PETITIONER APPEARING PRO SE: ATTORNEYS FOR RESPONDENT:
GARY L. OETTING STEVE CARTER
General Partner ATTORNEY GENERAL OF INDIANA
KEAG Family Limited Partnership Indianapolis, IN
Fort Wayne, IN
VINCENT S. MIRKOV
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
KEAG FAMILY LIMITED PARTNERSHIP, )
v. ) Cause No. 02T10-9906-TA-145
STATE BOARD OF TAX COMMISSIONERS, )
ON APPEAL FROM A FINAL DETERMINATION OF
THE STATE BOARD OF TAX COMMISSIONERS
NOT FOR PUBLICATION
September 17, 2001
KEAG Family Partnership (KEAG), appeals six final determinations of the State Board of
Tax Commissioners (State Board) finding that KEAG owed property taxes for the 1997
and 1998 tax years on three separate parcels. In its original tax
appeal, KEAG raises these issues:
Whether its property tax liabilities are void because they were assessed and collected
under a property tax system that has been declared unconstitutional by Indiana Courts?
Whether its parcels are exempt from property taxation because they are within the
protection of federal land patents? FACTS AND PROCEDURAL HISTORY
KEAG contends that in 1997 and 1998, the State Board improperly assessed a
property tax liability against three of its parcels in Allen County, Indiana.
More specifically, while the State Board found that Parcels 95-2564-0186, 95-2564-0196, and 18-0009-0006
each had assessed values of $14,940, $1,400, and $14,670 respectively (Petr Ex. F,
Ans. to Respt Motion), KEAG maintains that each of these parcels should have
an assessed value of zero.
Consequently, KEAG filed an original tax appeal with this Court on June 11,
1999, challenging all six final determinations.
The Court heard oral arguments on
April 27, 2000. Additional facts will be supplied as necessary.
Standard of Review
This Court gives great deference to final determinations of the State Board.
Wetzel Enters. Inc. v. State Bd. of Tax Commrs, 694 N.E.2d 1259, 1261
(Ind. Tax Ct. 1998). Accordingly, this Court will reverse State Board final
determinations only when they are unsupported by substantial evidence, are arbitrary or capricious,
constitute and abuse of discretion, or exceed statutory authority. Id. The
taxpayer bears the burden of showing 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).
Constitutionality of KEAGs Property Tax Assessments
Under Indianas Property Tax System
KEAGs first argument is that the 1997 and 1998 assessments on each of
its three parcels are null and void because Indianas system of taxing tangible
property has been declared unconstitutional. KEAG is mistaken.
In 1998, the Indiana Supreme Court affirmed this Courts ruling that the existing
cost schedules . . . violate the Property Taxation Clause of the Indiana
Constitution. State Bd. of Tax Commrs v. Town of St. John, 702
N.E.2d 1034, 1043 (Ind. 1998). That same year, however, this Court declared
that [r]eal property must still be assessed, and, until the new regulations are
in place, must be assessed under the present system. Whitley Prods., Inc.
v. State Bd. of Tax Commrs, 704 N.E.2d 1113, 1121 (Ind. Tax Ct.
1998) review denied; see also Town of St. John v. State Bd. of
Tax Commrs, 729 N.E.2d 242, 246, 251 (Ind. Tax Ct. 2000) (ordering real
property in Indiana to be reassessed under constitutional regulations as of March 1,
2002 and providing that until then real property tax assessments shall be made
in accordance with the current system). Consequently, the State Board did not
err in determining that KEAGs parcels were taxable under Indianas present system of
II. Taxability of Land Issued Pursuant to Federal Land Patents
KEAG also challenges the States right to assess taxes on its parcels because
it was land that it acquired pursuant to a federal patent. Again,
KEAG is mistaken.
Under the Property Clause of the United States Constitution
See footnote , Congress has the authority
to regulate and dispose of federal public lands. This authority over federal
lands, which Congress determines whether or not to exercise, is plenary. 63C
Am.Jur.2d Public Lands §7 (1997) (footnotes and citations omitted). Consequently, until the
issuance of a patent that conveys title, the United State has the fee
of public lands and has broad management authority. Id.
As the highest evidence of title, a patent is a deed by which
the government conveys title to public lands. Id. at §48. A
patent must be issued in order for the fee to public lands to
pass from the government. Id. A patent is intended to quiet
title to, and secure the enjoyment of, the land for the patentees and
their successors. Id.
KEAG argues that because land held by the federal government is exempt from
taxation, Indiana Code §6-1.1-10-1, one of the immunities granted to it in its
patent is the federal governments immunity from taxation. In a case recently
decided in our sister state of Oregon, however, the Oregon Supreme Court held
that the United States government cannot confer its privileges and immunities upon patent
grantees. Smith v. Dept. of Revenue, 998 P.2d 675, 677 (Or. 2000),
cert. denied, 531 U.S. 1013 (2000). Rather, the rights, privileges, and immunities
recited in the patent are those appended to or attached to the land,
not those inherent in the federal government. Id. (emphasis added, internal quotation
marks omitted). Other state courts have also found that land issued under
federal land patents is taxable. See State v. Nichols, 44 N.W.2d 49,
58 (Iowa 1950) (land became subject to taxation as soon as patent was
issued by the government). See also Cass County, Minnesota v. Leech Lake
Band of Chippewa Indians, 524 U.S. 103, 115 (1998) (the sale of reservation
land to non-Indians rendered the land taxable).
Thus, as a quitclaim deed, a land patent conveys whatever interest the government
has in the soil and the land. KEAG is entitled to all
rights, privileges, immunities that attach to the land; it is not entitled to
all rights, privileges, and immunities that attach to the federal government. KEAGs
property was originally tax-exempt because the federal government owned it. Once the
government issued its patent, however, the title transferred ownership, free and clear, from
the federal government to the assignee. KEAG, as the present assignee, is
not a tax-exempt entity. Accordingly, this Court finds that the State Board
did not err in determining that KEAGs parcels were taxable for the years
1997 and 1998.
For the aforementioned reasons, this Court AFFIRMS the final determinations of the State
Board of Tax Commissioners.
The State Board subsequently motioned this Court for summary judgment, asserting that
because KEAGs general partner, who is not an attorney, filed the appeal and
represented KEAG in court, the Court lacks subject matter jurisdiction to hear the
case. In an order issued simultaneously with this opinion, the Court denies
the State Boards motion.
onst., art. IV, §3.
KEAG also alleged in its original tax appeal that it was entitled
to damages under Indiana Code §6-1.1-15-18. Having determined that KEAG fails in
its contentions that it is exempt from property tax, the issue of its
entitlement to damages under Indiana Code §6-1.1-15-18 is rendered moot.