Griffin v. DEPARTMENT OF LOCAL GOV. FINANCE

• Decision Date: 03 April 2002
• Docket Number: No. 49T10-0009-TA-98.,49T10-0009-TA-98.
• Citation: 765 N.E.2d 716
• Parties: Michael GRIFFIN and Lake County, a political subdivision of the State of Indiana, Petitioners, v. DEPARTMENT OF LOCAL GOVERNMENT FINANCE, Respondent.
• Court: Indiana Tax Court

765 N.E.2d 716

Michael GRIFFIN and Lake County, a political subdivision of the State of Indiana, Petitioners, v. DEPARTMENT OF LOCAL GOVERNMENT FINANCE,¹ Respondent.

No. 49T10-0009-TA-98.

Tax Court of Indiana.

April 3, 2002.

Gerald M. Bishop, John S. Dull, Edward R. Hall, Merrillville, IN, for Petitioners.

Steve Carter, Attorney General of Indiana, Frances Barrow, Deputy Attorney General, Indianapolis, IN, for Respondent.

FISHER, J.

Michael Griffin appeals the final determination of the State Board of Tax Commissioners (State Board) denying his refund claim for real property taxes paid toward the Hospital Care for the Indigent (HCI) property tax levy for the 1996, 1997, and 1998 tax years. Griffin raises several issues in his motion for partial summary judgment; however, the Court finds that the relevant issues are:

I. Whether the HCI property tax levy is a state tax;

II. Whether the HCI tax, as a state tax, exceeds the one cent ($0.01) of $100 assessed value tax rate allowed under Indiana Code § 6-1.1-18-2; and

III. Whether the HCI tax rate violates Article 10, Section 1 of the Indiana Constitution because it results in nonuniform and unequal taxation of substantially similar property.²

For the reasons stated below, the Court GRANTS Griffin's motion for partial summary judgment and DENIES the State Board's cross motion for summary judgment.³

FACTS AND PROCEDURAL HISTORY

Griffin is a Lake County resident and real property owner.⁴ From 1996 to 1998, the Lake County HCI property tax levy ranged from $0.4824 to $0.5024 cents per $100 of assessed value.⁵ On January 12, 2000, Griffin filed two Forms 17T with the Lake County auditor seeking a refund for the 1996, 1997, and 1998 tax years. Griffin claimed that he was entitled to a refund of the HCI tax because it was illegal. Specifically, Griffin argued that the HCI property tax levy was a state tax, that it violated Article 10, Section 1 of the Indiana Constitution,⁶ and that it surpassed the maximum state tax rate allowed by Indiana Code § 6-1.1-18-2.⁷

Pursuant to Indiana Code § 6-1.1-26-2, the auditor forwarded Griffin's refund claims to the State Board for review. The State Board held a hearing, and on July 31, 2000, it issued its final determination, denying Griffin's claim for refund. The State Board concluded that it had no authority to determine the constitutionality of the HCI statute. The State Board also concluded that the HCI tax was not a state tax. The State Board concluded that even if it was a state tax, it did not violate the statutory state tax limits. The State Board reasoned that because the statute establishing the formula for the HCI tax was enacted subsequent to and was more specific than the state tax rate statute (Indiana Code § 6-1.1-18-2), the HCI statute repealed any inconsistent provisions in the state tax limit statute.

Griffin filed this original tax appeal on August 25, 2000.⁸ Griffin then filed a motion for partial summary judgment. The State Board filed its response opposing the summary judgment motion and made a cross motion for summary judgment in its favor. The Court heard oral arguments. Additional facts will be supplied as needed.

ANALYSIS AND OPINION

Standard of Review

The Court gives great deference to the State Board's final determinations when the State Board acts within the scope of its authority. Wetzel Enters., Inc. v. State Bd. of Tax Comm'rs, 694 N.E.2d 1259, 1261 (Ind. Tax Ct.1998). Accordingly, 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. The taxpayer bears the burden of demonstrating the invalidity of the State Board's final determination. Clark v. State Bd. of Tax Comm'rs, 694 N.E.2d 1230, 1233 (Ind. Tax Ct.1998). Summary judgment is proper only when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. See Ind. Trial Rule 56(C). See also W.H. Paige & Co. v. State Bd. of Tax Comm'rs, 732 N.E.2d 269, 270 (Ind. Tax Ct.2000)

. Cross motions for summary judgment do not alter this standard. W.H. Paige, 732 N.E.2d at 270.

Discussion

Griffin argues that the HCI property tax levy is illegal because it is a state tax, and as such, it violates Article 10, Section 1 of the Indiana Constitution and exceeds the once cent ($0.01) per $100 assessed value tax rate allowed under Indiana Code § 6-1.1-18-2. Because a review of the HCI program will assist with a decision of the ultimate issue in this case, the Court will first review the HCI program and property tax levy. The issues of whether the HCI tax is a state tax, whether Indiana Code § 6-1.1-18-2 applies, and whether it violates Article 10, Section 1 of the Indiana Constitution will be then be addressed in turn.

HCI Program

The HCI program, first enacted in 1986 and later recodified in 1992, was enacted to provide cost-free emergency medical care to indigent patients who did not qualify for Medicaid. State Bd. of Tax Comm'rs v. Montgomery, 730 N.E.2d 680, 681 (Ind. 2000). The HCI program is currently funded by a tax levy on property located in each county and by distributions from the financial institutions tax, motor vehicle excise taxes, and commercial vehicle excise taxes.⁹ IND.CODE § 12-16-14-1 (West Supp.2001);¹⁰see also Lake County Council v. State Bd. of Tax Comm'rs, 706 N.E.2d 270, 273 (Ind. Tax Ct.1999),

rev'd on other grounds by 730 N.E.2d 680 (Ind. 2000) (citing IND.CODE § 12-16-14-1 (1998)).

The fiscal body of each county annually imposes the property tax component of the HCI program and collects it like other state and county ad valorem property taxes. IND.CODE § 12-16-14-2. Although the county imposes this tax levy, it has no discretion to fix the rate of tax because the legislature, through a statutory formula, has mandated the rate. IND.CODE § 12-16-14-3. That formula requires each county to impose an HCI property tax levy equal to the product of:

(1) the [HCI] property tax levy imposed for taxes first due and payable in the preceding year; multiplied by

(2) the statewide average assessed value growth quotient, using all the county assessed value growth quotients determined under IC 6-1.1-18.5-2 for the year in which the tax levy under this section will be first due and payable.

IND.CODE § 12-16-14-3.¹¹ The HCI property tax rate, however, is not uniform across the state but varies from county to county. Lake County Council, 706 N.E.2d at 273. Indiana's ninety-two counties have seventy-two different tax rates. (Pet'r Partial Summ. J. Br. at 6; State Bd. Tr. at 855.) Furthermore, a county's HCI property tax rate is not tied to the amount of the state HCI fund spent in the particular county. Id.

The State Board reviews each county's property tax levy and enforces the requirements of the HCI property tax levy. IND. CODE § 12-16-14-4. Any money collected from a county's HCI property tax levy is deposited into a county HCI fund. IND. CODE § 12-16-14-5. Each month, all the money from the county HCI fund is then transferred to the state HCI fund. IND. CODE § 12-16-14-6(b). The State, which administers the HCI program, reimburses providers of emergency medical care to the indigent for their expenses from the state HCI fund. IND.CODE § 12-16-14-8.

In 1993, the legislature changed the HCI program to allow $35,000,000 of the state HCI fund to be used to procure federal Medicaid matching funds, or "special Medicaid revenue." P.L. 277-1993, § 8, 1993 Ind. Acts 4642-43; see also P.L. 277-1993, § 82, 1993 Ind. Acts 4783. This money was appropriated before any payments to providers were made from the state HCI fund. P.L. 277-1993, § 8, 1993 Ind. Acts 4642. After the State received the federal Medicaid matching funds, the budget director had to return any funds received in excess of $45,000,000 (up to a maximum of $18,000,000) to the state HCI fund. Id. The State then used this money to pay HCI providers under Indiana Code § 12-16-7-4.¹²

State Tax

Griffin argues that the HCI property tax levy is illegal because it is a state tax that is not uniform and equal. To support his argument that the HCI tax is a state tax, Griffin relies on this Court's opinion in Lake County Council. (Pet'r Partial Summ. J. Br. at 10-11.) In Lake County Council, this Court found that the HCI property tax was a state tax rather than a local tax because: (1) the State, through the enactment of the HCI program, statutorily mandates that the county fiscal bodies impose the HCI property tax levy at a formulary rate set by statute; (2) the amount of tax collected in a particular county is not a function of the actual indigent health care expenses in that county; (3) the monies generated by the HCI tax are forwarded to the State; and (4) those state HCI monies are used to defray the expenses and obligations of the State. Lake County Council, 706 N.E.2d at 277 & n. 13 (citations omitted). To further support his argument that the HCI is a state tax, Griffin points out that the State uses the HCI tax to leverage federal Medicaid funding and that State agencies administer Medicaid, which would not be possible if the HCI tax were a county tax. (Pet'r Partial Summ. J. Br. at 11.)

The State Board, on the other hand, argues that the HCI property tax is not a state tax because the legislature refers to the HCI fund in Indiana Code § 6-1.1-18-3, which establishes the maximum tax rate for political subdivisions. (Resp't Summ. J. Br. at 34) (citing IND.CODE § 6-1.1-18-3(b)(7).)¹³ The State Board also points out that the Supreme Court in Montgomery referred to this political subdivision statute when discussing the HCI property tax. (Resp't Summ. J. Br. at 34 (citing Montgomery, 730 N.E.2d at 681).)

This Court must reject the State Board's argument that the HCI tax is a local tax because the legislature made mention to it under section (b)(7) of the statute...