ATTORNEY FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
TAMATHA A. STEVENS KAREN M. FREEMAN-WILSON
MCMAINS, GOODIN & ORZESKE ATTORNEY GENERAL OF INDIANA
Indianapolis, IN Indianapolis, IN
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
DAMON CORPORATION, )
v. ) Cause No. 49T10-9701-TA-88
INDIANA STATE BOARD OF )
TAX COMMISSIONERS, )
ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
November 13, 2000
Damon Corporation (Damon) appeals the Elkhart County Board of Reviews (BOR) determination that
Damon is liable for the additional taxes accessed against the property for 1989-1993.
Damon also appeals the State Board of Tax Commissioners (State Board) final
determination denying Damons request to lower the assessed value of its property for
the 1994 assessment year. In this original tax appeal, Damon presents the
following issues for this Courts review:
I. whether Damon is a bona fide purchaser as defined under
Ind. Code Ann.
§ 6-1.1-9-4(b) (West 2000) and thus its property is not subject to a
lien for additional taxes assessed for the assessment dates prior to its purchase
of the property;
II. whether the State Boards determination that obsolescence should not be applied to Damons
property in the 1994 assessment was arbitrary and capricious or an abuse of
III. whether the State Board abused its discretion and acted arbitrarily and capriciously in
failing to apply the kit building adjustment to Damons property in its 1994
FACTS AND PROCEDURAL HISTORY
In 1989, Mallard Coach Company, Inc. (Mallard) owned two parcels of property with
improvements in Elkhart County, Indiana.
See footnote Mallard appealed the 1989 property tax assessment
on these two parcels to the State Board. While the appeal was
pending, the property taxes were billed at the 1988 value. While appeal
was still pending, in December of 1992, Damon purchased the property from Mallard.
On October 7, 1993, Damon was sent a bill for additional property
taxes due for the tax years 1989-1992. This bill was a result
of the State Boards determination that the value of the property was higher
than the 1988 assessment. In 1994, Damon filed a form 131 petition
for review of assessment (131 Petition) with the State Board for the years
1989-1993 claiming that it was not liable for the taxes because it was
a bona fide purchaser pursuant to
I.C. § 6-1.1-9-4(b). The State Board
did not hold a hearing or make a final determination on Damons 131
In addition, in 1994, Damon filed another form 131 petition for review of
the 1994 assessed value of parcel number 40-13-35-202-11 with the Elkhart County Auditors
Office. Thereafter, the State Board held a hearing on this 131 Petition.
The State Board subsequently issued its final determination on Damons petition, lowering
the assessed value of the improvements. However, the State Board declined to
grant Damon any obsolescence depreciation or a kit building adjustment.
On January 6, 1997, Damon filed an original tax appeal with this Court
appealing both the 1989-93 additional taxes for which it was billed and the
State Boards final determination regarding its 1994 assessment of parcel number 40-13-35-202-11.
Additional facts will be provided as necessary.
ANALYSIS AND OPINION
Standard of Review
This Court gives final determinations of the State Board great deference when the
State Board acts within the scope of its authority.
See Freudenberg-NOK General
Partnership v. State Bd. of Tax Commrs, 715 N.E.2d 1026, 1028-29 (Ind. Tax
Ct. 1999). Accordingly, this Court reverses final determinations of the State Board
only when they are unsupported by substantial evidence, are arbitrary or capricious, constitute
an abuse of discretion, or exceed statutory authority. See id. at 1029.
In addition, a taxpayer challenging the validity of the State Boards final determination
bears the burden of demonstrating the invalidity of the final determination. See
Clark v. State Bd. of Tax Comm'rs, 694 N.E.2d 1230, 1233 (Ind.
Tax Ct. 1998). The taxpayer must present a prima facie case (a
case in which the evidence is "sufficient to establish a given fact and
which if not contradicted will remain sufficient). GTE North Inc. v. State
Bd. of Tax Comm'rs, 634 N.E.2d 882, 887 (Ind. Tax Ct. 1994) (citations
and internal quotation marks omitted). To establish a prima facie case, the
taxpayer must offer probative evidence concerning the alleged error. See King Indus.
v. State Bd. of Tax Comm'rs, 699 N.E.2d 338, 343 (Ind. Tax Ct.
1998); Whitley Prods., Inc. v. State Bd. of Tax Comm'rs, 704 N.E.2d
1113, 1119 (Ind. Tax Ct. 1998), review denied. Once the taxpayer carries
the burden of establishing a prima facie case, the burden shifts to the
State Board to rebut the taxpayer's evidence and justify its decision with substantial
evidence. Clark, 694 N.E.2d 1233. To carry its burden, the State
Board must do more than merely assert that it assessed the property correctly.
Loveless Const. Co. v. State Bd. of Tax Comm'rs, 695 N.E.2d 1045,
1049 (Ind. Tax Ct. 1998), review denied. Instead, the State Board must
offer an authoritative explanation of its decision to rebut the taxpayer's prima facie
showing. See id.
I. Bona Fide Purchaser
The first issue is whether Damon is a bona fide purchaser as defined
under I.C. § 6-1.1-9-4(b) and thus its property is not subject to a
lien for additional taxes assessed for the assessment dates prior to its purchase
of the property. As an initial matter, this Court notes that because
the State Board did not make a final determination on this issue, this
Court reviews this issue in the same manner as if the state board
had made a final determination affirming the county board of reviews action with
respect to the assessment. Ind. Code Ann. § 6-1.1-15-4(e) (West 1989); See
also supra note 3.. As this Court is statutorily instructed to review
this issue as if it were a final determination, for purposes of clarity
this Court hereafter will refer to it as a final determination.
Damon argues that pursuant to I.C. § 6-1.1-9-4(b) it is a bona fide
purchaser of the parcels at issue and therefore its property is not subject
to a lien for the additional taxes billed to it for the assessment
dates prior to its purchase of the property.
Indiana Code § 6-1.1-9-4 provides:
(a) Real property may be assessed, or its assessed value increased, for a
prior year under this chapter only if the notice required by section 1
of this chapter is given within three (3) years after the assessment date
for that prior year.
(b) With respect to real property which is owned by a bona fide
purchaser without knowledge, no lien attaches for any property taxes which result from
an assessment, or an increase in assessed value, made under this chapter for
any period before his purchase of the property.
I.C. § 6-1.1-9-4 (emphasis added). This Court has previously stated that [w]hen
faced with a question of statutory interpretation, this Court looks first to the
plain language of the statute. Where the language is unambiguous, this Court
has no power to construe the statute for the purpose of limiting or
extending its operation." Joyce Sportswear Co. v. State Bd. of Tax Comm'rs,
684 N.E.2d 1189, 1192 (Ind. Tax Ct. 1997) (original emphasis) (internal quotation marks
omitted), review denied.
The plain language of I.C. § 6-1.1-9-4 clearly mandates that both subsections (a)
and (b) apply only to assessments or increased assessments made under Chapter 9,
which governs the assessment of omitted or undervalued tangible property. See id.
In Joyce Sportswear Co. v. State Bd. of Tax Comm'rs, this Court
held that I.C. § 6-1.1-9-4(a) did not apply to proceedings under I.C. §
6-1.1-15-4. See id. Specifically, this Court held that by the language
under this chapter in I.C. § 6-1.1-9-4(a) the General Assembly had limited the
reach of the statute and that this Court did not have the power
to extend the statute. See id. Similarly, this Court holds today
that the reach of I.C. § 6-1.1-9-4(b) is limited to actions involving the
assessment of omitted or undervalued tangible property under Chapter 9.
No evidence has been presented regarding Mallards reasons for appealing the 1989 assessment.
Consequently, there is no evidence that Mallard appealed the 1989 assessment on
the basis that the property had been undervalued or omitted pursuant to
§ 6-1.1-9-1 to -9-9. As such, Damon is not afforded the protection
of a bona fide purchaser under I.C. § 6-1.1-9-4(b) because the protection of
that section is limited to assessments or reassessments under Chapter 9. Consequently,
a prima facie case that Damons property should not be subject to a
lien for the additional taxes has not been made. See GTE North
Inc., 634 N.E.2d at 887. Therefore, this Court AFFIRMS the final determination,
which held Damons property is subject to a lien for the additional taxes.
See Freudenberg-NOK, 715 N.E.2d at 1029.
The next issue is whether the State Boards determination that obsolescence should not
be applied to Damons subject improvement in the 1994 assessment was arbitrary and
capricious or an abuse of discretion. Damon contends that its property suffers
from both functional and economic obsolescence. Specifically, Damon asserts that obsolescence is
warranted due to the proven poor market acceptability and low desirability of the
property. (Damons Post-trial Br. at 12.)
The True Tax Value of a commercial improvement is determined by calculating the
reproduction cost of the improvement (as determined by an application of the State
Board regulations) and subtracting any physical and obsolescence depreciation. Loveless Const.
Co., 695 N.E.2d at 1047. The regulations define obsolescence as a functional
and economic loss of value. See Ind. Admin. Code tit. 50, r.
2.1-5-1 (1992) (codified in present form at id., 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." Id. Economic obsolescence is caused by factors
that are external to the property. See id. In the commercial
context, a loss of value usually represents a decrease in the improvement's income
generating ability. See Loveless Const., 695 N.E.2d at 1047. In Clark
v. State Board of Tax Commissioners, this Court concluded that as a prerequisite
for this Court to review a taxpayers case, during its hearing before the
State Board the taxpayer must follow a two-step process whereby a taxpayer must
first identify causes of obsolescence and then quantify the amount of obsolescence to
be applied. See Clark, 694 N.E.2d at 1241. However, as this
case arose before Clark, the taxpayer here was not required to quantify its
evidence, but simply to identify it. See id.
This Court now looks to whether Damons contentions that its payment of less
than the true tax value for the property, the vacancy of the property
for over a year before Damon purchased it, or Damons building being under
construction constitute a prima facie case that its property was entitled to 30%
economic obsolescence for the 1994 tax year. Damon argues that its above
stated contentions show that the property suffered from poor market acceptability and low
desirability and therefore it is entitled to economic obsolescence. However, Damon does
not cite any authority that supports low market acceptability and low desirability of
the property as indicators of economic obsolescence, and the Courts research reveals no
authority for Damons proposition.
Cf. Pedcor Investments-1990-XIII, L.P. v. State Bd. of
Tax Commrs, 715 N.E.2d 432, 436-37 (Ind. Tax Ct. 1999) (holding that where
the product for which the property was constructed was rental apartments, economic obsolescence
can be caused by deed restrictions because the marketplace may have a negative
reaction to those restrictions). Therefore, Damons assertion is a mere allegation and
does not constitute probative evidence that economic obsolescence is present. See Whitley
Prods., Inc., 704 N.E.2d at 1119. Nonetheless, this Court addresses each of
Damons contentions below to determine if they show a loss in value that
would indicate that obsolescence should be applied.
A. True Tax Value Verses Purchase Price
Damon argues that the disparity between the true tax value of its property
and the price for which it purchased the property is evidence that the
property has poor proven market acceptability and low desirability and is thus entitled
to obsolescence. More specifically, Damon argues that it is entitled to economic
obsolescence because the true tax value of the property is 33% greater than
what it paid for the property. Damon presented evidence that the true
tax value of the property was $296,670
See footnote and the price for which it
purchased the property was $200,000. Damon seems to assert that the $200,000
price that it paid for the property was the propertys fair market value.
(Damons Post-trial Br. at 13-14; Damons Reply Br. at 5 (arguing that
the purchase price was likely the result of an arms length transaction); Trial
Tr. at 14 (stating that [Damon] came in and bought the property at
a fair value)). The difference between the true tax value of the
property and price for which Damon purchased the property (market value) does not
demonstrate a loss in value because the two numbers are not necessarily comparable.See footnote
See State Bd. of Tax Comm'rs v. Town of St. John, 702
N.E.2d 1034, 1038 (Ind. 1998) (holding that "true tax value" is not exclusively
or necessarily identical to fair market value). The statute in effect during
the tax year for which Damon is appealing provides: [w]ith respect to the
assessment of real property, true tax value does not mean fair market value.
True tax value
See footnote is the value determined under the rules of the
state board of tax commissioners.
Ind. Code Ann. § 6-1.1-31-6 (c) (West
2000) (emphasis added). Consequently, the difference between the true tax value of
Damons property and the price Damon paid for the property, two unrelated numbers,
does not demonstrate that there has been a loss in value of the
See footnote Thus, no probative evidence has been presented that identifies a
cause of obsolescence here. Therefore, a prima facie case has not been
established that, based upon the difference between these numbers, obsolescence is present.
B. Vacancy of Building
Next, Damon argues that the vacancy of the building shows that the property
has poor proven market acceptability and low desirability, thus making it eligible for
obsolescence. At trial, Damon presented the testimony of an employee of a
property tax consulting firm that the building was vacant for well over a
year prior to Damon purchasing it. (Trial Tr. at 14.) However,
a prima facie case has not been established because Damon has not presented
any evidence explaining the reason that the property was vacant for over one
year or whether the property was on the market during that time.
Damon simply states that Mallard had filed for bankruptcy, without telling us the
reasons for the bankruptcy. Accordingly, probative evidence has not been presented that
identifies a cause of obsolescence here. Consequently, Damons unsupported allegation that the
vacancy of the property prior to its purchase indicates obsolescence does not constitute
a prima facie case that the property suffered a loss and is entitled
See Herb v. State Bd. of Tax Commrs, 656 N.E.2d
890, 893 (Ind. Tax Ct. 1995) (holding that [a]llegations, unsupported by factual evidence,
remain mere allegations).
C. Building Under Construction
Finally, Damon argues that the lack of use of the building addition
See footnote while
it was under construction warrants greater than the forty percent obsolescence that it
claims it was given previously in its assessment.See footnote The State Boards final
determination concluded that Damon was entitled to zero obsolescence. Therefore, this Court
looks to whether economic obsolescence can be applied to Damons addition while it
was under construction.See footnote Damon argues that obsolescence was applicable here because the
building was only sixty percent complete and did not have heat or lights.See footnote
Therefore, Damon asserts that the building was virtually useless or completely unusable.
(Damons Post-trial Br. at 14; Reply Br. at 5.)
In order for an obsolescence adjustment to be made, there must be some
loss in value. See Pedcor Investments, 715 N.E.2d at 439-40. Generally,
obsolescence cannot be applied to a building that is under construction because its
useful life has not yet begun. See id. at 440. This
Court has previously stated that an interpretation of the regulations to allow for
an obsolescence adjustment merely because a building is vacant while it is under
construction would lead to palpably absurd results. Id. Damon is not
entitled to economic obsolescence here because its building under construction had not begun
its useful life. See id. Moreover, Damons assertion that its building
was virtually useless or completely unusable while under construction does not demonstrate that
it suffered a loss in value, because if it was being newly constructed,
it would not have had any previous value to lose. (Damons Post-trial
Br. at p. 14; Reply Br. at 5.) Therefore, no probative evidence
has been presented that identifies a cause of obsolescence here. Consequently, a
prima facie case of economic obsolescence has not been presented.
A prima facie case that Damon is entitled to functional
See footnote or economic obsolescence
has not been presented.
See GTE North Inc., 634 N.E.2d at 887.
As such, the State Board is not required to rebut Damons case.
See Clark, 694 N.E.2d at 1233. Accordingly, this Court AFFIRMS the
final determination of the State Board with regard to the obsolescence issues because
Damon has not demonstrated that the State Board acted in an arbitrary and
capricious manner. See Freudenberg-NOK, 715 N.E.2d at 1029.
III. Kit Building
The final issue is whether the State Board abused its discretion and acted
arbitrarily and capriciously in failing to apply the kit building adjustment to Damons
property in its 1994 assessment. The State Board bases its decision not
to apply a kit building adjustment to Damons property on its assertion that
Damon had altered the building structurally by adding two additions to the main
In 1991, the State Board amended its regulations to include a fifty percent
reduction in the base rate for certain light pre-engineered or kit-type buildings.
See Whitley Prods., 704 N.E.2d at 1121; Ind. Admin. Code tit. 50,
r. 2.1-4-5 (Schedules A1 and A2 )(1992) (codified in present form at id.,
r. 2.2-11-6 (Schedule A.4)(1996)). Thereafter, the State Board issued Instructional Bulletin 91-8
to provide guidance to assessors in determining which light pre-engineered buildings qualified for
the reduction. See Componx, Inc. v. Indiana State Bd. of Tax Comm'rs,
683 N.E.2d 1372, 1374 (Ind. Tax Ct. 1997). Generally, kit buildings are
made of light weight and inexpensive materials and are "fabricated at central manufacturing
facilities and shipped to the construction site ready for fast and efficient assembly."
Instructional Bulletin 91-8 at 1; See also King Indus., 699 N.E.2d at
339. The reduction in base price is offered because of the low
cost and economical quality of materials used in kit buildings. See King
Indus., 699 N.E.2d at 339.
Instructional Bulletin 91-8 sets forth several examples of common characteristics of low-cost kit
buildings. According to Instructional Bulletin 91-8, the "key element in identifying this
low cost economical 'kit-type' structure is the type of interior column and roof
beam support." Instructional Bulletin 91-8 at 4. Some examples of
characteristics of these column and roof beam systems include: Cold Form Cee Channel
wall supports, tapered columns, H columns, and steel post columns. See id.
at 4-5. Instructional Bulletin 91-8 also provides assessors with "other identification clues"
that a building is a kit building including: X bracing, metal or steel
exterior skin, steel purlins and girders that are normally 14 to 16 gauge,
concrete floors that have minimal tolerances, evenly spaced vertical supports, and normal building
widths ranging from 30 feet to 120 feet. Id. at 6; see
also King Indus., 699 N.E.2d at 339.
Damon argues that it is entitled to the kit building adjustment because it
has presented evidence that its building qualifies for the adjustment. At trial,
Mark Drew Miller testified on behalf of Damon, stating that [t]he main structure,
as far as the framing and the interior and exterior of the building,
does comply with the guidelines set out by the State Tax Board.
(Trial Tr. at 17-18.) He also testified that the building had tapered
columns, Cee channels, and cross bracing and that the buildings dimensions fell within
See footnote (Trial Tr. at 18) This is probative evidence that Damons
building qualifies for the kit building adjustment.
See Instructional Bulletin 91-8 at
4-6; King Indus., 699 N.E.2d at 339. Miller, however, noted that the
attached office building would not qualify for the kit adjustment. Miller posited
that the main 17,440 square foot structure qualified as a kit building.
Because Damon has presented evidence that its building had tapered columns and Cee
channels (both key factors in identifying kit buildings) as well as cross bracing,
this Court concludes that Damon has established a prima facie case that its
building is eligible for a kit building adjustment. See King Indus., 699
N.E.2d at 343; Whitley Prods., 704 N.E.2d at 1119.
Because Damon has presented a prima facie case, the burden shifts to the
State Board to rebut Damons evidence and justify its decision with substantial evidence.
See King Indus., 699 N.E.2d at 343; Clark, 694 N.E.2d at 1233.
The State Board did not contest Damons evidence. In fact, at
trial, hearing officer Schultz, testified that the main-the original structure less the three
See footnote that were added, excluding the original office, may have qualified for the
kit adjustment. (Trial Tr. at 28.) The State Boards sole reason
for denying the kit building adjustment was because the structure had been altered
by two additions to the main building. (Defs Ex. A.)
It is true that changes that affect the structural integrity of a building
could prevent it from receiving the kit building adjustment. See Componex, 683
N.E.2d at 1375. However, under Instructional Bulletin 91-8, slight modifications or variations
in the structural components of a pre-engineered building do not necessarily prevent it
from qualifying for the kit adjustment.
See Instructional Bulletin 91-8 at 7;
King Indus., 699 N.E.2d at 342 n.11; Barker v. State Bd. of Tax
Comm'rs, 712 N.E.2d 563, 570 (Ind. Tax Ct. 1999) (stating that Instructional Bulletin
91-8 allows kit buildings to have stronger structural support systems than that of
the basic kit model). Instructional Bulletin 91-8 allows improvements to deviate somewhat
from the basic kit model and still qualify for the adjustment. See
Morris v. State Bd. of Tax Comm'rs, 712 N.E.2d 1120, 1123 (Ind. Tax
Ct. 1999); Componx, Inc., 683 N.E.2d at 1375; Instructional Bulletin 91-8 at 7.
Instructional Bulletin 91-8 also discusses the use of grade factors in conjunction
with the kit building adjustment. Instructional Bulletin 91-8 at 7. According
to Instructional Bulletin 91-8, certain deviations from the basic kit model can be
accounted for by increasing the grade of the improvement being assessed. See
Componx, Inc., 683 N.E.2d at 1375; Instructional Bulletin 91-8 at 7; King Indus.,
699 N.E.2d at 340. However, if the additional features of the kit
building result in the building no longer being economical, then it cannot qualify
for the kit adjustment. Instructional Bulletin 91-8 at 7. If a
building does not qualify for the kit adjustment, an assessor may apply "a
low grade and design factor to account for the lower cost of construction."
King Indus., 699 N.E.2d at 340-41 (internal quotations omitted).
During trial, the State Board presented testimony that a 39,000 square foot addition
to the rear of the facility and a 4,000 square foot addition adjacent
to the facility structurally modified the original structure. The State Board presents
us with no authority for its proposition that additions to a building (that
would otherwise qualify as a kit building) per se render the main structure
ineligible. Beyond size, the State Board did not supply this Court with
any description of the physical characteristics of the additions or any explanation of
how the additions structurally modify the main building. Because the additions identified
by the State Board do not automatically disqualify the main building from receiving
the kit adjustment, the State Board was required to do more than simply
point to the additions to support its final determination in this case.
See Morris, 712 N.E.2d at 1124. Therefore, the State Board has not
supported its decision to deny Damon the kit building adjustment with substantial evidence.
See Clark., 694 N.E.2d at 1233. Consequently, the State Board's final
determination was arbitrary and capricious and an abuse of discretion.
See footnote Because Damon
has presented a prima facie case that its building qualifies for the kit
building adjustment and the State Board has not rebutted Damons case with substantial
evidence, we REVERSE Damons case with regard to this issue and grant it
the kit building adjustment.
See Morris, 712 N.E.2d at 1124.
This Court REMANDS this issue to the State Board with the following instructions.
On remand, the State Board must assess the main building as a kit
building and then adjust the assessment to account for the reproduction cost of
the additional features. See id. at 1126. The State Board must
quantify the effect of these additional features on the reproduction cost of the
building and support its quantification with substantial evidence. See id. Moreover,
because the application of the kit adjustment in this case may create an
error in the D-2 grade assigned to the subject improvement, the State Board
may alter the grade of the subject improvement. See id. However,
any adjustment to the grade, other than to a C, must be supported
with substantial evidence and the State Board is required to include detailed written
findings explaining its calculations. See id.; Instructional Bulletin 91-8 at 7 (providing
that [t]he basic version of the economy kit type structure should be graded
a C). If the State Board adjusts the grade, Damon must be
given the opportunity to present evidence relevant to the grading of the subject
See Barker, 712 N.E.2d at 571. In making its assessment,
the State Board may assess the main building separately from its additions when
determining the assessed value of that improvement, just as an assessor may assess
any improvement by breaking the improvement into parts and assessing those parts separately.
See Morris, 712 N.E.2d at 1126. Instructional Bulletin 91-8 does not
mandate that improvements alleged to qualify for the kit adjustment must necessarily be
assessed as a whole.
For the foregoing reasons, the Court hereby AFFIRMS the Elkhart County Boards determination
that Damon is liable for the additional taxes assessed for the years prior
to Damons purchase of the property. This Court hereby AFFIRMS the State
Boards determination that Damon is not entitled to an obsolescence adjustment for its
1994 property assessment. This Court hereby REVERSES the State Boards final determination
as it relates to the applicability of the kit building adjustment to Damons
1994 property assessment and REMANDS this issue to the State Board for further
proceedings consistent with this opinion.
Although Damon asserted in its form 131 petition and argues to
this Court that it is appealing taxes for 1989-1993, the tax bill that
it received was for 1989 pay 1990 through 1992 pay 1993. (Petr.
Exhibit 3.) In Indiana, taxes are paid one year after property is
See Graybar Elec. Co. v. State Bd. of Tax Comm'rs, 723
N.E.2d 491, 495 (Ind. Tax Ct. 2000). Consequently, the tax assessment years
at issue are 1989-1992. Moreover, Damon is claiming that no lien can
attach to its property for taxes levied for years prior to its purchase.
Damon purchased the property in December of 1992. As such, it
owned the property at issue during the 1993 tax assessment year. Nonetheless,
this fact is not material to the outcome of this case.
The parcels of property in question are numbers 40-13-35-202-011 and 40-13-35-202-012
and are located in Nappanee, Indiana.
Footnote: In 1994, Damon filed its 131 Petition seeking review of the
tax years 1989-1993, and the State Board has since not made a final
determination. Therefore, this Court looks to the code provision applicable in 1994
to determine whether this Court has jurisdiction to decide this case.
State Bd. of Tax Commrs v. Mixmill Mfg., 702 N.E.2d 701, 703 n.3
(Ind. 1999). Pursuant to Ind. Code Ann. § 6-1.1-15-4(e) (West 1989):
[i]f the state board of tax commissioners fails to conduct a hearing and
make a final determination required under this section within twelve (12) months after
the state board receives a petition for review in a nonreassessment year and
twenty-four (24) months in a reassessment year, the person who petitioned for review
may initiate an appeal under section 5 of this chapter in the same
manner as if the state board had made a final determination affirming the
county board of reviews action with respect to the assessment.
Because Damon initiated this appeal after the requisite time period for the State
Board to make its final determination had passed, this Court has jurisdiction to
decide this case.
When questioned by this Court regarding whether the property was under
valued and thus fell under Chapter 9, Damon responded:
if the taxpayer and the taxing officials possibly believed that the assessed
value for 1990 was the 88 value under the statute, and that is
what they billed them at, and that is what they assessed them at,
then the final determination is what increased the assessment. It wasnt the
89 assessment standing. It was, wash away the 89 assessment, and lets
review the whole thing and determine what the assessment should be. If
that were the case, then it would definitely fall under [chapter] nine, and
that is what everything indicated to our taxpayer. Our taxpayer did not
have any availability, any evidence out there to find that.
(Amended Oral Argument Tr. at 17.) (emphasis added.) This completely speculative response
by Damon does not constitute probative evidence showing that Mallards appeal to the
State Board was made under Chapter 9. See Whitley Prods., 704 N.E.2d
at 1119. Therefore, Damon has not met its burden of presenting a
prima facie case with regard to this issue. See Herb v. State
Bd. of Tax Commrs, 656 N.E.2d 890, 893 (Ind. Tax Ct. 1995) (holding
that [a]llegations, unsupported by factual evidence, remain mere allegations).
The Court notes that Damon contends that obsolescence is warranted because
property has poor market acceptability. As Damon points out, one of
the reasons for economic obsolescence that is set forth by the regulations is
[m]arket acceptability of the product or devices for which the property was constructed
or is currently used. Ind. Admin. Code tit. 50, r. 2.1-5-1 (1992)
(codified in present form at id., r. 2.2-10-7(e) (1996) (emphasis added)). This
market acceptability appears, by its plain language, to be limited to the marketability
of the product or devices for which the property was constructed or is
currently used. Id. (emphasis added) Damon has not presented any evidence
of the products or devices for which it utilizes the property. As
such, it also has not presented evidence of the lack of market acceptability
of those products or devices. Therefore, this factor, listed in the regulations,
does not further Damons case.
The evidence and testimony presented at trial listed the true tax
value at $299,670. However, in Damons Post-trial Brief, it asserts that the
true tax value was $296,670. For the purposes of this case, this
Court will use the figure of $296,670, the number stated in Damons Post-trial
Footnote: At trial, the State Board called Steven Schultz, an assessor, who
testified that he questioned whether the purchase price of property could be considered
in determining whether economic obsolescence was applicable. (Trial Tr. at 23)
Footnote: True tax value of an improvement is calculated by the "reproduction
cost" of the item, less any physical depreciation or obsolescence depreciation to which
it is entitled.
Ind. Admin. Code. tit. 50, r. 2.1-5-1 (1992).
Reproduction cost is defined as the "whole-dollar cost of reproducing the item."
Ind. Admin. Code. tit. 50, r.2.1-4-2 (1992). The "reproduction cost" of an
improvement, however, is not the actual cost of reproducing the item. Rather,
it is based upon base rates and adjustments in the State Board's "cost
schedules." See Ind. Admin. Code. tit. 50, r. 2.1-4-5 (1992).
Thus, the "true tax value" of an improvement does not necessarily approximate its
Schultz testified at trial that we dont base our assessments on
either the closing statement or purchase price of property; we base our assessments
on 50 IAC 2.2. (Trial Tr. at 26.)
Footnote: Damon does not tell this Court what building or addition is
at issue here.
Footnote: In responding to a question on whether the assessor applied obsolescence
to Damons incomplete building, the assessor replied:
On the property record card it may appear as obsolescence, but I indicated
that the percentage adjustment that was entered into that area on the property
record card, its identified as obsolescence depreciation as its heading. Id entered
a forty percent factor in there to reduce the remainder value by forty
percent to a true tax value that would represent sixty percent from the
course of the remainder value, and I had indicated that that factor, that
forty percent, was to reflect the incomplete status of that addition rather than
either functional or economic obsolescence.
(Trial Tr. at 24-25.)
Footnote: Damon does not state in its Post-trial Brief whether it is
appealing functional or economic obsolescence with regard to this issue. The Court
would appreciate the taxpayers designation of the type of obsolescence (and the development
of an argument relevant thereto) that the taxpayer contends it should receive instead
of forcing this Court to guess what the taxpayer is arguing.
North Park Cinemas, Inc. v. State Bd. of Tax Commrs, 689 N.E.2d 765,
769 (Ind. Tax Ct. 1997) (holding that a hearing officer did not have
an affirmative duty to make a case on behalf of a party, rather
a party is responsible for presenting evidence and an argument in support of
its position). Because Damon asserts that while the building was under construction
it was useless, this Court assumes that Damon is arguing that the incomplete
building was economically obsolescent. See Pedcor Investments, 715 N.E.2d at 439-40.
However, in Damons Post-trial Briefs it does not direct us to
any evidence that shows lack of heat or lights.
Footnote: The Court notes that Damon has not identified any functional obsolescence
issues in its Post-trial Briefs or developed any argument regarding functional obsolescence.
Footnote: In its final determination, the State Board concluded, with regard to grade,
that the structure is constructed with low cost economy materials and workmanship throughout.
(Defendants Ex. A.) This Court notes that for purposes of kit building
identification, Instructional Bulletin 91-8 also states that only low cost and economical versions
of pre-designed and pre-engineered structures qualify for kit building status. Instructional Bulletin
91-8 at 3.
Footnote: Earlier during the trial, Schultz testified that there were
to the main building. Based upon the majority of testimony at trial,
this Court assumes that there are two, not three additions. However, the
number of additions is not relevant to the outcome of this case.
In discussing the language in Instructional Bulletin 91-8 that supports the
proposition that slight variations in structural components would not necessarily disqualify a building
for a kit adjustment, this Court previously stated:
Not only does the bulletin use language such as minimal and normal (leading
to the inference that slight variations in structure are acceptable), but Bulletin 91-8
specifically refers to the use of increased grade to account for quality differences
of the . . . supports and/or roof beams. Moreover, Bulletin 91-8
specifically allows some buildings to qualify for the kit adjustment in spite of
mixed support systems, described as "upgrades." Instructional Bulletin 91-8 at 7.
King Indus., 699 N.E.2d at 342 n.11 (internal citations omitted).
The State Board must identify the characteristics of an improvement that
it contends render the improvement ineligible for a kit adjustment.
712 N.E.2d at 1124. Then, the State Board [is] required to quantify
the effect of the subject improvement's deviations from the basic kit model on
the subject improvement's reproduction cost to determine whether those deviations rendered the subject
improvement no longer economical. Id. Consequently, when faced with evidence demonstrating
that an improvement qualifies for the kit adjustment, the State Board cannot simply
point to a deviation from the basic kit model and use that deviation
to justify the denial of a kit adjustment, unless the deviation specifically disqualifies
the improvement for the kit adjustment or the deviation increases the cost of
the improvement so that the improvement is no longer economical. Id. at
Damon also contends that the State Board denied its kit building
adjustment because the State Board gave Damons building a D-2 grade. Damons
assertion is based upon testimony by the assessor that typically the assessors consider
either a grade reduction or kit adjustment, but not both. During trial
the hearing officer stated that typically assessors consider one or the other, a
grade reduction or kit. (Trial Tr. at 28.) In commenting on
the grade that he recommended, he also stated that often a petitioner would
request a kit adjustment or a reduced grade in lieu of the kit
adjustment. (Trial Tr. at 23-24.) This Court reminds the State Board
that it is not permitted to use a grade adjustment in lieu of
a kit adjustment.
See Morris, 712 N.E.2d at 1125; See Barth, Inc.
v. State Bd. of Tax Commrs, 699 N.E.2d 800, 805 (Ind. Tax Ct.
1998) (holding that [u]nder the State Board regulations, a building must be given
a kit adjustment if it qualifies for that adjustment), rehg denied; Ind. Admin.
Code tit. 50, r. 2.1-4-5 (Schedules A1 and A2) ("Deduct 50% of base
price (1st floor) for pre-engineered kit-type structure")).
If Damon asserts that the grade should be lower than a
C, Damon has the burden of proving with probative evidence that the lower
grade is appropriate. Should Damon choose to challenge the C grade, then
the State Board must be given the opportunity to present relevant evidence regarding
Footnote: Arriving at the most accurate assessment is the goal.
Morris, 712 N.E.2d at 1126. This Court notes that the Department's regulations
permit application of a separate base rate for each distinct area of a
building with two or more use types. See Ind. Admin. Code tit
50, r. 2.1-4-1 (1992) (providing formula for determining base rate for mixed use
building) (codified in present form at id. tit 50, 2.2-10-2 (1996)).