ATTORNEY FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
JOSEPH D. GEESLIN, JR. STEVE CARTER
GEESLIN & ASSOCIATES ATTORNEY GENERAL OF INDIANA
Lebanon, IN Indianapolis, IN
TED J. HOLADAY
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
LDI MANUFACTURING CO., INC., )
v. ) Cause No. 49T10-9905-TA-129
STATE BOARD OF TAX COMMISSIONERS, )
ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
December 18, 2001
LDI Manufacturing Co., Inc. (LDI), appeals the final determination of the State Board
of Tax Commissioners (State Board) establishing the assessed value of LDIs improvement as
of March 1, 1996. The relevant issue for review is whether the
State Board abused its discretion and acted arbitrarily and capriciously in failing to
apply the General Commercial Kit (GCK) pricing schedule to LDIs improvement.
For the reasons stated below, the Court REVERSES this case and REMANDS it
to the State Board.
FACTS AND PROCEDURAL HISTORY
LDI, which manufactures restaurant exhaust ventilating equipment, owns land and improvements in Logansport,
Indiana. The improvement on LDIs land consists of two preengineered buildings that
are connected. Both buildings were manufactured by Butler Manufacturing Company.
The township assessed LDIs improvement at $308,870 under the General Commercial Industrial (GCI)
Light Manufacturing model. LDI filed a Form 130 Petition for Review of
Assessment with the Cass County Property Tax Assessment Board of Appeals (PTABOA) arguing
that its improvement should be assessed using the GCK schedule, and the PTABOA
affirmed the assessment.
LDI then filed a Form 131 Petition for Review of Assessment with the
State Board. The State Board held a hearing, and afterwards, the hearing
officer inspected LDIs improvement. In its final determination, the State Board stated
that the building did not qualify for the GCK schedule because it was
a special purpose design building. (Joint Ex. 2 at 19.) Thus,
the State Board made no change in the assessment of the improvement for
the requested application of the GCK schedule.
On May 26, 1999, LDI filed an original tax appeal. This Court
conducted a trial, heard oral arguments, and took the matter under advisement.
Additional facts will be supplied as needed.
ANALYSIS AND OPINION
Standard of Review
The Court gives great deference to the State Boards final determinations when the
State Board acts within the scope of its authority. Wetzel Enters., Inc.
v. State Bd. of Tax Commrs, 694 N.E.2d 1259, 1261 (Ind. Tax Ct.
1998). Accordingly, this Court reverses final determinations of the State Board only
when those decisions are unsupported by substantial evidence, are arbitrary or capricious, constitute
an abuse of discretion, or exceed statutory authority. Id.
The taxpayer bears the burden of demonstrating the invalidity of the State Boards
final determination. Clark v. State Bd. of Tax Commrs, 694 N.E.2d 1230,
1233 (Ind. Tax Ct. 1998). The taxpayer must present a prima facie
case, which is a case in which the evidence is "sufficient to establish
a given fact and which if not contradicted will remain sufficient." Damon
Corp. v. State Bd. of Tax Commrs, 738 N.E.2d 1102, 1106 (Ind. Tax
Ct. 2000) (citations and internal quotation marks omitted). To establish a prima
facie case, the taxpayer must offer probative evidence concerning the alleged error.
King Indus. v. State Bd. of Tax Commrs, 699 N.E.2d 338, 343 (Ind.
Tax Ct. 1998).
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. Loveless Const. Co. v. State Bd. of
Tax Commrs, 695 N.E.2d 1045, 1049 (Ind. Tax Ct. 1998), review denied.
To carry its burden, the State Board must do more than merely assert
that it assessed the property correctly. Id. Instead, the State Board
must offer an authoritative explanation of its decision to discount the taxpayers prima
facie showing. Id.
LDI argues that the State Board abused its discretion when it refused to
apply the GCK pricing schedule to its improvement. The State Board argues
that the GCK schedule does not apply because LDIs improvement is a special
purpose design building due to the thickness of its columns.
The GCK pricing schedule is used for valuing preengineered and predesigned pole buildings
which are used for commercial and industrial purposes. Ind. Admin. Code tit.
50, r. 2.2-10-6.1(a)(1)(D) (1996).
The GCK schedule value[s] the base building on
a perimeter area ratio basis and adjust[s] the value based on the various
individual components of the building. Id. However, [b]uildings classified as a
special purpose design are not valued using the GCK pricing schedule. Id.
To prove that it should have been assessed under the GCK model, LDI
presented evidence that the two connected areas of its improvement were preengineered buildings
manufactured by Butler Manufacturing Company.
(Joint Ex. 3; Trial Tr. at 29.)
LDI also presented testimony and photographs that the improvement had: (1)
steel post and beam construction; (2) steel purlins; (3) a low-pitched roof; and
(4) exterior walls made of pre-manufactured sandwich paneling. (Joint Ex. 3, 5
at 9-10; Trial Tr. at 30-32.) All of these components are listed
and priced under the GCK schedule. See Ind. Admin. Code tit. 50,
r. 2.2-11-6 (Sched. A.4.) (1996). LDI also presented a proposed property record
card to demonstrate how its base rate would be calculated under the GCK
schedule. After showing that its improvement had a perimeter area ratio of
two, LDI calculated its base rate under the GCK schedule by applying the
schedules pricing to the components of the improvement (e.g., steel purlins, insulation, sandwich
paneling, steel post and beams, low pitch roof). (Joint Ex. 5 at
By comparing the features of LDIs improvement with those listed in the regulation,
LDI has made a prima facie case that its improvement should have been
assessed under the GCK pricing schedule. See Componx, Inc. v. Indiana State
Bd. of Tax Commrs, 683 N.E.2d 1372, 1374 (Ind. Tax Ct. 1997).
Because LDI has presented a prima facie case, the burden shifts to the
State Board to rebut LDIs evidence and support its decision with substantial evidence.
See Damon, 738 N.E.2d at 1112. The State Board, however, has
failed to do so.
The State Board admits that LDI presented evidence that supported the application of
the GCK schedule. (Respt Br. at 2; Oral Argument Tr. at 15.)
The State Board, however, has failed to deal with that evidence in a
meaningful manner. See Barker v. State Bd. of Tax Commrs, 712 N.E.2d
563, 568-69 (Ind. Tax Ct. 1999). Instead, the State Board argues that
LDI failed to make a prima facie case because it did not also
prove that the State Boards use of the GCI schedule was wrong.
(Respt Br. at 8; Oral Argument Tr. at 14-15.) The State Board
misunderstands the taxpayers burden.
In a case where the State Board denies a kit adjustment, the taxpayer
is only required to offer probative evidence tending to demonstrate that the improvement
is entitled to assessment under the GCK schedule. See Barker, 712 N.E.2d
at 567-68. After a taxpayer has made such a showing, the State
Board must come forward with probative evidence to rebut the taxpayers showing.
Id. at 568. The State Board is required to deal with
the taxpayers evidence in a meaningful manner, and where the State Board fails
to take relevant evidence into consideration, reversal is mandated. Id.
Here, LDI presented probative evidence showing that its improvement was entitled to assessment
under the GCK schedule. Therefore, it was incumbent upon the State Board
not LDI to rebut LDIs evidence and to come forward with
probative evidence that would substantiate the use of the GCI schedule. See
Barker, 712 N.E.2d at 568. The State Board, however, failed to meet
In its final determination, the State Board found that LDIs improvement did not
qualify for assessment under the GCK schedule because it was a special purpose
design building. (Joint Ex. 2 at 19.) In determining that the
improvement was a special purpose design building, the State Board relied on LDIs
representatives statement that the building could be increased in size. (Joint Ex.
2 at 19.) However, there is nothing about an improvements ability to
be doubled in size that would disqualify it for the GCK schedule.
Furthermore, as the parties agree, the regulations contain no specific definition of what
constitutes a special purpose design in the GCK context.
See footnote (Trial Tr. at
12; Oral Argument Tr. at 20, 21.)
Because the regulations do not specifically define special purpose design, this Court must
apply rules of statutory construction. The rules of statutory construction apply to
administrative rules and regulations in the same manner as they do to statutes.
Componx, Inc. v. State Board of Tax Commrs, 741 N.E.2d 442, 446
(Ind. Tax Ct. 2000). Words and phrases in a statute are given
their plain and ordinary meaning unless they are technical words and phrases having
a peculiar and appropriate meaning in the law requiring definition according to their
technical import. Ind. Code § 1-1-4-1(1).
Because the State Board has used a technical, appraisal term in its regulations,
the Court will refer to such texts to define it. See I.C.
1-1-4-1(1). A special-purpose property or a special-design property is [a] limited-market property
with a unique physical design, special construction materials, or a layout that restricts
its utility to the use for which it was built[.] Appraisal Institute,
The Appraisal of Real Estate 25 (12th ed. 2001).
LDIs improvement does not fall under the definition of a special purpose design
property. The only evidence that the State Board put forth to support
its contention that LDIs improvement was a special purpose design was that some
of the columns were thicker than some of the others and that the
building could be increased in size. At trial, the State Boards hearing
officer, who stated that he was only vaguely familiar with the GCK schedule,
explained that only the thickness of the wall columns was used to determine
that LDIs improvement was a special purpose building. (Trial Tr. at 12,
18.) The hearing officer, stated that he did not think the GCK
model was appropriate because of the improvements heavy duty columns. (Trial Tr.
at 10-11.) He believed the columns were heavy duty because some of
them were 3/8 inch thick, which was twice as thick as the 3/16
inch columns. (Trial Tr. at 11-12.) He admitted, however, that the
regulations do not have any provision that says that the thickness of the
columns are a determinant of whether a building qualifies for the GCK schedule.
(Trial Tr. at 13.) This evidence does not show that LDIs
improvement had a unique design, special materials, or restrictive layout that would limit
its marketability. Thus, the State Board has failed to rebut LDIs evidence
that the improvement should be assessed under the GCK schedule.
Moreover, the State Board has failed to justify its decision to use the
GCI schedule. The hearing officer testified that he did not use the
GCK schedule because he felt that the GCI schedule was a better schedule
to use on LDIs improvement despite the fact that he didnt have any
support in the regulations for that determination. (Trial Tr. at 16.)
This Court has previously stated that feelings do not constitute the requisite probative
evidence required to uphold a State Board determination, nor do they constitute substantial
evidence. See Freudenberg-Nok General Partnership v. State Bd. of Tax Commrs, 715
N.E.2d 1026, 1030 (Ind. Tax Ct. 1999), review denied. Because the State
Board did not support its final determination with substantial evidence, this Court REVERSES
the State Boards final determination.
For the aforementioned reasons, the State Boards final determination is REVERSED and this
case is REMANDED to the State Board to assess LDIs improvement using the
In its original tax appeal, LDI also raised an issue
of whether the State Board correctly used the forty-year life table to determine
the physical depreciation of the improvement. At trial, the parties stipulated that
the resolution of the life table issue would be contingent on the outcome
of the General Commercial Kit (GCK) issue. (Trial Tr. at 7.)
The parties agreed that if the Court finds that the improvement should have
been assessed under the GCK schedule, then the State Board should apply the
thirty-year life table, and if the GCK schedule is not applicable, the forty-year
life table will stand. (Trial Tr. at 7.) Thus, this Court
will not address this issue.
The State Board did, however, increase the assessment of the improvement
to $323,530 due to a math error.
(Joint Ex. 2 at 20.)
The GCK base rates are located in Schedule A.4 of the
Indiana Administrative Code, title 50, regulation 2.2-11-6.
One building, used for manufacturing and as a warehouse, is
160 x 280 feet and has 40 x 40 foot bays and a
15-foot eave. The other building, used as an office, is 60 x
100 feet and has a 12-foot eave.
In its proposed property record card, LDI also included components
the township and county assessors omitted from the assessment, such as a wood
mezzanine, concrete paving, dock floor, and a plumbing fixture. (Trial Tr. at
33-34; Joint Ex. 5 at 2, 7.)
The Court notes, however, that the regulations do contain some references
to special purpose buildings, which are applicable to determining depreciation.
Admin. Code tit. 50, r. 2.2-13-6; 4.2-11-8(b)(1).