ATTORNEY FOR PETITIONER
DAVID L. PIPPEN
ATTORNEY AT LAW
ATTORNEYS FOR THE RESPONDENT
ATTORNEY GENERAL OF INDIANA
VINCENT S. MIRKOV
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
RONALD D. CLARK d/b/a THE ARCHES, )
v. ) Cause No. 49T10-9808-TA-103
DEPARTMENT OF LOCAL GOVERNMENT )
ON APPEAL FROM A FINAL DETERMINATION OF
THE STATE BOARD OF TAX COMMISSIONERS
December 17, 2002
Ronald D. Clark (Clark) challenges the State Board of Tax Commissioners (State
Board) March 1, 1993 assessment of his two apartment buildings. The Court
finds that the dispositive issues are:
I. Whether Clark presented a prima facie case showing the proper grade for his
apartment buildings; and
II. Whether Clark quantified the obsolescence depreciation he sought for his apartment buildings.
For the reasons given below, the Court AFFIRMS the State Boards May 31,
1996 final determination on these issues.
FACTS AND PROCEDURAL HISTORY
This case arrives back in this Court from a previous remand to the
State Board. See Clark v. State Bd. of Tax Commrs 694 N.E.2d
1230 (Ind. Tax Ct. 1998) (Clark I). In that case, Clark initiated
an original tax appeal from the State Boards final determination in which it
valued his two apartment buildings (the Woods Property and the Salisbury Property) for
the March 1, 1993 assessment. In the final determination, the State Board
assigned the properties a grade of C and 5% obsolescence.
In 1996, Clark appealed the final determination to this Court. At his
trial, Clark presented a prima facie case showing that the C grade was
excessive and improper and that the State Board had failed to quantify its
award of 5% obsolescence to both apartment buildings. Accordingly, the Court remanded
this case to the State Board for further proceedings so that Clark could
present evidence showing what the grade of his apartments should have been and
to quantify his request for obsolescence depreciation.
Following a remand hearing, the State Board issued a second final determination on
Clarks assessment, raising the grade of his apartments to a C+1 and removing
its original award of 5% obsolescence. Clark again initiated an original tax
appeal and a trial was held on January 20, 1999. Oral arguments
were held on August 6, 1999. Additional facts will be supplied as
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 its findings are unsupported by substantial evidence, arbitrary, capricious, constitute an
abuse of discretion, or exceed 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 was invalid.
Id. 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 I,
694 N.E.2d at 1233.
The first issue is whether Clark presented a prima facie case as to
what the correct grade should have been for his apartments. Clark argues
that the State Board failed to provide a basis for its grade determination.
Clark, however, is mistaken as to which party had the burden on
In general, every improvements materials, design, and workmanship are collectively assigned a grade
from A to E, which represents a numeric multiplier that may raise or
lower an improvements assessment. Deer Creek Developers, Ltd. v. Dept of Local
Govt Fin., 769 N.E.2d 259, 265 (Ind. Tax Ct. 2002). The C
grade is given to [m]oderately attractive buildings constructed with average quality materials and
workmanship throughout[.] Ind. Admin. Code tit. 50, r. 2.1-4-3(f) (1992).
When challenging grade, a taxpayer may either submit probative evidence showing (1) that
the grade given to its improvement by the State Board was improper or
(2) what the proper grade for his improvement should have been. Deer
Creek, 769 N.E.2d at 26566. In Clark I, Clark submitted probative evidence
showing that the C grade given to his two apartment buildings was improper.
Clark I, 694 N.E.2d at 1236, 1242. Because Clark made a
prima facie case as to whether his apartments had received the proper grade,
he necessarily raised the issue of what the proper grade should be.
When a taxpayer raises an issue, the burden is on the taxpayer to
make a prima facie case regarding that issue. See id. at 1234
(holding that [w]hat the taxpayer must demonstrate . . . depends on the
issues raised by the [taxpayers] challenge (emphasis added)). Thus, Clarknot the State
Boardhad the burden of proof as to this issue on remand.
On remand Clark only submitted evidence showing that the C grade given to
his apartments was excessive and improper. However, Clark had already made that
case. On remand, Clark was supposed to move forward and show what
his grade should have been. Instead, Clark stood still. Clark admits
that he presented no evidence to show what grade his two apartment buildings
should have received. (Oral Argument Tr. at 19.) As a result, he
failed to make a prima facie case as to grade.
The State Board, on the other hand, rather than deny relief to Clark
for failing to make a prima facie case, increased Clarks grade to a
C+1. Upon remand the state board of tax commissioners may take action
only on those issues specified in the decision of the tax court.
Ind. Code § 6-1.1-15-8(a) (emphasis added). Nothing in this Courts remand order
specified that the State Board should raise Clarks grade; its attempt to do
so here is void.
The Courts opinion in Clark I was to serve as a North Star
to guide Clark and the State Board across a sea of property tax
law. But Clark never got his ship out of port, and the
State Board sailed its ship right off the map. This is a
decade-old case in which there has been a terrific expenditure of public and
private resources. The Court feels constrained by these events to take reasonable
steps against their occurring again.
The procedure and practice in all actions jurisdictionally cognizable in the Indiana Tax
Court . . . shall . . . secure the just, speedy and
inexpensive determination of every action. Ind. Tax Court Rule 1 (2002).
Given the procedural history of this case, the Court believes that it will
secure the just, speedy and inexpensive determination of actions involving issues of grade
if a taxpayer who challenges the assessment of grade is required to present
a prima facie case at the administrative level showing what the correct grade
assessment should be. Therefore, going forward, this Court will not consider taxpayer
complaints concerning grade unless the taxpayer asserts what his grade should have been
and submits probative evidence to support that claim at the administrative level.
Cf. Clark I, 694 N.E.2d at 124142 (holding that a taxpayer must now
identify and quantify obsolescence at the administrative level before his case is heard
in this court).
Because Clark failed to make a prima facie case showing what the correct
grade of his two apartment buildings should have been, the Court AFFIRMS the
State Boards original final determination of a C grade for both apartment buildings.
The second issue is whether Clark presented a prima facie case on remand
quantifying the amount of obsolescence to be applied to his apartments. Clark
argues that the State Board failed to deal meaningfully with his evidence of
See footnote Again, Clark is mistaken.
Obsolescence is the functional or economic loss of property value.
694 N.E.2d at 1238. Functional obsolescence is caused by factors internal to
the property and is evidenced by conditions within the property. Id. (citations
and internal quotation marks omitted). Economic obsolescence is caused by factors external
to the property. Id. Clark fails to distinguish between economic or functional
obsolescence in his brief. The two types of obsolescence are not synonymous.
Accordingly, in all cases where the Indiana Board of Tax Review holds
a hearing on a taxpayers claim of obsolescence after the date of this
case, taxpayers are required to specify whether they are seeking economic or functional
obsolescence, or both. The Court will not accept creative ambiguity that leaves it
to the taxing authorities or this Court to determine what type of obsolescence
is being sought and whether the evidence identifies and quantifies it. See
Davidson Industries v. Indiana State Bd. of Tax Commrs, 744 N.E.2d 1067, 1071
(Ind. Tax Ct. 2001) (holding that the Court will not make a taxpayers
case for it); see also Clark I, 694 N.E.2d at 1241 (holding that
taxpayers must identify and quantify obsolescence to make a prima facie case).
In Clark I, this Court found that the State Boards explanation that it
had awarded 5% obsolescence to Clarks Woods Property because of fire code violations
was not supported by substantial evidence. Clark I, 694 N.E.2d at 124041.
Likewise, the Court found that the State Board had not provided substantial
evidence supporting its 5% obsolescence depreciation adjustment to Clarks Salisbury Property. Id.
at 1243. Nevertheless, the initial burden of quantifying obsolescence on remand belonged
to Clark, not to the State Board. See id. at 1241 n.17.
At the second trial in this matter, Clarks appraiser testified that he could
not quantify the obsolescence for the Salisbury Property. (Trial Tr. at 37.)
As for the Woods Property, the appraiserconsidering persistent fire code violationsestimated the
rent loss for twelve units
See footnote at $100 per month based on the assumption
that Clark could only rent the units as one-bedrooms, not as two bedrooms.
(Trial Tr. at 34.) The $100 figure was merely Clarks estimate,
itself based on another estimate of what other two bedrooms might be renting
for versus one bedrooms. (Trial Tr. at 35.) Clarks appraiser then
calculated that twelve of Clarks units were losing $14,000 per year and, capitalizing
that at a rate of 10%, determined a loss of $144,000. (Trial
Tr. at 35.) Finally, Clarks appraiser took the $144,000 as a percentage
of the remainder value of the Woods PropertySee footnote and concluded that the property
should receive a 41% obsolescence depreciation adjustment. (Trial Tr. at 35; Joint
Ex. D at 5.)
The Court need not address the validity of Clarks capitalization of loss.
His initial assumptions and estimates as to rent loss are without any evidentiary
basis, estimated simply on what he thought other unspecified apartments might lose
in rent in similar circumstances.See footnote An assumption based on an estimate based
on an unsubstantiated guess is the pinnacle of conclusory evidence; this Court will
not accept it as support for a taxpayers claim.
See Walker Mfg.,
772 N.E.2d at 7. Clark has submitted no probative evidence quantifying obsolescence.
Thus, he has failed to present a prima facie case on this
This, however, does not end the issue, because the State Board again on
remand launched into a reassessment of Clarks property, removing in its entirety the
5% obsolescence adjustment it had originally given to Clarks two apartment buildings.
Nevertheless, the State Board on remand could take action only on those issues
specified in the decision of the tax court. I.C. § 6-1.1-15-8(a) (emphasis
added). This Court remanded the issue of obsolescence so that Clark could
make a prima facie case quantifying the amount of obsolescence to which he
was entitled. Clark I, 694 N.E.2d at 1241 n.17. Thus, the
State Board was limited to rebutting Clarks prima facie case if he made
one. Clark did not make a prima facie case; therefore, the State
Boards attempt to alter the 5% obsolescence adjustment on remandregardless of any supporting
evidence it submittedis void.
Clark did not make a prima facie case as to the Salisbury Property
and has failed to make one as to the Woods Property. Accordingly,
the Court AFFIRMS that State Boards original final determination on Clarks obsolescence of
For the aforementioned reasons, the Court AFFIRMS the State Boards May 31, 1996
final determination on Clarks assessment as to both grade and obsolescence.
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
Clark also argues that the State Boards final determination is void in
its entirety because the State Board never issued a written order of appointment
for the hearing officer. Because Clark never objected to the hearing officers
authority at the administrative level, Clark has waived this issue.
Farm and Fleet, Inc. v. State Bd. of Tax Commrs, 747 N.E.2d 88,
91 (Ind. Tax Ct. 2001). Clark also attacks the sufficiency of the
State Boards written findings; the Court, however, discerns no defect that would warrant
reversal of the State Boards final determination. Finally, Clark argues that the
State Boards rules lack ascertainable standards and violate the Indiana Constitution. As
the Court has repeatedly stated, these arguments are not grounds for reversing a
final determination of the State Board. See, e.g., id. at 90 n.
1 (indicating that until the March 1, 2002 property tax rules are in
place, facial challenges to Indianas property tax laws will be rejected).
Clark made a prima facie case that his grade should be lowered.
On remand, the State Board raised it. The State Boards act
made winning in this Court more costly for Clark than losing. However,
because a taxpayer must now declare and prove at the administrative level the
proper grade his improvement should have received, the likelihood of these events being
repeated is negated.
Footnote: Nowhere in Clarks brief does he specify how much obsolescence should be
given to his apartments. Rather, he merely claims that he is entitled
to obsolescence and then refers the Court to the record. It
is the taxpayers duty to walk the Court through every element of the
analysis. If the analysis is quantification of economic or functional obsolescence, then
the taxpayer must carefully, methodically, and in detail brief this Court as to
what the amount of obsolescence should be and why. The Court will
no longer accept arguments in a brief that (1) generically claim without explanation
that the taxpayer made a prima facie case then (2) cite to large
swathes of the record as though the evidence speaks for itself. [T]his
Court will not make a taxpayers case for it.
Davidson Industries v.
Indiana State Bd. of Tax Commrs, 744 N.E.2d 1067, 1071 (Ind. Tax Ct.
2001) (internal quotation marks omitted). In the future, the Court will dismiss
The record indicates that the Woods Property has more than twelve units,
but Clarks brief does not specify the exact number.
Footnote: Clarks appraiser did not, however, specify the value of the Woods
Property in his testimony.
Footnote: Clark submitted partial rent rolls for 1993 that included rents from units
suffering fire code violations as well as rents from units not affected by
such violations. The rolls, however, showed no difference in rent between the
two classes of apartments and so could not reasonably be relied upon to
determine that accuracy of Clarks estimates. (
See Trial Tr. at 5758.)
At oral argument, Clark claimed to have submitted other evidence quantifying obsolescence; if
he did submit such evidence, he either failed to cite to it in
his brief, or he failed in his brief to articulate a cogent argument
based on such evidence, or both. See Davidson, 744 N.E.2d at 1071
(holding that the Court will not make a taxpayers case for it).
Furthermore, Clarks appraiser testified that the fire code violations alone formed the crux
of his obsolescence analysis. (Trial Tr. at 34.)