ATTORNEY FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN STEVE CARTER
ATTORNEY AT LAW ATTORNEY GENERAL OF INDIANA
Indianapolis, IN Indianapolis, IN
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
HARVEST LEASING CORP., )
v. ) Cause No. 49T10-0002-TA-26
INDIANA STATE BOARD OF )
TAX COMMISSIONERS, )
ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
NOT FOR PUBLICATION
December 18, 2001
Harvest Leasing Corp. (Harvest) appeals the State Board of Tax Commissioners (State Board)
final determination that assessed its property as of the March 1, 1996 assessment
date. Harvest presents the following issues for this Courts review on appeal,
which the Court restates as:
whether the State Board properly affirmed the pricing of Harvests building utilizing the
General Commercial Industrial (GCI) Schedule;
whether the State Board properly affirmed the assessment of Harvests building as a
D grade; and
whether the State Board properly affirmed the use of the forty-year life expectancy
table for the physical depreciation of Harvests building.
For the reasons stated below, the Court AFFIRMS this case.
FACTS AND PROCEDURAL HISTORY
Harvest owns property located in Kosciusko County, Indiana.See footnote For the 1996 tax
year, the improvement located on Harvests land was priced using the GCI schedule,
was assigned a D grade, and was depreciated using a 40-year life table.
On January 20, 1997, Harvest filed a form 131 Petition for Review
of Assessment (131 Petition) with the State Board seeking review of the March
1, 1996, assessment of its improvement claiming among other things that its building
should have been priced using the General Commercial Kit (GCK) schedule, assigned a
D-2 grade, and depreciated using a 30-year life table. Thereafter, the State
Board held a hearing on the 131 Petition. However, the improvement was
not inspected. On December 21, 1999, the State Board issued its final
determination wherein no changes were made to Harvests assessment. On February 4,
2000, Harvest filed its original tax appeal in this Court. The parties
stipulated to the record from the administrative proceedings. 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.
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. 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. 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. Damon
Corp. v. Indiana State Bd. of Tax Commrs, 738 N.E.2d 1102, 1106 (Ind.
Tax Ct. 2000). A prima facie case is one in which the
evidence is sufficient to establish a given fact and which if not contradicted
will remain sufficient. Id. 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);
Whitley Prods., Inc. v. State Bd. of Tax Commrs, 704 N.E.2d 1113,
1119 (Ind. Tax Ct. 1998), review denied. Once the taxpayer establishes a
prima facie case, the burden shifts to the State Board to rebut the
taxpayers evidence and justify its decision with substantial evidence. Clark, 694 N.E.2d
I. Pricing Schedule
The first issue is whether the State Board properly affirmed the pricing of
Harvests building by utilizing the GCI schedule. Harvest argues that its building
should have been assessed using the GCK schedule. The State Board argues
that Harvest did not present probative evidence that its building should be priced
using the GCK Schedule.
The GCK pricing schedule is used for valuing preengineered and predesigned pole buildings
which are used for commercial and industrial purposes. Quality Farm and Fleet,
Inc. v. State Bd. of Tax Commrs, 747 N.E.2d 88, 92-93, (Ind. Tax
Ct. 2001) (quoting Ind. Admin. Code tit. 50, r. 2.2-10-6.1(a)(1)(D) (1996)). Moreover,
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. (quoting 50 IAC 2.2-10-6.1(a)(1)(D)). The GCK base rates are located
on Schedule A.4 of Ind. Admin. Code tit. 50, r. 2.2-11-6 (1996).
The Court first looks to whether Harvest presented a prima facie case that
its building should be priced using the GCK schedule. The only evidence
presented by Harvest is the testimony of its tax representative, Drew Miller, and
black-and-white copies of three photographs of the building at issue. (Record of
Administrative Proceedings at 21, 49, 51.)
At the hearing Miller testified:
I dont have a whole lot. Um, basically first of all we
believe that the subject should be priced up at the GCK schedule you
look at the components out of the GCK pricing, all the components in
there can be found right out of the GCK pricing with the columns
and the insulation, metal walls. . . . This building clearly is better
described by the GCK model. Its a building that was manufactured by
strand [sic]. 26 gauge metal. It meets all the components that
are found in the GCK schedule.
(Record of Administrative Proceedings at 51.) The only specific evidence in Millers
testimony is that the building is made of 26 gauge metal
See footnote and was
manufactured by Stran. The regulations seem to indicate that 20 to 24
gauge steel is considered heavy gauge and, where present, must be accounted for
by adding to the base rate.
See Ind. Admin. Code tit. 50, r.
2.2-11-6 (Schedule A.4) n.2 (1996). Therefore, it appears that Harvest is arguing
that 26 gauge steel is standard for the GCK model, and thus, a
characteristic of a building eligible for GCK pricing. With regard to the
manufacturer, in Harvests brief, it cites to Morris v. State Bd. of Tax
Commrs, 712 N.E. 2d 1120, 1122 (Ind. Tax Ct. 1999) to support its
assertion that its building was manufactured by Stran, and therefore, it should be
priced as a GCK because Stran is one of the leading manufacturers of
pre-engineered buildings. (Petr Reply Br. at 2.) In Morris, the taxpayer
submitted, among other evidence, an affidavit from a builder stating that the taxpayers
building was in fact a STRAN pre-engineered steel framed building. Morris, 712
N.E.2d at 1122. Harvest presented no such affidavit in this case.
Miller did not testify as to any other specific components or characteristics of
the building. The remainder of Millers testimony consists of nothing more than
generalized conclusory statements that the building should be priced using the GCK schedule
because whatever the buildings components are, they can be found in the GCK
schedule. Conclusory statements are not probative evidence. Quality Farm and Fleet,
747 N.E.2d at 93. In addition, the black-and-white copies of photographs that
were submitted by Harvest are not labeled and no reference is made to
specific photographs or portions thereof in Millers testimony that would identify characteristics of
the building that would qualify it for pricing according to the GCK schedule.
However, when discussing what he believed to be the proper depreciation schedule,
Miller generally stated that [y]ou can see from the photographs that it is
[a] metal-skinned, pre-engineered, steel framed building. (Record of Administrative Proceedings at 51.)
This Court has rejected past attempts by taxpayers to put forth evidence
such as photographs without specific explanations and does so again in this case.
Miller Structures, Inc. v. Indiana State Bd. of Tax Commrs, 748 N.E.2d
943, 954 n.7 (Ind. Tax Ct. 2001); Fleet Supply, Inc. v. State Bd.
of Tax Commrs, 747 N.E.2d 645, 650 (Ind. Tax Ct. 2001), review denied;
Heart City Chrysler v. State Bd. of Tax Commrs, 714 N.E.2d 329, 333
(Ind. Tax Ct. 1999).
The above evidence is not sufficient to establish a prima facie case that
the building should have been priced using the GCK Schedule rather than the
GCI Schedule. Consequently, this Court AFFIRMS the State Boards final determination that
assessed the subject building using the GCI Schedule.
The next issue is whether the State Board properly affirmed the assessment of
Harvests building as a D grade. Harvest argues that if its building
is not priced using the GCK pricing model, the D grade assigned to
the building should be lowered to a D-2 because its structure is
a light pre-engineered building. (Petr Br. at 5, Petr Reply Br. at
3.) The State Board argues that Harvest did not present probative evidence
that its grade should be lowered.
[G]rades represent multipliers that are applied to the base reproduction cost of an
improvement. Kemp v. State Bd. of Tax Commrs, 726 N.E.2d 395, 400
(Ind. Tax Ct. 2000); see also Ind. Admin. Code tit. 50, r. 2.2-10-3
(1996). Under Indianas true tax value system, grade may be utilized to
account for deviations from the C grade, which is the norm.
See footnote 50
IAC 2.2-10-3. The most significant variables in establishing grade are the quality
and design of the building.
Id. Lowering Harvests building to a
D-2 grade would lower the buildings base value by twenty percent. See
Ind. Admin. Code tit. 50, r. 2.2-11-6 (1996) (Schedule F). When contesting
the grade assigned to an improvement, a taxpayer must offer probative evidence concerning
the alleged assessment error. Kemp, 726 N.E.2d at 400; Quality Farm and
Fleet, 747 N.E.2d at 94.
The Court first looks to whether Harvest presented a prima facie case that
the grade assigned to its building should be lowered to a D-2.
The evidence presented by Harvest included a copy of a page from the
Marshall Valuation Service and the testimony of Miller. At the hearing Miller
we do feel that the grade is excessive, because it does have substantially,
inferior components than compared to the concrete block model that its priced from.
The, what I did to estimate that difference or estimate the grade
is to look at those design and cost differences using Marshall Valuation Services
comparing a concrete block structure to a steel structure. And making that
comparison, weve got $28.71 for the concrete per square foot for the concrete
block structure versus $17.86 for the steel structure. In other words the
steel structure cost[s] about 62% of the concrete block structure. So we
would estimate a D-2 grade would be appropriate.
(Record of Administrative Proceedings at 51.) Millers calculation utilizing the Marshall Valuation
Service presumes that Harvests building is a [l]ight, pre-engineered, utility-type building.
(Record of Administrative Proceedings at 48.) However, as previously decided in section
one of this opinion, Harvest has not demonstrated that its building is a
light pre-engineered structure. The fact that the building has some steel construction
does not mean that it is light pre-engineered. Therefore, the Court does
not reach an evaluation of whether Harvests calculation using the Marshal Valuation Service
table would show that a D-2 grade would be more appropriate. Harvests
contentions are conclusory because they do not specifically describe why the improvements better
resemble the description of D-2 grade improvements as set forth in
Code tit. 50, r. 2.2-10-3. A taxpayers conclusory statements do not constitute
probative evidence concerning the grading of the subject improvement. Sterling Management-Orchard Ridge
Apartments v. State Bd. of Tax Commrs, 730 N.E.2d 828, 838 (Ind. Tax
Ct. 2000). Harvest has not made a prima facie case that the
grade of the improvements should be lowered to a D-2. Consequently, the
Court AFFIRMS the State Boards final determination that the improvement in question is
entitled to a D grade.
The final issue is whether the State Board properly affirmed the use of
the forty-year life expectancy table for the physical depreciation of Harvests building.
According to Harvest, the State Board should have applied the thirty-year life expectancy
table instead of the forty-year life expectancy table. The State Board contends
that Harvest did not submit probative evidence that its building should be depreciated
using the thirty-year life expectancy table.
The regulations provide that [p]hysical depreciation is determined by the combination of age
and condition. Each type of building has a life expectancy that is
determined by the building components and the use of the building. Ind.
Admin. Code tit. 50, r. 2.2-10-7(c) (1996). To apply physical depreciation, the
assessor must select the correct life expectancy table and identify the condition and
age of the building. 50 IAC 2.2-10-7(d). The regulations provide four
different life expectancy tables for use in determining the physical depreciation of commercial
and industrial buildings. 50 IAC 2.2-10-7(c). These tables are located in
the regulations at Ind. Admin. Code tit. 50, r. 2.2-11-7 (1996). Among
other things, the thirty-year life expectancy table is used to assess light pre-engineered
buildings and the forty-year life expectancy table is used to assess all fire-resistant
buildings not listed elsewhere. Ind. Admin. Code tit. 50, r. 2.2-11-7 (1996).
The Court now looks to whether Harvest presented probative evidence that its building
was a light pre-engineered building. Again, the only evidence submitted by Harvest
is Millers testimony and the copies of the black-and-white photographs of the building.
At the hearing Miller testified:
You can see from the photographs that it is [a] metal-skinned, pre-engineered, steel
framed building. Therefore it would [be] required also to be depreciated using
the 30 year life-table.
(Record of Administrative Proceedings at 51.) This does not qualify as probative
evidence sufficient to establish a prima facie case that Harvests building is light
pre-engineered, and thus, that the thirty-year life expectancy table should be used to
depreciate Harvests building. Millers testimony consists of nothing more than conclusory statements,
which are not probative. See Fleet Supply, 747 N.E.2d at 649-50.
Moreover the unclear, black-and-white photographs lack probative value because they are not labeled
and Miller has not specifically pointed out any of the components that he
mentions in any particular photograph. See Id.; Heart City Chrysler, 714 N.E.2d
at 333. Harvest has not made a prima facie case as to
its position that the thirty-year life expectancy table should have been applied to
determine its buildings physical depreciation adjustment. Therefore, Court AFFIRMS the State Boards
final determination that the building should be depreciated using the forty-year life table.
For the foregoing reasons, the Court hereby AFFIRMS the State Boards final determination
in all respects.
Harvest also raises the issue of whether the State Boards assessment
regulations violate both the United States Constitution and the Indiana Constitution. The
fact that a subject improvement was assessed under an unconstitutional regulation does not
mean that the assessment will be invalidated on that basis.
Co. v. State Bd. of Tax Commrs, 745 N.E.2d 928, 930 n.1 (Ind.
Tax Ct. 2001), review denied; Whitley Prods., Inc. v. State Bd. of Tax
Commrs, 704 N.E.2d 1113, 1121 (Ind. Tax Ct. 1998), review denied; see also
White Swan Realty v. State Bd. of Tax Commrs, 712 N.E.2d 555, 559
(Ind. Tax Ct. 1999), review denied; Phelps Dodge v. State Bd. of Tax
Commrs, 705 N.E.2d 1099, 1104 (Ind. Tax Ct. 1999), review denied. Real
property must still be assessed, and, until the new regulations are in place,
must be assessed under the present system. Whitley Prods., 704 N.E.2d at
1121; see also Town of St. John v. State Bd. of Tax Commrs,
729 N.E.2d 242, 246, 250-51 (Ind. Tax Ct. 2000) (ordering that all real
property in Indiana shall be reassessed under new, constitutional rules as of March
1, 2002, and stating that, until then, real property tax assessments shall be
made in accordance with the current system). Therefore, the Court will not
address the constitutionality issue.
This property is parcel number 004-018-003.E.
Footnote: The Court notes that the regulations refer to guage in two
different places in Schedule A.4 rather than gauge.
Ind. Admin. Code tit.
50, 2.2-11-6 (Schedule A.4) (1996). The Court assumes that these are typographical
When an improvement deviates from the model and associated cost schedule
used to assess the improvement, the deviation frequently affects the reproduction cost of
Whitley Products, 704 N.E.2d at 1117. The preferred method
of accounting for this deviation is by using an objective approach, whereby separate
schedules that show the costs of certain components and features present in the
model are used to adjust the base reproduction cost of the improvement.
Id.; Quality Farm and Fleet, Inc. v. State Bd. of Tax Commrs, 747
N.E.2d 88, 94 (Ind. Tax Ct. 2001). The other way to account
for the deviation is to adjust the grade of the improvement. Whitley
Products, 704 N.E.2d at 1117. The grade adjustment is not preferred because
it requires the assessor to exercise his subjective judgment. Id. However, it
is sometimes necessary because the component (base rate adjustment) schedules are not comprehensive.
The Marshall Valuation Service table submitted by Harvest describes this $17.86
per square foot building as being a [l]ight, pre-engineered, utility-type building. (Record
of Administrative Proceedings at 48.)