ATTORNEY FOR PETITIONERS: ATTORNEYS FOR RESPONDENT:
TIMOTHY J. VRANA STEVE CARTER
SHARPNACK BIGLEY LLP ATTORNEY GENERAL OF INDIANA
Columbus, IN Indianapolis, IN
TED J. HOLADAY
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
TERRY L. CLARKSON AND )
KIMBERLY CLARKSON, )
) Cause No. 49T10-9907-TA-160
DEPARTMENT OF LOCAL )
See footnote )
ON APPEAL FROM A FINAL DETERMINATION OF
THE STATE BOARD OF TAX COMMISSIONERS
July 19, 2004
Terry L. Clarkson and Kimberly Clarkson (the Petitioners) appeal the State Board of
Tax Commissioners (State Board) final determination valuing their real property for the 1995
tax year. The issue for the Court to decide is whether the
State Board erred in valuing the Petitioners land under the Johnson County Land
Order (land order).
FACTS AND PROCEDURAL HISTORY
The Petitioners own and operate a manufacturing facility in Franklin, Indiana. In
accordance with Indiana Code § 6-1.1-4-13.6, the State Board promulgated a land order
for the Johnson County assessing officials to use for the 1995 general reassessment.
See Ind. Code Ann. § 6-1.1-4-13.6 (West 1993) (amended 2002). Under
that land order, the base rate values for commercial primary land could vary
between $6,500 and $84,900 per acre; the value for industrial primary land varied
between $6,500 and $19,500 per acre. (See Cert. Admin. R. at 24.)
The Petitioners land was valued as commercial at $65,000 per acre.
Believing this value to be excessive, the Petitioners appealed their assessment to the
Johnson County Board of Review (BOR); it denied the Petitioners request to value
their land as industrial. The Petitioners then appealed their assessment to the
State Board; on April 7, 1998, the State Board conducted an administrative hearing
on the matter. On May 24, 1999, the State Board issued a
final determination denying the Petitioners requested relief.
The Petitioners initiated an original tax appeal on July 6, 1999. In
lieu of a trial, the parties agreed to argue the case based on
the record and briefs submitted to the Court. On September 21, 2001,
the Court heard the parties oral arguments. Additional facts will be supplied
ANALYSIS AND OPINION
Standard of Review
This Court gives great deference to the final determinations of the State Board
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). Thus, this Court will reverse a final determination of the State
Board only when its findings are unsupported by substantial evidence, arbitrary, 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.
The sole issue is whether the State Board erred in valuing the Petitioners
land under the land order. The Petitioners contend that the land should
be assessed as industrial because they operate a manufacturing facility thereon. The
State Board contends that the classification of commercial was proper.
Land orders are administrative rules; therefore, they are subject to the same rules
of construction as statutes. See The Precedent v. State Bd. of Tax
Commrs, 659 N.E.2d 701, 704 (Ind. Tax Ct. 1995). Consequently, [i]n construing
a land order, the first and foremost rule of construction is to ascertain
and give effect to the land commissions intent, and the most reliable guide
to that intent is the language of the land order itself. Id.
To accomplish this, the Court will give [the] words and phrases used [in
the land order] their plain, ordinary, and usual meaning, unless it is apparent
that the land commission intended some other meaning. Id. at 705.
In this case, the land order fails to define either commercial or industrial
land. (See Cert. Admin. R. at 24.) Thus, the Petitioners rely
on the definitions of land classification and industrial property found within Indianas assessment
manual to support their conclusion that their land is industrial under the land
See footnote Specifically, the manual defines land classification as the classification of land
based upon its capabilities for use.
Ind. Admin. Code tit. 50, r.
2.2-4-1(13) (1996). In turn, industrial property is defined as land, improvements, or
machinery, or all three (3), used or adaptable for use in the production
of goods. It also includes supporting auxiliary facilities. Ind. Admin. Code
tit. 50, r. 2.2-1-33 (1996) (emphasis added).
Both parties agree that: (1) the Petitioners improvement is assessed under the
General Commercial Industrial pricing schedule; (2) the Petitioners use their property to manufacture
circuit boards; and (3) that no more than 2% of the Petitioners business
is walk-in business. Because the manual unambiguously provides for the classification of
land based upon its capabilities for use, and because the Petitioners have established
that their property is used in the production of circuit boards, the Petitioners
land properly falls within the definition of industrial property. Accordingly, the Petitioners
have demonstrated that their land should be valued under the industrial classification of
the land order.
See State Bd. of Tax Commrs v. Indianapolis Racquet
Club, Inc., 743 N.E.2d 247, 253 (Ind. 2001) (finding that because [the taxpayer]
has proved that its classification was not arrived at according to the [Indiana
assessment manual], it has carried its burden of showing that the State Boards
final determination was invalid). Consequently, the burden shifted to the State Board
to support its final determination with substantial evidence.
See Clark v. State
Bd. of Tax Commrs, 694 N.E.2d 1230, 1233 (Ind. Tax Ct. 1998) (finding
that once a taxpayer has made a prima facie case, the State Boards
final determination must be supported with substantial evidence).
In its final determination, the State Board concluded that
the dominant use type in the immediate area is commercial. The base
rate of the land falls within the value range for land in Franklin
Township. The petitioner presented no evidence to show the value of the
subject parcel is excessive, that the assessment is unfair or that the petitioner
is being treated differently than others in this area.
(Cert. Admin. R. at 17.) The State Board further asserted that
there is no indication that geographic features, zoning or anything else prohibits using
th[e] land [for a commercial use] similar to its neighbors. . . .
[Therefore], lacking evidence of any significant difference concerning this particular land, it would
be a violation of the constitutional obligation to maintain uniformity and equality of
assessment if the State Board were to lower the assessment on only [the
(Respt Br. at 6 (citations omitted).)
The State Board has not substantially supported its final determination. First, the
State Board ignores Indianas assessment manual, which specifically provides that land is to
be classified based upon its capabilities for use the Petitioners demonstrated that
their land not only is capable, but that indeed, it is being used
for producing circuit boards. See 50 IAC 2.2-4-1(13); 50 IAC 2.2-1-33.
Instead, the State Board valued industrial land as commercial merely because there were
commercial properties nearby. Second, having established that their land should be valued
as industrial rather than commercial, the Petitioners have necessarily demonstrated that the assessment
was excessive and unfair. The State Board presented no evidence showing a
physical or functional distinction between the Petitioners property and other industrial property in
Johnson County to warrant classifying it as anything other than industrial land.
See Indianapolis Historic Partners v. State Bd. of Tax Commrs, 694 N.E.2d 1224,
1229 (Ind. Tax Ct. 1998). Accordingly, the State Board has failed to
support its final determination with substantial evidence.
For the reasons stated above, the Court REVERSES the final determination of the
State Board and REMANDS it to the Indiana Board of Tax Review (Indiana
See footnote to instruct the local assessing officials to value the Petitioners property from
the industrial township section of the land order.
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 § 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 § 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.
The relevant section of the land order provided:
Commercial/Industrial Acreage Franklin Township, Johnson County
Page 9 of 24.
10, 14, 15, 22, 23 Twp 12 Range 4
West of RR tracks in
sec 2, 3, 11
(Cert. Admin. R. at 24.)
Footnote: The Indiana assessment manual does not define commercial property.
Footnote: The Department asserts that because the Petitioners did not rely on the
definitions found in the assessment manual at the administrative hearing, they could not
rely on them when they filed their briefs with this Court. (
Respt Br. at 8.) The Court concludes, however, that the Petitioners could
rely on the definitions as additional supporting authority for their arguments previously made
at the administrative hearing.
Substantial evidence is more than a scintilla. It means such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion.
Amax Inc. Through Amax Coal Co. v. State Bd. of Tax Commrs,
552 N.E.2d 850, 852 (Ind. Tax Ct. 1990) (citation omitted).
All cases that would have been remanded to the State Board are
now remanded to the Indiana Board of Tax Review (Indiana Board).
Code Ann. § 6-1.1-15-8 (West Supp. 2003). Final determinations made by the
Indiana Board are subject to review by this Court pursuant to Indiana Code
§ 6-1.1-15. Ind. Code Ann. §§ 6-1.5-5-7, 33-3-5-2 (West Supp. 2003).