ATTORNEY FOR PETITIONER:    ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN    STEVE CARTER
ATTORNEY AT LAW     ATTORNEY GENERAL OF INDIANA
Indianapolis, IN    Indianapolis, IN
    
    TED J. HOLADAY
    DEPUTY ATTORNEY GENERAL
    Indianapolis, IN
______________________________________________________________________
     IN THE INDIANA TAX COURT WIELAND DESIGNS,

See footnote         )
                                                                  )
    Petitioner,                                                   )
    v.                                                            )

            ) Cause No. 49T10-0010-TA-112
DEPARTMENT OF LOCAL         )
GOVERNMENT FINANCE, See footnote         )
                )
    Respondent.            )    
______________________________________________________________________
ON APPEAL FROM A FINAL DETERMINATION OF
THE STATE BOARD OF TAX COMMISSIONERS

NOT FOR PUBLICATION
July 7, 2004

FISHER,J.

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 Wieland’s improvement. See footnote
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 Wieland’s improvement. Wieland appealed its assessment to the Elkhart County Board of Review (BOR); the BOR assigned Wieland’s 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 Wieland’s 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 Board’s final determinations when it acts within the scope of its authority. Hamstra Builders, Inc. v. Dep’t of Local Gov’t 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.
Discussion

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 Comm’rs, 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 improvement’s actual loss of value. See Miller Structures, Inc. v. State Bd. of Tax Comm’rs, 748 N.E.2d 943, 954 (Ind. Tax Ct. 2001). In this case, the local assessing officials awarded an obsolescence depreciation adjustment to Wieland’s improvement; therefore, the existence of obsolescence itself is not at issue. See Heart City Chrysler v. State Bd. of Tax Comm’rs, 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 property’s record cards. (See Stip. R. at 67-83.) At the administrative hearing, Wieland’s property tax consultant, Drew Miller (Miller), explained how the economic age-life calculation reflected 90% obsolescence depreciation in Wieland’s 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 isn’t 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 improvement’s 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 Wieland’s improvement, Wieland was still required to demonstrate how those causes resulted in its improvement’s loss of value in order to convert that actual loss of value into a percentage reduction and apply it against its improvement’s 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 improvement’s causes of obsolescence and the associated loss in value. Without more, Wieland’s evidence failed to demonstrate that it was entitled to additional obsolescence depreciation. Accordingly, the State Board properly rejected Wieland’s request for additional obsolescence.

CONCLUSION

    For the aforementioned reasons, the Court AFFIRMS the State Board’s final determination.


Footnote: While various documents submitted to the Court spell the taxpayer’s name “Weiland,” the Court will refer to the taxpayer as “Wieland” as the original complaint and the taxpayer’s 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), see 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.

Footnote: 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 Comm’rs, 756 N.E.2d 1124, 1127 n.1 (Ind. Tax Ct. 2001). Because Wieland’s claims and supporting arguments are identical to those previously rejected by the Court, the Court will not address them.