DAVID L. PIPPEN                 
Attorney General of Indiana
TAMATHA A. STEVENS                
Indianapolis, Indiana
Dickinson & Abel                    
Indianapolis, Indiana                 MARILYN S. MEIGHEN See footnote
                            Deputy Attorney General
                            Indianapolis, Indiana



B.L. CURRY & SONS, INC.,            )
            Petitioner,                    ) 
        v.                                 ) Cause No. 49T10-9602-TA-00010
            Respondent.                    )

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_____________________________________________________________________ON APPEAL FROM A FINAL DETERMINATION

December 2, 1999



    B.L Curry & Sons (Curry) appeals the final determination of the State Board of Tax Commissioners (State Board) fixing the assessed value of its property as of the March 1, 1992 assessment date. Curry presents three issues for this Court's consideration, which the Court consolidates and restates as:    
         I.    Whether the State Board's final determination with respect to obsolescence depreciation lacked substantial evidentiary support and is therefore arbitrary or capricious.
         II.    Whether the State Board acted arbitrarily and capriciously by conducting a post-hearing inspection and thereafter concluding further that an adjustment for obsolescence depreciation was not warranted.

    Curry owns and operates a veneer manufacturing plant in New Albany, Indiana, which was first constructed in 1929. See footnote The veneer manufacturing plant occupies parcel #008-61700-12 (Parcel 12). On October 8, 1992, Curry filed a Form 131 petition (petition) for the tax year 1992, alleging that the assessment made by the Floyd County Board of Review (BOR) was erroneous. On July 15, 1994, the State Board held a hearing regarding Curry's petition. At the hearing, Curry introduced evidence supporting his request for obsolescence depreciation, including the property record card of a comparable property owned by Mr. Robinson Nugent.
    On December 15, 1995, the State Board issued its final determination regarding Curry's Petition. In its final determination, the State Board declined to assign to the subject property an adjustment for obsolescence depreciation. Deeming the State Board's refusal to grant any obsolescence to the subject property erroneous, Curry filed an original tax appeal with this Court. On November 15, 1996, the parties tried this case before this Court. On March 14, 1997, this Court heard oral arguments regarding this matter. Additional facts will be supplied as necessary.
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. See Garcia v. State Bd. of Tax Comm'rs, 694 N.E.2d 794, 795-96 (Ind. Tax Ct. 1998). 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. See id. at 796.
I. Obsolescence Depreciation.

    Curry contends that the subject property complained of in its petition to the State Board warranted an adjustment for obsolescence depreciation and that the State Board improperly failed to consider the evidence he presented in support of his petition. The State Board deemed the evidence tendered by Curry insufficient to support a claim for any obsolescence and therefore granted the subject property zero obsolescence. Curry also argues that the State Board failed to consider evidence regarding a comparable property owned by Mr. Nugent and located less than one-quarter of a mile away that received a 40% obsolescence depreciation factor.
    Obsolescence is a form of depreciation that is defined as a loss of value and classified as either functional or economic. See Ind. Admin. Code tit. 50, r. 2.1-5-1 (1992) (codified in present form at id. r. 2.2-10-7(e) (1996)). Functional obsolescence is either a physical element that buyers are unwilling to pay for or a deficiency that impairs the utility of a property when compared to a more modern replacement, thus leading to a loss in value. See Michael D. Larson, Identifying, Measuring, and Treating Functional Obsolescence in an Appraisal, 10 J. Prop. Tax Mgmt. 42, 44 (1999); see also Ind. Admin. Code tit. 50, r. 2.1-5-1. Functional obsolescence therefore 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. Economic obsolescence is caused by factors external to the property. See Ind. Admin. Code tit. 50, r. 2.1-5-1; see also Clark v. State Bd. of Tax Comm'rs, 694 N.E.2d 1230, 1238 (Ind. Tax Ct. 1998) (discussing obsolescence). Economic obsolescence of a given improvement also represents a loss of value. See Loveless Constr. Co. v. State Bd. of Tax Comm'rs, 695 N.E.2d 1045, 1047 (Ind. Tax Ct. 1998) (citing Clark, 694 N.E.2d at 1238), review denied. “In the commercial context, a loss of value usually represents a decrease in the improvement's income generating ability.” Id. (citing Simmons v. State Bd. of Tax Comm'rs, 642 N.E.2d 559, 560-61 (Ind. Tax Ct. 1994); GTE N., Inc. v. State Bd. of Tax Comm'rs, 634 N.E.2d 882, 887 (Ind. Tax Ct. 1993)).
    The determination of obsolescence is a two-step inquiry. See Clark, 694 N.E.2d at 1238. Under the regulations, an assessor must first 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, 714 N.E.2d 329, 333 (Ind. Tax Ct. 1999); Ind. Admin. Code tit. 50, r. 2.1-5-1. With respect to the second part of the inquiry, 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, Curry must shoulder the responsibility of demonstrating that the State Board's determination is erroneous. See Loveless, 695 N.E.2d at 1048. “Once the taxpayer carries the burden of establishing a prima facie case, the burden shifts to the State Board to rebut the taxpayer's evidence and justify its decision with substantial evidence.” Clark, 694 N.E.2d at 1233 (citing Western Select Properties v. State Bd. of Tax Comm'rs, 639 N.E.2d 1068, 1072 (Ind. Tax Ct. 1994)). Curry argues that the State Board not only failed to offer a sufficient rebuttal but that it also erroneously disregarded his evidence of obsolescence depreciation, including evidence of a comparable property. The State Board counters by arguing that Curry failed to make a prima facie case demonstrating that additional evidence was justified. With respect to the comparable property, the State Board argues that, because Curry failed to provide it with evidence “demonstrating that Curry's building suffered from the same problems or loss of value as did [Nugent's] property,” Curry failed to meet his “burden of proof.” (Resp't Br. at 3). For ease of analysis, the Court will perform a separate analysis of Curry's claims dealing with obsolescence and comparable properties.
    In its final determination, the State Board, with respect to Curry's claim of obsolescence, stated: “Petitioner failed to provide adequate evidence of functional obsolescence.” (State Bd. Final Determination ¶ 7). Curry believes that it did in fact tender evidence indicating that an adjustment for functional and economic obsolescence depreciation was justified and should have been made by the State Board. The record indicates that Curry submitted evidence indicating that the subject property suffered a loss of value due to obsolescence. Curry introduced evidence that indicated the subject property suffered from, inter alia, irregular or insufficient floor plans; foundational or structural failures due to excessive vibrations of processing equipment; inadequate heating and lighting systems; inefficient truck loading and unloading areas; inappropriate building location for its neighborhood; and inconsistent building code requirements. See footnote (Pet'r Br. at 3). In response to this evidence, the State Board, in its brief, but not in its final determination, stated that Curry did show the existence of certain features in its building, such as irregular floor plans. (Resp't Br. at 2). However, Curry, as the State Board explains, did not “explain how, why, or even if, these features resulted in a loss of value.” (Resp't Br. at 2). Because the administrative hearing occurred prior to this Court's opinion in Clark, the State Board's analysis is incorrectly focused.
    As this Court stated in Clark, in order to establish a prima facie case, a taxpayer must introduce evidence “sufficient to establish a given fact and which if not contradicted will remain sufficient.” Clark, 694 N.E.2d at 1233. Once the taxpayer does so, it is then incumbent upon the State Board to rebut this evidence and support its decision with substantial evidence. See id. The State Board did not do so in this case with respect to Curry's evidence regarding causes of obsolescence. While it is true that some of the evidence submitted by Curry could be viewed by the State Board as the mere identification of factors that cause obsolescence, Curry at first blush has done more than make bare allegations with no factual support. See Herb v. State Bd. of Tax Comm'rs, 656 N.E.2d 890, 893 (Ind. Tax Ct. 1995). Despite this, the State Board incorrectly dismissed Curry's evidence as insufficient. Although Curry did not quantify his evidence, a reasonably prudent person would agree that the totality of evidence submitted by Curry amounts to the requisite probative evidence that is needed to establish a prima facie case pre-Clark. See Clark, 694 N.E.2d at 1233; see also Whitley Prods., Inc. v. State Bd. of Tax Comm'rs, 704 N.E.2d 1113, 1119 (Ind. Tax Ct. 1998) (requiring the taxpayer to “do something more than allege that an error exists in an assessment” in order to trigger the State Board's substantial evidence requirement), review denied. Not only did the State Board fail to rebut Curry's evidence, but also, its decision falls short of the substantial evidence required for this Court to uphold it. See Clark, 694 N.E.2d at 1240-41.
    However, the Court notes that upon closer inspection, Curry's evidence regarding inconsistent building code requirements falls short of what is required to make a prima facie case. Specifically, Curry failed to submit examples of current building codes and how the subject property varied from it. There is no way of determining how conforming to current building codes would affect the economic obsolescence of the subject property. Simply alleging that building codes have changed since the subject property was originally constructed remains a mere allegation and does not amount to probative evidence. See Herb, 656 N.E.2d at 893. While it is true that the hearing officer can corroborate some factors of obsolescence as a result of training, other evidence must be explained and brought to the attention of the hearing officer by the taxpayer. Cf. Clark, 694 N.E.2d at 1239 n. 13 (explaining that prudent litigants would err on the side of offering more evidence rather than less evidence). Briefly mentioning that “ . . . separate portions of the building were built with different technology and under different building codes . . . establish economic obsolescence ” is simply not helpful to the State Board or to this Court in determining the correlation between current building codes and the economic obsolescence adjustment that should apply as a result of bringing the subject property current according to present-day building code standards. Therefore, this Court holds that the State Board acted properly by not considering Curry's allegation regarding inconsistent building code requirements. Thus, on remand, the State Board shall not consider evidence regarding inconsistent building codes while making its determination regarding obsolescence.
    The parties should note that if this case was heard post-Clark, the Court's analysis might have differed. This Court has held in the past that the State Board commits no error when it denies an adjustment for obsolescence in cases where the taxpayer fails to present or identify any evidence concerning obsolescence at the administrative hearing. See White Swan Realty v. State Bd. of Tax Comm'rs, 712 N.E.2d 555, 560 (Ind. Tax Ct. 1999), review denied; see also Lake County Trust Co. v. State Bd. of Tax Comm'rs, 694 N.E.2d 1253, 1258 (Ind. Tax Ct. 1998), review denied. This case is distinguishable, however, in that Curry did in fact tender evidence tending to prove causes of obsolescence. See Lake County Trust, 694 N.E.2d at 1258. In this case, the State Board failed to properly rebut Curry's evidence and support its own findings with substantial evidence.
     Curry also argues that the State Board failed to refute its claim that its property was assessed inconsistently with a comparable property. The State Board asserts that Curry did nothing more than identify and describe a similar property as comparable. (Resp't Br. at 3). The State Board asserts further that the record is devoid of evidence demonstrating that Curry's building suffered from the same problems or loss of value, as did Mr. Nugent's building. The State Board is correct.
     In cases such as this, where the taxpayer introduces evidence of a comparable property, the taxpayer bears the burden to show that its assessment is inconsistent with that of the comparable property. See Western Select Properties, 639 N.E.2d at 1074 (Ind. Tax Ct. 1994) (citing Paul Heuring Motors, Inc. v. State Bd. of Tax Comm'rs, 620 N.E.2d 39, 41 (Ind. Tax Ct. 1993); Meridian Hills Country Club v. State Bd. of Tax Comm'rs, 512 N.E.2d 911, 913 (Ind. Tax Ct. 1987)). As stated above, the taxpayer is required to present a prima facie case showing that the two assessments are indeed inconsistent. See Western Select, 639 N.E.2d at 1074 (citing GTE North Inc., 634 N.E.2d at 887)).
    In this case, Curry argues that the subject property is entitled to an obsolescence depreciation simply because a nearby property received one. Curry erroneously believes that this is all that is required to make a prima facie case. To supplement his argument, Curry tendered photographs and the property record card of Mr. Nugent's building. Yet, Curry failed to submit any evidence that would show how Mr. Nugent's building suffered from obsolescence. As a result, Curry's argument must fail. Further, the record does not provide an adequate comparison of the two buildings or the activity therein. In Western Select, the State Board cited the failure of the taxpayer to submit a property record card of the comparable property as a primary reason to reject the taxpayer's contention that the State Board had improperly denied obsolescence adjustments to the taxpayer's buildings in that case. See id. In this case Curry, along with the submission of photographs of Mr. Nugent's building, did submit the property record card for Mr. Nugent's building. Yet, Curry failed to go further and supplement this evidence with sufficient details. The taxpayer is expected to provide details regarding the comparable property that would allow the hearing officer to determine whether those factors are either present or not present in the subject property. See Western Select, 639 N.E.2d at 1074 (explaining that the taxpayer presented detailed evidence that the characteristics, features and location of the two facilities were similar). The taxpayer cannot simply identify another property and label it a comparable property and expect that this Court will agree that the State Board was incorrect because it chose not to grant the same or a comparable amount of obsolescence as the other property. In this Court, the burden of production rests with the taxpayer. See Loveless, 695 N.E.2d at 1048. This is not an insurmountable obstacle or even an onerous requirement. See footnote See generally Appraisal Institute, The Appraisal of Real Estate, 148-152 (10th ed. 1992). Because Curry failed to do so here, the Court affirms the State Board's final determination with respect to comparable properties. As a result, on remand, the comparable property (Mr. Nugent's building) originally submitted by Curry may not be used as a basis for the claimed obsolescence. As such, the State Board's final determination with respect to the issue of obsolescence is REVERSED and REMANDED for reconsideration consistent with this opinion. See footnote
II. Post-Hearing Inspection
    Curry contends that his due process rights were offended when the State Board performed a post-hearing inspection and concluded that “the building was working fine and there were no unused areas of the building warranting obsolescence.” (Pet'r Br. at 15). The State Board argues that its administrative hearing process satisfied all statutory requirements and due process. See Ind. Code Ann. § 6-1.1-15-4 (West 1989 & Supp. 1999); see generally Castello v. State Bd. of Tax Comm'rs, 638 N.E.2d 1362 (Ind. Tax Ct. 1994); see also Wirth v. State Bd. of Tax Comm'rs, 613 N.E.2d 874 (Ind. Tax Ct. 1993). However, because of the Court's decision to reverse and remand on the issue of obsolescence, the issue involving a post-hearing inspection made by the State Board hearing officer is moot. The Court notes that, although it may not be a breach of a taxpayer's right to due process, See footnote it would not be unreasonable to allow a taxpayer to respond to the findings made as a result of a post-hearing inspection prior to an original tax appeal. See Heart City Chrysler, 714 N.E.2d at 332 n.6 (citing Joyce Sportswear Co. v. State Bd. of Tax Comm'rs, 684 N.E.2d 1189, 1190 (Ind. Tax Ct. 1997), appeal dismissed). See footnote
    For the foregoing reasons, the Court REVERSES and REMANDS the State Board's final determination with respect to the issue of obsolescence. Upon reconsideration, the State Board shall exclude any evidence dealing with building codes or the comparable property originally submitted by Curry.

Footnote:      On November 10, 1997, after this cause was taken under advisement, Jeffrey A. Modisett, Attorney General of Indiana, filed a Notice of Withdrawal of Appearance with the Court for Deputy Attorney General Marilyn S. Meighen. The Notice also stated that a new Deputy Attorney General would be filing an appearance at a later date. The record, however, does not indicate that a new Deputy Attorney General has been substituted for Ms. Meighen.
Footnote: The record indicates that there is conflicting testimony as to whether parts of the subject property had been torn down in the past. This fact, however, is not material to the disposition of this case, and, as a result, does not affect the Court's analysis of the issues raised in this case.
Footnote: The term “inconsistent building code requirements” is an interpretation of Curry's assertion “that the building was constructed under different building code requirements
than those building code requirements in place today.” (Pet'r Br. at 3)

Footnote: This requirement is consistent with that which is offered in Western Select, where the taxpayer is reminded of the duty to present some evidence of probative value to support its claim that its property has been assessed inconsistently with similar properties. See Western Select, 639 N.E.2d at 1074. Thus, although the regulations reference the assessor, on appeal, the burden of production falls upon the taxpayer to substantiate its claim that the subject property should receive a similar factor for obsolescence depreciation.
Because the hearing in this case took place prior to the date of the Clark opinion, Curry was not required to quantify the obsolescence of the subject improvement. See Heart City Chrysler, 714 N.E.2d at 334. However, pursuant to Clark, on remand, Curry will be required to quantify the obsolescence of the subject improvement with generally accepted appraisal techniques. See id. This means that Curry will have to do more than identify causes of obsolescence. He will have to quantify those causes as well. The State Board will then be required to deal with that evidence in a meaningful manner. See Loveless Constr. Co. v. State Bd. of Tax Comm'rs, 695 N.E.2d 1045, 1049 (Ind. Tax Ct. 1998), review denied.

Footnote: Cf. Wirth, 613 N.E.2d at 879 (citing State Bd. of Tax Comm'rs v. Oliverius, 294 N.E.2d 646 (1973)) (The State Board may address and correct all errors in an assessment, even those errors not raised in the taxpayer's petition for review. However, the taxpayer's due process rights must remain in place).
Footnote: The State Board should note, however, that it cannot make this same argument regarding the taxpayer's due process rights and then in this Court object to the taxpayer's testimony based on State Board of Tax Commissioners v. Gatling Gun Club, Inc., 420 N.E.2d 1324, 1329 (Ind. Ct. App. 1981). Under these circumstances, the Court must adhere to due process requirements and will likely overrule any objections.

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