ATTORNEYS FOR PETITIONERS:    ATTORNEYS FOR RESPONDENT:
B. KEITH SHAKE KAREN M. FREEMAN-WILSON
KERRY L. WAGNER     ATTORNEY GENERAL OF INDIANA
HENDERSON DAILY WITHROW & Indianapolis, Indiana
DeVOE     
Indianapolis, Indiana     VINCENT S. MIRKOV
DEPUTY ATTORNEY GENERAL
Indianapolis, Indiana

_____________________________________________________________________

    IN THE INDIANA TAX COURT _____________________________________________________________________

W.H. PAIGE & CO.,                                                 )
                                                                           )
Petitioner,                                                                )
                                                                           )
v.                                                                         ) Cause No. 49T10-9611-TA-157
                                                                           )
STATE BOARD OF TAX COMMISSIONERS,                                          )
                                                                           )
Respondent.                                                                )    

    An exception to the mandatory penalty exists only if the taxpayer has complied with all of the requirements for claiming a deduction, an exemption or an adjustment for abnormal obsolescence or permanently retired equipment. See footnote See id. See also Ind. Ann. Code § 6-1.1-37-7(e). If such deduction, exemption, or adjustment is denied, the “increase in assessed value that results from [the] denial of the deduction, exemption See footnote or adjustmentSee footnote “ is not considered to be an undervaluation. See id. See also Ind. Admin. Code tit. 50, r. 4.2-2-10(d). Rather, it is considered to be an “interpretive difference” not subject to the penalty. See Ind. Admin. Code tit. 50, r. 4.2-2-10(d). However, all other amounts “not fully disclosed through omission or undervaluation . . . are subject to the twenty percent (20%) penalty.” See id. To be clear, the term “interpretive difference,” as defined in the regulations, does not mean any disagreement or misunderstanding between the taxpayer and the State Board. Instead, the regulations have limited the situations in which the term “interpretive difference” applies. See id.
    Some of the Court’s prior cases have dealt with the exceptions to the undervaluation penalty. In Rogers v. State Board of Tax Commissioners, 565 N.E.2d 398, 400 (Ind. Tax Ct. 1991), the taxpayer argued that he qualified for a personal property tax adjustment for formal wear that he maintained was “permanently retired” pursuant to Ind. Admin. Code tit. 50, r. 4.1-2-4 (1988) (repealed 1989.) See footnote The State Board denied the adjustment and imposed an undervaluation penalty. See Rogers, 565 N.E.2d at 399. This Court held that the State Board improperly imposed the penalty on the taxpayer’s taxes because the taxpayer’s undervaluation resulted from interpretive differences concerning a personal property tax adjustment. See id. at 403. Moreover, the Court stated that the “increase in assessed value resulting from the State Board’s denial of the adjustment is not subject to penalty.” Id.
    Similarly, in Monarch Steel v. State Board of Tax Commissioners, 611 N.E.2d 708, 710 (Ind. Tax Ct. 1993), the taxpayer appealed the State Board’s final determination that the interstate commerce exemption was unavailable for steel cut by the taxpayer prior to shipment. The State Board penalized the taxpayer for failing to include its “allocable expenses” as required by Ind. Admin. Code tit. 50, r. 4.2-5-5(c)(1996) in the valuation of its inventory. See Monarch Steel, 611 N.E.2d at 715. This Court held that the nature and length of litigation over the applicability of the interstate commerce exemption for business personal property assessments established interpretive differences that precluded imposition of the penalty against the taxpayer for undervaluation of its inventory. See footnote See id.
    Unlike the taxpayers in Rogers and Monarch, Paige did not claim a qualified deduction, exemption, or adjustment for abnormal obsolescence or permanently retired equipment on the return form as required by Ind. Code § 6-1.1-37-7(e) and Ind. Admin. Code tit. 50, r. 4.2-2-10(c). Rather, Paige erroneously understood its own agreements to be sales with security interests instead of leases. Consequently, Paige omitted the musical instruments that it leases from its personal property tax return resulting in an undervaluation that exceeded five percent of the value that should have been reported on the return. This does not fall within one of the exceptions to the mandatory undervaluation penalty and is not considered to be an interpretive difference. See id. See also Ind. Admin. Code tit. 50, r. 4.2-2-10. Therefore, section 6-1.1-37-7(e) is triggered and a 20% undervaluation penalty must be applied.
    This Court has held that where a statute is clear and offers no opportunity for discretion in applying a penalty and where the facts meet the requirements of the statute, the penalty cannot be waived. See American Juice Co. v. State Bd. of Tax Comm’rs, 527 N.E.2d 1169, 1171 (Ind. Tax Ct. 1988) (citing Gulf Stream Coach, Inc. v. State Bd. of Tax Comm’rs, 519 N.E.2d 238, 243 (Ind. Tax Ct. 1988)). Because Paige reported less than the total assessed value it was required by law to report and because the amount of the undervaluation exceeds five percent (5%) of the value that should have been reported, the penalty must stand.