ATTORNEYS FOR PETITIONERS: ATTORNEYS FOR RESPONDENTS:
J. DAVID HUBER STEVE CARTER
DONALD L. HAWK ATTORNEY GENERAL OF INDIANA
CHRISTOPER M. GOFFINET Indianapolis, IN
McENTARFER & GOFFINET JOEL SCHIFF
Tell City, IN DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
HOOSIER ENERGY RURAL ELECTRIC )
COOPERATIVE, INC., et al., )
v. ) Cause No. 49T10-0007-TA-85
DEPARTMENT OF LOCAL )
ON APPEAL FROM THE FINAL DETERMINATIONS OF
THE STATE BOARD OF TAX COMMISSIONERS
December 23, 2004
Hoosier Energy Rural Electric Cooperative, Inc. (Hoosier Energy), Bartholomew County Rural Electric Membership
Corporation, Clark County Rural Electric Membership Corporation, Daviess-Martin County Rural Electric Membership Corporation,
Decatur County Rural Electric Membership Corporation, Dubois County Rural Electric Cooperative, Inc., Harrison
County Rural Electric Membership Corporation, Henry County Rural Electric Membership Corporation, Johnson County
Rural Electric Membership Corporation, Orange County Rural Electric Membership Corporation, RushShelby Rural Electric
Membership Corporation, South Central Indiana Rural Electric Membership Corporation, Southeastern Indiana Rural Electric
Membership Corporation, Southern Indiana Rural Electric Cooperative, Inc., Utilities District of Western Indiana
Rural Electric Membership Corporation, Whitewater Valley Rural Electric Membership Corporation, and Western Indiana
Rural Electric Membership Corporation (the REMCs), hereinafter referred to, collectively, as the Petitioners,
appeal the State Board of Tax Commissioners (State Board) final assessments of their
distributable property for the 1999 and 2000 tax years (the years at issue).
The sole issue before the Court is whether the State Board erred
in not assessing the Petitioners property on a consolidated basis during the years
RELEVANT FACTS AND PROCEDURAL HISTORY
Hoosier Energy is a public electric utility organized and operating as a general
district corporation under Indianas Rural Electric Membership Corporation Act (the Act). See
Ind. Code Ann. § 8-1-13-1 et seq. (West 2004). As a general
district corporation, Hoosier Energy furnishes utility services to the local district corporations, which
in turn provide utility services to the ultimate consumers. See Ind. Code
Ann. § 8-1-13-23 (West 2004). In this case, Hoosier Energy operates the
generating plants and transmission lines for the system of which it is a
Hoosier Energy is owned by sixteen local rural electric membership corporations (the REMCs).
Each of these sixteen REMCs is also a public utility company, operates
as a local district corporation under the Act, has a representative sitting on
Hoosier Energys Board of Directors, and is a Petitioner to this case.
As local district corporations, each of the REMCs owns and operates its own
distribution lines for delivery of the electricity to the ultimate consumer. Consequently,
each of the REMCs has a separate agreement with Hoosier Energy for the
purchase of its electricity.
In March of 1999, the Petitioners sought the State Boards permission to file
a consolidated property tax return. The State Board, in exercising its discretion
under Indianas Administrative Code, did not respond to this request. See Ind.
Admin. Code tit. 50, r. 4.2-1-6 (1996). Consequently, each of the Petitioners
filed individual returns for the 1999 assessment year. Nevertheless, each of the
Petitioners filed with their individual returns a schedule indicating the property value of
the entire group as calculated on a consolidated basis.
In May of 1999, the State Board issued its tentative assessments on each
of the Petitioners properties. Each of the Petitioners timely filed objections thereto.
Consequently, the State Board conducted an administrative hearing on the objections on
June 2, 1999. On June 30, 1999, the State Board issued a
final determination ordering that the tentative assessments be made final, and denying the
Petitioners request to file a consolidated return. The Petitioners subsequently initiated an
original tax appeal on July 16, 1999.
For the 2000 assessment, each of the Petitioners again attached a schedule computing
the value of the Petitioners property on a consolidated basis with their individual
returns. The State Board subsequently issued tentative assessments on each of the
Petitioners properties. Each of the Petitioners timely filed objections thereto. The
State Board conducted an administrative hearing on the Petitioners objections on June 13,
2000. On June 29, 2000, the State Board issued its final determination
ordering that the tentative assessments be made final, and denying the Petitioners request
to file a consolidated return. The Petitioners subsequently initiated an original tax
appeal on July 14, 2000.
On September 25, 2000, upon the Petitioners motion, this Court consolidated the Petitioners
1999 and 2000 appeals. This Court conducted a trial on May 25,
2001, and heard the parties oral arguments on November 16, 2001. Additional
facts will be supplied as necessary.
STANDARD OF REVIEW
When this Court reviews a State Board assessment of public utility property, its
standard of review is set by statute:
When a public utility company initiates an appeal under section 30 [of Indiana
Code § 6-1.1-8], the tax court may set aside the state board of
tax commissioners final assessment . . . if:
(1) the company shows that the boards final assessment, or the boards apportionment
and distribution of the final assessment, is clearly incorrect because the board violated
the law or committed fraud; or
(2) the company shows that the boards final assessment is not supported by
Ind. Code § 6-1.1-8-32 (West 1999) (amended 2001). Substantial evidence means such
relevant evidence as a reasonable mind might accept as adequate to support a
conclusion. Glass Wholesalers, Inc. v. State Bd. of Tax Commrs, 568 N.E.2d
1116, 1122 (Ind. Tax Ct. 1991) (internal quotation and citation omitted). DISCUSSION AND ANALYSIS
The issue in this case is whether the State Board erred in not
allowing the Petitioners to file consolidated returns for the years at issue.
As the Petitioners explain, by filing a consolidated return, they would have been
able to take advantage of additional depreciation, thereby reducing their overall assessment.
For example, for the 1999 tax year, the State Board found that the
assessed value of the Petitioners distributable property, combined, was $122,183,414; however, if the
Petitioners would have been able to file a consolidated return, they claim that
the assessed value of their distributable property would have only been $101,295,226.
(See Petrs Ex. 5.)
To support their argument that they are entitled
to file consolidated returns, the Petitioners state that three investor-owned electric utilities (IOUs)
have been permitted to file consolidated returns.
(See Petrs Br. at 15
(footnote added).) Thus, the Petitioners merely want equal treatment. (Petrs Br.
at 15.) To the extent that they are not receiving equal treatment,
the Petitioners claim the State Board has violated Article 10, § 1 of
the Indiana Constitution, which provides that
[t]he General Assembly shall provide, by law, for a uniform and equal rate
of property assessment and taxation and shall prescribe regulations to secure a just
valuation for taxation of all property, both real and personal.
Ind. Const. art. X, § 1(a).
The State Board, on the other hand, argues that the Petitioners are not
entitled to file consolidated returns because they have not proven that they are
similarly situated to the IOUs that filed the consolidated returns. (See Respt
Br. at 14.) More specifically, the State Board asserts that unlike the
IOUs, the Petitioners do not share a single parent company; rather they are
all separate legal entities. (See, e.g., J. Ex. 2 at 5-8; J.
Ex. 3 at 10-12; J. Ex. 5 at 7-8.) Thus, the Petitioners
have not proven that the substance of the organizational structure of Hoosier Energy
and . . . each individual REMC is equivalent to that of investor
owned utilities that have one parent company. (See, e.g., J. Ex. 2
at 8; J. Ex. 3 at 12; J. Ex. 5 at 8.)
In turn, the State Board complains that the Petitioners are merely attempting an
improper end-run around the regulation [Indiana Administrative Code title 50, rule 5.1-6-9] limiting
depreciation. (Respt Br. at 20 (citation omitted).)
While the Court ultimately agrees with the State Board in result, it does
not agree with its reasoning. Indeed, both parties have spent a great
deal of time and paper arguing about how the Petitioners organizational structure should
affect their assessment, but they have skirted the real issue in this case:
whether a public utility company may file a consolidated return in the
Public utilities are subject to the centralized assessment scheme contained within Indiana Code
§ 6-1.1-8. Consequently, public utility companies do not file property tax returns
in the traditional sense. Rather, during the years at issue, they filed
statements of value with both the State Board and the appropriate local assessing
authorities. See Ind. Code Ann. § 6-1.1-8-19 (West 1999) (amended 2002); Ind.
Code Ann. § 6-1.1-8-23 (West 1999) (amended 2002). After these statements were
filed, the appropriate township assessors determined the assessed value of each public utilitys
fixed property, while the State Board determined the assessed value of the public
utlilitys distributable property. See Ind. Code Ann. § 6-1.1-8-24 (West 1999) (amended
2002); Ind. Code Ann. § 6-1.1-8-9 (West 2004); Ind. Code Ann. § 6-1.1-8-25
(West 1999) (amended 2002); A.I.C. § 6-1.1-8-9(b). Then, on or before June
1st of each year, the State Board issued a tentative valuation of each
public utilitys overall property. See Ind. Code Ann. § 6-1.1-8-26, -28 (West
1999) (amended 2002).
Indiana Code § 6-1.1-8 is completely silent with respect to the filing of
consolidated returns by public utilities, as are the administrative regulations applicable to public
utility assessment. See Ind. Admin. Code tit. 50, r. 5.1-6 (1996).
This Court has often said that what a statute or regulation does not
say is just as important as what it does say. See LeSea
Broad. Corp. v. State Bd. of Tax Commrs, 525 N.E.2d 637, 639 (Ind.
Tax Ct. 1988). See also Western Select Prop. v. State Bd. of
Tax Commrs, 639 N.E.2d 1068, 1073 (Ind. Tax Ct. 1994) (stating that rules
of statutory construction also apply to administrative rules and regulations). This leads
the Court to the conclusion that the statutes and regulations relating to public
utility assessment were drafted with the intent that public utilities cannot file consolidated
As mentioned earlier, the Petitioners entire argument is based on the
fact that because three other public utilities were allowed to file consolidated returns,
the Petitioners, likewise, are entitled to such a filing. The fact that
those other public utilities filed consolidated returns, however, will be of no consequence
to the treatment the Petitioners seek. Indeed, there is no sound reason
to give the Petitioners the benefit of the State Boards misinterpretation and misapplication
of the law simply because someone else may have previously benefited from the
same mistake; to do so would only exacerbate the inequity for everyone else.
For the foregoing reasons, this Court hereby AFFIRMS the State Boards final determinations
in this case.
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. 2001 Ind. Acts 198 § 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. 2004)(eff. 1-1-02); 2001 Ind. Acts 198
§ 66, and the Indiana Board of Tax Review (Indiana Board). Ind.
Code Ann. § 6-1.5-1-3 (West Supp. 2004)(eff. 1-1-02); 2001 Ind. Acts 198 §
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 Ann. § 6-1.5-5-8 (West
Supp. 2004)(eff. 1-1-02); 2001 Ind. Acts 198 § 95. Nevertheless, the law
in effect prior to January 1, 2002 applies to these appeals. A.I.C.
§ 6-1.5-5-8. See also 2001 Ind. Acts 198 § 117. Although
the DLGF has been substituted as the Respondent, this Court will still reference
the State Board throughout this opinion.
In addition, each REMC has a separate contract with Hoosier Energy
for the provision of some centralized services, including marketing and business development, finance
and strategic planning services, and environmental services. (
See J. Ex. 1 at
Generally, the assessed value of a public utilitys depreciable tangible personal
property is computed based upon the original basis of each asset for federal
depreciation purposes, less the accumulated depreciation relative to that asset. To the
extent that the aggregate net value of all of the distributable tangible personal
property of a utility company is less than 30% of the original basis,
the deduction of accumulated depreciation is disallowed.
See Ind. Admin. Code
tit. 50, r. 5.1-6-9 (1996).
By filing a consolidated return, the Petitioners would have been able to apply
the 30% floor to all of the Petitioners distributable property, as opposed to
only a portion of each Petitioners property. The reason th[is] happens is
because Hoosier[ Energys] power plants and transmission lines are depreciated well below the
30% floor. The other Petitioners distribution lines, if separately assessed, are still
above the floor. If combined, all the system property would be below
the floor, and the assessment would therefore be raised to the 30% floor,
which is well below the assessment made by the State Board in both
1999 and 2000. (Petrs Br. at 17.)
Each of the three IOUs consists of a holding company and
its wholly-owned subsidiaries. (
See J. Ex. 1 at 13.)
In other words, the Petitioners assert that the State Board is
simply unable and unwilling to articulate . . . why or how the
difference in Petitioners organizational structure from that of an [IOU] can justify assessing
exactly the same type of property in a different and discriminatory manner.
(Petrs Reply Br. at 3.)
Footnote: The body of statutory law that pertains to the assessment of
personal property in general does allow for the filing of consolidated returns.
See Ind. Code Ann. § 6-1.1-3-7(d) (West Supp. 2004) (stating that a taxpayer
may file a consolidated return with the county assessor if the taxpayer has
personal property subject to assessment in more than one (1) township in a
county and the total assessed value of the personal property in the county
is less than one million five hundred thousand dollars ($1,500,000)). Nevertheless, this
statute has no applicability to public utility assessments. Indeed, Indiana Code §
6-1.1-8-43 expressly provides that:
[Indiana Code § 6-1.1-8] is designed to provide special rules for the assessment
and taxation of public utility company property. If a provision of [chapter
8] conflicts with any provision of another chapter of [article 1.1], the provision
of this chapter controls with respect to the assessment and taxation of public
utility company property.
Ind. Code Ann. § 6-1.1-8-43 (West 2004).