ATTORNEY FOR PETITIONER:    ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN    STEVE CARTER    
ATTORNEY AT LAW     ATTORNEY GENERAL OF INDIANA
Indianapolis, IN    Indianapolis, IN
    
     JOEL SCHIFF
    DEPUTY ATTORNEY GENERAL
    Indianapolis, IN
    

_____________________________________________________________________

    IN THE INDIANA TAX COURT _____________________________________________________________________

SSK CO.,                                                                  )
                                                                               )
    Petitioner,                                                                )
                                                                               )
    v.                                                                         )   Cause No. 49T10-9907-TA-174
                                                                               )
DEPARTMENT OF LOCAL                                                            )
GOVERNMENT FINANCE,
                                                           
                                                 
                                                                      
                                      See footnote 
                          
        )
                )
    Respondent.            )    
_____________________________________________________________________

ON APPEAL FROM A FINAL DETERMINATION OF
THE STATE BOARD OF TAX COMMISSIONERS

NOT FOR PUBLICATION
November 13, 2002

FISHER, J.

    SSK Co. (SSK) appeals the final determination of the State Board of Tax Commissioners (State Board) valuing its property for the March 1, 1995 assessment.
ISSUES

    I. Whether SSK’s improvements are entitled to additional
     obsolescence depreciation;

    II. Whether SSK’s land is entitled to a negative influence
     factor adjustment; and

    III. Whether SSK’s improvements were improperly graded? See footnote



FACTS AND PROCEDURAL HISTORY

    SSK timely filed a Form 131 Petition for Review of Assessment (“Form 131”) with the State Board challenging the 1995 assessment of its Indianapolis, Indiana property. In its Form 131, SSK claimed that its improvements were entitled to an additional obsolescence adjustment, that its land was improperly valued, and that its improvements were graded improperly. On May 24, 1999, the State Board issued its final determination on SSK’s Form 131, denying relief on SSK’s claims.
    SSK filed an original tax appeal with this Court on July 7, 1999. The Court did not conduct a trial, as both parties requested to have the matter resolved based on the evidence stipulated into the record as well as on their briefs. Additional facts will be supplied as necessary.
STANDARD OF REVIEW

    This Court accords great deference to the State Board when it acted within the scope of its authority. Wetzel Enters., Inc. v. State Bd. of Tax Comm’rs, 694 N.E.2d 1259, 1261 (Ind. Tax Ct. 1998). Accordingly, the Court will reverse a State Board final determination only if it is unsupported by substantial evidence, constitutes an abuse of discretion, exceeds statutory authority, or is arbitrary and capricious. Id.
    The party challenging the propriety of a State Board final determination bears the burden of demonstrating its invalidity. Clark v. State Bd. of Tax Comm’rs, 694 N.E.2d 1230, 1233 (Ind. Tax Ct. 1998). To do so, the taxpayer must present a prima facie case, or one in which the evidence is “sufficient to establish a given fact and which if not contradicted will remain sufficient.” Id. (internal quotation and citation omitted). See footnote Although the burden of proof never shifts, once the taxpayer presents a prima facie case, the duty to go forward with the evidence shifts, and it is incumbent on the State Board to rebut the taxpayer’s evidence and support its decision with substantial evidence. Id.
DISCUSSION
OBSOLESCENCE DEPRECIATION

    For the 1995 reassessment, the Marion County Board of Review (BOR) awarded SSK a 15% obsolescence depreciation adjustment on one of the improvements to the property and a 5% obsolescence depreciation adjustment to the other building. (See R. of Admin. Proceeding at 5). SSK, however, seeks at least a 66% depreciation adjustment.
    To receive an adjustment for obsolescence, SSK must (1) identify the causes of obsolescence and (2) quantify the amount of obsolescence to be applied. See Clark, 694 N.E.2d at 1241. While it appears that the parties agree that obsolescence is present in the subject property, See footnote they disagree as to the quantification. ( See R. of Admin. Proceeding at 46-48.) In effort to quantify its obsolescence entitlement, SSK offered a comparison sales method.See footnote Nevertheless, SSK did nothing more than supply some sales data from four supposedly comparable properties, as well some pages from an appraisal textbook. At the State Board hearing, SSK’s tax representative, M. Drew Miller of Landmark Appraisals (Miller), failed to explain and link the quantification method to the instant case, and the Court will not now craft SSK’s argument. Consequently, because SSK has not presented a prima facie case that it is entitled to an obsolescence depreciation adjustment, the State Board’s duty to rebut SSK’s evidence is not triggered. See Clark, 694 N.E.2d at 1233. Accordingly, this Court AFFIRMS the State Board’s determination on this issue.
NEGATIVE INFLUENCE FACTOR FOR LAND

    SSK argues that its land is entitled to a negative influence factor to account for the fact that while the property is commercial/industrial in nature, it is located in a residential neighborhood. (R. of Admin. Proceeding at 46.) See also Ind. Admin. Code tit. 50, r. 2.2-4-10(a)(9)(E) (stating that a decrease in the value of land may be made to account for the fact that a parcel does not have the same use as its surrounding parcels). To support its claim, the only evidence See footnote presented by the taxpayer was Miller’s testimony at the administrative hearing:
[A]s far as the land goes, the subject property is industrial property. It’s in an older section of town and in a mixed, mostly residential, neighborhood. The influence factor that we’re asking for is for misimprovement, which the manual describes it as the surrounding properties being of a different use. The surrounding properties of the subject property are definitely of a different use, and we feel a negative influence factor should be applied.

Q: How much?

A: Fifty percent.

Q: Minus fifty percent?

A: Correct.

* * * * *


Q: I just wanted to ask what type of documentation you’re basing your fifty percent influence factor on the land on. I don’t see any documentation . . . I’m just wondering where that figure is coming from.

A: That’s basically coming from the fact that there is no guidelines to say what influence factor. The regulations simply say that a deduction should be made. That’s based off the fact that 50% of the property is bordered by a use other than what the first subject is.

(R. of Admin. Proceeding at 46-48.)

    When contesting an assessment, a taxpayer must offer probative evidence concerning the alleged assessment error. See Whitley Prods., Inc. v. State Bd. of Tax Comm’rs, 704 N.E.2d 1113, 1119 (Ind. Tax Ct. 1998), review denied. Mere conclusory statements, however, do not constitute probative evidence. Id. Here, other than Mr. Miller’s conclusion that SSK’s land is entitled to a fifty percent negative influence factor, the record is devoid of any evidence calculating the appropriate adjustment to be applied. SSK, therefore, is not entitled to any relief on this issue. Thus, the Court AFFIRMS the State Board’s final determination on this issue.

GRADE

    For the 1995 assessment, one of SSK’s improvements had been assigned a “D” grade. SSK maintains that the grade should be reduced to an “E.”
    Under Indiana’s true tax value system, improvements are assigned various grades based on their materials, design, and workmanship; the grades represent multipliers that are applied to the base reproduction cost of an improvement. Ind. Admin. Code tit. 50, r. 2.2-10-3; Whitley Prods., 704 N.E.2d at 1116. The selection of which grade should be applied to an improvement calls for a subjective judgment and is committed to the discretion of the assessor. Mahan v. State Bd. of Tax Comm’rs, 622 N.E.2d 1058, 1064 (Ind. Tax Ct. 1993). Thus, in determining grade, the assessor is to “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[.]” Ind. Admin. Code tit. 50, r. 2.2-10-3(a)(4). On the other hand, “‘E’ grade buildings are constructed with substandard grade materials, usually ‘culls’ and ‘seconds’, and very poor quality workmanship resulting from unskilled, inexperienced, do-it-yourself labor.” Ind. Admin. Code tit. 50, r. 2.2-10-3(a)(5).
    When contesting a grade assigned to an improvement, a taxpayer must offer probative evidence concerning the alleged assessment error. Whitley Prods., 704 N.E.2d at 1119. A taxpayer’s conclusory statements concerning the grading of a subject improvement, however, do not constitute probative evidence. Id. Likewise, mere references to photographs or State Board regulations, without explanation, do not qualify as probative evidence for purposes of grading issues. Heart City Chrysler v. State Board of Tax Comm’rs, 714 N.E.2d 329, 333 (Ind. Tax Ct. 1999). In the event that a taxpayer fails to provide the State Board with probative evidence supporting its position on a grade issue, the State Board’s duty to support its final determination with substantial evidence is not triggered. Whitley Prods., 704 N.E.2d at 1120.
    In examining the evidence it presented to the State Board at it’s administrative hearing, the Court determines that SSK has not met its burden of proof. For instance, at the administrative hearing, SSK presented several photocopied pictures of the subject improvement. No supporting explanation, however, was provided to show what features of the improvement warranted an “E” grade. As stated earlier, photographs, without explanation, do not qualify as probative evidence for purposes of grading issues. Heart City Chrysler, 714 N.E.2d at 333. Finally, Miller’s testimony at the administrative hearing was nothing more than “we would ask that a grade of E be applied to that to account for the major differences in the subject property in the grade.” (R. of Admin. Proceeding at 46.)
    Because SSK has failed to provide the State Board with probative evidence to support its position on grade, the State Board’s duty to support its final determination with substantial evidence is not triggered. See Whitley Prods., 704 N.E.2d at 1119-20. As a result, the State Board’s determination of a “D” grade is AFFIRMED.
CONCLUSION

SSK has not made a prima facie case with respect to its issues. Consequently, the State Board’s final determination is AFFIRMED on all counts.


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. P.L. 198-2001, § 119(b)(2). Effective January 1, 2002, the legislature created the Department of Local Government Finance (“DLGF”), see Indiana Code § 6-1.1-30-1.1 (West Supp. 2001)(eff. 1-1-02); P.L. 198-2001, § 66, and the Indiana Board of Tax Review (“Indiana Board”). Ind. Code § 6-1.5-1-3 (West Supp. 2001)(eff. 1-1-02); P.L. 198-2001, § 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); P.L. 198-2001, § 95. Nevertheless, the law in effect prior to January 1, 2002 applies to these appeals. Id. See also P.L. 198-2001, § 117. Although the DLGF has been substituted as the Respondent, this Court will still reference the State Board throughout this opinion.

Footnote: SSK also argues that its assessment should be voided because portions of Indiana’s regulations for taxing tangible property have been declared unconstitutional. Indeed, in 1998, the Indiana Supreme Court affirmed this Court’s determination that “the existing cost schedules . . . violate the Property Taxation Clause of the Indiana Constitution.” State Bd. of Tax Comm’rs v. Town of St. John, 702 N.E.2d 1034, 1043 (Ind. 1998). That same year, however, this Court declared that “[r]eal property must still be assessed, and, until the new regulations are in place, must be assessed under the present system.” Whitley Prods., Inc. v. State Bd. of Tax Comm’rs, 704 N.E.2d 1113, 1121 (Ind. Tax Ct. 1998), review denied; see also Town of St. John v. State Bd. of Tax Comm’rs, 729 N.E.2d 242, 246 & 251 (Ind. Tax Ct. 2000) (ordering real property in Indiana to be reassessed under constitutional regulations as of March 1, 2002 and providing that until then, “real property tax assessments shall be made in accordance with the current system”). The Court, therefore, will not analyze SSK’s state constitutional claim in this opinion.
SSK also contends that because Indiana’s system of taxing tangible property is not “based upon objectively verifiable data,” (see Pet’r Br. and Findings of Fact and Conclusions of Law at 8-10), its due process rights under the Fifth and Fourteenth Amendments to the U.S. Constitution are violated. This Court has in the past rejected legal arguments analogous to SSK’s. See Town of St. John v. State Bd. of Tax Comm’rs, 690 N.E.2d 370, 388–97 (Ind. Tax Ct. 1997), rev’d in part on other grounds by 702 N.E.2d 1034 (Ind. 1998). Even if SSK’s federal constitutional claims had merit, real property must still be assessed, and, until the new regulations are in place, must be assessed under the present system. See Whitley Prods., 704 N.E.2d at 1121. The Court, therefore, will not analyze SSK’s federal constitutional claim in this opinion either.

Footnote: In bearing that burden, SSK may only present evidence to this Court that it presented at the administrative level. See State Bd. of Tax Comm’rs v. Gatling Gun Club, Inc., 420 N.E.2d 1324, 1328 (Ind. Ct. App. 1981).

Footnote:
SSK asserts that the improvements suffer from various forms of economic and functional obsolescence (inefficient floor plans, varying ceiling heights, inadequate docking facilities and poor access to and from the property). (R. of Admin. Proceeding at 46-47.)


Footnote: Specifically, SSK used four comparable sales to arrive at an estimated accrued depreciation for the subject property. (See R. of Admin. Proceeding at 26, 30-38.) SSK then subtracted the amount of physical depreciation the subject property received from the estimated accrued depreciation figure to arrive at a 66% adjustment factor.


Footnote: In fact, SSK did not even address the argument in its brief/reply brief filed with this Court.