ATTORNEY FOR PETITIONER:
ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN
ATTORNEY AT LAW
LINDA I. VILLEGAS
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
JASPER WOOD PRODUCTS, INC., )
v. ) Cause No. 49T10-0011-TA-120
DEPARTMENT OF LOCAL )
ON APPEAL FROM A FINAL DETERMINATION OF
THE STATE BOARD OF TAX COMMISSIONERS
NOT FOR PUBLICATION
October 22, 2004
Jasper Wood Products, Inc. (Jasper Wood) appeals the final determination of the State
Board of Tax Commissioners (State Board) valuing its real property for the 1999
tax year. The issues before this Court are:
Whether Jasper Woods heating system has been valued twice; and
Whether Jasper Woods improvements are entitled to additional obsolescence depreciation.
FACTS AND PROCEDURAL HISTORY
Jasper Wood owns land and improvements in Dubois County, Indiana. For the
1999 tax year, local assessing officials assigned Jasper Woods two light manufacturing buildings
10% obsolescence depreciation adjustments. For two specific sections of the buildings, assessing
officials assigned special feature pricing to Jasper Woods boilers.
Jasper Wood appealed the assessment to the Dubois County Board of Review (BOR),
claiming that additional obsolescence should be granted and that the cost for the
buildings heating system should be removed from the base rate.See footnote The BOR
upheld the assessment and, on September 7, 1999, Jasper Wood filed a Petition
for Review of Assessment (Form 131) with the State Board.See footnote A hearing
was held on Jasper Woods petition on February 17, 2000. On September
26, 2000, the State Board issued its final determination in which it applied
10% and 15% obsolescence to the two buildings and refused to remove the
heating cost from the base rate. The State Board subsequently issued an
amended final determination on November 2, 2000. In the amended final determination,
the State Board again declined to adjust the base rate; however, it held
that the boilers should not be assessed separately as special features and that
the assessment should be adjusted accordingly. The State Boards holding on the
obsolescence issue remained unchanged.
Jasper Wood filed an original tax appeal with this Court on November 13,
2000. The Court conducted a trial on March 23, 2001. The
Court heard the parties oral arguments on September 24, 2001. Additional facts
will be supplied as necessary.
ANALYSIS AND OPINION
Standard of Review
This Court gives great deference to 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. The taxpayer bears the
burden of showing that the final determination is invalid. Id.
I. Heating System
Citing to the State Boards first final determination, Jasper Wood contends that it
has been subjected to double taxation because its boilers were assessed first through
the GCI models and again when the boilers were assigned a special feature
cost. (See Petr Br. at 3-4.) The State Board notes, however,
that its amended final determination provided that the boilers were not to be
assessed separately as special features and the assessment was ordered to be adjusted
accordingly. (See Respt Br. at 5; Cert. Admin. R. at 108.)
The record indicates that this adjustment was not made.
See footnote Accordingly, the Court
REMANDS this issue to the Indiana Board with instructions to deduct the cost
of the boilers as a special feature.
Obsolescence, which is a form of depreciation, is defined as a loss of
value and classified as either functional or economic.
Freudenberg-NOK Gen. Pship v.
State Bd. of Tax Commrs, 715 N.E.2d 1026, 1029 (Ind. Tax Ct. 1999),
review denied. See also Ind. Admin. Code tit. 50, r. 2.2-10-7(e) (1996).
Functional obsolescence is caused by factors internal to the property and is
evidenced by conditions within the property itself. See 50 IAC 2.2-10-7(e).
Economic obsolescence is caused by factors external to the property. Id.
To establish obsolescence, the taxpayer must first identify the causes of obsolescence and
then quantify the amount of obsolescence. See Clark v. State Bd. of
Tax Commrs, 694 N.E.2d 1230, 1241 (Ind. Tax Ct. 1998). It is
important to recognize, however, that each of these prongs requires a connection to
an actual loss in property value. See id. at 1238. For
example, when identifying factors that cause obsolescence, a taxpayer must show through the
use of probative evidence that those causes of obsolescence are causing an actual
loss of value to its property.
See Miller Structures, Inc. v. State
Bd. of Tax Commrs, 748 N.E.2d 943, 954 (Ind. Tax Ct. 2001) (footnote
added). Likewise, when a taxpayer quantifies the amount of obsolescence to which
it believes it is entitled, it is required to convert that actual loss
of value (shown in the first prong) into a percentage reduction and apply
it against the improvements overall value. See Clark, 694 N.E.2d at 1238.
At the administrative hearing, Jasper Wood claimed that it was entitled to a
60% obsolescence depreciation adjustment. To support that claim, Jasper Wood presented an
Assessment Review and Analysis (Analysis). (Cert. Admin. R. at 117-55.) The
Analysis was prepared by Jasper Woods property tax consultant, M. Drew Miller (Miller)
of Landmark Appraisals, Inc. The Analysis states:
[t]he subject property was originally constructed in 1924 with an estimated 70,000 SF
brick and block wood framed two story structure with several additions over the
years. The most recent addition being a steel framed block structure built
in 1977. This add-on type of construction has created numerous bottle necks
and inefficiencies with added production and material handling costs, due to multiple floors,
limited floor load capacity, narrow doorways, areas of low clear ceiling heights, narrow
bay spacing and excessive interior walls.
The subject lacks adequate lighting, insulation and thermal pane windows [ which] increases
Ingress and egress of vehicles is inadequate. Access to the plant is
limited to only one side due to the extreme slope of the land.
The subject was originally constructed with use of rail service which no
The subject is mostly constructed of brick and block with wood framing materials.
In todays market this is considered to be a superadequacy as well
as an obsolete design, as a modern building  with better utility could
be constructed with a less expensive light pre-engineered metal building.
(Cert. Admin. R. at 133.) The Analysis also contains the following:
photos of the subject property; a map showing the layout of the subject
property; the propertys record cards; calculations for obsolescence and a description of the
methods used; a list of the causes of obsolescence; life expectancy and depreciation
tables; an excerpt from an article titled Identifying, Measuring, and Treating Functional Obsolescence;
and property record cards and photographs from another property owned by Jasper Wood.
(See Cert. Admin. R. at 117-55.)
Although the only issue in this case is the quantification of obsolescence,
See footnote Jasper
Wood was necessarily required to explain its causes of obsolescence in order to
translate its improvements loss in value (due to the causes) into a quantifiable
amount of obsolescence depreciation.
See Heart City Chrysler v. Dept of Local
Govt Fin., 801 N.E.2d 215, 218 (Ind. Tax Ct. 2004). In other
words, Jasper Wood was required to link the causes of its obsolescence to
an actual loss in its propertys value. See Miller Structures, 748 N.E.2d
at 953. Here, Jasper Wood did not present any evidence of an
actual loss. For example, Jasper Wood states that the property lacks adequate
lighting, insulation and thermal pane windows. (Cert. Admin. R. at 133.)
However, it does not submit probative evidence showing how these deficiencies are causing
an actual decrease in income-generating ability. Instead, Jasper Wood, via Miller, has
merely stated that these deficiencies have caused increased heating costs. (Cert. Admin.
R. at 133.) No evidence was provided to substantiate the increase in
Because Jasper Wood failed to link the factors causing obsolescence with an actual
loss in its propertys value, it could not quantify the amount of obsolescence
to which it was entitled. Thus, the Court AFFIRMS the State Boards
final determination with respect to obsolescence depreciation.
For the foregoing reasons, the Court AFFIRMS the State Boards final determination with
respect to the obsolescence issue. The Court, however, REMANDS the heating issue
to the Indiana Board for further proceedings consistent with this opinion.
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 Annotated § 6-1.1-30-1.1 (West Supp. 2004)(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. 2004)(eff. 1-1-02); 2001 Ind. Acts 198 §
95. Pursuant to Indiana Code Annotated § 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. 2004)(eff. 1-1-02); 2001 Ind. Acts 198 § 95. Nevertheless, the
law in effect prior to January 1, 2002 applies to these 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.
Jasper Wood also 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 Jasper Woods claims and supporting arguments are identical to
those previously rejected by the Court, the Court will not address them.
The sections of the buildings where the boilers are located were assessed
from the General Commercial Industrial (GCI) Light Manufacturing and Light Utility Models which
presume [g]as fired, forced air heating and [g]as space heaters with fan, respectively.
Ind. Admin. Code tit. 50, r. 2.2-11-2(4) and (25) (1996). Jasper
Wood argues that assessing its boiler heating system under these models and as
special features resulted in double taxation.
In its appeal to the State Board, Jasper Wood also raised issues
relating to grade, sprinkler pricing, and condition rating. The sprinkler pricing and
condition rating issues were withdrawn, however, at the administrative hearing. (Cert. Admin.
R. at 108.) The grade issue was not addressed at oral argument
nor in the briefs submitted to this Court. Consequently, the Court considers
the issue waived for review on this appeal.
Footnote: The value of each of the boilers was listed as $33,500 on
the property record cards issued with the State Boards first final determination.
(Cert. Admin. R. at 48, 52.) However, there is no calculation or
detail provided for the boilers on the property record cards issued with the
State Boards amended final determination. (Cert. Admin. R. at 81-87.) Those
property record cards only reflect a downward adjustment of $3,330 in total assessed
value. (Cert. Admin. R. at 41, 82.) This adjustment does not
account for the total cost of the boilers and both parties noted this
mistake during oral argument before this Court. (
See Oral Argument Tr. at 4-5,
In the commercial context, loss of value usually means a decrease in
the propertys income generating ability.
See Miller Structures, Inc. v. State Bd.
of Tax Commrs, 748 N.E.2d 943, 953 (Ind. Tax Ct. 2001).
Because the local assessing officials awarded Jasper Wood an initial obsolescence adjustment
of 10%, the parties essentially agree that obsolescence is present in Jasper Woods
improvements. Accordingly, the issue is not identification of the causes of obsolescence,
but rather the quantification of obsolescence.
See Phelps Dodge v. State Bd.
of Tax Commrs, 705 N.E.2d 1099, 1102 (Ind. Tax Ct. 1999), review denied
(stating that the fact that the parties agree on the causes of obsolescence
obviates [the taxpayers] burden of offering probative evidence showing that the subject improvements