ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
CURTIS J. DICKINSON JEFFREY A. MODISETT
DAVID L. PIPPEN Attorney General of Indiana
Dickinson & Abel Indianapolis, Indiana
VINCENT S. MIRKOV Deputy Attorney General
Freudenberg-NOK General Partnership (NOK) appeals the final determination of the State Board of Tax Commissioners (State Board) fixing the assessed value of its
property as of March 1, 1992. NOK presents two issues for this Court's consideration:
I. Whether the State Board abused its discretion by failing to review
additional errors that were raised by NOK at hearing on remand but not raised by taxpayer in its Form 131 Petition or in its complaint to this Court.
II. Whether the State Board's final determination with respect to obsolescence depreciation lacked substantial evidentiary support.
consideration of the issues raised on appeal. Freudenberg-NOK Gen. Partnership v.
State Bd. of Tax Comm'rs, No. 49T10-9704-TA-00146 (Ind. Tax Ct. Jan. 9, 1998)
(unpublished order remanding cause to the State Board). On February 17, 1998, the
State Board conducted a hearing on NOK's Petition. At the hearing, NOK offered
testimony describing certain errors, which were in addition to those alleged in its
Petition, in the assessment of the subject property. These additional errors included
the grade of the subject property, an improper wall height adjustment, sprinkler pricing,
and the lack of an adjustment for a division wall. (Pet'r Ex. A). On March 27, 1998, the
State Board issued its final determination. The final determination only dealt with the
issues raised by NOK in its Petition.See footnote
On April 1, 1998, NOK, pursuant to the Court's January 9, 1998 order in which the Court retained jurisdiction pending the outcome of the State Board hearing, requested that the Court set this matter for trial. On July 27, 1998, the parties tried this case before this Court. Additional facts will be supplied as necessary.
evidence, are arbitrary or capricious, constitute an abuse of discretion, or exceed
statutory authority. See id. at 796.
put, functional obsolescence works as a penalty against the property's value. See
Larson, supra, at 44
; see also
Ind. Admin. Code tit. 50, r. 2.1-5-1.
The determination of obsolescence is a two-step inquiry. See Clark v. State Bd. of Tax Comm'rs, 694 N.E.2d 1230, 1238 (Ind. Tax Ct. 1998). Under the regulations, an assessor must identify the causes of obsolescence and then quantify the amount of obsolescence to be applied. See id.; see also Heart City Chrysler v. State Bd. of Tax Comm'rs, No. 49T10-9701-TA-00020, slip op. at 9 (Ind. Tax Ct. 1999); see Ind. Admin. Code tit. 50, r. 2.1-5-1. With respect to the second part, this Court has held that despite the failure of the regulation governing obsolescence to provide proper guidance regarding the quantification of obsolescence, the State Board is not relieved of its responsibility to support its quantification of obsolescence with substantial evidence. See Clark, 694 N.E.2d at 1240; see also Phelps Dodge v. State Bd. of Tax Comm'rs, 705 N.E.2d 1099, 1102 (Ind. Tax Ct. 1999), review denied.
In the present case, NOK requested State Board review of the BOR's application of a 20% factor to account for obsolescence depreciation. The State Board declined to increase the BOR's findings, leaving the depreciation factor unchanged at 20%. Upon performing a proper review, the State Board is not required to alter a finding of the BOR if it makes a proper determination that no change is necessary. However, a key element of a proper determination is substantial evidence, and, in this case, the State Board's final determination regarding the subject improvement's obsolescence falls short of the substantial evidence required for this Court to uphold it. See Clark, 694 N.E.2d at 1240-41.
challenge the accuracy of an assessment in order to challenge the basis of an
assessment. See id. (quoting Clark, 694 N.E.2d at 1234). As it did in Loveless, the
State Board, in this case, failed to support the BOR's application of a 20% factor for
obsolescence with substantial evidence. The Court finds no reason to alter its holding
in Loveless by affirming the State Board's actions in this proceeding. Because the
State Board apparently does not understand the Court's holding in Loveless and
continues to rely on this argument, the Court will explain further its reasoning so as to
prevent the same argument from recurring in the future.
The most troubling aspect of the State Board's argument that the taxpayer must prove the BOR's findings erroneous is that, to accept the argument, the Court would have to step into the shoes of the administrative decision maker. It would require a weighing of the probative value of the taxpayer's evidence at the administrative level against the basis for the BOR's determination. This Court, in reviewing State Board final determinations, does not weigh evidence. See Garcia, 694 N.E.2d at 796; see also Shoot v. State, 691 N.E.2d 1290, 1292 (Ind. Ct. App. 1998), trans. denied (Courts that review administrative decisions are prohibited from reweighing evidence and judging the credibility of witnesses. ); D.F. v. Western Sch. Corp., 921 F.Supp. 559, 564 (S.D. Ind. 1996) (Under the substantial evidence standard, credibility decisions are best left for the administrative decision maker rather than the Court.) . Fact-finding is clearly the responsibility of the State Board. See Alte Salems Kirche v. State Bd. of Tax Comm'rs, 694 N.E.2d 810, 813 (Ind. Tax Ct. 1998); see also Sangralea Boys Fund, 686 N.E.2d 954, 959 (Ind. Tax Ct. 1997), review denied. Thus, despite what the Court
thinks about the quality of the evidence presented at the administrative level, the Court
is limited as to what it can review.
See, e.g., Fuller v. Allison Gas Turbine Div., 670
N.E.2d 64, 67 (Ind. Ct. App. 1995) (citing Indiana Civil Rights Comm'n v. Southern Ind.
Gas & Elect. Co., 648 N.E.2d 674, 679 (Ind. Ct. App. 1995), trans. denied).
in its review of State Board final determinations, this Court examines whether the
taxpayer has presented probative evidence (i.e., carried its burden of production) and,
if so, whether the State Board has supported its final determination with substantial
evidence. Altering the Court's standard of review is not an option, not to mention that it
is also contrary to law. See Whitley Prods. Inc. v. State Bd. of Tax Comm'rs, 704
N.E.2d 1113, 1120 (Ind. Tax Ct. 1998). (This Court has but one standard by which it
reviews final determinations of the State Board . . . [t]his standard does not change.);
see also North Park Cinemas v. State Bd. of Tax Comm'rs, 689 N.E.2d 765, 769 (Ind.
Tax Ct. 1997) (finding that the allocation of burden of proof is not relevant to the Court's
standard of review).
This Court has recently articulated that the taxpayer's evidence should do two things: identify causes of the alleged obsolescence and support a quantification of obsolescence at the administrative level. See footnote 6 See Clark, 694 N.E.2d at 1241. In this case, it is undisputed that the subject improvement suffers obsolescence. See Phelps Dodge, 705 N.E.2d at 1102. The fact that the parties agree that causes of
obsolescence existSee footnote
obviates NOK's burden to offer probative evidence showing that
the subject improvements experience obsolescence.See footnote
See Phelps Dodge, 705 N.E.2d
at 1102. Therefore, this leads to the question that this Court must ask: did the State
Board support its findings with substantial evidence? It did not. Indeed, the State
Board may have been correct in its assertion that the subject improvement merited no
more than a 20% factor for obsolescence. However, this Court has no means of
determining this from the record, see Corey v. State Board. of Tax Commissioners, 674
N.E.2d 1062, 1066 (Ind. Tax Ct. 1997); Bailey Seed Farms v. State Bd. of Tax
Comm'rs, 542 N.E.2d 1389, 1392 (Ind. Tax Ct. 1989), and, as a result, this issue must
be remanded. Because the hearing in this case pre-dates the Clark opinion, NOK was
not required to quantify the obsolescence of the subject improvement; however, on
remand, NOK will be required to do so.
On remand, NOK will be required to offer probative evidence regarding its claim of obsolescence.See footnote 9 See Clark, 694 N.E.2d at 1241. Not only will the State Board be required to deal with this evidence in a meaningful mannerSee footnote 10 but it will also be required
support whatever amount of obsolescence it deems to be appropriate with substantial
evidence. Accordingly, the issue of obsolescence is remanded for further
consideration consistent with this opinion and the Court's holding in Clark.
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