ATTORNEY FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
ON APPEAL FROM A FINAL DETERMINATION OF
DAVID L. PIPPEN STEVE CARTER
ATTORNEY AT LAW ATTORNEY GENERAL OF INDIANA
Indianapolis, IN Indianapolis, IN
TED J. HOLADAY
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
See footnote )
) Cause No. 49T10-0010-TA-112
DEPARTMENT OF LOCAL )
See footnote )
THE STATE BOARD OF TAX COMMISSIONERS
NOT FOR PUBLICATION
July 7, 2004
Wieland Designs (Wieland) appeals the State Board of Tax Commissioners (State Board) final
determination valuing its real property for the 1995 tax year. The issue
for the Court to decide is whether the State Board erred when it
refused to award additional obsolescence depreciation to Wielands improvement.
FACTS AND PROCEDURAL HISTORY
Wieland owns land and an industrial improvement in Goshen, Indiana. For the
1995 assessment year, local assessing officials assigned zero obsolescence depreciation to Wielands improvement.
Wieland appealed its assessment to the Elkhart County Board of Review (BOR);
the BOR assigned Wielands improvement a 25% obsolescence depreciation adjustment. Wieland then
appealed to the State Board, arguing that its improvement was entitled to a
90% obsolescence depreciation adjustment. After conducting an administrative hearing, the State Board
issued a final determination denying Wielands claim for additional obsolescence.
On October 10, 2000, Wieland initiated an original tax appeal. The parties
stipulated to the record and, on September 10, 2001, this Court heard their
oral arguments. Additional facts will be supplied as necessary.
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. Hamstra Builders, Inc. v. Dept
of Local Govt Fin., 783 N.E.2d 387, 390 (Ind. Tax Ct. 2003).
Accordingly, this Court reverses final determinations of the State Board only when they
are unsupported by substantial evidence, are arbitrary or capricious, constitute an abuse of
discretion, or exceed statutory authority. Id. When appealing to this Court
from a State Board final determination, the taxpayer bears the burden of showing
that the final determination is invalid. Id.
Obsolescence is the functional or economic loss of property value; it is expressed
as a percentage reduction in the remaining value of the subject improvement.
Clark v. State Bd. of Tax Commrs, 694 N.E.2d 1230, 1238 (Ind. Tax
Ct. 1998); see also Ind. Admin. Code tit. 50, r. 2.2-10-7(f) (1996).
Functional obsolescence is caused by factors internal to the property; economic obsolescence
is caused by factors external to the property. See 50 IAC 2.2-10-7(e).
When a taxpayer seeks an obsolescence adjustment, it must make a two prong
showing: 1) it must identify causes of the alleged obsolescence and 2)
it must quantify the amount of obsolescence to be applied to its improvement.
Clark, 694 N.E.2d at 1241. It is important to remember that
each of these two prongs must be tied to an improvements actual loss
of value. See Miller Structures, Inc. v. State Bd. of Tax Commrs,
748 N.E.2d 943, 954 (Ind. Tax Ct. 2001). In this case, the
local assessing officials awarded an obsolescence depreciation adjustment to Wielands improvement; therefore, the
existence of obsolescence itself is not at issue. See Heart City Chrysler
v. State Bd. of Tax Commrs, 714 N.E.2d 329, 333 n.13 (Ind. Tax
Ct. 1999). Accordingly, Wieland bore the burden of quantifying the amount of
obsolescence depreciation to be applied to its improvement. Id.
To support its claim that its improvement was entitled to additional obsolescence depreciation,
Wieland submitted a calculation based on the economic age-life appraisal method; a chart
titled Depreciation Commercial Properties; a chart titled Life Expectancy Guidelines; a one-page
discussion of the economic age-life method from The Appraisal of Real Estate, Eighth
Edition; and the subject propertys record cards. (See Stip. R. at 67-83.)
At the administrative hearing, Wielands property tax consultant, Drew Miller (Miller), explained
how the economic age-life calculation reflected 90% obsolescence depreciation in Wielands improvement.
Specifically, Miller explained that:
In my calculation . . . I used a total economic life of
fifty (50) years, which comes from the Class B type building[.] . .
. For the remaining economic life, I took that from the Commercial Properties
Depreciation Schedule[,] . . . under a typical life expectancy of fifty (50)
years, and actually I estimated the effective age at fifty-seven (57), but [since]
. . . there isnt a fifty-seven (57) slot,  using fifty-five (55),
it gives us a remaining life of three (3) years, making the effective
age forty-seven (47) years divided by the total economic life, gives us total
accrued depreciation of ninety-four (94) percent. . . . [P]ull[ing] out the physical
depreciation that is applied by the County and the remaining then would be
the obsolescence depreciation, which would be applied under True Tax Value[.] So
basically  using ninety (90) percent obsolescence gives us a total True Tax
Value or Estimated True Tax Value of $1,747 or $174,628 which would be
the equivalent to a total accrued depreciation of ninety-four (94) percent.
(Stip. R. at 113.)
To meet its burden, Wieland was required to explain its causes of obsolescence
in order to translate its improvements loss in value (due to those causes)
into a quantifiable amount of obsolescence depreciation. See Clark, 694 N.E.2d at
1238; see also Miller Structures, Inc., 748 N.E.2d at 954. Thus, although
both parties agreed that causes of obsolescence existed in Wielands improvement, Wieland was
still required to demonstrate how those causes resulted in its improvements loss of
value in order to convert that actual loss of value into a percentage
reduction and apply it against its improvements overall value. See Miller Structures,
Inc., 748 N.E.2d at 954. Instead, Wieland presented a cursory calculation bearing
no relationship to the causes of obsolescence present in its improvement. Similarly,
Miller made no attempt to explain how the numbers used in his calculation
related to the improvements causes of obsolescence and the associated loss in value.
Without more, Wielands evidence failed to demonstrate that it was entitled to
additional obsolescence depreciation. Accordingly, the State Board properly rejected Wielands request for
For the aforementioned reasons, the Court AFFIRMS the State Boards final determination.
While various documents submitted to the Court spell the taxpayers name Weiland,
the Court will refer to the taxpayer as Wieland as the original complaint
and the taxpayers signature on its power of attorney form state Wieland.
Footnote: 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),
Indiana Code Annotated § 6-1.1-30-1.1 (West Supp. 2003)(eff. 1-1-02); 2001 Ind. Acts 198
§ 66, and the Indiana Board of Tax Review (Indiana Board). Ind.
Code Ann. § 6-1.5-1-3 (West Supp. 2003)(eff. 1-1-02); 2001 Ind. Acts 198 §
95. Pursuant to Indiana Code Annotated § 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 Ann. § 6-1.5-5-8
(West Supp. 2003)(eff. 1-1-02); 2001 Ind. Acts 198 § 95. Nevertheless, the
law in effect prior to January 1, 2002 applies to those appeals.
A.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 addition, Wieland raises various state and federal constitutional claims that this
Court has declined to reach in previous cases.
See, e.g., Barth, Inc.
v. State Bd. of Tax Commrs, 756 N.E.2d 1124, 1127 n.1 (Ind. Tax
Ct. 2001). Because Wielands claims and supporting arguments are identical to those
previously rejected by the Court, the Court will not address them.