Clark v. State Bd. of Tax Com'rs

• Decision Date: 24 April 1998
• Docket Number: No. 49T10-9607-TA-00083,49T10-9607-TA-00083
• Citation: 694 N.E.2d 1230
• Parties: Ronald D. CLARK, Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.
• Court: Indiana Tax Court

Page 1230

694 N.E.2d 1230

Ronald D. CLARK, Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.

No. 49T10-9607-TA-00083.

Tax Court of Indiana.

April 24, 1998.

Curtis J. Dickinson, David L. Pippen, Dickinson & Abel, Indianapolis, for Petitioner.

Jeffrey A. Modisett, Attorney General, Vincent S. Mirkov, Deputy Attorney General, Indianapolis, for Respondent.

FISHER, Judge.

Ronald D. Clark appeals final determinations of the State Board of Tax Commissioners (State Board) assessing two of his properties as of March 1, 1993.

BACKGROUND AND PROCEDURAL HISTORY

Clark owns two neighboring apartment buildings, one located at 201 South Salisbury Street (Salisbury Property) and the other located at 121 West Wood Street (Wood Property) in West Lafayette, Indiana. The Wood and Salisbury Properties are located near Purdue University and serve a primarily student market. On October 12, 1993, Clark filed a Form 130 Petition for Review of Assessment for each apartment building with the Tippecanoe County Board of Review (BOR) challenging the apartment buildings' assessment. The BOR declined to change the assessed value of the apartment buildings. On December 9, 1993, Clark filed a Form 131 Petition for Review of Assessment for each apartment building with the State Board alleging that the BOR had given the apartment buildings an improper amount of obsolescence depreciation. ¹ On May 31, 1996, the State Board issued two final determinations reducing the assessed value of the Wood and Salisbury Properties. On July 16, 1996, Clark initiated this original tax appeal, and on May 23, 1997, the parties tried this cause before this Court.

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 final determinations of the State Board only when the decision is unsupported by substantial evidence, is arbitrary or capricious, constitutes an abuse of discretion, or exceeds statutory authority. Sangralea Boys Fund, Inc. v. State Bd. of Tax Comm'rs, 686 N.E.2d 954, 956 (Ind.Tax Ct.1997), review denied. This oft-repeated language mirrors the traditional standard by which courts evaluate the decisions of administrative agencies. ² See State Bd. of Tax Comm'rs v. Smith, 463 N.E.2d 493, 495 n. 2 (Ind.Ct.App.1984) (judicial review of State Board decisions closely analogous to judicial review of administrative decisions).

In addition, the party challenging the propriety of a State Board final determination bears the burden of demonstrating the invalidity of that final determination. See Zakutansky v. State Bd. of Tax Comm'rs, 691 N.E.2d 1365, 1367 (Ind.Tax Ct. 1998); Vonnegut v. State Bd. of Tax Comm'rs, 672 N.E.2d 87, 89 (Ind.Tax Ct.1996), review denied. This Court's decisions contain various formulations of how a taxpayer may satisfy this burden. A few decisions of this Court have characterized this burden as requiring the taxpayer to make a prima facie case. See Wareco Enters. v. State Bd. of Tax Comm'rs, 689 N.E.2d 1299, 1300 (Ind.Tax Ct.1997); Western Select Properties v. State Bd. of Tax Comm'rs, 639 N.E.2d 1068, 1071 (Ind.Tax Ct.1994); GTE N., Inc. v. State Bd. of Tax Comm'rs, 634 N.E.2d 882, 887 (Ind.Tax Ct.1994); Thorntown Tel. Co. v. State Bd. of Tax Comm'rs, 629 N.E.2d 962, 964 (Ind.Tax Ct.1994). In order to establish a prima facie case, a taxpayer must introduce evidence "sufficient to establish a given fact and which if not contradicted will remain sufficient." GTE N., 634 N.E.2d at 887. 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. See Western Select Properties, 639 N.E.2d at 1072.

Other decisions by this Court have characterized the burden of demonstrating the invalidity of an assessment as requiring the taxpayer to "show [that] the State Board's assessment was inaccurate." Paul Heuring Motors, Inc. v. State Bd. of Tax Comm'rs, 620 N.E.2d 39, 41 (Ind.Tax Ct.1993) (citing Meridian Hills Country Club v. State Bd. of Tax Comm'rs, 512 N.E.2d 911, 913 (Ind.Tax Ct.1987)). Cf. North Park Cinemas, Inc. v. State Bd. of Tax Comm'rs, 689 N.E.2d 765, 770 (Ind.Tax Ct.1997) (burden of proving the incorrectness of an assessment lies with taxpayer).

Other decisions have eschewed these requirements, focusing instead on whether the State Board's final determination is proper. See, e.g., Bender v. State Bd. of Tax Comm'rs, 676 N.E.2d 1113 (Ind.Tax Ct.1997); Simmons v. State Bd. of Tax Comm'rs, 642 N.E.2d 559 (Ind.Tax Ct.1994); Harrington v. State Bd. of Tax Comm'rs, 525 N.E.2d 360 (Ind.Tax Ct.1988). The critical inquiry in these cases is not what the taxpayer demonstrated the assessment should be, but rather whether the State Board acted properly in arriving at its final determination. See Scheid v. State Bd. of Tax Comm'rs, 560 N.E.2d 1283, 1285 (Ind.Tax Ct.1990) (Court concerned with "integrity of the process by which the facts were found, rather than the facts themselves"). At first glance, these cases might seem somewhat inconsistent with the cases that require the establishment of a prima facie case or that require the taxpayer to establish the inaccuracy of a particular assessment. Those cases seem to predicate a taxpayer's ability to challenge an assessment on the taxpayer affirmatively demonstrating a competing view of what the assessment should be. However, a deeper examination of the case law reveals that the differences are linked to the issues raised in each case, rather than any inconsistency in this Court's jurisprudence.

As this Court's decisions demonstrate, there are a variety of different challenges that can be made to a final determination of the State Board. What the taxpayer must demonstrate in order to gain reversal of the final determination depends on the issues raised by the challenge. For example, when a taxpayer challenges his assessment as violating the uniformity and equality requirement of the Indiana Constitution, in order to demonstrate the invalidity of the assessment, the taxpayer will have to bring evidence of similar properties. See Zakutansky, 691 N.E.2d at 1370 (by introducing assessments of comparable properties, taxpayer placed burden on State Board to explain disparity in assessments); Western Select Properties, 639 N.E.2d at 1075 (taxpayer must offer evidence of assessment of similar properties in order to demonstrate inconsistent assessments); Meridian Hills Country Club, 512 N.E.2d at 915 (where taxpayer does not bring evidence of dissimilar treatment of similar properties, claim that assessment violates uniform and equal mandate must fail). In order to successfully challenge a final determination, the taxpayer will necessarily have to offer a competing view (and evidence to support that view) of what the assessment should be. However, a taxpayer need not offer a competing view of an assessment in every case (although the taxpayer's case will undoubtedly be helped by doing so). Under this Court's standard of review, a State Board final determination must be reversed if, inter alia, that final determination is unsupported by substantial evidence. A demonstration that an assessment is not supported by substantial evidence is not necessarily predicated on demonstrating a competing view of what the assessment should be. Cf. Bock Prods., Inc. v. State Bd. of Tax Comm'rs, 683 N.E.2d 1368, 1371 (Ind.Tax Ct.1997) (taxpayer is not required to demonstrate how assessment error is supposed to be corrected). In other words, a taxpayer need not always challenge the accuracy of an assessment in order to challenge the basis of the assessment. ³

Properly understood, the term prima facie case is a convenient shorthand for describing situations where the taxpayer has chosen or is required to offer evidence of a competing view of an assessment to demonstrate the invalidity of a State Board final determination. Once the taxpayer has made the proper evidentiary showing, it is incumbent upon the State Board to offer some explanation in order to rebut the taxpayer's evidence. This requirement stems from the State Board's duty not to act arbitrarily and capriciously. See Western Select Properties, 639 N.E.2d at 1075. The State Board may not simply refuse to consider the taxpayer's evidence. See Conti v. Commissioner, 39 F.3d 658, 664 (6th Cir.1994) ("[A] taxpayer's unimpeached, competent, and relevant testimony 'may not be arbitrarily discredited and disregarded....' ") (quoting Loesch & Green Const. Co. v. Commissioner, 211 F.2d 210, 212 (6th Cir.1954)); Anastasato v. Commissioner, 794 F.2d 884, 888 (3d Cir.1986) (Tax Court must consider taxpayer's evidence.); Western Select Properties, 639 N.E.2d at 1075 (State Board cannot simply refuse to recognize taxpayer's evidence). The rule is simple: when a taxpayer offers probative evidence, that evidence must be dealt with in some meaningful manner. The prima facie case formulation allows this Court to determine whether the State Board did so.

Discussion

Clark makes a variety of challenges to the assessments at issue in this case. He challenges the grade given to both properties, the amount of obsolescence depreciation given to both properties and the use of the GCM Pricing Schedule to assess the Salisbury Property. For ease of analysis, the Court will consider the Wood and Salisbury Properties separately.

I. The Wood Property

a. Grade--Clark challenges the C grade given to the Wood Property. According to the regulations governing the assessments at issue, a C grade is given to a "moderately attractive building[ ] conforming with the base specifications used to develop the pricing schedule." IND.ADMIN.CODE tit. 50, r. 2.1-4-3(f) (1992) (codified in present form at id. r. 2.2-10-3(a)(3) (1996)). The Wood Property was assessed using the GCR Pricing Schedule for apartment buildings. IND.ADMIN.CODE tit. 50, r....