Brydon Corporation v. Department of Local Government Finance

ATTORNEY FOR PETITIONER:    ATTORNEYS FOR RESPONDENT:
DAVID L. PIPPEN    STEVE CARTER
ATTORNEY AT LAW     ATTORNEY GENERAL OF INDIANA
Indianapolis, IN     Indianapolis, IN
 
     TED J. HOLADAY
    DEPUTY ATTORNEY GENERAL
    Indianapolis, IN
    
 
_____________________________________________________________________

    IN THE INDIANA TAX COURT _____________________________________________________________________

BRYDON CORPORATION, ) ) Petitioner, ) ) v. ) Cause No. 49T10-0012-TA-131 ) DEPARTMENT OF LOCAL ) GOVERNMENT FINANCE, See footnote         )
                )
                )
    Respondent.            )    
_____________________________________________________________________

ON APPEAL FROM A FINAL DETERMINATION
OF THE STATE BOARD OF TAX COMMISSIONERS
 
 
NOT FOR PUBLICATION
September 8, 2003
FISHER, J.
 
    The Petitioner, Brydon Corporation (Brydon), appeals the final determination of the State Board of Tax Commissioners (State Board) valuing its commercial improvement for the 1996 tax year. The issue for the Court to decide is whether the State Board erred when it refused to award Brydon additional obsolescence depreciation. See footnote
    For the reasons stated below, the Court AFFIRMS the final determination of the State Board.
FACTS AND PROCEDURAL HISTORY
    Brydon owns an industrial improvement in Elkhart County, Indiana. For the 1994 assessment, Brydon's improvement was awarded a 20% economic obsolescence depreciation adjustment. That adjustment was reduced to 10% for the 1996 assessment. Brydon subsequently filed a Form 131 Petition for Review (Form 131) with the State Board, claiming that the 10% adjustment applied was incorrect and that the 20% adjustment for the 1994 assessment year should have carried over to the 1996 assessment. The State Board held hearings on the matter on July 2, 1999 and May 23, 2000. On November 15, 2000, the State Board issued its final determination denying Brydon's request.
    On December 27, 2000, Brydon initiated an original tax appeal. The parties stipulated to the record and, on February 21, 2002, presented oral arguments to this Court. Additional facts will be supplied as needed.
ANALYSIS AND OPINION
Standard of Review
    This Court gives great deference to the final determinations of the State Board when it acts within its authority. Wetzel Enters., Inc. v. State Bd. of Tax Comm'rs, 694 N.E.2d 1259, 1261 (Ind. Tax Ct. 1998). This Court will reverse a final determination by the State Board only when its findings are unsupported by substantial evidence, are arbitrary, or capricious, constitute an abuse of discretion, or exceed statutory authority. Id.
    Further, a taxpayer who appeals to this Court from a State Board final determination must demonstrate that the final determination was incorrect. Thousand Trails, Inc. v. State Bd. of Tax Comm'rs, 757 N.E.2d 1072, 1075 (Ind. Tax Ct. 2001). The taxpayer must present a prima facie case by submitting probative evidence. Id. Probative evidence is evidence sufficient to establish a given fact that, if not contradicted, will remain sufficient. Id.
Discussion
     The issue in this case is whether the State Board erred when it refused to award additional obsolescence depreciation to Brydon's improvement for the 1996 assessment. Obsolescence is the functional or economic loss of property value; it is expressed as a percentage reduction in the remaining value of the subject improvement. Clark v. Dep't of Local Gov't Fin., 779 N.E.2d 1277, 1283 (Ind. Tax Ct. 2002) (Clark II); Clark v. State Board of Tax Comm'rs, 742 N.E.2d 46, 51 (Ind. Tax Ct. 2001) (Clark I) (internal citation omitted), review denied, 753 N.E.2d 15. "Functional obsolescence is caused by factors internal to the property and is evidenced by conditions within the property." Clark II, 779 N.E.2d at 1283 (internal quotations marks omitted). "Economic obsolescence is caused by factors external to the property." Id. (internal quotation marks omitted). "Determination of obsolescence involves (1) identification of causes of obsolescence and (2) quantification of the amount of obsolescence to be applied." Clark I, 742 N.E.2d at 51 (footnote omitted).
     The question in this case is whether Brydon submitted probative evidence quantifying its request for additional obsolescence. See footnote At the administrative hearings, Brydon produced two separate calculations to support its claim for additional obsolescence based on the Economic Life Method; copies of the Marshall Swift Valuation Services Tables (MSV Tables); a page of text explaining the Economic Life Method; and, photocopies of the property record cards for the subject property. (Cert. Admin. R. at 41-56.) On the calculation page, Brydon merely states "[a]fter deducting the physical depreciation that is already applied by the County from the total accrued depreciation that is calculated using the Economic Life Method, 27% is the amount attributable to obsolescence depreciation." (Cert. Admin. R. at 41.) No additional information or narrative is provided to explain the quoted language, the Economic Life Method calculation, the MSV Tables, or the Economic Life method generally.
    To quantify obsolescence, Brydon is required to carefully, methodically, and in detail explain the logical relationship between the existence of obsolescence and the quantification of the effects of obsolescence. See Clark II, 779 N.E.2d at 1282 n.4. By contrast, Brydon's presentation consisted of two conclusory calculations for additional obsolescence depreciation using the Economic Life method with no showing of how the statements relate to the MSV Tables, nor how they relate to the 1994 adjustment of 20%. Indeed, Brydon's evidence is presented as though it speaks for itself in regard to the obsolescence depreciation. However, the evidence tells the Court nothing about why the 1994 obsolescence depreciation is correct while the 1996 calculation is incorrect. Because Brydon has failed to explain the relationship between the existence of obsolescence and the quantifiable effects of that obsolescence, Brydon has failed to make a prima facie case. As a result, this Court affirms the State Board's final determination.
CONCLUSION
    Brydon has not presented probative evidence quantifying its request for additional obsolescence. Thus, for the foregoing reasons, the State Board's final determination is AFFIRMED.

Footnote: The State Board of Tax Commissioners (State Board) was originally the Respondent in this appeal. However, the Legislature abolished the State Board as of December 31, 2001. 2001 Ind. Acts 198 § 119(b)(2). Effective January 1, 2002, the Legislature created the Department of Local Government Finance (DLGF), and the Indiana Board of Tax Review (Indiana Board). Ind. Code §§ 6-1.1-30-1.1; 6-1.5-1-3 (West Supp. 2001); 2001 Ind. Acts 198 §§ 66, 95. Pursuant to Indiana Code § 6-1.5-5-8, the DLGF is substituted for the State Board in appeals from final determinations of the State Board that were issued before January 1, 2002. Ind. Code § 6-1.5-5-8 (West Supp. 2001) (eff. 2002); 2001 Ind. Acts 198 § 95. Nevertheless, the law in effect prior to January 1, 2002 applies to these appeals. I.C. § 6-1.5-5-8. See also 2001 Ind. Acts 198 § 117. Although the DLGF has been substituted as the Respondent, this Court will still reference the State Board throughout this opinion.
Footnote: In addition, Brydon's counsel raises various state and federal constitutional claims that this Court has declined to reach in previous cases. See, e.g., Barth, Inc. v. State Bd. of Tax Comm'rs, 756 N.E.2d 1124, 1127 n.1 (Ind. Tax Ct. 2001). Because Brydon's claims and supporting arguments are identical to those previously rejected, this Court will not address them.
Footnote: The State Board's allowance of the 10% adjustment indicates that obsolescence does exist. Therefore, the first prong of Clark I, identification of causes of obsolescence, is not at issue here.