Barth, Inc. v. State Bd. of Tax Com'rs, 49T10-9701-TA-00086

• Decision Date: 22 September 1998
• Docket Number: No. 49T10-9701-TA-00086,49T10-9701-TA-00086
• Citation: 699 N.E.2d 800
• Parties: BARTH, INC., Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent. Cause
• Court: Indiana Tax Court

Page 800

699 N.E.2d 800

BARTH, INC., Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.

Cause No. 49T10-9701-TA-00086.

Tax Court of Indiana.

Sept. 22, 1998.

Tamatha A. Stevens, McMains, Goodin & Orzeske, Indianapolis, for Petitioner.

Jeffrey A. Modisett, Attorney General, Kathryn Symmes Kirk, Deputy Attorney General, Indianapolis, for Respondent.

FISHER, Judge.

Barth, Inc. (Barth) appeals final assessment determinations of the State Board of Tax Commissioners (State Board) fixing the assessed value of property Barth owns for the 1989, 1990, and 1991 tax years. Barth raises three issues in this original tax appeal. Barth contends that the base rate calculations of the buildings located on the property are incorrect, that the buildings were entitled to a kit adjustment as of March 1, 1991, ¹ and that two of the buildings should have been depreciated according to a 30-year life expectancy table instead of a 40-year life expectancy table.

FACTS AND PROCEDURAL HISTORY

Barth owns real property in Milford, Indiana. This property consists of two parcels of land and four buildings. On December 20, 1991, Barth filed six Form 133 Petitions for Correction of an Error with the Kosciusko County Auditor. See IND.CODE ANN. § 6-1.1-15-12 (West 1989) (amended 1993, 1995 & 1997). These petitions alleged that an incorrect base rate was applied. These petitions were denied on January 13, 1992. As required by statute, the petitions were forwarded to the State Board. ² See id. § 6-1.1-15-12(d). A State Board hearing officer, Lynn Leininger met with Barth's authorized representative, ³ Drew Miller of Landmark Appraisals, a property tax consulting firm, to discuss the petitions. In that discussion, Mr. Miller raised issues other than the base rate of the property, namely, the kit adjustment and the 30-year life expectancy table. On November 22, 1996, the State Board issued six separate final determinations in which it denied Barth's request to recalculate the base rate, Barth's request that the buildings be given a kit adjustment, and Barth's request that two of the buildings be depreciated according to the 30-year life expectancy table. This original tax appeal ensued. On December 22, 1997, the parties tried this cause before this Court. Additional facts will be added as necessary.

ANALYSIS AND OPINION

Standard of Review

The State Board is given great deference when it acts within the scope of its authority. Accordingly, this Court reverses State Board final determinations only when those determinations are unsupported by substantial evidence, are arbitrary or capricious, constitute an abuse of discretion, or

exceed statutory authority. See Clark v. State Bd. of Tax Comm'rs, 694 N.E.2d 1230, 1233 (Ind.Tax Ct.1998).

Discussion

I. The Base Rate Calculation

The petitions used by the taxpayer in this case were Form 133 Petitions for Correction of an Error, which are governed by IND.CODE ANN. § 6-1.1-15-12 and applicable State Board regulations. This Court has repeatedly held that the Form 133 process "provides an avenue for correcting objective mistakes in an assessment, not errors in subjective judgment." See, e.g., Bock Prods., Inc., 683 N.E.2d at 1370 (collecting cases). Therefore, the only errors that may be corrected on a Form 133 Petition are those that may be corrected without the resort to subjective judgment. See id. In each of its final determinations, the State Board rejected Barth's claim that the base rate was calculated improperly on the basis that any "[c]hanges would be subjective in nature." (Joint Exhs. C-1 to C-3 and D-1 to D-3). In the State Board's view, the alleged error was not correctable via a Form 133 Petition; therefore, the State Board did not substantively review Barth's allegation that the base rate was calculated improperly.

The calculation of base rate is an element in calculating the reproduction cost of a given improvement. See Bock Prods., 683 N.E.2d at 1371. The base rate for an improvement is calculated by choosing the model that most resembles the physical characteristics of the subject improvement ⁴ and then applying the pricing schedule ⁵ associated with that model to the improvement. See IND. ADMIN. CODE tit. 50, r. 2.1-4-3(a); Clark, 694 N.E.2d at 1235; Wareco Enters. v. State Bd. of Tax Comm'rs, 689 N.E.2d 1299, 1302 (Ind.Tax Ct.1997); Bock Prods., 683 N.E.2d at 1371. The State Board has recognized that not all improvements will conform exactly to the particular pricing schedule used to assess the improvement. See Bock Prods., 683 N.E.2d at 1371. Consequently, the State Board has provided separate schedules showing the costs of certain components and features in order to allow assessors to adjust the base rate to account for an improvement's deviation from the model used to develop the pricing schedule. See IND. ADMIN. CODE tit. 50, r. 2.1-4-3(b)-(e) (1992) (codified in present form at id. r. 2.2-10-6.1(b)-(e) (1996)); Clark, 694 N.E.2d at 1236 n. 6; Wareco Enters., 689 N.E.2d at 1302; Bock Prods., 683 N.E.2d at 1371; see also Hatcher v. State Bd. of Tax Comm'rs, 601 N.E.2d 19, 21-22 (Ind.Tax Ct.1992).

One of these schedules, Schedule C, details many of the component costs of the interior and mechanical features contained in the models. In general, where an improvement does not contain a component presumed to exist in the model, and a cost for that component is listed in Schedule C, a deduction from the base rate is made pursuant to that schedule. As this Court has held, these type of base rate adjustments often involve objective determinations ⁶ or, in other words, an "uncomplicated true or false finding of fact that is correctable via a Form 133." Bock Prods., 683 N.E.2d at 1371 (internal quotation marks and citation omitted). Where the model contains a feature to which a value has been assigned, but that feature In this case, Barth has alleged that the subject improvements lack features presumed to exist in the model, ⁷ such as a lack of partitioning and a lack of interior finish. (Trial Tr. at 8-9). If these features are not present in the subject buildings and values for these features have been assigned to the buildings, those values must be subtracted. ⁸ As this Court stated in Hatcher, 561 N.E.2d at 857-58, "If a fireplace exists, then it is assessed. If no fireplace exists, then its value can be subtracted from the computation. Similarly, for any item that exists and a value is assigned to that item by the property record card, if the item no longer exists, then the auditor should be permitted to subtract that value, as well." Determining whether certain values that have been assigned should have been subtracted involves a simple observation of fact without resort to subjective judgment. See Wareco Enters., 689 N.E.2d at 1302. Accordingly, the Form 133 Petition is the appropriate method to correct these alleged errors, and the State Board erred in concluding that it was not. Therefore, this issue is REMANDED to the State Board so that it may evaluate Barth's contention that the base rate calculation was erroneous.

does not exist in the subject improvement, the value assigned should be subtracted from the improvement's base rate. See Hatcher v. State Bd. of Tax Comm'rs, 561 N.E.2d 852, 857-58 (Ind.Tax Ct.1990).

II. The Kit Building Adjustment

In 1991, the State Board amended its regulations to include a 50% reduction in the base rate for certain light pre-engineered or kit-type buildings. Because this amendment occurred during a non-reassessment year, the State Board ordered local assessing officials to reassess all improvements that qualified for the 50% reduction. See Memorandum from State Board of Tax Commissioners to All Assessing Officials (Feb. 22, 1991), at 2. Later that year, the State Board issued Instructional Bulletin 91-8 to instruct assessors on how to determine which buildings qualified for the reduction. This instructional As was foreseeable, taxpayers and local assessing officials did not always see eye-to-eye on whether a particular improvement qualified for the kit adjustment. Where the local assessing officials did not reassess the improvements, many taxpayers appealed their assessments by filing either a Form 130 Petition for Review of Assessment ⁹ with a County Board of Review or a Form 133 Petition for Correction of an Error with the County Auditor. On August 28, 1992, the State Board issued Instructional Bulletin 92-1, ¹⁰ which provides guidance on handling these petitions.

bulletin provides examples of kit buildings and outlines several characteristics of these buildings. See generally King Industrial Corp. v. State Bd. of Tax Comm'rs, 699 N.E.2d 338 (Ind.Tax Ct.1998) (describing Instructional Bulletin 91-8).

Instructional Bulletin 92-1 states:

Taxpayer files Form 133 on a structure that qualifies for the [kit] adjustment. The assessment is correct because the assessor applied a low Grade and Design Factor to account for the lower cost of construction. The assessing officials should deny the Form 133 Petition for Correction of [an] Error based on the rationale that there is no error to correct. ¹¹

In its final determination, the State Board denied the kit adjustment for the buildings at issue on this basis. In this case, two of the buildings alleged to qualify for the kit adjustment had already received a D grade, and the remaining two buildings received a C-2 grade. ¹² Therefore, the State Board concluded that there was no error in the assessment and did not reach the issue of whether the buildings qualified for the kit adjustment.

At trial, the parties spent a great deal of time trying to show whether the buildings at issue were or were not kit buildings. This was premature. See 20th Century Fiberglass v. State Bd. of Tax Comm'rs, 683 N.E.2d 1376, 1378 (Ind.Tax Ct.1997). In its Under the State Board regulations, a building must be given a kit adjustment if it qualifies for that adjustment. See IND. ADMIN. CODE tit. 50, r....