ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENTS:
Jeffrey T. Bennett STEVE CARTER
Steven G. Cracraft ATTORNEY GENERAL OF INDIANA
Michael S. Prakel Indianapolis, IN
BINGHAM McHALE LLP
Indianapolis, IN JOEL SCHIFF
DEPUTY ATTORNEY GENERAL
CLORIUS LEE LAY
JOHN ROBERT CANTRELL
ATTORNEYS FOR INTERVENING RESPONDENTS:
BARTON T. SPRUNGER
DAVID M. MATTINGLY
INDIANA TAX COURT
BP PRODUCTS NORTH AMERICA INC., )
v. ) Cause No. 49T10-0203-TA-25
DEPARTMENT OF LOCAL )
GOVERNMENT FINANCE; JON LARAMORE, )
Commissioner; PETER BENJAMIN, in his )
official capacity as LAKE COUNTY AUDITOR; )
and PEGGY HOLINGA KATONA, in her official )
capacity as LAKE COUNTY TREASURER, )
CITY OF EAST CHICAGO, SCHOOL CITY OF )
EAST CHICAGO, and EAST CHICAGO )
PUBLIC LIBRARY, )
Intervening Respondents. )
Order on Motion to Dismiss
August 21, 2002
BP Products North America Inc. (BP), appeals the Indiana Department of Local Government
Finances (DLGF) February 15, 2002 certification of the budgets, tax rates, and tax
levies (Tax Package) for East Chicago, Lake County, Indiana. The City of
East Chicago, School City of East Chicago, and the East Chicago Public Library
(City Entities) as intervening respondents have filed a motion to dismiss. They
claim that the Court lacks jurisdiction to decide this case because the DLGFs
certification does not constitute a final determination. Therefore, the issue before the
Court today is whether the Court has subject matter jurisdiction to decide BPs
For the reasons stated below, the Court GRANTS the City Entities motion to
FACTS AND PROCEDURAL HISTORY
LTV Steel (LTV) conducted business in East Chicago, located in Lake County, Indiana.
In late December of 2000, LTV publicly announced that pursuant to its
Chapter 11 Bankruptcy Reorganization, it was seeking court approval to shut down its
East Chicago plant.
On August 1, 2001, the Lake County Auditor, Peter Benjamin, certified the assessed
values of East Chicago for the 2001 tax year payable in 2002.
On October 18, 2001, Lake County issued a Notice to Taxpayers of Lake
County of Proposed Tax Rates. This was published in local newspapers on
October 24, 2001.
As of November 21, 2001, LTV had not paid its May and November
property tax installments for the 2000 tax year payable in 2001, and it
did not appear to the Lake County Auditor that LTV would be paying
any future tax bills. Consequently, the Lake County Auditor sought a formal
opinion from the State Board of Tax Commissioners (State Board)
See footnote giving him approval
to exclude the assessed value of LTVs property pursuant to Indiana Code Section
6-1.1-17-0.5See footnote and to re-certify the assessed values for the 2001 tax year payable
in 2002. The State Board declined to issue an opinion giving its
approval, and instead, stated that the statute empowered the county auditor to make
the decision as to whether to exclude the assessed value of LTVs property.
On December 31, 2001, the Lake County Auditor excluded the assessed value
of LTVs property and re-certified the assessed values of East Chicago (Auditors December
BP owns property in East Chicago. On February 5, 2002, BP sent
a letter to the DLGF asserting that the $303,133,613 reduction in assessed value
(due to the exclusion of LTV) reflected in the Auditors December Re-certification
unfairly burdened it and other East Chicago taxpayers by inequitably increasing the effective
property tax rate. BP requested that the DLGF invalidate the Auditors December
Re-certification and reinstate the original August 1, 2001 certification because: 1) the Auditors
December Re-certification was performed after the statutory deadline;See footnote 2) the Auditor improperly excluded
LTV from the tax duplicate;See footnote and 3) the Auditors December Re-certification was in
violation of the Indiana and United States constitutions.See footnote BP asserted that it
would incur an estimated additional $1.7 million in tax liability as a result
of the exclusion of LTVs property.
On February 15, 2002, the Auditor revised and re-certified the Auditors December Re-certification
(Auditors February Re-certification), which reflected an increase in the assessed value of
East Chicago.See footnote On that same day, the DLGF certified the East Chicago
Tax Package including the assessed values re-certified by the Auditor earlier that same
day (DLGF February Certification).See footnote
On March 4, 2002, BP filed a petition for judicial review of a
final determination of the DLGF in this Court claiming that: 1) the DLGF
certified the December 31, 2001 and the February 15, 2002 assessed values despite
their untimeliness and illegality, and 2) because the DLGF could not rule on
the constitutionality of Indiana Code Section 6-1.1-17-0.5(b), BP was forced to seek judicial
review on that issue. BP claims that the DLGFs certification of the
East Chicago Tax Package constitutes a final determination.
On May 14, 2002, the City Entities filed a motion to dismiss pursuant
to Indiana Trial Rule 12(B)(1).See footnote The City Entities claimed that this Court
lacked subject matter jurisdiction because there was no final determination from which BP
could appeal, and that BP had failed to exhaust its administrative remedies.
On June 6, 2002, the Lake County Auditor filed a motion to dismiss
stating the same reasons for dismissal as the City Entities.
On June 10, 2002, the Court held a hearing on these motions.See footnote
Additional facts will be provided as necessary.
ANALYSIS, OPINION & ORDER
As mentioned above, the Court must determine whether it has subject matter jurisdiction
over BPs appeal. Subject matter jurisdiction is the power of a court
to hear and determine the general class of cases to which the proceedings
before it belong. Whetzel v. Dept of Local Govt Fin., 761 N.E.2d
904, 906 (Ind. Tax Ct. 2002). Whether a court has subject matter
jurisdiction depends on whether the type of claim advanced by the petitioner falls
within the general scope of authority conferred upon the court by constitution or
statute. Musgrave v. State Bd. of Tax Commrs, 658 N.E.2d 135, 138
(Ind. Tax Ct. 1995).
The Tax Court is a court of limited jurisdiction. State Bd. of
Tax Commrs v. Mixmill Mfg. Co., 702 N.E.2d 701, 702 (Ind. 1998); Ind.
Code § 33-3-5-2(a). This Court has jurisdiction over:
any case that arises under the tax laws of this state and that
is an initial appeal initiated after December 31, 2001, of a final determination
made by the [DLGF] if the following apply: (1) The tax court would
have had jurisdiction over the case if the appeal had been initiated before
January 1, 2002. (2) This act does not provide that the final determination
is subject to appeal to the Indiana board of tax review.
P.L. 198-2001, § 116 (emphasis added).
See footnote A final determination is an order
that determine[s] the rights of, or impose[s] obligations on, the parties as a
consummation of the administrative process.
Mills v. State Bd. of Tax Commrs,
639 N.E.2d 698, 701 (Ind. Tax Ct. 1994); see also Lake County
Council v. State Bd. of Tax Commrs, 706 N.E.2d 270, 275 (Ind. Tax
Ct. 1999), revd on other grounds by 730 N.E.2d 680 (Ind. 2000).;
Matonovich v. State Bd. of Tax Commrs, 705 N.E.2d 1093, 1095 (Ind. Tax
Ct. 1999), review denied. The Court can also be conferred jurisdiction by
I.C. § 33-3-5-2(b). The legislature has been clear in providing
that [i]f a taxpayer fails to comply with any statutory requirement for the
initiation of an original tax appeal, the tax court does not have jurisdiction
to hear the appeal. Ind. Code § 33-3-5-11(a); Mixmill, 702 N.E.2d
The parties do not dispute and the Court agrees
See footnote that this case arises
under the Indiana tax laws. Therefore, the Court will look only to
whether the DLGF issued a final determination in this case. The Court
will analyze BPs case by looking at whether the DLGFs February Certification of
the East Chicago Tax Package meets the definition of a final determination.
The Court first looks to whether BP was a party to the DLGFs
February Certification. As stated earlier, BP sent a letter to the DLGF
on February 5, 2002 asking the DLGF to invalidate the Auditors December Re-certification.
BP requested that the DLGF include LTVs assessed value in its upcoming
certification of East Chicago. BP asserts that by mailing the letter it
became a party to a proceeding. (Petr Post Hearing Br. at 3.)
BP contends that by sending this letter it was filing its petition
with the DLGF and the DLGF had a legal duty to act, not
just an administrative function to perform. (Petr Post Hearing Br. at 3.)
Although the DLGF did not respond to the letter, BP contends that
the DLGFs February Certification of the East Chicago Tax Package constituted a final
BPs letter to the DLGF did not convert the certification into an adjudicatory
processSee footnote wherein BP could make itself a party. BP cannot confer subject
matter jurisdiction upon the Court by sending a letter to the DLGF and
insisting that the letter changed the DLGFs February Certification into an adjudicatory proceeding
C.f. Lake County Council, 706 N.E.2d at 274 (stating that the parties
cannot confer subject matter jurisdiction upon the Court). Moreover, in Board of
School Commissioners of City of Indianapolis v. Eakin, the Indiana Supreme Court discussed
the State Boards authority to revise, reduce, or increase certain tax packages that
it was required to review. Board of School Commrs of City of
Indianapolis v. Eakin, 444 N.E.2d 1197, 1201 (Ind. 1983). The Court held
that in a non-appellate review of tax packages, interested people may submit information
for the State Board to consider, but the State Board has the discretion
to decide what information is useful and what it will reject as irrelevant
or extraneous. Id. at 1202. Accordingly, the DLGF could have considered
the information provided in BPs letter if it found the information useful or
could have ignored it. Either way, the letter submitted to the DLGF
did not make BP a party to the DLGF February Certification.
Second, the Court looks to whether the DLGFs February Certification imposed obligations on
BP. BP contends that the DLGFs February Certification is a final determination
because it imposes obligations on it and other taxpayers to pay higher property
taxes in 2002 without having the option of further administrative review. While
the certification of every tax package imposes obligations on all taxpayers within the
taxing unit, every certification cannot be a final determination giving the taxpayer a
right of direct appeal to the Tax Court. BP must show that
it suffered direct injury to have standing to bring this case. See
Embry v. OBannon, 770 N.E.2d 943, 946-47 (Ind. Ct. App. 2002) (holding a
party must demonstrate an interest beyond that of the general public to have
standing). It is simply not enough to have a general interest common
to all the other taxpayers. See id. BP has not shown
that it has more than a general interest common to all the East
Chicago taxpayers. Moreover, if the DLGF were required to conduct full-scale, quasi-judicial
proceedings in conjunction with reviews of all tax packages, its ability to review
the large number of tax packages submitted to it in accordance with statutory
deadlines would be severely hindered and would make the property tax disbursement scheme
unworkable. See Eakin, 444 N.E.2d at 1202.
Third, the Court looks to whether the DLGFs February Certification constituted a consummation
of the administrative process. BP posits that the DLGF February Certification was
a consummation of the administrative process because Indiana Code Section 6-1.1-17-16(f)
See footnote provides that
[t]he action of the [DLGF] on a budget, tax rate, or tax levy
Ind. Code § 6-1.1-17-16(f). However, this statute does not
state that the action is a final determination that would be directly appealable
to the Tax Court. See id. BP has other administrative remedies
to pursue before the Court will have jurisdiction over its appeal. For
example, BP could pay the taxes and then file a claim for refund
pursuant to Indiana Code Section 6-1.1-26-1
See footnote , which if denied, constitutes a final determination
that would be reviewable by this Court.
See State Bd. of Tax
Commrs v. Montgomery, 730 N.E.2d 680, 685 (Ind. 2000).
The DLGF February Certification does not meet any of the definitional elements of
a final determination. BP has not shown that it is a party
upon which the DLGFs February Certification imposed obligations on as a consummation of
an administrative process. Therefore, the Court holds that the BP February Certification
does not constitute a final determination.
BP raises a number of additional arguments in an attempt to persuade this
Court to hear its case today. First, BP contends that direct appeal
to the Tax Court is the most efficient method of appealing. BP
asserts that waiting to pay the tax and then requesting a refund is
not administratively economical. Generally, exhaustion of administrative remedies is required before a
court may exercise jurisdiction over a matter conferred to an administrative agency.
Smith v. State Lottery Commn, 701 N.E.2d 926, 931 (Ind. Ct. App. 1998),
trans. denied. An exception to this general rule exists when administrative remedies
are not adequate. Id. As mentioned above, BP has other administrative
remedies to pursue before the Court will have jurisdiction over its appeal.
Second, BP argues that its case is similar to Ispat Inland, Inc. v.
State Board of Tax Commissioners, because BP, like Ispat, requested review pursuant to
Indiana Code Section 6-1.1-35-1,
See footnote which allows the DLGF to interpret the Indiana tax
Ispat Inland, Inc. v. State Bd. of Tax Commrs, 757 N.E.2d
1078, 1081-82 (Ind. Tax Ct. 2001), review granted. However, that is
where the similarity ends.
In Ispat, the State Board specifically acted in response to Ispats letter requesting
it to interpret the tax laws. Ispat, 757 N.E.2d at 1081-82.
Thereafter, the State Board issued a Decision directly to Ispat explaining what Ispats
obligations would be. Id. at 1082-84. Furthermore, following the State Boards
Decision, there was no other administrative proceeding for Ispat to pursue regarding its
challenge. Id. at 1084.
Here, BPs letter did not provoke the DLGF to act. The DLGF
was already acting on its own volition and in its administrative function when
it issued the February Certification. Also, the DLGF did not issue any
sort of response directly to BP in reply to BPs letter. Finally,
unlike Ispat, BP still has administrative remedies available to pursue.
Third, BP argues that this Court must decide its case because the DLGF
did not have the power to resolve the constitutionality of Indiana Code Section
6-1.1-17-0.5. Despite BPs complaint that the statute was unconstitutional, it is still
required to exhaust its administrative remedies because during the administrative action, nonconstitutional issues
may render the constitutional challenge moot. See Montgomery, 730 N.E.2d at
Fourth, BP argues that the DLGFs February Certification can be appealed to this
Court because the revised Tax Court Rules provide for specific procedures for appeals
from a final determination by the DLGF to the Tax Court. See
Ind. Tax Court Rule 4(A)(1).
See footnote Citing
Browing v. Walters, BP asserts that
these rules have the binding force of a statute. See Browing v.
Walters, 620 N.E.2d 28, 31 (Ind. Ct. App. 1993). However, BP does
not acknowledge that the Tax Court Rules also provide that [n]othing in this
rule shall relieve a party from complying with statutory requirements for bringing an
original tax appeal. Ind. Tax Court Rule 4(A)(1). Because the Court
has decided that the DLGF February Certification did not constitute a final determination,
this argument is without merit.
For the foregoing reasons, the City Entities motion to dismiss for lack of
subject matter jurisdiction is GRANTED.
Thomas G. Fisher, Judge
Indiana Tax Court
Jeffrey T. Bennett
Steven G. Cracraft
Michael S. Prakel
BINGHAM McHALE, LLP
2700 Market Tower
10 West Market Street
Indianapolis, IN 46204
Clorius L. Lay
Gary, IN 46407
John Robert Cantrell
2149 U.S. Highway 41
Schererville, IN 46375
Barton T. Sprunger
David M. Mattingly
One American Square
Indianapolis, IN 46282-0002
Office of the Attorney General
Indiana Government Center South, 5th Floor
402 W. Washington Street
Indianapolis, IN 46204
The legislature abolished the State Board as of December 31, 2001.
P.L. 198-2001, § 119(b)(2). Effective January 1, 2002, the legislature created
the Department of Local Government Finance (DLGF),
Ind. Code § 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,
Indiana Code Section 6-1.1-17-0.5, which was passed by the legislature in
(a) For purposes of this section, assessed value has the meaning set forth
in IC 6-1.1-1-3(a).
(b) The county auditor may exclude and keep separate on the tax duplicate
for taxes payable in a calendar year the assessed value of tangible property
that meets the following conditions:
(1) The assessed value of the property is at least nine percent (9%)
of the assessed value of all tangible property subject to taxation by a
taxing unit (as defined in IC 6-1.1-1-21).
(2) The property is or has been part of a bankruptcy estate that
is subject to protection under the federal bankruptcy code.
(3) The owner of the property has discontinued all business operations on the
(4) There is a high probability that the taxpayer will not pay property
taxes due on the property in the following year.
(c) This section does not limit, restrict, or reduce in any way the
property tax liability on the property.
Ind. Code § 6-1.1-17-0.5.
BP asserts that Indiana Code Section 6-1.1-17-1(a) requires that the certification
must be sent to the DLGF on or before August 1
the next calendar year.
BP contends that the four requirements of Indiana Code Section 6-1.1-17-0.5(b),
which allows the exclusion of certain bankruptcy property from the tax duplicate, were
Footnote: BP claims a violation of Article 10 Section 1 of the
Indiana Constitution and the Equal Protection clauses of the Indiana and United States
Constitutions (U.S. Const. Amend. XIV). BP claims that Indiana Code Section 6-1.1-17-0.5
is unconstitutional because by excluding the property subject to bankruptcy, it permits one
taxpayers tax burden to be redistributed to others without regard for the taxpayers
Footnote: The record does not reveal what revisions the Auditor made to
the assessed values.
Footnote: Pursuant to Indiana Code Section 6-1.1-17-16(a) the state board of tax
commissioners may revise, reduce, or increase a political subdivisions budget, tax rate, or
tax levy which the board reviews under section 8 or 10 of this
Ind. Code § 6-1.1-17-16(a). Indiana Code Section 6-1.1-17-16(g) states that
[t]he state board of tax commissioners is expressly directed to complete the duties
assigned to it under this section not later than February 15th of each
year for taxes to be collected during that year. . Ind.
Code § 6-1.1-17-16(g).
The City Entities also move for dismissal pursuant to Trial Rule
12(B)(6) asserting that BP failed to state a claim upon which relief could
be granted arguing that the DLGF had no authority to nullify or correct
the Lake County Auditors re-certifications. However, because the Court grants their
motion to dismiss for lack of subject matter jurisdiction, it is not necessary
for the Court to address this issue.
The Court also heard BPs petition to enjoin the collection of
Footnote: The Court also has jurisdiction over certain final determinations of the
Indiana Board of Tax Review and the Indiana Department of State Revenue.
Ind. Code § 33-3-5-2.
BP does cite to nor does the Court find any statute
that specifically assigns this Court jurisdiction to decide appeals from the DLGFs certification
of Tax Packages nor is there any statute pointed out that allowed such
appeals to have been taken from State Board certifications in the past.
Footnote: A case arises under the tax laws of Indiana if: 1)
an Indiana tax statute creates the right of action; or 2) the case
principally involves collection of a tax or defenses to that collection.
County Council v. State Bd. of Tax Commrs, 706 N.E.2d 270, 274 (Ind.
Tax Ct. 1999), revd on other grounds by 730 N.E.2d 680 (Ind. 2000).
This case involves the DLGFs power to reduce, revise, or increase a
political subdivisions budget, tax levy or tax rate pursuant to Indiana Code Section
6-1.1-17-16. In addition, BP contests the constitutionality of Indiana Code Section 6-1.1-17-0.5,
which allows certain properties to be excluded from the tax duplicate. As
the parties do not dispute, because this case involves the defense to the
collection of property tax, it arises under the tax laws of this state.
This Court has held that the State Boards certification of an
HCI property tax levy rate was not a final determination because the certification
proceeding was not adjudicatory.
Montgomery v. State Bd. of Tax Commrs, 708
N.E.2d 936, 940 n.7 (Ind. Tax Ct. 1999), (stating that the State Board
was not operating in an adjudicatory manner when it certified the Lake County
HCI property tax levy rate), revd on other grounds by 730 N.E.2d 680
The language in Indiana Code Section 6-1.1-17-16 still refers to the
state board of tax commissioners, an entity that no longer exists.
P.L. 198-2001 § 119(b)(2). However, Public Law 198-2001, Section 119 states that
until the Indiana legislative Services Agency prepares legislation to correct internal references in
the Indiana Code takes effect, a reference in the Indiana Code to the
state board of tax commissioners is, after December 31, 2001, considered to be
a reference to the department of local government finance or the Indiana board
of tax review, as the context requires. P.L. 198-2001, § 119.
The context of Indiana Code Section 6-1.1-17-16 requires that state board of tax
commissioners be read as the department of local government finance. See id.
The DLGF has taken on the administrative duties of the former state
board of tax commissioners. Compare Ind. Code § 6-1.1-30-14 with Ind. Code
§ 6-1.1-30-14 (West 2000).
The statute governing claims for refund provides:
A person . . . may file a claim for the refund of
all or a portion of a tax installment which he has paid.
However, the claim must be:
(1) filed with the auditor of the county in which the taxes were
(2) filed within three (3) years after the taxes were first due;
(3) filed on the form prescribed by the state board of accounts and
approved by the state board of tax commissioners; and
(4) based upon one (1) of the following grounds:
* * * *
(ii) The taxes, as a matter of law, were illegal.
* * * *
Ind. Code § 6-1.1-26-1.
Indiana Code Section 6-1.1-35-1 provides:
The [DLGF] shall:
(1) interpret the property tax laws of this state;
(2) instruct property tax officials about their taxation and assessment duties and ensure
that the county assessors, township assessors, and assessing officials are in compliance with
section 1.1 of this chapter;
(3) see that all property assessments are made in the manner provided by
(4) develop and maintain a manual for all assessing officials and county assessors
(A) assessment duties and responsibilities of the various state and local officials;
(B) assessment procedures and time limits for the completion of assessment duties;
(C) changes in state assessment laws; and
(D) other matters relevant to the assessment duties of assessing officials, county assessors,
and other county officials.
Ind. Code § 6-1.1-35-1. This statute still uses the state board of
tax commissioners. It appears that P.L. 198-2001 did not amended it.
However, according to Public Law 198-2001 the context would now require this reference
to be to the DLGF. P.L. 198-2001, § 119.
Indiana Tax Court Rule 4(A)(1) provides:
Notwithstanding anything to the contrary herein, the Tax Court acquires jurisdiction over .
. . the Department of Local Government Finance upon the filing of a
petition with the clerk of the Tax Court seeking to set aside a
final determination. Ind. Tax Court Rule 4(A)(1)