Square 74 Assocs. LLC v. Marion Cnty. Assessor

• Citation: 138 N.E.3d 336
• Decision Date: 03 December 2019
• Docket Number: Cause No. 19T-TA-00020
• Parties: SQUARE 74 ASSOCIATES LLC, Petitioner, v. MARION COUNTY ASSESSOR, Respondent.
• Court: Tax Court of Indiana

138 N.E.3d 336

SQUARE 74 ASSOCIATES LLC, Petitioner,

v.MARION COUNTY ASSESSOR, Respondent.

Cause No. 19T-TA-00020

Tax Court of Indiana.

FILED December 3, 2019

ATTORNEY FOR PETITIONER: BETH H. HENKEL, LAW OFFICE OF BETH HENKEL LLC, Indianapolis, IN

ATTORNEY FOR RESPONDENT: JESSICA R. GASTINEAU, SPECIAL COUNSEL – TAX LITIGATION, OFFICE OF CORPORATION COUNSEL, Indianapolis, IN

WENTWORTH, J.

Square 74 Associates LLC has challenged the Indiana Board of Tax Review's final determination that dismissed its petitions for correction of an error for the 2008 through 2011 tax years. Upon review, the Court affirms the Indiana Board's final determination.

FACTS AND PROCEDURAL HISTORY

During the years at issue, the Department of Metropolitan Development of the Consolidated City of Indianapolis, acting for and on behalf of the Metropolitan Development Commission of Marion County, Indiana in its capacity as the Redevelopment Commission of the City of Indianapolis, Indiana (collectively, the "City of Indianapolis") owned a 7-story 209,888 square foot public parking garage in downtown Indianapolis. (See, e.g., Cert. Admin. R. at 171, 212-15.) The City of Indianapolis leased a portion of the ground floor, consisting of five separate tenant spaces totaling approximately 31,000 square feet, to Square 74 for the operation of five restaurants. (See Cert. Admin. R. at 171-206, 216-31.)

For purposes of assessing the properties, the parking garage and the tenant spaces were each assigned distinct parcel numbers. (See Cert. Admin. R. at 212-31.) See also 50 IND. ADMIN. CODE 1-3-3 (2008) (requiring assessing officials to create permanent assessment records for purposes of assessing improvements on leased ground).) The Marion County Assessor assessed the tenant spaces as follows: Parcel 1 was assessed at $633,800 ($284,500 for land and $349,300 for improvements) for the 2008 tax year and $626,700 ($284,500 for land and $342,200 for improvements) for the 2009 through 2011 tax years; Parcel 2 was assessed at $536,400 ($0 for land and $536,400 for improvements) for the 2008 through 2009 tax years and $540,000 ($0 for land and $540,000 for improvements) for the 2010 through 2011 tax years; Parcel 3 was assessed at $877,100 ($408,200 for land and $468,900 for improvements) for the 2008 through 2011 tax years; Parcel 4 was assessed at $1,606,400 ($917,900 for land and $688,500 for improvements) for the 2008 through 2011 tax years; and Parcel 5 was assessed at $950,600 ($387,900 for land and $562,700 for improvements) for the 2008 through 2011 tax years. (See Cert. Admin. R. at 2, 9, 16, 23, 30, 37, 44, 51, 58, 65, 72, 79, 86, 93, 100, 107, 114, 121, 128, 135.)

Believing that these assessments contained mathematical errors, among other things, Square 74 filed "Petition[s] for Correction of an Error" ("Form 133s") with the Marion County Auditor for each of the four years at issue on November 13, 2012. (See, e.g., Cert. Admin. R. at 1 - 2, 6 - 7.) On February 26, 2016, after the Form 133s were forwarded to the Marion County Property Tax Assessment Board of Appeals ("PTABOA"), the PTABOA adjusted Square 74's assessments by reducing the assessed value of certain improvements and increasing the assessed value of some of the land. (See, e.g., Cert. Admin. R. at 3, 31, 59, 87, 115.) Specifically, the PTABOA adjusted the assessments as follows: Parcel 1 was reduced to $532,300 ($284,500 for land and $247,800 for improvements) for the 2008 tax year and $528,400 ($284,500 for land and $243,900 for improvements) for the 2009 through 2011 tax years; Parcel 2 was increased to $926,000 ($499,100 for land and $426,900 for improvements) for the 2008 through 2009 tax years and $929,600 ($499,100 for land and $430,500 for improvements) for the 2010 through 2011 tax years; Parcel 3 was reduced to $758,100 ($408,200 for land and $349,900 for improvements) for the 2008 through 2011 tax years; Parcel 4 was reduced to $1,584,500 ($917,900 for land and $666,600 for improvements) for the 2008 through 2011 tax years; and Parcel 5 was reduced to $916,400 ($387,900 for land and $528,500 for improvements) for the 2008 through 2011 tax years. (See Cert. Admin. R. at 3, 10, 17, 24, 31, 38, 45, 52, 59, 66, 73, 80, 87, 94, 101, 108, 115, 122, 129, 136.)

On April 5, 2016, Square 74 filed Form 133s with the Indiana Board, claiming that all its assessments contained mathematical errors due to 1) numerous building components being double-assessed; and 2) the assessment of its leasehold interest in the tenant spaces included the underlying land that was allegedly the responsibility of the owner, the City of Indianapolis, not Square 74.¹ (See, e.g., Cert. Admin. R. at 1 - 7.) The parties subsequently determined that the Square 74 Form 133s could be consolidated and resolved by means of summary judgment. (See Cert. Admin. R. at 160-64.)

On May 15, 2018, Square 74 filed its "Motion for Summary Judgment and Designation of Evidence in Support of Summary Judgment," arguing that the land assessments were made against the wrong person and illegal as a matter of law because the terms of its lease stated that it "has no right, interest, or responsibility as to the land" beneath the tenant spaces.² (See, e.g., Cert. Admin. R. at 165-70, 234-248.) In response, the Assessor filed a "Cross[-]Motion to Dismiss" pursuant to Indiana Trial Rule 12(B)(6). (See Cert. Admin. R. at 249-56.) In his Cross-Motion, the Assessor contended that Square 74's appeals should be dismissed for failure to state a claim upon which relief could be granted because Square 74 complained of errors that were not objective errors and therefore could not be corrected under the Form 133 appeals process. (See Cert. Admin. R. at 251-54.)

On April 18, 2019, without conducting a hearing, the Indiana Board issued its final determination that granted the Assessor's Cross-Motion. (See Cert. Admin. R. at 291-301.) In its final determination, the Indiana Board explained that while it

serious[ly] doubts that leasing ground floor space in a structure carries with it no interest in the underlying land, particularly where the lease does not plainly say so[, it did not need to resolve that issue because b]y statute, the interest being assessed was Square 74's possessory interest, not the land or improvements themselves or fee ownership in them.

(Cert. Admin. R. at 297-98 ¶¶ 15-16.) Consequently, the Indiana Board determined that Square 74's appeals could not be resolved under the Form 133 appeals process, a process limited to resolving objective errors, because the resolution of the issue depended on the subjective matter of how Square 74's leasehold estate was to be valued. (See Cert. Admin. R. at 295-300 ¶¶ 8-20.)

On May 31, 2019, Square 74 initiated this original tax appeal. The Court took the matter under advisement on October 30, 2019. Additional facts will be supplied when necessary.

STANDARD OF REVIEW

The party seeking to overturn an Indiana Board final determination bears the burden of demonstrating its invalidity. Osolo Twp. Assessor v. Elkhart Maple Lane Assocs., 789 N.E.2d 109, 111 (Ind. Tax Ct. 2003). Thus, to prevail on appeal, Square 74 must demonstrate to the Court that the Indiana Board's final determination is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; contrary to constitutional right, power, privilege or immunity; in excess of or short of statutory jurisdiction, authority, or limitations; without observance of the procedure required by law; or unsupported by substantial or reliable evidence. See IND. CODE § 33-26-6-6(e)(1)-(5) (2019).

LAW

During the years at issue, a taxpayer could challenge a property tax assessment by filing a Form 133 petition for correction of an error with the county auditor. See IND. CODE § 6-1.1-15-12 (2008) (amended 2009). (See also, e.g., Cert. Admin. R. at 1 - 2.) The Form 133 administrative appeal procedure could be filed at any point within three years from the date the taxes were first due. See Pulte Homes of Indiana, LLC v. Hendricks Cty. Assessor, 42 N.E.3d 590, 593 (Ind. Tax Ct. 2015), review denied. See also Hutcherson v. Ward, 2 N.E.3d 138, 142 (Ind. Tax Ct. 2013) (explaining that as of 2013, the Form 133 administrative appeal procedure was no longer restricted to a three-year time limitation by 50 IAC 4.2-3-12 ).

The types of errors that were correctable under the Form 133 administrative appeal procedure were expressly enumerated. See I.C. § 6-1.1-15-12(a). For example, the administrative appeal procedure could be used to correct the following errors: (1) an assessment against the wrong person; (2) an error in carrying delinquent taxes forward from one tax duplicate to another; (3) the taxes were illegal as a matter of law; or (4) a mathematical error was made in computing an assessment. See generally I.C. § 6-1.1-15-12(a)-(d). These types of errors have been designated as objective errors, not errors that required subjective judgment. See Pulte Homes, 42 N.E.3d at 593.

ANALYSIS

On appeal, Square 74 contends that the final determination must be reversed because the Indiana Board erred in concluding that the issue, which simply "asks the Court to determine the leasehold interest to be assessed[,]" required the use of subjective judgment. (See Pet'r Br. at 14.) Square 74 maintains that the issue is "wholly objective in nature" because its resolution depends on the plain language of three objective items, i.e., its lease, Indiana Code § 6-1.1-10-37(b), and 50 IAC 1-3-3. (See Pet'r Br. at 16-22; Pet'r Reply Br. at 2-5.) Alternatively, Square 74 asks the Court to correct the PTABOA's "retroactive assessments" of Parcel 2, claiming the PTABOA exceeded its authority in reassessing the property. (See Pet'r Reply Br. at 4-5.)

I. Whether Square 74's leasehold estate includes the land

A. The Lease

Square 74 maintains that the "Square 74 Master Lease" defines the tenant spaces, real estate taxes, and the lessee's and lessor's responsibilities for maintenance, insurance, ...