ATTORNEY FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
PAUL M. PITTMAN STEVE CARTER
BAKER SIEGEL & PAGE ATTORNEY GENERAL OF INDIANA
Indianapolis, IN Indianapolis, IN
TED J. HOLADAY
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
STANDARD PLASTIC CORPORATION, )
v. ) Cause No. 49T10-9606-TA-72
DEPARTMENT OF LOCAL )
ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
July 1, 2002
The Petitioner, Standard Plastic Corporation (Standard Plastic), appeals the final determination of the
State Board of Tax Commissioners (State Board) establishing the assessed value of Standard
Plastics business personal property as of March 1, 1995. Standard Plastic raises
various issues, which the Court restates as:
Whether the State Boards decision to value Standard Plastics not-owned special tool molds
by using its replacement cost list was supported by substantial evidence;
Whether Standard Plastics barrel and screw assemblies and platens should have been classified
as special tools;
Whether the value of Standard Plastics application software was sufficiently reflected on its
books and records, thus entitling it to a deduction; and
Whether the State Board arbitrarily and capriciously assessed a 20% undervaluation penalty against
For the reasons stated below, the Court AFFIRMS the State Boards final determination
on Issues II and III and REMANDS Issues I and IV to the
Indiana Board for further proceedings. FACTS AND PROCEDURAL HISTORY
Standard Plastic manufactures plastic molded parts and is located in Wells County, Indiana.
On the March 1, 1995, assessment date, Standard Plastic possessed some special
tools, which consisted of molds owned by customers but used by Standard Plastic
to make different types of plastic injected-molded products. Standard Plastics injection molding
machines contain barrel and screw assemblies and platens that deliver melted plastic to
the molds and help hold the molds in place. Standard Plastic is
able to use different molds without changing the barrel and screw assembly.
When Standard Plastic filed its 1995 Business Tangible Personal Property Assessment Return (Form
103), it did not report that it owned or possessed any special tools
and thus did not file a Confidential Return of Special Tools (Form 103-T)
to disclose that it was in possession of customer-owned special tool molds.
Standard Plastic reported that it had business personal property with an assessed value
On September 20, 1995, a State Board field auditor conducted a hearing and
audit of Standard Plastics business personal property tax return. During the audit,
the field auditor found that Standard Plastic had failed to report special tool
molds in its possession when it filed its Form 103. Standard Plastic
gave the auditor a list, which showed that the replacement cost of the
molds was $2,725,703. The field auditor requested a list containing an estimate
of the original cost of the molds, and Standard Plastic submitted a second
list with an estimated original cost of $355,950. The field auditor and
her supervisor rejected Standard Plastics estimated original cost list and ultimately decided that
the assessment recommendation for these not-owned special tools would be based on Standard
Plastics replacement cost list.
On January 30, 1996, the field examiner issued her recommendation for the 1995
assessment of Standard Plastics personal property, which increased Standard Plastics total assessed value
from $99,590 to $139,180. The auditor also recommended that Standard Plastic receive
a 20% penalty with respect to $39,590 of the assessed value.
Standard Plastic objected to the field auditors assessment recommendation and requested an administrative
hearing before the State Board. The State Board held a hearing on
March 14, 1996, wherein Standard Plastics tax representative, True Tax Management, presented testimony
Standard Plastic argued, among other things, that: (1) the
not-owned special tool molds in its possession should have been assessed according to
the estimated original cost; (2) its barrel and screw assemblies and platens should
have been classified and assessed as special tools; and (3) it should have
received a deduction for application software because application software value was sufficiently reflected
on its books and records.
On May 9, 1996, the State Board issued its final determination. The
State Board concluded that the assessment of Standard Plastics not-owned molds would be
based on the values contained in Standard Plastics first submitted list, which was
based on replacement cost, because it found that the second list was not
credible evidence. The State Board also concluded that Standard Plastics barrel and
screw assemblies and platens did not meet the definition of special tools and
were not entitled to a deduction. Finally, the State Board found that
Standard Plastic was not entitled to a deduction for its application software because
it had not proven that the value of the application software was recorded
on its books and records. The State Board assessed Standard Plastics business
personal property at $137,880 and assessed a 20% penalty with respect to $38,290
of the assessed value that resulted from Standard Plastics undervaluation.
Standard Plastic filed an original tax appeal on June 21, 1996. This
Court conducted a trial and heard oral arguments. 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 the
State Board acts within the scope of its authority. Wetzel Enters., Inc.
v. State Bd. of Tax Commrs, 694 N.E.2d 1259, 1261 (Ind. Tax Ct.
1998). 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. Clark v. State Bd. of Tax Commrs, 694 N.E.2d 1230,
1233 (Ind. Tax Ct. 1998). 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. GTE
North Inc. v. State Bd. of Tax Commrs, 634 N.E.2d 882, 887 (Ind.
Tax Ct. 1994) (citations and internal quotation marks omitted). To establish a
prima facie case, the taxpayer must offer probative evidence concerning the alleged error.
Miller Structures, Inc. v. Indiana State Bd. of Tax Commrs, 748 N.E.2d
943, 947 (Ind. Tax Ct. 2001). 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.
Clark, 694 N.E.2d at 1233. To carry its burden, the State Board
must do more than merely assert that it assessed the property correctly.
Loveless Const. Co. v. State Bd. of Tax Commrs, 695 N.E.2d 1045, 1049
(Ind. Tax Ct. 1998), review denied. Instead, the State Board must offer
an authoritative explanation of its decision to rebut the taxpayers prima facie showing.
Not-Owned Special Tool Molds
Standard Plastic argues that the State Boards final determination regarding the valuation of
its not-owned special tool molds was not supported by substantial evidence. Specifically,
Standard Plastic contends that the State Boards own regulation requires that the original
cost be used if available and that the State Boards refusal to use
Standard Plastics list of estimated original cost of the special tool molds was
arbitrary and capricious. The State Board agrees that valuation of special tools
should be based upon original cost but contends that Standard Plastic did not
present credible evidence of the original cost. The State Board argues that
its final determination is based on substantial evidence because it based the assessment
on the most credible information available, which happened to be Standard Plastics replacement
In Indiana, the personal property tax system is a self-assessment system, which relies
primarily upon full disclosure and accurate reporting by the taxpayer. Dav-Con, Inc.
v. State Bd. of Tax Commrs, 644 N.E.2d 192, 195 (Ind. Tax Ct.
1994). In completing a personal property return for a year, a taxpayer
shall make a complete disclosure of all information, required by the state board
of tax commissioners, that is related to the value, nature, or location of
personal property[.] Ind. Code § 6-1.1-3-9 (West 2000). The taxpayer is
responsible for reporting personal property on his personal property tax return form for
assessment and taxation. Ind. Admin. Code tit. 50, r. 4.2-2-5 (1996).
Special tools, whether or not owned by a taxpayer, must be reported on
a Form 103-T and attached to a taxpayers business personal property return.
Ind. Admin. Code tit. 50, rr. 4.2-6-2(c), (d)(1), (d)(2) (1996). The State
Boards regulation sets forth how it must assess special tools that the taxpayer
does not own:
The total value of special tools not owned by the taxpayer must be
based on the original cost to the owner of such special tools, if
available. If the original cost to the owner is not available, the
value shall be based upon the best information available[.]
50 IAC 4.2-6-2(d)(2). Barrel and Screw Assemblies and Platens
Although Standard Plastic originally failed to report its possession of not-owned special tool
molds on its Form 103, it did later provide evidence of the estimated
original cost for these not-owned special tools to the State Board. When
the field auditor realized that Standard Plastic had not reported possession of the
special tool molds, she requested the names of the owners and the cost
of each mold. Standard Plastic initially provided the auditor with a list
showing the replacement cost of the molds as $2,725,703. The State Board
field auditor originally rejected Standard Plastics replacement cost list as too high and
instructed Standard Plastic that it could use an estimate of the original cost.
Standard Plastic submitted a second list estimating the original cost at $355,950.
Standard Plastic presented both of these lists to the State Board.
(Petr Exs. 3 & 4.) Standard Plastic also submitted evidence to show
that the difference between the two lists was because of the replacement versus
original cost and because of the relative age of the molds. (Petr
Ex. 5.) Specifically, many of the molds were fifty years old, while
others were twenty to thirty-five years old. Because Standard Plastic did not
know the original cost to the owners, it instead provided a list with
the estimated original cost. Thus, Standard Plastic provided the State Board with
the best information available regarding the original cost. Therefore, the evidence Standard
Plastic submitted was sufficient to meet its initial burden of proof.
The Court agrees with Standard Plastic that the State Board did not support
its valuation of Standard Plastics not-owned special tools with substantial evidence. The
State Boards determination is supported with substantial evidence if a reasonable person could
view the record in its entirety and find enough relevant evidence to support
the State Boards determination. Amax Inc. Through Amax Coal Co. v. State
Bd. of Tax Commrs, 552 N.E.2d 850, 852 (Ind. Tax Ct. 1990).
Substantial evidence is more than a scintilla. It means such relevant evidence
as a reasonable mind might accept as adequate to support a conclusion.
Dav-Con, 644 N.E.2d at 196 (citing South Shore Marina, Inc. v. State Bd.
of Tax Commrs, 527 N.E.2d 738, 742 (Ind. Tax Ct. 1988), affd 543
N.E.2d 644 (Ind. 1989) (internal quotation marks omitted)).
The State Board rejected Standard Plastics estimated original cost list and instead used
Standard Plastics replacement cost list after finding that this list was not unreasonable
and was the most credible evidence. (Petr Ex. 1 at 6.)
However, the State Boards regulation requires that it use information regarding the original
cost or the best information thereof when assessing not-owned special tools.
The State Boards regulation is clear. The State Board must assess not-owned
special tools by using the original cost to the owner. 50 IAC
4.2-6-2(d)(2). If that original cost to the owner is not available, then
the best information available must be used. Id. The plain language
of the regulation shows that the best information available is in reference to
the original cost. Id. Additionally, the regulation is unambiguous in that
it does not make any reference to using replacement costs in determining the
assessed value of the not-owned special tools. See Id. See also
Ispat Inland, Inc. v. State Bd. of Tax Commrs, 757 N.E.2d 1078, 1085
(Ind. Tax Ct. 2001) (discussing statutory construction maxim expressio unius est exclusio alterius,
which means the enumeration of certain things in a statute implies the exclusion
of all others). The record, however, shows that the State Board determined
the assessed value of the not-owned special tools by relying on replacement cost.
Because the State Boards use of Standard Plastics replacement cost list is
contrary to its regulation, its final determination regarding the assessed value of Standard
Plastics not-owned special tools is not supported by substantial evidence and is arbitrary
and capricious. See Damico v. State Bd. of Tax Commrs, 769 N.E.2d
715, 2002 WL 1171026, *3 (Ind. Tax Ct. 2002) (State Board is required
to follow its own regulations). Accordingly, this Court REMANDS this issue to
the Indiana Board with instructions to use the estimated original cost list provided
by Standard Plastic.
Standard Plastic argues that its barrel and screw assemblies and platens are special
tools in accordance with the State Boards regulation, Indiana Administrative Code title 50,
regulation 4.2-6-2(b). The State Board contends that the barrel and screw assemblies
and platens did not qualify as special tools because they did not meet
the plain meaning of the regulations definition of special tools.
The State Boards regulations define special tools as:
Special tools includes, but is not limited to, tools, dies, jigs, fixtures, gauges,
molds, and patterns acquired or made for the production of products or product
models which are of such specialized nature that their utility generally ceases with
the modification or discontinuance of such products or product models.
Ind. Admin. Code tit. 50, r. 4.2-6-2(b) (1996). The owner of special
tools is required to report any special tools on a Form 103-T as
an attachment to his business personal property tax return. 50 IAC 4.2-6-2(c).
To satisfy its burden, Standard Plastic needed to show that its barrel
and screw assemblies and platens were of such specialized nature that their utility
generally ceases with the modification or discontinuance of various molds. See 50
IAC 4.2-6-2(b). III. Application Software
In its evidence presented to the State Board, Standard Plastic failed to show
that the barrel and screw assemblies and platens meet the definition of special
tools. Standard Plastic presented evidence that it was not necessary to use
different barrel and screw assemblies and platens in its injection molding operation.
(Petr Ex. 7.) Standard Plastics tax representative presented a list from NewCastle
Industries of different barrel and screw assemblies with a description of potential applications
for each. (Petr Ex. 7 at 2.) Standard Plastic, however, did
not present any explanation of how that list applied to it. Standard
Plastic did not provide any evidence that it even used these various barrel
and screw assemblies contained on the list. Standard Plastics mere reference to
a list of barrel and screw assemblies, without explanation, does not qualify as
probative evidence. See Heart City Chrysler v. State Bd. of Tax Commrs,
714 N.E.2d 329, 333 (Ind. Tax Ct. 1999) (unexplained photographs do not qualify
as probative evidence); North Park Cinemas v. State Bd. of Tax Commrs, 689
N.E.2d 765, 769 (Ind. Tax Ct. 1997) (a taxpayer has an obvious responsibility
to appear before the State Board and present evidence and argument in support
of its position.).
Standard Plastic also submitted a copy of a fax that its tax
representative sent to Mike Caudill at Cincinnati Milacron.
(Petr Ex. 8.)
The fax stated:
[W]e talked about the Cincinnati Milacron equipment owned by Standard Plastics Corporation.
We talked about the stationary and moving platens, and the screw and barrel
assembly. I would like clarification regarding the above described components. Would
an owner of your equipment use a different platen, screw and/or barrel based
on processing a different product. [sic] Specifically, if a different type
of raw material (plastic) was used, could a different platen, screw and/or barrel
be recommended to produce the best product. [sic]
(Petr Ex. 8.) The fax contained the initials M.C. handwritten on the
bottom of the page. (Petr Ex. 8.)
Standard Plastics tax representative simply concluded that this fax is evidence of Mike
Caudills belief that Standard Plastics screw and barrel assemblies and platens qualify as
special tools. Even assuming M.C. constituted an affirmation of the contents of
the fax, the fax was merely conclusory. Conclusory statements do not constitute
probative evidence. Kemp v. State Bd. of Tax Commrs, 726 N.E.2d 395,
400 (Ind. Tax Ct. 2000). Moreover, this fax does not even
contain a definitive statement or opinion that the barrel and screw assemblies and
platens are of such specialized nature that their utility generally ceases with the
modification or discontinuance of various molds. Therefore, this Court does not find
it to be probative evidence. CDI, Inc. v. State Bd. of Tax
Commrs, 725 N.E.2d 1015, 1021 (Ind. Tax Ct. 2000) (the Court will not
rely upon unsupported opinion).
Where a taxpayer fails to provide the State Board with probative evidence supporting
its position on special tools, the State Boards duty to support its final
determination with substantial evidence is not triggered. See Kemp, 726 N.E.2d at
400. Here, Standard Plastic did not come forward with probative evidence showing
that its barrel and screw assemblies and platens qualified as special tools.
Thus, the State Board had no duty to refute Standard Plastics arguments with
substantial evidence. See CDI, 725 N.E.2d at 1021. Accordingly, this
Court AFFIRMS the State Boards final determination on this issue.
Standard Plastic argues that the State Board improperly assessed it for the value
of application software
included in the price of its injection molding machines.
The State Board admits that its regulations allow for a deduction of application
software for property tax purposes but argues that Standard Plastic was not entitled
to the deduction because it did not prove that the value of the
application software was recorded on its books and records.
The State Boards regulations provide in pertinent part:
If the value recorded on the books and records reflects charges for customer
support services such as . . . application software that relate to future
periods and not to the value of the tangible personal property, such charges
may be deducted as nonassessable intangible personal property (to the extent that a
separate charge or value can be identified).
Ind. Admin. Code tit. 50, r. 4.2-4-3(g) (1996). Thus, to obtain the
deduction for application software, Standard Plastic first needed to show that its application
software was recorded on its books and records.
Standard Plastic asserts that the value of the application software was recorded on
its books and records in the form of its property tax return and
on invoices (Petr Exs. 9 11) submitted to the State Board.
(Oral Argument Tr. at 14.) A review of its tax return and
invoices, however, reveals no mention of the value of application software let alone
any mention of application software. (See Petr Exs. 9 11.)
Standard Plastic admits that the invoices did not contain the value of the
application software (Petr Trial Br. at 18, Trial Tr. at 58.) Instead,
Standard Plastic submitted a copy of a fax that its tax representative sent
to Mike Caudill at Cincinnati Milacron. (Petr Ex. 12.) The fax
Thank you for taking time to discuss the . . . software components
on the Cincinnati Milacron injection molding machines owned by Standard Plastics Corp.
Per our discussion, we identified the . . . application software contained in
the control system to be 10% of the total cost of the machine.
The machines included in our conversation were the T-75-8, T-150-14, T-200-14, and
200 Ton oz pc-3. Please initial and fax this notice back to
confirm our conversation[.]
(Petr Ex. 12.) The fax contained the initials M.C. handwritten on the
bottom of the page. (Petr Ex. 12.) IV. Penalty
The State Board rejected Standard Plastics fax as evidence that established that the
value of its application software was contained in its books and records.
This Court agrees that the fax is not probative evidence to meet the
requirement of the regulation that the value of the application software be recorded
on Standard Plastics books and records. See 50 IAC 4.2-4-3(g). Unless
the value is recorded on the books and records, it is irrelevant what
anyone discussed. Therefore, Standard Plastic has not met its burden of establishing
a prima facie case. Accordingly, this Court AFFIRMS the State Boards final
determination on this issue.
Standard Plastic argues that the State Board erroneously assessed a penalty against it
because the State Boards determinations were incorrect. The State Board contends that
its determinations, and thus the assessed penalties against Standard Plastic, were correct and
should be sustained.
A taxpayer must report personal property for assessment and taxation on its personal
property tax form. 50 IAC 4.2-2-5. If a taxpayer undervalues its
property on a personal property tax return by more than 5%, the taxpayer
may, pursuant to Indiana Code § 6-1.1-37-7(e), be penalized 20% of the additional
taxes finally determined to be due as a result of the undervaluation.
Ind. Code § 6-1.1-37-7(e) (2000). The penalty is mandatory and offers no
opportunity for discretion when the facts meet the requirements of the statute.
Dav-Con, 644 N.E.2d at 197 (citing Gulf Stream Coach Inc. v. State Bd.
of Tax Commrs, 519 N.E.2d 238, 243 (Ind. Tax Ct. 1988) (internal quotation
On its personal property tax return, Standard Plastic reported that it had personal
property with an assessed value of $99,590. Standard Plastic did not, however,
report for assessment the not-owned special tool molds that it had in its
possession. By reporting less than the total assessed value that it was
required by law to report, Standard Plastic undervalued its personal property subject to
assessment. The issue of the not-owned special tool molds has been remanded
to the Indiana Board for a proper valuation. See supra, Issue I.
Until the Indiana Board reaches a proper valuation on these not-owned special
tools, the amount of the penalty cannot be finally determined. If the
amount of that undervaluation exceeds 5% of the proper amount, Standard Plastic is
liable for a 20% penalty. See I.C. § 6-1.1-37-7(e). Therefore, the
Court REMANDS the penalty issue to the Indiana Board.
For the aforementioned reasons, the Court AFFIRMS the State Boards final determinations on
Issues II and III and REMANDS Issue I and IV to the Indiana
Board for further proceedings consistent with this opinion.
The State Board of Tax Commissioners (State Board) was originally the
Respondent in this appeal. However, as of December 31, 2001, the legislature
abolished the State Board. P.L. 198-2001, § 119(b)(2). Effective January 1,
2002, the legislature created the Department of Local Government Finance (DLGF),
§ 6-1.1-30-1.1 (West Supp. 2001)(eff. 1-1-02); P.L. 198-2001, § 66, and the Indiana
Board of Tax Review (Indiana Board). Ind. Code § 6-1.5-1-3 (West Supp.
2001)(eff. 1-1-02); P.L. 198-2001, § 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. 1-1-02); P.L. 198-2001, § 95. Moreover,
the law in effect prior to January 1, 2002 applies to these appeals.
Ind. Code § 6-1.5-5-8 (West Supp. 2001)(eff. 1-1-02); P.L. 198-2001, §§ 95,
117. Although the DLGF has been substituted as the Respondent, this Court
will still reference the State Board throughout this opinion.
Standard Plastic also raises an issue regarding whether the value
of its special tools was substantiated on its books and records. Because
this Court finds that Standard Plastics barrel and screw assemblies and platens are
not special tools, the Court need not address this issue.
A person holding, possessing, or controlling special tools, not owned,
is required to furnish a complete listing on Form 103-T (50 IAC 4.2-2-9),
of all not owned personal property pursuant to 50 IAC 4.2-2-5.
Admin. Code tit. 50, r. 4.2-6-2(c) (1996). See also Ind. Admin. Code
tit. 50, r. 4.2-6-2(d)(2) (1996).
The State Board allowed Standard Plastic to submit additional evidence
one week after the administrative hearing.
Footnote: Cincinnati Milacron manufactured some of the injection molding machines which Standard
Plastic used. (Trial Tr. at 58, 66.) Mike Caudill is a
special project engineer at Cincinnati Milacron. (Trial Tr. at 67.)
Footnote: Application software is a written sequence of instructions which details the
operations the equipment is to perform in order to achieve a specific objective
of the user.
Ind. Admin. Code tit. 50, r. 4.2-4-3(g)(3) (1996).