_____________________________________________________________________

    IN THE INDIANA TAX COURT _____________________________________________________________________

JAMES L. & BARBARA A. PUCKETT,                                        )
                                                                               )
    Petitioners,                                                               )
                                                                               )
    v.                                                                         )   Cause No. 49T10-9910-TA-206
                                                                               )
DEPARTMENT OF LOCAL                                                            )
GOVERNMENT FINANCE,                                                            )
             
                                                                              
                                                                              
                                                                              
                                                                 
    )
    Respondent.            )    
_____________________________________________________________________

ORDER ON PETITIONERS’ PETITION FOR REHEARING


NOT FOR PUBLICATION
October 17, 2003

FISHER, J.

    Come now the Petitioners, James L. and Barbara A. Puckett (the Pucketts), and file a Petition for Rehearing pursuant to Indiana Appellate Rules 54 and 63. In their Petition, the Pucketts challenge this Court’s holding in James L. & Barbara A. Puckett v. Department of Local Government Finance, No. 49T10-9910-TA-206, slip op. (Ind. Tax Ct. July 22, 2003). Having reviewed the Pucketts’ Petition and having held a hearing thereon, the Court now GRANTS the Pucketts’ Petition in part.
FACTS AND PROCEDURAL HISTORY

    The Pucketts own several warehouses in Columbus Township, Bartholomew County, Indiana. For the 1997 tax year, the Pucketts’ warehouses were assessed as ”mini-warehouses” under the General Commercial Industrial (GCI) cost schedule.     
    The Pucketts challenged the assessment, first with the local assessing authorities and then with the State Board of Tax Commissioners (State Board). Throughout the appeal process, the Pucketts argued that because their warehouses were pole buildings, they should have been valued under the General Commercial Kit (GCK) cost schedule. In the alternative, the Pucketts argued that under the current pricing (i.e., GCI pricing), the warehouses’ grade factor should be reduced from a “D” to an “E.”
     Neither the local assessing officials, nor the State Board, awarded the Pucketts any relief on their appeal. Consequently, the Pucketts filed an original tax appeal with this Court on October 20, 1999. After conducting trial and oral argument, this Court issued an opinion in which it affirmed the State Board’s final determination. Puckett, slip. op. at 5. More specifically, the Court determined that the Pucketts did not submit any evidence to show that their warehouses qualified for GCK pricing. Id. at 4. Furthermore, the Court did not address the Pucketts’ grade issue, as it determined that the Pucketts waived the issue at the administrative hearing. Id. at n.5.
    On August 21, 2003, the Pucketts filed a Petition for Rehearing. The Court held a hearing on the Pucketts’ Petition on October 7, 2003. Additional facts will be provided as necessary.
ANALYSIS & ORDER

    In their Petition, the Pucketts argue that the Court’s decision was erroneous because it incorrectly determined that the Pucketts waived the grade issue at the administrative hearing. (Pet’rs Pet. for Reh’g at 1.) The Pucketts are correct.
    After reviewing the administrative record in this case again, the Court finds the following discussion, between the Pucketts’ property tax consultant Milo Smith and State Board hearing officer Kay Schwade, persuasive that the Pucketts did not waive their grade issue at the hearing:
[Milo] Smith: Okay. Items number 3 See footnote and 5 are addressed in issue number 2 above, and I can either withdraw those or just make that statement. Probably be easier . . . but issue number 4, I don’t have any evidence to submit about negative partitioning adjustment. Therefore, I can either withdraw it or just say I don’t have any evidence. What would you prefer? If I --

[Kay] Schwade: Would you just withdraw it?

Smith: I’ll just withdraw it then. And I can withdraw issues 3 and 5 as well, but what I’m saying is they’re addressed in issue number 2 above, so there’s no reason for me to address them twice. Okay?

Schwade: Okay.

(Cert. Admin. R. at 149 (footnote inserted).) Later, during the hearing, grade was discussed numerous times. (See Cert. Admin. R. at 150-153, 156-57.)
    It is clear from the record that the Pucketts did not waive the issue of grade. Rather, the Pucketts’ representative, Milo Smith, having presented testimony and evidence regarding grade in conjunction with his presentation on issue two (square foot pricing), merely intended that he not present the evidence twice. Accordingly, because the Court erred in not addressing the Pucketts’ grade issue on appeal, it does so now.


Grade

    The Pucketts allege that the State Board erred in grading their warehouses. More specifically, the Pucketts argue that even if the warehouses do not qualify for the kit building pricing under the GCK schedule, they are, nonetheless, low-cost, pre-engineered buildings. As a result, the Pucketts contend that the State Board should have graded the warehouses with an “E” grade instead of a “D” grade. See King Indus. Corp. v. State Bd. of Tax Comm’rs, 699 N.E.2d 338, 340-41 (Ind. Tax Ct. 1998) (stating that if a pre-engineered building does not qualify for a kit adjustment, i.e., GCK pricing, the assessor may apply a lower grade and design factor to account for the lower cost of construction).
Pursuant to the State Board’s regulations, improvements are assigned various grades based on their materials, design, and workmanship. Ind. Admin. Code tit. 50, r. 2.2-10-3; Whitley Prods., Inc. v. State Bd. of Tax Comm’rs, 704 N.E.2d 1113, 1116 (Ind. Tax Ct. 1998), review denied. In determining grade, the assessor must “distinguish significant variations [in an improvement’s] quality and design.” Ind. Admin. Code tit. 50, r. 2.2-10-3(a). The State Board’s regulations define the different characteristics that help assessors differentiate between grades. For instance, “‘D’ grade buildings are constructed with economy materials and fair workmanship. These buildings are devoid of architectural treatment and have a substandard quality interior finish . . . electrical and plumbing fixtures, and . . . heating system.” Ind. Admin. Code tit. 50, r. 2.2-10-3(a)(4). On the other hand, “‘E’ grade buildings are constructed with sub-standard grade materials . . . and very poor quality workmanship resulting from unskilled, inexperienced, do-it-yourself labor. They have low grade mechanical features and fixtures.” Ind. Admin. Code tit. 50, r. 2.2-10-3(a)(5).
The Pucketts bear the burden of proof on the grade issue and must offer probative evidence concerning the alleged grading error. See Clark v. State Bd. of Tax Comm’rs, 694 N.E.2d 1230, 1233 (Ind. Tax Ct. 1998); Miller Structures, Inc. v. State Bd. of Tax Comm’rs, 748 N.E.2d 943, 947 (Ind. Tax Ct. 2001). During the administrative hearing, the Pucketts presented their federal tax depreciation report indicating that their warehouses had an actual cost basis totaling $380,462. The Pucketts explained (by way of Milo Smith) that because the base prices contained within the State Board’s regulations were 15% lower than the base prices used by Indiana businesses, the actual cost basis needed to be adjusted by 85%. In turn, the resulting figure of $323,546, was approximately 40% of the total reproduction cost ($806,357) assigned by the State Board. The Pucketts contend that by reducing the grade on the warehouses from a “D” to an “E,” the State Board could reduce the total reproduction cost to be more in line with the actual cost basis. (See Cert. Admin. R. at 72, 132, 134, 136-37.)
The Pucketts’ evidence is nothing more than a calculation supporting their conclusion that “the grade is this” and “it should be that.” “A taxpayer’s conclusory statements do not constitute probative evidence concerning the grading of the subject improvement.” Sterling Mgmt.-Orchard Ridge Apartments v. State Bd. of Tax Comm’rs, 730 N.E.2d 828, 838 (Ind. Tax Ct. 2000). Instead, the Pucketts should have compared the features of “D” and “E” grade improvements – as provided the State Board regulations – with the features (or lack thereof) in their own improvements. The Pucketts should have then attempted to calculate the value of the features in the applicable models and translate that lack of value into a grade adjustment. Because the Pucketts did not make the necessary comparisons, they did not make a prima facie case that their warehouses were entitled to an “E” grade.
Conclusion

    Upon review and for the foregoing reasons, this Court GRANTS the Pucketts’ Petition to the extent that the Court incorrectly determined that the Pucketts waived the issue of grade at the administrative hearing. Nevertheless, upon reviewing the evidence presented by the Pucketts at the administrative hearing regarding the issue of grade, the Court finds that the Pucketts did not make a prima facie case that they were entitled to their requested grade change. Accordingly, the Court AFFIRMS the State Board’s final determination.

SO ORDERED this 17th day of October, 2003.
     _________________________
     Thomas G. Fisher, Judge
Indiana Tax Court

DISTRIBUTION:

Timothy J. Vrana
SHARPNACK BIGLEY LLP
321 Washington Street
P.O. Box 310
Columbus, IN 47202-0310

Steve Carter
Attorney General of Indiana
By: Ted J. Holaday
Deputy Attorney General
Indiana Government Center South, Fifth Floor
402 West Washington Street
Indianapolis, IN 46204-2770


Footnote: At the administrative hearing, Milo Smith presented an exhibit listing the Pucketts’ issues on appeal. ( See Cert. Admin. R. at 132.) Item number three on the list is the issue of grade.