Magnatek Inc. v. State Board of Tax Commissioners

ATTORNEY FOR PETITIONER:    ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN    JEFFREY A. MODISETT
DICKINSON & ABEL     ATTORNEY GENERAL OF INDIANA
Indianapolis, IN     
     ANGELA L. MANSFIELD    
    DEPUTY ATTORNEY GENERAL
    Indianapolis, IN
_____________________________________________________________________

IN THE
INDIANA TAX COURT _____________________________________________________________________

MAGNATEK, INC., ) ) Petitioner, ) ) v. ) Case No. 49T10-9701-TA-00098 ) STATE BOARD OF TAX COMMISSIONERS, ) ) Respondent. ) _____________________________________________________________________

ON APPEAL FROM THE STATE BOARD OF TAX COMMISSIONERS _____________________________________________________________________

June 16, 1998 NOT FOR PUBLICATION
FISHER, J.
    Magnatek, Inc. (Magnatek) appeals from a final determination of the State Board of Tax Commissioners (State Board) denying it a 40% obsolescence depreciation reduction. The facts are undisputed.
FACTS AND PROCEDURAL HISTORY

    Magnatek owns land and improvements located in Huntington County, Indiana. This property was valued as follows: land _ $10,830, improvements _ $302,430. On September 8, 1992, Magnatek filed a Form 130 Petition for Review of Assessment with the BOR. The BOR decided to award a 15% obsolescence depreciation deduction to Magnatek's improvements. This reduced the assessed value of Magnatek's improvements to $290,970. Unsatisfied with this result, Magnatek filed a Form 131 Petition for Review of Assessment with the State Board seeking a 40% obsolescence depreciation deduction. A hearing on the Form 131 was held on December 18, 1995. On November 22, 1996 the State Board issued a final determination denying Magnatek's claim. Magnatek filed an original tax appeal on January 6, 1997, and a trial was held before this Court on January 26, 1998. Additional facts will be supplied as necessary.
ANALYSIS AND OPINION
Standard of Review
    This Court gives the final determinations of the State Board great deference when it acts within the scope of authority. Indiana Sugars, Inc. v. State Bd. of Tax Comm'rs, 683 N.E.2d 1383, 1385 (Ind. Tax Ct. 1997). This Court reverses final determinations of the State Board only when those decisions are unsupported by substantial evidence, are arbitrary or capricious, constitute an abuse of discretion, or exceed statutory authority. Id.
Discussion     The sole issue for this Court's review is whether Magnatek has shown that the State Board failed to support its quantification of obsolescence with substantial evidence . That is, has Magnatek shown that the State Board has no basis for its decision to award 15% obsolescence rather than 40%? The Court has recently discussed virtually identical issues.
    In Clark v. State Bd. of Tax Comm'rs, No. 49T10-9607-TA-00083 (Ind. Tax Ct. Apr. 24, 1998), the Court was called on to determine whether two apartment buildings were given the appropriate amount of obsolescence depreciation. The Court noted that "the determination of obsolescence is a two-step inquiry. The assessor must identify the causes of obsolescence and then quantify the amount of obsolescence to be applied." Id. at 14. With respect to the second part of this inquiry, the Court held that State Board had a responsibility to support its quantification of obsolescence. Id. at 17. The Court found that the State Board's decision to award 5% obsolescence did not have any evidentiary support. However, the Court also noted its frustration with the result of the case.
    The taxpayer in Clark retained a property tax consulting firm, Landmark Appraisals, to represent him in his property tax appeal. The court noted that the taxpayer made a "half-hearted" case of obsolescence at the administrative level. Id. at 20. This forced this Court to choose between holding for the taxpayer or the State Board when neither party had presented evidence to support its position.
    The same frustrations present in Clark are present here. In this case, Magnatek retained the same property tax consulting firm. Landmark and the taxpayer have

presented a less than impressive case before the State Board and this Court. Once again, the State Board has no evidence with which to support its decision to award 15% obsolescence.See footnote 1
    The Court finds that Magnatek's and the State Board's handling of the issue of obsolescence in this case suffers from the the same infirmities that were present in Clark. For the reasons stated in Clark, this cause is REMANDED to the State Board for further action consistent with this Court's opinion in Clark. The Court's admonitions and standards put forth in Clark with respect to obsolescence will apply on remand.
 
CONCLUSION
    For the foregoing reasons, this Court REMANDS this matter to the State Board for further consideration consistent with this opinion.

Footnote:     1 The hearing officer in this case, Mr. Richard Schultz, testified that Huntington County awarded Magnatek 15% obsolescence and Magnatek did not present evidence to him that would "warrant [a] change in that percent . . . . It was not proven that the percent that was applied by the county was in error." (Tr. at 10). However, when asked whether he tested the county's figure for its accuracy and validity, Schultz answered "No." (Tr. at 10-11). Moreover, when asked what facts aided him in determining 15% was correct, Mr. Schultz replied that "15[%] basically agreed with what the county did, and I didn't feel [Magnatek] presented a case that justified the 40%." (Tr. at 23-24).
    These statements are indicative of the testimony and evidence presented by both parties throughout this case and are insufficient to support either party's position. Further, the Court is issuing a separate opinion that addresses the propriety of an argument that the State Board's assessment is correct merely because the percentage of obsolescence awarded by the county was accepted by the State Board. Therefore, both parties are instructed to read this Court's opinion in Loveless Construction Co. v. State Bd. of Tax Comm'rs, No. 49T10-9701-TA-00065 (Ind. Tax Ct. June 15, 1998) for the Court's conclusions regarding such an argument.