ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN STEVE CARTER
ATTORNEY AT LAW ATTORNEY GENERAL OF INDIANA
Indianapolis, IN Indianapolis, IN
JOEL SCHIFF
DEPUTY ATTORNEY GENERAL
Indianapolis, IN
_____________________________________________________________________
IN THE
INDIANA TAX COURT
_____________________________________________________________________
DAVIDSON INDUSTRIES, )
)
Petitioner, )
)
v. ) Cause No. 49T10-9804-TA-29
)
INDIANA STATE BOARD OF )
TAX COMMISSIONERS, )
)
Respondent. )
_____________________________________________________________________
ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
_____________________________________________________________________
FOR PUBLICATION
February 1, 2001
FISHER, J.
Davidson Industries (Davidson) appeals the State Board of Tax
Commissioners’ (State Board) final determination that assessed its property
as of the March 1, 1995 assessment date. Davidson presents the following
issues for this Court’s review on appeal:
1) whether the State Board’s final determination of Davidson’s
case should be reversed because the State Board’s
Regulations are unconstitutional; and
2) whether Davidson presented a prima facie case that its
property suffers from obsolescence.[1]
FACTS AND PROCEDURAL HISTORY
Davidson owns property located in Johnson County, Indiana.[2] On
February 5, 1996, Davidson filed a form 131 petition for review of
assessment (131 Petition) with the State Board seeking review of the March
1, 1995, assessment of its improvements claiming among other things that
its “building should have 25% functional and economic obsolescence applied
to it.” (Joint Ex. 1 at 3.) Thereafter, the State Board held a hearing on
the petition. On February 18, 1998, the State Board issued its final
determination concluding that the base prices previously calculated were
correct,[3] the property was not entitled to obsolescence depreciation, and
the assessment did not violate the Indiana Constitution. In addition, the
State Board concluded that the depreciation table used by the county board
was incorrect and changed it to a 20-year table. On March 31, 1998,
Davidson filed its original tax appeal in this Court. The parties
stipulated to the evidence and thereafter an oral argument was held on June
17, 1999. Additional facts will be provided as necessary.
ANALYSIS AND OPINION
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.
Freudenberg-NOK General Partnership v. State Bd. of Tax Comm’rs, 715 N.E.2d
1026, 1028-29 (Ind. Tax Ct. 1999). 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. Id. at 1029.
In addition, a taxpayer challenging the validity of the State Board’s
final determination bears the burden of demonstrating the invalidity of the
final determination. Clark v. State Bd. of Tax Comm'rs, 694 N.E.2d 1230,
1233 (Ind. Tax Ct. 1998). The taxpayer must present a prima facie case,
that is a case in which the evidence is "sufficient to establish a given
fact and which if not contradicted will remain sufficient.” GTE North Inc.
v. State Bd. of Tax Comm'rs, 634 N.E.2d 882, 887 (Ind. Tax Ct. 1994)
(citations and internal quotation marks omitted). To establish a prima
facie case, the taxpayer must offer probative evidence concerning the
alleged error. King Indus. v. State Bd. of Tax Comm'rs, 699 N.E.2d 338,
343 (Ind. Tax Ct. 1998); Whitley Prods., Inc. v. State Bd. of Tax Comm'rs,
704 N.E.2d 1113, 1119 (Ind. Tax Ct. 1998), review denied. “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. To carry
its burden, the State Board must do more than merely assert that it
assessed the property correctly. Loveless Const. Co. v. State Bd. of Tax
Comm'rs, 695 N.E.2d 1045, 1049 (Ind. Tax Ct. 1998), review denied.
Instead, the State Board must offer an authoritative explanation of its
decision to rebut the taxpayer's prima facie showing. Id.
Discussion
I.
The first issue is whether the State Board’s final determination of
Davidson’s case should be reversed because the State Board’s Regulations
are unconstitutional. Davidson seems to argue that because the current
regulations are unconstitutional they should not be applied to its
assessment. This Court has recognized that the fact that the subject
improvement was assessed under an unconstitutional regulation does not mean
that the assessment will be invalidated on that basis. Whitley Prods., 704
N.E.2d at 1121; See also White Swan Realty v. State Bd. of Tax Comm'rs, 712
N.E.2d 555, 559 (Ind. Tax Ct. 1999), review denied; Phelps Dodge v. State
Bd. of Tax Comm'rs, 705 N.E.2d 1099, 1104 (Ind. Tax Ct. 1999), review
denied. “Real property must still be assessed, and, until the new
regulations are in place, must be assessed under the present system.”
Whitley Prods., 704 N.E.2d at 1121; See also Town of St. John v. State Bd.
of Tax Comm'rs, 729 N.E.2d 242, 250-251 (Ind. Tax Ct. 2000). This means
that a taxpayer cannot come into court, point out the inadequacies of the
present system and obtain a reversal of an assessment. Whitley Prods., 704
N.E.2d at 1121. Instead, the taxpayer must come forward with probative
evidence relating to the issue the taxpayer raises. Id. Therefore,
Davidson’s argument that the final determination should be reversed simply
because the regulations are unconstitutional cannot prevail.
II.
The second issue is whether Davidson presented a prima facie case that
its property suffers from obsolescence. “The True Tax Value of a
commercial improvement is determined by calculating the reproduction cost
of the improvement (as determined by an application of the State Board
regulations) and subtracting any physical and obsolescence depreciation.”
Loveless Const., 695 N.E.2d at 1047. The regulations define obsolescence
as a functional and economic loss of value. 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 caused by factors internal to the property and
is "evidenced by conditions within the property." Id. Economic
obsolescence is caused by factors that are external to the property. Id.
In the commercial context, a loss of value usually represents a decrease in
the improvement's income generating ability. Loveless Const., 695 N.E.2d
at 1047. See also Damon Corp. v. State Bd. of Tax Comm’rs, 738 N.E.2d
1102, 1108 (Ind. Tax Ct. 2000).
In Clark v. State Board of Tax Commissioners, this Court concluded
that as a prerequisite for this Court to review a taxpayer’s case, during
its hearing before the State Board the taxpayer must follow a two-step
process whereby a taxpayer must first identify causes of obsolescence and
then quantify the amount of obsolescence to be applied. Clark, 694 N.E.2d
at 1241. However, as this case arose before Clark, Davidson was not
required to quantify its evidence, but simply to identify it. See id.
Davidson is required to present probative evidence sufficient to establish
a prima facie case regarding its asserted causes of economic obsolescence.
White Swan Realty, 712 N.E.2d at 560 (stating “when challenging the State
Board's determination denying an obsolescence adjustment, the taxpayer has
to offer evidence tending to prove causes of obsolescence”).
Davidson asserts that it “presented substantial evidence and
testimony establishing the fact that the subject properties suffer causes
of obsolescence.” (Pet’r Br. at 7.) More specifically, Davidson argues
that the property at issue has no room for growth, does not have sufficient
storage, “consists of multiple and heavily columned buildings when a single
building design would be more efficient,” lacks an emphasis on economy and
safety that is present in current “codes” because most of the buildings
were constructed in 1961, and that economic and social conditions indicated
a need for more depreciation than was applied. (Pet’r Br. at 7.) Davidson
also submitted photographs of its facility and provided what it asserts
were comparable properties in the Assessment Review and Analysis that it
prepared. (Joint Ex. 2.) Davidson asserts that its major structure and
exterior yard improvements constructed in 1961 should receive 50%
obsolescence and its exterior yard items constructed in 1981 should receive
25% obsolescence. (Joint Ex. 2 at 2.) Davidson contends that the State
Board did not meaningfully address its evidence.
Davidson misunderstands its burden here. Davidson has the burden of
establishing a prima facie case of obsolescence before the burden shifts to
the State Board to deal with Davidson’s evidence in a meaningful manner.
See Canal Square Ltd. Partnership v. State Bd. of Tax Comm'rs, 694 N.E.2d
801, 805 (Ind. Tax Ct. 1998). Conclusory statements do not constitute
probative evidence. Sterling Management-Orchard Ridge Apartments v. State
Bd. of Tax Comm'rs, 730 N.E.2d 828, 839 (Ind. Tax Ct. 2000). “[T]his Court
has also rejected attempts by taxpayers to put forth evidence such as
photographs without explanations.” Heart City Chrysler v. State Bd. of Tax
Comm'rs, 714 N.E.2d 329, 333 (Ind. Tax Ct. 1999). A “hearing officer does
not have an affirmative duty to make a case on behalf of a party. A party
who stands to be adversely affected by a petition for review has an obvious
responsibility to appear before the State Board and present evidence and
argument in support of its position.” North Park Cinemas, Inc. v. State
Bd. of Tax Comm'rs, 689 N.E.2d 765, 769 (Ind. Tax Ct. 1997). Moreover,
this Court will not make a taxpayer’s case for it. See CGC Enters v. State
Bd. of Tax Comm’rs, 714 N.E.2d 801, 803 (Ind. Tax Ct. 1999).
Here, in Davidson’s brief and Assessment Review and Analysis it
presented only conclusory statements that its property suffered from
obsolescence. See Sterling Management-Orchard Ridge Apartments, 730 N.E.2d
at 839. Davidson did not explain how its assertions showed a loss in value
that would be indicative of obsolescence. See Ind. Admin. Code tit. 50, r.
2.1-5-1. Moreover, at trial, Davidson’s presentation of photographs of its
property and allegedly comparable properties lacked any explanation. See
Heart City Chrysler, 714 N.E.2d at 333. Davidson did not even designate
what kind of obsolescence was allegedly demonstrated by its evidence.
Davidson’s presentation of evidence without showing how that evidence
demonstrates that its property has suffered from obsolescence is not
probative evidence. It is not this Court’s place to sift through
Davidson’s evidence and make its arguments for it. See CGC Enterprises,
714 N.E.2d at 803. Because Davidson has failed to present probative
evidence to the State Board regarding obsolescence, the Court AFFIRMS the
final determination of the State Board.
CONCLUSION
For the foregoing reasons, the Court hereby AFFIRMS the State Board’s
final determination that Davidson is not entitled to obsolescence.
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[1] Davidson also argues that the State Board’s findings of fact were
insufficient in its case. It is true that the State Board’s decision will
be reversed if it fails to make any findings as to evidence rebutting the
taxpayer's prima facie case. Canal Square Ltd. Partnership v. State Bd. of
Tax Comm'rs, 694 N.E.2d 801, 805 (Ind. Tax Ct. 1998). However, in order to
invoke this requirement, the taxpayer must first present a prima facie
case. Id. As discussed infra, Davidson has not presented a prima facie
case with regard to obsolescence in order to trigger the State Board’s duty
to support its decision with substantial evidence. See infra part II.
Therefore, this contention by Davidson is without merit.
[2] This property is parcel number 5100-03-01-035/00.
[3] Davidson does not appear to raise the base price issue on appeal.
Therefore, this Court will not address it.
