer inspected Heart City's property, agreed with
Heart City's contentions, and recommended that the used car sales office receive a
total physical depreciation factor of 10%. The State Board adopted the
recommendation and granted Heart City a total factor of 10% for physical depreciation
in its final determination.
The State Board then proceeded with a sua sponte assessment of another building, a structure built in 1966 (1966 structure). Heart City did not raise the issue of physical depreciation with respect to the 1966 structure in its petition or at the
administrative hearing, nor did the hearing officer give any indication to Heart City that
he would make a recommendation to the State Board regarding the 1966 structure.See footnote
trial, the hearing officer stated that he did not make a recommendation regarding the
1966 structure. (Trial Tr. at 11). After the sua sponte assessment, Heart City found
itself with a 35% physical depreciation factor See footnote
applied to the 1966 structure,See footnote
resulted in an increased assessment.
The State Board is correct in its assertion that it may conduct a sua sponte assessment to address and correct all errors not raised in a taxpayer's petition for review pursuant to section 6-1.1-15-4.See footnote 9 See Wirth v. State Bd. of Tax Comm'rs, 613 N.E.2d 874, 879 (Ind. Tax Ct. 1993). However, in doing so, the State Board must also adhere to the strictures of section 6-1.1-30-12. In this case the State Board did not.
The Court is unable to determine from the record the basis of the State Board's findings with respect to the 1966 structure. In addition to the hearing officer's failure to submit a written report regarding the 1966 structure, the record is also devoid of any information that would indicate to the Court that the 35% physical depreciation factor was based on any relevant records, or any additional evidence taken by the State Board. The State Board's failure to adhere to the requirements of section 6-1.1-30-12, invalidates the State Board's final determination. Accordingly, the State Board's final determination is reversed and remanded.
and 1991 assessments are almost identical to those regulations, this Court has held
that the mere fact that a subject improvement may have been assessed under an
unconstitutional regulation does not guarantee a reversal of a State Board final
determination. See Phelps Dodge v. State Bd. of Tax Comm'rs, 705 N.E.2d at 1104.
This is true because [r]eal property must still be assessed, and, until the new
regulations are in place, must still be assessed under the present system. Whitley
Prods., Inc., 704 N.E.2d at 1121.
Although Heart City correctly identifies the shortcomings of the regulations governing grade, this Court has also held that a taxpayer may not simply point out the inadequacies of the regulations governing grade and expect to secure a reversal. See White Swan Realty v. State Bd. of Tax Comm'rs, No. 49T10-9701-TA-00019, slip op. at 8 (Ind. Tax Ct. 1999) (citing Phelps Dodge, 705 N.E.2d at 1104), petition for review filed, Jun. 23, 1999; Town of St. John v. State Bd. of Tax Comm'rs, 691 N.E.2d 1387 (Ind. Tax Ct.) (order and judgment entry), rev'd in part, aff'd in part, 702 N.E.2d 1034 (Ind. 1998)); Whitley Prods., Inc., 704 N.E.2d at 1121; Dana Corp., 694 N.E.2d at 1247. This Court has consistently required more on the part of the taxpayer. The taxpayer must offer probative evidence relating to the issue of grade. See Whitley Prods., Inc., 704 N.E.2d at 1121. In this case, instead of presenting probative evidence Heart City presented only conclusions that referenced grade factors. For example, as part of its presentation, Heart City submitted photographs without adequately explaining how they affect grade. However, this Court has rejected attempts by taxpayers to put forth evidence such as photographs without explanations. See Whitley Prods., Inc., 704
N.E.2d at 1119-20 & n.12; see also North Park Cinemas v. State Bd. of Tax Comm'rs,
689 N.E.2d 765, 769 (Ind. Tax Ct. 1997)
(A party who stands to be adversely affected by a petition for review has an obvious
responsibility to . . . present evidence and argument in support of its position.)
(emphasis added). Also, for one of the subject properties, the auto service center,
Heart City concluded that it should receive a grade of C-1 for the reason that it is
inferior to the base model described in the assessment manual. (Pet'r Ex. 1). Heart
City fails to show, however, how the subject property is inferior to the base model.See footnote
Likewise, with respect to another subject property, the auto showroom, Heart City
asserts that a grade of C+1 more accurately describes the overall quality of the
[showroom] without explaining why or offering any evidence to support its assertions.
(Pet'r Ex. 1). These statements are conclusory, and this Court will not substitute
conclusory statements for probative evidence.See footnote
See Whitley Prods., Inc., 704 N.E.2d at
Moreover, in Petitioner's Exhibit 2, Heart City asserts more conclusions and also includes a photocopy of the model and the regulations with variances from the model highlighted. Yet Heart City fails to present evidence as to what exactly the variances are. Heart City's trial testimony was similar to the documentary evidence presented in
that it offered only conclusions. Some specific items regarding grade were testified to
at trial, but there was no effort made to show how they affect the grade of the parcels
under consideration. Heart City's presentation to this Court fails to meet any burden
because it consists entirely of conclusions.
Because Heart City has failed to present probative evidence to the State Board that identify and explain all items that relate to grade the Court affirms the final determinations of the State Board on the issue of grade.
how to quantify obsolescence in a particular improvement, this does not obviate the
State Board's burden of supporting quantification of obsolescence with substantial
evidence. See id. at 1102. Although more information is provided in the State Board's
final determination than that which is usually provided, it still falls short of substantial
evidence in that it fails to provide this Court with an adequate explanation as to why it
granted a 10% obsolescence factor as opposed to any other factor. See Clark, 694
N.E.2d at 1240. Thus, the findings submitted by the State Board fail to rise to the level
of substantial evidence and, as a result, reversal is mandated.
Recently, this Court affirmed a State Board finding that an improvement did not suffer from obsolescence where the taxpayer presented no evidence of obsolescence. See White Swan Realty, No. 49T10-9701-TA-00019, slip op. at 9. Thus, in similar cases, the responsibility of offering evidence proving causes of obsolescence rests with the taxpayer. See id.; see also Lake County Trust Co. v. State Bd. of Tax Comm'rs, 694 N.E.2d 1253, 1258 (Ind. Tax Ct. 1998), review denied. However, in this case, it is undisputed that the subject improvements suffer from obsolescence. Thus, Heart City is relieved from the burden of offering probative evidence showing that the subject improvements experience obsolescence. See Phelps Dodge, 705 N.E.2d at 1102. This negates the State Board's reliance on the notion that the taxpayer has to prove that the State Board is incorrect with respect to its findings. In cases such as this, the question becomes whether the State Board's quantification of obsolescence is supported by substantial evidence. As stated above, it is not.
In Clark, this Court noted its frustration in cases where both parties failed to
properly quantify obsolescence. Without proper guidance from the regulation
governing obsolescence, the State Board and taxpayer were left to argue about the
quantification of a particular improvement's obsolescence with no means of supporting
their respective views with any evidence. As a result, in Clark, this Court announced a
prospective rule that required taxpayers to quantify obsolescence at the administrative
level with generally accepted appraisal techniques at the administrative level. In this
case, Heart City did not do so; however, because the hearing in this case took place
before the date of the Clark opinion, Heart City was not required to quantify the
obsolescence of the subject improvements with generally accepted appraisal
techniques. On remand, however, Heart City will be required to do so.
Accordingly, the issue of obsolescence is remanded for further proceedings consistent with this opinion and this Court's opinion in Clark.
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