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Indiana Property Tax Updates

UPDATED MARCH 2019

Indiana Tax Court Denies Motion To Dismiss Assessor’s Property Tax Appeal On Procedural Grounds

In Marion County Assessor v. Stutz Business Center, LLC (January 11, 2019), Owner fell short in its effort to cut short an appeal by a County Assessor challenging the Owner’s voluntary withdrawal of its 2012 to 2014 real property tax appeals. Owner withdrew its appeals five days before the scheduled administrative hearing before the Indiana Board of Tax Review. Assessor objected, but the Indiana Board allowed the withdrawals, explaining that decisions precluding voluntary withdrawals are “rare” and “are meant for extraordinary, rather than routine, circumstances and apply where precluding voluntary withdrawal is necessary to prevent manifest unfairness.” The Assessor had failed to show “the existence of those extreme circumstances.”

Assessor timely filed his petition to the Tax Court. But the Assessor served a summons on the clerk a day after the window for filing a petition closed. In addition, Assessor served a copy of the petition on Owner’s counsel, not the Owner. Owner claimed these were procedural errors that warranted dismissal of the Assessor’s appeal for lack of subject matter jurisdiction.

To timely initiate an original tax appeal, the Tax Court’s rules – unlike the trial rules governing other civil actions – do not require submission of the appropriate process papers with the clerk.

Assessor claimed that the trial rules permitted him to serve his petition on Owner’s counsel, as agents for the Owner. The Court, however, noted that Assessor’s failure to serve Owner was a “technical failure to comply with the trial rules.” Nevertheless, the Court concluded that Owner was not harmed or prejudiced by Assessor’s service of the petition, which was reasonably calculated to inform Owner of the appeal. Here, Owner’s counsel had represented it for more than two years at the administrative level, and there was no reason for Assessor to think they would not continue to do so on appeal to the Tax Court. There was no indication that counsel did not accept service, and there was no indication that Owner was not, in fact, informed of the appeal. Assessor “substantially complied with the rules for establishing effective service.”

Owner’s motion to dismiss was denied.

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Faegre Baker Daniels LLP
American Property Tax Counsel (APTC)

Indiana Tax Court denies petition to enjoin the collection of property tax, where Taxpayer failed to show former school building and athletic facility had zero value

Name:  Wigwam Holdings LLC v. Madison County Assessor

Date Issued: December 14, 2018

Property Type: 220,000 SF building, including a natatorium, auditorium and 8,996 seat basketball facility

Assessment Date: March 1, 2015

Point of Interest: Wigwam Holdings LLC (“Holdings”) claimed that an appraisal and purchase price of $0 supported a zero assessment for its improvements, a former school property with an iconic basketball arena.  Holdings was denied an injunction for the collection of tax, because it failed to show that it has a reasonable opportunity to prevail on the merits.

Synopsis: Holdings acquired four parcels by Quitclaim Deed from the City of Anderson Department of Redevelopment. The only parcel at issue contained, among other things, an 8,996-seat basketball facility. The Madison County Property Tax Assessment Board of Appeals had reduced the assessment from $11,415,000 down to $2,115,200. Holdings filed its appeal to the Indiana Board and claimed its assessment should be reduced to $68,500 ($68,500 for land and $0 for improvements). In support of its appeal, Holdings presented a USPAP-compliant appraisal, testimony of an appraiser, and documents related to the purchase.

The appraisal provided that the Wigwam’s highest and best use was as vacant land, because the building contained asbestos and had other issues.  The appraisal concluded that the property had a negative value.  Holdings further asserted that the building — acquired for $0 in September 2014 — had no value.  The appraiser also testified that the property’s assessment failed to account for abnormal obsolescence.  The Indiana Board concluded that Holdings did not make a prima facie case for reducing the assessment because the “appraisal did not credibly value the Wigwam and the September 2014 sale was not a probative, market transaction.”

On appeal to the Indiana Tax Court, Holdings sought to enjoin the collection of tax.  To do so, Holdings had to show the following three factors exist: “(1) it has a reasonable opportunity to prevail in the appeal; (2) the issues raised by its appeal are substantial; and (3) the equitable considerations favor the enjoining of the collection of the tax outweigh the state’s interest in collecting the tax pending the appeal.” A reasonable opportunity to prevail is a “tolerable, moderate, rational, honest, or equitable chance of success on the merits of the appeal.”

Holdings argued that it was likely to prevail on the merits because of its appraisal and the testimony of its expert witness. The Court noted that there is no per se rule that a USPAP-compliant appraisal automatically establishes a prima facie case for reducing an assessment.  The Assessor’s expert witness testified that the property was a special purpose property.  Therefore, according to the witness, the cost approach was the appropriate valuation method.  The Indiana Board, the Court reasoned, properly exercised its discretion and weighed the competing evidence.

In addition, Holdings claimed that it had a chance of success on the merits based on the September 2014 acquisition price.  Assessor’s witness claimed that the seller was atypically motivated, as shown by the buyer having paid zero dollars and received access to substantial funds for site restoration.  Holdings was unable to point to anything in the administrative record indicating the Indiana Board abused its discretion.

Finally, Holdings asserted that it “presented uncontroverted evidence of the Wigwam’s significant functional and economic obsolescence.” But Holdings failed to provide any evidence to quantify the alleged obsolescence and its impact on the value of the property.

For these reasons, the Court found that Holdings did not have a reasonable opportunity to prevail on the issues raised, so there was no need to address the remaining two factors to enjoin the tax.  Consequently, the Court denied Holdings’ Petition to Enjoin the Collection of Tax.

Brent A. Auberry
Faegre Baker Daniels LLP
American Property Tax Counsel (APTC)

Indiana Tax Court Affirms Removal Of Obsolescence Adjustment To Residential Property, As Homeowners Fail To Show Comparable Subdivision Sales Were Similar 

Case Name: Marinov and Marinova v. Tippecanoe County Assessor

Date Issued: February 20, 2019

Property Type: Single-family residence

Assessment Year(s): 2014

Point of Interest: Assessor removed an obsolescence adjustment, causing a 26% assessment increase for a home over its 2013 value. Assessor offered a sales comparison analysis to support his value. Homeowners’ list of comparable assessments failed to support a reduction under a “Section 18” analysis, and they failed to identify the cause of or quantify the impact of obsolescence.

Synopsis: For the January 1, 2014, assessment, Assessor removed an obsolescence adjustment for Homeowners’ single-family residence. The adjustment was first applied to the home for the 2007 assessment based on an appraisal presented in connection with the 2006 appeal of the property. Removing the adjustment caused a 26% increase over the property’s 2013 value.

Due to this massive increase, Assessor under Indiana Code § 6-1.1-15-17.2 (which shifts the burden of proof when certain assessments increase by more than 5% year-over-year) had the burden of proof on appeal. To meet his burden, Assessor presented a sales comparison analysis based on sales of seven, two-story homes in 2013 within a 1,400 foot radius of the subject home. To account for differences between the subject home and the comparable sales, Assessor presented a linear regression model based on 101 property sales from within the subdivision. He relied on information from these sales to develop a time trend analysis. Based on this information and analysis, the Assessor reasoned that removing the obsolescence adjustment brought the subject home’s value in line with those of comparable properties in the neighborhood.

Homeowners responded with a list of property assessments in the subdivision showing increases of only 0%-2% between 2013 and 2014.

The Indiana Board of Tax Review upheld the assessment. On appeal to the Tax Court, Homeowners raised three issues, which the Court rejected in turn:

  1. Assessor failed to physically inspect the home. This was not necessary, the Court held, because 2014 was not a general reassessment year and assessing officials annually apply a trending process to determine adjustment factors.
  2. Reduce the subject home’s 2014 value to its 2012 level, because the property had not changed since that assessment date. The Court noted that each assessment year stands alone, and “property values can fluctuate each year for a variety of reasons, including factors extrinsic to the property.”
  3. The increase of the subject home’s assessment was far above that of comparable properties in the subdivision. Under Indiana Code 6-1.1-15-18, Homeowners were permitted to introduce evidence of the assessments of comparable properties to challenge the subject home’s value. But, under the statute, the “determination of whether properties are comparable shall be made using generally accepted appraisal and assessment practices.” Homeowners offered no credible evidence that the purportedly comparable neighborhood properties were, in fact, comparable to the subject home.

Finally, the Court concluded that Homeowners “did not properly rebut the Assessor’s removal of the obsolescence adjustment because they failed to both identify causes of the purported obsolescence and to quantify the amount of obsolescence they claim should be applied.” Conclusory statements about “serious defects” in the property were not probative and did not rebut the Assessor’s decision to remove the obsolescence adjustment. 

Brent A. Auberry
Faegre Baker Daniels LLP

American Property Tax Counsel (APTC)

Indiana Tax Court Affirms Assessment For Contaminated Foundry Land, Where Owner Failed To Provide Evidence Showing The Land Had A $0 Value 

Name:  Garrett LLC v. Noble County Assessor

Date Issued:  September 24, 2018

Property Type:  Former foundry with environmental contamination

Assessment Date:  Jan. 1, 2016

Point of Interest:  Taxpayer claimed that contaminated industrial land purchased for $1 had $0 value, but it offered no probative evidence that the sale was a reliable indication of value.  The administrative record lacked facts showing (i) the property had been exposed to the market, (ii) the property had no value due to the contamination, or (iii) how the 2014 sale price related to the 2016 valuation date.

Synopsis:  Taxpayer was in the business of acquiring, remediating, and reselling contaminated properties. In June 2014, it purchased a former foundry with soil and ground water contamination for $1.  After entering into a Voluntary Remediation Program with the State of Indiana, Taxpayer sold a ten-acre portion of the property at a discount to a local school corporation for purposes of building a new middle school. The 2015 assessment of $200,000 was appealed; the parties agreed to keep the total value at that level but re-allocated the spilt between land improvements and land, reducing the land value to $68,900.  The Assessor and Taxpayer signed a Form 134 Joint Report to memorialize this agreement.  In 2015, Taxpayer transferred nearly five acres to another entity and demolished all buildings on the retained portion. For the 2016 assessment, Taxpayer protested the $131,700 assessment — $121,700 for land and $10,000 for improvements.  The County Board reduced the land to $95,400, and Taxpayer appealed to the Indiana Board of Tax Review. 

Before the Indiana Board, Taxpayer argued the land had $0 value but indicated it would accept the stipulated 2015 value of $68,900.  To support its claim, Taxpayer relied on the $1 purchase price, a list of “comparable” properties with their tax records, and the 2015 Form 134.  The Indiana Board ruled that the improvements had $0 value, where the evidence showed no building remained on the property as of the January 1, 2016 assessment date, but the evidence did not support a reduction in the property’s land value. 

The 2014 $1 purchase.  To represent a “market value” transaction, a sold property must have had “reasonable exposure in a competitive market under all conditions requisite to a fair sale.”  Here, Taxpayer failed to show that the property had been exposed to the market for a reasonable time before the $1 purchase.  The sale also appeared to be influenced by undue duress, according to the Indiana Board. Taxpayer’s conclusory statements to the contrary were not probative of the property’s value.

No evidence of $0 value.  Contamination can impact a property’s value, but the fact of contamination “does not by itself necessitate a finding that a property is valueless.” (emphasis in original).  The Tax Court observed that the “record is devoid of any objective factual basis that would support Garrett’s claim that its property has no value simply because its contaminated.”  Evidence suggested the contaminated property did have some value, e.g. Taxpayer’s sale of a portion of the land to a local school corporation. 

Failure to relate 2014 purchase to 2016 assessment date.  Even if the 2014 sale price was probative, Taxpayer offered no evidence to relate that price to the January 1, 2016 assessment date. The Court rejected Taxpayer’s “bald assertion” that the 18-month gap was insignificant. 

No evidence of comparability.  Taxpayer listed three properties it claimed were comparable and supported a reduction, submitting property tax records for two of them.  Evidence indicated the purported comparable properties had been transferred by Commissioner’s Tax Deed, or either sold or failed to sale at tax sale.  The Indiana Board concluded that the evidence was not probative because Taxpayer “did not provide evidence, explanation, or analysis comparing these properties to the subject property and did not explain how any differences may affect determining the subject property’s market value-in-use.”  The Court observed that Taxpayer “provided so little information about these three properties that the Indiana Board had to infer the reason [each property] was presented.”  Taxpayer failed to analyze and compare the impact of contamination, if any, on the values of the three comparable properties.  Parties must walk the Indiana Board and the Court “through every element of their analyses.” Taxpayer failed to do so. 

2015 land stipulation.  Taxpayer argued that the 2016 land value could not be higher than the 2015 stipulated value because the land was still contaminated and the property in 2016 was smaller after selling off almost five acres.  But the Court declined to “follow Garrett down the rabbit hole and hold that just because fewer acres were assessed in 2016 than 2015, the 2016 assessed value can be no greater than that in 2015.”  Each tax year stands alone, and “a prior year’s assessed value is not necessarily probative evidence of a subsequent year’s assessed value in other contexts.”  In addition, the 2015 stipulation on its face addressed only that year.

The Court rejected Taxpayer’s “thinly veiled request that the Court reweigh the evidence” presented to the Indiana Board.  The Indiana Board’s final determination was affirmed.

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Faegre Baker Daniels LLP
American Property Tax Counsel (APTC)

 Indiana Assessment Notices - and Appeal Opportunities -- are Coming Soon!

Indiana is in a transitional phase regarding appeal deadlines.  The deadline to appeal property tax assessments will be different depending on whether the assessment date at issue is January 1, 2018 (or earlier) or January 1, 2019. 

For counties (like Marion County, where Indianapolis is located) that use tax bills as assessment notices, the Spring 2018-pay-2019 tax bills will give taxpayers forty-five (45) days after the tax bill is mailed to appeal.  If an assessor issues an assessment notice for January 1, 2018 or any earlier assessment date, a taxpayer’s deadline to appeal is forty-five days after the notice is mailed.

Indiana Code 6-1.1-15-1.1 changed the timeline in which a taxpayer may appeal an assessment of tangible property for assessments after December 31, 2018.  The new code provision provides two specific dates as a deadline to appeal January 1, 2019 or later assessments, both of which are June 15.  If the county mails the notice of assessment before May 1 of the assessment year, then the deadline to appeal the assessment is June 15 of the assessment year.  If the county mails the notice of assessment on or after May 1 of the assessment year, then the deadline to appeal the assessment is June 15 of the year in which the tax statement is mailed by the county treasurer. 

A taxpayer still initiates an appeal by filing a notice in writing with the county assessor (or, in the rare instance there is one, the township assessor).  The taxpayer must file a written notice on the form designated by the Department of Local Government Finance. 

Take care in reviewing all tax bills and assessment notices for appeal opportunities. 

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Faegre Baker Daniels LLP
American Property Tax Counsel (APTC)

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