ATTORNEY FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN STEVE CARTER
ATTORNEY AT LAW ATTORNEY GENERAL OF INDIANA
Indianapolis, IN Indianapolis, IN
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
TUBE PROCESSING CORP., )
v. ) Cause No. 49T10-0002-TA-25
DEPARTMENT OF LOCAL )
ON APPEAL FROM A FINAL DETERMINATION OF
THE STATE BOARD OF TAX COMMISSIONERS
NOT FOR PUBLICATION
SEPTEMBER 9, 2003
Tube Processing Corp. (Tube) appeals the State Board of Tax Commissioners (State Board)
final determination valuing its real property for the 1995 tax year. The
for the Court to decide are: 1) whether the State Board erred
when it refused to increase the amount of obsolescence depreciation assigned to Tubes
improvements; and, 2) whether the State Board erred when it refused to reduce
the grade of one of those improvements from C to D. For
the following reasons, the Court AFFIRMS the State Boards final determination on both
FACTS AND PROCEDURAL HISTORY
Tube owns two commercial improvements in Marion County, Indiana. For the 1995
assessment year, the local assessing officials assigned Tubes improvements 25% and 20% obsolescence
depreciation adjustments, respectively. Furthermore, the local assessing officials determined that one of
the improvements should be graded a C. Tube appealed this assessment to
the Marion County Board of Review (BOR) arguing that additional obsolescence was warranted
for both improvements; the BOR denied Tubes appeal. Tube then appealed the
BORs decision to the State Board arguing again that both improvements were entitled
to increased obsolescence depreciation and that the C graded improvement should have been
graded D. After a hearing on March 4, 1999, the State Board
issued a final determination denying Tubes requests.
On February 4, 2001, Tube initiated an original tax appeal. The parties
stipulated to the record and, on February 21, 2001, this Court heard the
parties oral arguments. Additional facts will be supplied as necessary.
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). 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.
Furthermore, a taxpayer who appeals to this Court from a State Board final
determination bears the burden of showing that the final determination was invalid.
Id. To do so, the taxpayer must present a prima facie case
by submitting probative evidence, i.e., evidence sufficient to establish a given fact that,
if not contradicted, will remain sufficient. Id. Once the taxpayer presents
a prima facie case, the burden shifts to the State Board to rebut
the taxpayers evidence and support its findings with substantial evidence. Id.
Issue #1: Obsolescence
Tube contends that the State Board erred in refusing to award additional obsolescence
depreciation to its improvements.
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, 742
N.E.2d 46, 51 (Ind. Tax. Ct. 2001). Functional obsolescence is caused by
internal factors; economic obsolescence is caused by external factors. See Ind. Admin.
Code tit. 50, r. 2.2-10-7(e),(f) (1996). The determination of obsolescence involves (1)
identification of causes of obsolescence and (2) quantification of the amount of obsolescence
to be applied. See Clark, 742 N.E.2d at 51 (citations omitted).
Thus, the nexus between the causes of obsolescence and the effects of such
obsolescence must be examined in tandem when determining the percentage of obsolescence depreciation
to be applied to a specific improvement.
In this case, the State Board awarded obsolescence depreciation allowances for both improvements;
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). Consequently, the burden was on Tube to present
probative evidence quantifying the amount of additional obsolescence it requested. In an
attempt to satisfy its burden, Tube presented an exhibit at the administrative hearing
entitled Assessment Review and Analysis (Analysis) prepared by its tax representative, M. Drew
Miller of Landmark Appraisals, Inc. (Miller). See (Stip. R. at 49 &
In the Analysis, Miller determined that the improvements were entitled to additional obsolescence
depreciation ranging from 40% - 60% as ascertained by deducting the physical depreciation
that is already applied by the County from the total accrued depreciation that
is calculated using the Economic Life Method. (Stip. R. at 53 &
64.) Attached to Millers calculations are photocopied photographs of the buildings; a
one-page description of the Economic Age-Life Method calculation formula; a chart titled Depreciation
- Commercial Properties and, a chart titled Life Expectancy Guidelines (Typical Building Lives).
To meet its burden, Tube was required to make a factual case at
the State Board level in order . . . to get relief in
this Court. See Hoogenboom-Nofziger v. State Bd. of Tax Commrs, 715 N.E.2d
1018, 1023 (Ind. Tax. Ct. 1999). The submission of generalized, non-specific evidence
containing conclusory assertions without support, however, does not constitute probative evidence. See
Whitley Prods., Inc. v. State Bd. of Tax Commrs, 704 N.E.2d 1113, 1119
(Ind. Tax. Ct. 1998) review denied. Tube failed to explain to the
State Board or this Court how the information included in the Analysis report
related to the request for increased obsolescence depreciation. Instead, it
merely presented its conclusion that it was entitled to additional obsolescence without further
explanation. Thus, Tube failed to make a prima facie case that it
was entitled to increased obsolescence.
Issue #2: Grading
Tube next contends that the State Board erred when it refused
to reduce the grade of one of its improvements from a C to
a D. Grade is defined as the classification of an improvement based
on certain construction specifications and quality of materials and workmanship. Ind. Admin.
Code tit. 50, r. 2.2-1-30 (1996). When determining grade, the assessor uses
his judgment to distinguish significant variations in quality and design. Ind. Admin.
Code tit. 50, r. 2.2-10-3(a) (1996). In this case, the assessor determined
that Tubes improvement fit within the grade C category; C grade buildings are
moderately attractive and constructed with average quality materials and workmanship. Ind. Admin.
Code tit. 50, r. 2.2-10-3(a)(3) (1996).
Tube again had the burden of establishing a prima facie case that the
State Boards grade assignment was erroneous. See Whitley Prods., 704 N.E.2d at
1119. In an attempt to meet its burden, Millers Analysis contained a
page titled Errors and Contentions in which he states that the subject is
substantially inferior to the base model for ten reasons.
(Stip. R. at
51.) For instance, Miller asserts that subject has single pane windows and
subject lacks insulation. (Stip. R. at 51.) Such assertions, however, do
not illustrate how the deficiencies relate to Tubes request for a decrease in
grade from C to D. These statements are merely conclusions, and do
not constitute probative evidence concerning the grading of improvements. See Whitley Prods.,
704 N.E.2d at 1119.
Tube failed to make a prima facie case that the State Boards grade
of C was erroneous. Consequently, the State Board properly rejected Tubes request
to change the grade assignment.
For the aforementioned reasons, the Court AFFIRMS the State Boards final determination on
both the issues of obsolescence and grade.
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. 2001)(eff. 1-1-02); 2001 Ind. Acts 198 §
66, and the Indiana Board of Tax Review (Indiana Board). Ind. Code
§ 6-1.5-1-3 (West Supp. 2001)(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 § 6-1.5-5-8 (West Supp. 2001)(eff. 1-1-02);
2001 Ind. Acts 198 § 95. Nevertheless, the law in effect prior
to January 1, 2002 applies to these appeals. 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
In addition, Tube 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 Tubes claims and supporting arguments are identical to those
previously rejected by the Court, the Court will not address them.
Tube uses the same argument to support its claim for additional obsolescence
on both improvements; the Board reviewed the obsolescence claim on both parcels together
and the Court will do so as well.
Footnote: Two individual analysis reports, one for each parcel, were prepared by Miller
and submitted as exhibits during the hearing; essentially the reports were identical with
respect to content, but for the differences in numerical calculations specific to each
property. Consequently, the Courts references to the Analysis refer to both submissions.
In only one of the ten reasons does Miller even attempt to
show how its improvement differs from the model: [t]he subject has approximately
740 [linear feet] of partitions, the model includes approximately 2,100 [linear feet].
(Stip. R. at 51.)