ATTORNEY FOR PETITIONER
JOSEPH D. GEESLIN, JR.
ATTORNEY AT LAW
ATTORNEYS FOR THE RESPONDENT
ATTORNEY GENERAL OF INDIANA
VINCENT S. MIRKOV
DEPUTY ATTORNEYS GENERAL
INDIANA TAX COURT
SUNBEAM DEVELOPMENT CORP., )
COMPANY, Successor in Merger with
v. ) Cause Nos. 49T10-9805-TA-46
DEPARTMENT OF LOCAL ) 49T10-9806-TA-68
ON APPEAL FROM A FINAL DETERMINATION OF
THE STATE BOARD OF TAX COMMISSIONERS
NOT FOR PUBLICATION
October 30, 2002
Sunbeam Development Corporation (Sunbeam) appeals three final determinations of the State Board of
Tax Commissioners (State Board) assessing Sunbeams two parcels of land and an improvement
for the 1995 tax year. The Court restates the issues as:
I. Whether Sunbeams land should be classified as agricultural land;
II. Whether the assessment of Sunbeams improvement should be reduced to account for economic
III. Whether the State Board abused its discretion by grading Sunbeams improvement as a
FACTS AND PROCEDURAL HISTORY
For the reasons stated below, the Court AFFIRMS the State Boards final determination
on each issue.
For the 1995 tax year, Sunbeam owned three parcels of real property in
Hamilton County, Indiana. Two parcels were land only, and the third was
land and a one-story office building. Parcel 1 was classified as commercial
undeveloped useable land. Parcel 2 was classified as a one-acre homesite with
the remaining acreage classified as residential excess acreage. On parcel 3, Sunbeams
office building was graded a C+2. Sunbeam appealed the three assessments to the
Hamilton County Board of Review (BOR). On March 7, 1997, the BOR
denied any relief to Sunbeam.
On March 20, 1997, Sunbeam filed three Form 131 Petitions for Review of
Assessment (131 Petitions), appealing the BORs final determinations to the State Board.
On December 9, 1997, the State Board held a joint hearing on all
three of Sunbeams claims. Sunbeam argued that (1) the land on parcels
1 and 2 should be classified as agricultural land, (2) the improvement should
be given a C grade, and (3) the improvement was entitled to twenty
percent economic obsolescence depreciation. On March 26, 1998, the State Board issued
a final determination, making no changes to the land classifications for parcels 1
and 2, and denying Sunbeams request for grade and obsolescence adjustments.
On May 11, 1998, Sunbeam initiated three original tax appeals. The Court
heard all three claims at one trial on January 8, 1999. Additional
facts will be supplied as needed.
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. Walker Mfg. Co.
v. Dept of Local Govt Fin., 772 N.E.2d 1, 4 (Ind. Tax Ct.
2002). This Court will reverse a final determination of the State Board
only when it is unsupported by substantial evidence, arbitrary, capricious, constitutes an abuse
of discretion, or exceeds 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 is 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 carries
the burden of establishing a prima facie case, the burden shifts to the
State Board to rebut the taxpayers evidence and justify its decision with substantial
evidence. Clark v. State Bd. of Tax Commrs, 694 N.E.2d 1230, 1233
(Ind. Tax Ct. 1998).
I. Agricultural land
The first issue is whether the land in parcels 1 and 2 should
be reclassified from commercial and residential land to agricultural land.
See footnote Sunbeam contends
that it submitted probative evidence showing that parcels 1 and 2 were farmed
in 1994 and 1995. The State Board, on the other hand, asserts
that Sunbeam submitted no probative evidence to support its claim. The State
Board is correct.
Indiana Code Section 6-1.1-4-13 provides: In assessing or reassessing land, the land
shall be assessed as agricultural land only when it is devoted to agricultural
Ind. Code Ann. § 6-1.1-4-13(a) (West 1989). See also Ind.
Admin. Code tit. 50, r. 2.2-5-2 (2001) (providing for farmland use types).
To show that parcels 1 and 2 were agricultural land, Sunbeam submitted several
documents. First, Sunbeam submitted an aerial photograph of Delaware Township that includes
parcels 1 and 2. (Stip. Ex. 9.) In conjunction with the
aerial photograph, Sunbeam also submitted evidence showing that other parcels in Delaware Township
had been classified as agricultural land for the 1995 tax year and argued
that those parcels, as depicted on the aerial map, were nearly indistinguishable in
appearance from parcels 1 and 2. (Trial Tr. at 5556; Stip. Exs.
In addition to the aerial map, Sunbeam submitted a letter from its Director
of Properties stating that Sunbeam had leased as farmland any useable acreage that
was available in 1994 and 1995. (Stip. Ex. 2.) The
letter, however, does not indicate specifically whether parcels 1 and 2 were part
of the useable acreage that was available for the 1995 tax year.
(Trial Tr. at 6162; Stip. Ex. 2.)
Next, Sunbeam submitted a copy of a signed lease agreement it entered into
with a local farmer. (Stip. Ex. 6.) The lease, however, does
not specify that parcels 1 and 2 were in fact the parcels leased.
(See id.) Rather, the lease merely provides that it was for
approximately thirty-five . . . acres tillable, more or less, and as shown
shaded in Exhibit A attached hereto and made a part hereof. (Id.)
The exhibit attached to the lease is a hand-drawn map of Delaware
Township that bears a series of hash marks in the lower right corner
with the handwritten legend denotes land included in lease[.] (Id.) The
areas so shaded with hash marks on the attached lease exhibit do not,
however, correspond to parcels 1 and 2. (Cf. id., Stip. Ex. 9.)
Sunbeam also submitted a black-and-white photocopy of an aerial photograph showing parcel 1
as of March 1996. (Stip. Ex. 5.) Sunbeam proposes that the
photocopy depicts a harvest from 1995. (Petr Proposed Findings of Fact and
Conclusions of Law at 11.) What the photocopy shows, however, is a
field of tall weeds next to a parking lot.
See footnote (
See Stip. Ex.
Finally, Sunbeam presented the testimony of its tax consultant, William H. Price:
Q.[Geeslin]: Mr. Price, do you know personally if this property was farmed in 1994
A.[Price]: Yes, I do.
Q.[Mirkov]: Preliminary question?
The Court: Proceed.
Q.[Mirkov]: Had you presented this testimony down below? The answer to this question youve
just been asked?
A.[Price]: I was not asked this question down below.
Q.: That was not my question. Did you present this testimony?
A.: Yes, I did.
Q.: You presented the testimonythe answer to this question that youve just been asked?
A.: That I had personal knowledge of its being farmed?
Q.: Yes. II. Economic obsolescence
Mirkov: Withdraw the question, your Honor.
The Court: Proceed.
Q.[Geeslin]: Was this property farmed in 1997?
A.[Price]: The parcels in question, I dont believe they were.
(Trial Tr. at 12223.) Prices testimony does not expressly indicate that the
parcels were farmed during the period in question. Consequently, Prices testimony does
not showespecially when considered with Stipulated Exhibit 5that the parcels were devoted to
agricultural use for the 1995 tax year. Because Sunbeam has neither submitted
evidence nor testimony showing that parcels 1 and 2 were devoted to agricultural
use, it has not made a prima facie case that they should be
reclassified as agricultural land. The Court therefore AFFIRMS the State Boards final
determination on this issue.
The second issue is whether Sunbeams improvement should have been given twenty percent
economic obsolescence adjustment. Sunbeam argues that its improvement was entitled to the
obsolescence adjustment because it was approximately forty percent vacant during the 1995 calendar
year. The State Board contends that Sunbeam submitted no probative evidence to
support its claim.
Economic obsolescence means a diminishing of a propertys desirability and usefulness brought about
by . . . adverse economic factors external to the property.
Code tit. 50, r. 2.2-1-40 (2001); see also Ind. Admin. Code tit. 50,
r. 2.2-1-24 (2001) (defining economic obsolescence as obsolescence caused by factors extraneous to
the property). In cases where the State Board has held a hearing
on the taxpayers claim prior to this Courts opinion in Clark (such as
the case here), the taxpayer makes a prima facie case of economic obsolescence
merely by identifying the cause of the obsolescence. Louis D. Realty Corp.
v. State Bd. of Tax Commrs, 743 N.E.2d 379, 38586 (Ind. Tax Ct.
The burden was on Sunbeam to present probative evidence showing the cause of
its improvements obsolescence.
See Deer Creek Developers, Ltd. v. Dept of Local
Govt Fin., 769 N.E.2d 259, 263 (Ind. Tax Ct. 2002). Sunbeams only
evidence was a letter from its Director of Properties providing a monthly breakdown
of Sunbeams vacancy rate for calendar year 1995. (Stip. Ex. 2.)
As this Court has previously held, [v]acancy by itself does not prove any
obsolescence. Deer Creek, 769 N.E.2d at 263. Vacancy is merely a
sign of possible obsolescence; a taxpayer seeking an obsolescence reduction because of building
vacancy must still present probative evidence showing the reason why its building is
vacant. Id. (emphasis in original). Sunbeam did not submit any evidence
showing why its improvement was vacant, and therefore did not meet its initial
burden of proof. As a result, the Court AFFIRMS the State Boards
final determination of this issue.
Sunbeams final issue is that the State Board abused its discretion by grading
Sunbeams improvement a C+2. Again, the State Board argues that Sunbeam offered
no probative evidence in support of its claim.
In general, the State Boards rules provide for grades from A to E,
which represent numeric multipliers that raise or lower the assessed value of an
Walker, 772 N.E.2d at 7. Grade is used . .
. to account for deviations from the norm or C grade. The
quality and design of a building are the most significant variables in establishing
grade. Ind. Admin. Code tit. 50, r. 2.2-10-3(a) (2001). [A] C grade
indicates a multiplier of one hundred percent[.] Ind. Admin. Code tit. 50,
r. 2.2-10-3(b)(3) (2001). A C+2 grade indicates a multiplier of 110%.
Ind. Admin. Code tit. 50, r. 2.2-10-3(c)(1) (2001).
When challenging grade, a taxpayer satisfies its initial burden by either (1) submitting
probative evidence showing that the grade it received was unwarranted, or (2) submitting
probative evidence showing that the grade it seeks is warranted. See Walker,
772 N.E.2d at 8; see also Deer Creek, 769 N.E.2d at 26566.
The administrative record indicates that Sunbeam submitted no evidence with respect to the
appropriate grade, or why the C+2 grade was unwarranted to the State Board.
Because it submitted no evidence, Sunbeam did not make a prima facie
case as to grade. Accordingly, the Court AFFIRMS the State Boards final
determination of this issue.
For the aforementioned reasons, the Court AFFIRMS the State Boards final determinations on
Issues I , II, and III.
Footnote: 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. Pub. L. No. 198-2001, § 119(b)(2). Effective January 1,
2002, the Legislature created the Department of Local Government Finance (DLGF) and the
Indiana Board of Tax Review (Indiana Board).
Ind. Code §§ 6-1.1-30-1.1; 6-1.5-1-3
(West Supp. 2001); Pub. L. No. 198-2001, §§ 66, 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. 2002); Pub.
L. No. 198-2001, § 95. Nevertheless, the law in effect prior to
January 1, 2002 applies to these appeals. I.C. § 6-1.5-5-8. See
also Pub. L. No. 198-2001, § 117. Although the DLGF has been
substituted as the Respondent, this Court will still reference the State Board throughout
The base rate for agricultural land is $495 per acre.
Admin. Code tit. 50, r. 2.2-5-6(5) (2001). See also Blackbird Farms Apartments,
LP v. Dept of Local Govt Fin., 765 N.E.2d 711, 713 (Ind. Tax
Ct. 2002) (explaining how the true tax value of land is calculated).
Had the land in the photocopy been harvested six months prior, furrow
marks would have been apparent; none was apparent in Stipulated Exhibit 5.
See Stip. Ex. 5.) Furthermore, one would not expect such prolific weed
growth if the ground had been harvested just six month earlier with most
of the winter season intervening.
In the commercial setting, economic obsolescence is usually manifested by a decline
in an improvements income generating ability.
Louis D. Realty Corp. v. State
Bd. of Tax Commrs, 743 N.E.2d 379, 385 (Ind. Tax Ct. 2001).
In cases where the State Board has held its hearing after this
Courts opinion in
Clark, the taxpayer must (1) identify the cause of obsolescence
and (2) quantify the obsolescence to make a prima facie case. Louis
D. Realty, 743 N.E.2d at 38586.
Sunbeam claimed for the first time in its reply brief that its
improvement should have been given a functional obsolescence adjustment to account for the
height of its walls. (Petr Reply Br. at 6.) Sunbeams evidence
of functional obsolescence is its claim that it was granted functional obsolescence for
its wall height in 1991 and 1992. (
See Petr Reply Br. at
6.) However, as this Court has held on numerous occasions, each tax
year stands alone, and evidence of what was or was not assessed for
one tax year is not probative evidence for any other tax year.
See, e.g., Thousand Trails, Inc. v. State Bd. of Tax Commrs, 757 N.E.2d
1072, 1077 (Ind. Tax Ct. 2001). Accordingly, Sunbeam has not made
a prima facie case with regard to functional obsolescence and is not entitled
to relief on this issue.
Footnote: At trial, the Hearing Officer testified that he considered the putative cost
to construct the obliquely-angled perimeter walls of Sunbeams improvement as justification for a
C+2 grade. (Trial Tr. at 71.) Consequently, in its reply brief,
Sunbeam advanced the legal theory that its grade should be a C because
the State Boards formula for calculating the perimeter to area ratio (PAR) accounts
for the construction cost of the perimeter walls. See generally Damico v.
Dept of Local Govt Fin., 769 N.E.2d 715, 722 n.12 (Ind. Tax Ct.
2002) (discussing the concept of PAR). Although this is a novel legal
argument, the Court cannot reach the State Boards ostensible justification for its final
determination on this issue because Sunbeam failed to satisfy its initial burden of
proof as to grade. See Clark v. State Bd. of Tax Commrs,
694 N.E.2d 1230, 1233 (Ind. Tax Ct. 1998) (providing that the State Boards
justification for its final determination is not an issue until the taxpayer satisfies
its initial burden of proof).