GTE North Inc. v. State Bd. of Tax Com'rs, s. 49T10-9107-TA-00034

Citation634 N.E.2d 882
Decision Date29 April 1994
Docket NumberNos. 49T10-9107-TA-00034,49T10-9107-TA-00035,s. 49T10-9107-TA-00034
PartiesGTE NORTH INCORPORATED, and Contel of Indiana, Inc., d/b/a GTE Indiana, Petitioners, v. STATE BOARD OF TAX COMMISSIONERS, C. Kurt Zorn, Chairman, Gordon E. McIntyre, Member, Wanda K. Watts, Member, Respondents. 1 .
CourtTax Court of Indiana

Steven R. Reed, Bonnie K. Simmons, Westfield, IN, for petitioners.

Pamela Carter, Atty. Gen., Marilyn S. Meighen, Joel Schiff, Deputy Attys. Gen., Indianapolis, IN, for respondents.

FISHER, Judge.

GTE North Incorporated (GTE) and Contel of Indiana, Inc. (collectively referred to as the Telephone Companies) appeal the State Board of Tax Commissioners' (the State Board) assessment of their distributable property for 1991.

ISSUES

I. Whether a prior settlement of litigation between GTE and the State Board operates to bar GTE from maintaining all or part of this litigation.

II. Whether the Telephone Companies are entitled to economic obsolescence adjustments for their distributable property.

III. Whether the State Board's application of a 30 percent floor to the Telephone Companies' property assessments was improper.

FACTS AND PROCEDURAL POSTURE

The Telephone Companies are public utilities that do business and own distributable property in Indiana. More specifically, they provide local exchange telephone service and access service in Indiana.

In April 1991, each Telephone Company filed a statement with the State Board pursuant to IND.CODE 6-1.1-8-19. At that time, the Telephone Companies requested that the State Board make adjustments to their individual assessments to reflect losses from economic obsolescence.

Subsequently, the State Board issued tentative assessments of the Telephone Companies' properties without the requested adjustments. The Telephone Companies objected, and the State Board held a hearing on June 27, 1991. On June 28, 1991, the State Board issued orders making its tentative assessments final, stating the Telephone Companies failed to identify any property that required adjustments for economic obsolescence.

The Telephone Companies now appeal. Additional facts will be supplied as necessary.

STANDARD OF REVIEW

When the court reviews a State Board assessment of public utility property, its standard of review is set by statute:

When a public utility company initiates an appeal under section 30 of [IND.CODE 6-1.1-8], the tax court may set aside the state board of tax commissioners' final assessment and refer the matter to the board with instructions to make another assessment if:

(1) the company shows that the board's final assessment, or the board's apportionment and distribution of the final assessment, is clearly incorrect because the board violated the law or committed fraud; or

(2) the company shows that the board's final assessment is not supported by substantial evidence. 2

IND.CODE 6-1.1-8-32 (footnote added).

DISCUSSION AND DECISION
I

In 1990, GTE appealed the State Board's final assessment of its distributable property for that tax year. On February 12, 1991, GTE and the State Board entered into a settlement agreement. Then, when GTE appealed its final assessment of distributable property for tax year 1991, the State Board filed a motion for summary judgment in which it maintained that GTE, under the terms of the previous settlement agreement, was barred from maintaining the 1991 appeal.

In an unpublished opinion on the motion for summary judgment, the court determined the following language of the settlement agreement was a matter of public record:

[GTE] agree[s] to dismiss its case with prejudice and to forego any further dispute, case or controversy regarding the issue of equalization or any other substantive issue raised and pending in the litigation which relate[s] to assessment years 1990 and 1991, so long as the Board complies with the terms set forth herein.

GTE North Inc. v. State Bd. of Tax Comm'rs (filed July 7, 1992), Ind.Tax, Case No. 49T10-9107-TA-00034 (unpublished), slip op. at 4 (footnotes omitted). The court also determined that the settlement agreement did not prevent GTE from contesting its 1991 final assessment, but rather from raising "the issue of equalization or any other substantive issue raised and pending in" the 1990 appeal in a dispute concerning its 1991 final assessment. Id., slip op. at 5-6.

The State Board, though, claimed that the economic obsolescence issue raised in GTE's 1991 appeal was the same as the equalization issue raised in its 1990 appeal. The court denied summary judgment, however Assessment is the "valuation of property ... for the purpose of taxation." Webster's Third New International Dictionary (1981) 131. See also Riggs v. Bd. of Comm'rs of Sullivan County (1913), 181 Ind. 172, 103 N.E. 1075. The statutory standard of value in Indiana is "true tax value." See IND.CODE 6-1.1-31-5. True tax value does not mean fair market value, but rather that value determined under the rules of the state board of tax commissioners. See IND.CODE 6-1.1-31-7(d).

"because the parties draw conflicting, reasonable inferences concerning whether the appeals raise the same issues, [and therefore] ... a genuine issue exists for trial." Id. at 8-9. Thus, the question to be resolved at trial was whether equalization adjustments and economic obsolescence adjustments are one in the same. The court finds they are not.

With respect to the assessment of personal property, the rules of the state board of tax commissioners shall include instructions for determining:

(1) the proper classification of personal property;

(2) the effect that location has on the value of personal property;

(3) the cost of reproducing personal property;

(4) the depreciation, including physical deterioration and obsolescence, of personal property; and

(5) the true tax value of personal property based on the factors listed in this subsection and any other factor that the board determines by rule is just and proper.

IC 6-1.1-31-7(b) (emphasis added). Thus, economic obsolescence must be considered and accounted for in the true tax value of any given property. In other words, determining economic obsolescence is merely a step in arriving at the assessed value of personal property.

Indiana's equalization process, however, stems from the state constitution's uniformity provision:

The General Assembly shall provide, by law, for a uniform and equal rate of property assessment and taxation and shall prescribe regulations to secure a just valuation for taxation of all property, both real and personal.

IND. CONST. Article X, § 1. See also IND.CODE 6-1.1-2-2. Because not all property is alike, "the constitutional requirement of uniform and equal taxation requires that assessments be consistent with similar property of the same classification." Harrington v. State Bd. of Tax Comm'rs (1988), Ind.Tax, 525 N.E.2d 360, 361 (emphasis added) (citing IND. CONST. Article X, § 1). Thus, the necessity exists "to adopt different methods for assessment of different classes of property in order to achieve a just and uniform valuation." Indiana State Bd. of Tax Comm'rs v. Lyon & Greenleaf Co. (1977), 172 Ind.App. 272, 277, 359 N.E.2d 931, 934 (citing Clark v. Vandalia R. Co. (1909), 172 Ind. 409, 86 N.E. 851). 3

Equalization "is a process applied to certain taxpayers and their property by which the assessed value of a taxpayer's property is adjusted so that it bears the same relationship of assess[ment] value to ... [true tax value] as other properties within the same taxing jurisdiction." Jerrold F. Janata, ed., Property Taxation 608 (2d ed. 1993). In fact, IND.CODE 6-1.1-14-4 provides that "[t]he state board of tax commissioners shall review the assessments of all tangible property made by the various counties of this state." "If, after its review, the State Board determines a county assessment appears improper, [it] may pursue the equalization remedies created by IND.CODE 6-1.1-14-5 through 6-1.1-14-9." Bielski v. Zorn (1994), Ind.Tax, 627 N.E.2d 880, 885. Thus, the equalization process provides the State Board with a method to cure assessment problems and bring all assessments into compliance with Article X, § 1. Id.

The distinction is clear. Economic obsolescence adjustments are given in order to arrive at a property's assessed value, or true tax value. Equalization adjustments are given after the property's assessed value has been determined to ensure compliance with Article X, § 1. The two adjustments are not the same. In the case at bar, the Telephone Companies are appealing the State Board's denial of economic obsolescence adjustments, not equalization adjustments. Thus, the conflicting inferences that precluded a grant of summary judgment has been resolved and GTE is able to raise an economic obsolescence claim for 1991.

II

"[D]epreciation of property results from three elements: physical deterioration, functional obsolescence, and economic obsolescence." Thorntown Telephone Co. v. State Bd. of Tax Comm'rs (1992), Ind.Tax, 588 N.E.2d 613, 619 (Thorntown I ) (citing J. Amdur, Property Taxation of Regulated Industries, 40 TAX LAWYER 339, 359 (1987)). Economic obsolescence is defined as

loss in value resulting from external economic factors such as decreased demand, governmental restrictions and social changes. A deduction should be made for economic obsolescence to reflect depressed earning capacity and other economic factors affecting the value of property.

Id. at 617 (quoting Amdur, supra, at 360 (footnotes omitted)). The Telephone Companies contend their properties suffer from economic obsolescence and that adjustments are therefore necessary to reflect the losses stemming from the economic obsolescence. To support their claim, they prepared and submitted "income shortfall" analyses 4 and "blue chip" studies 5 to the State Board at the June 27, 1991 hearing.

The Telephone Companies "bear[ ] the burden to show the State Board's assessment was inaccurate." See Paul...

To continue reading

Request your trial
54 cases
  • Inland Container Corp. v. STATE BD. OF TAX COM'RS, 49T10-9609-TA-109.
    • United States
    • Tax Court of Indiana
    • October 1, 2001
    ...Bd. of Tax Comm'rs, 525 N.E.2d 360, 361 (Ind. Tax Ct.1988) (citing IND. CONST., Art. 10, § 1); see also GTE North Inc. v. State Bd. of Tax Comm'rs, 634 N.E.2d 882, 886 (Ind. Tax Ct.1994). "[W]hen, for any reason, [taxation] becomes discriminative between individuals of the class taxed, and ......
  • Griffin v. DEPARTMENT OF LOCAL GOV. FINANCE, 49T10-0009-TA-98.
    • United States
    • Tax Court of Indiana
    • April 3, 2002
    ...Bd. of Tax Comm'rs, 525 N.E.2d 360, 361 (Ind. Tax Ct.1988) (citing IND. CONST., Art. 10, § 1); see also GTE North Inc. v. State Bd. of Tax Comm'rs, 634 N.E.2d 882, 886 (Ind. Tax Ct.1994). "[W]hen, for any reason, [taxation] becomes discriminative between individuals of the class taxed, and ......
  • Clark v. State Bd. of Tax Com'rs, 49T10-9607-TA-00083
    • United States
    • Tax Court of Indiana
    • April 24, 1998
    ...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 pri......
  • Inland Container Corp. v. State Bd. of Tax Commissioners
    • United States
    • Tax Court of Indiana
    • October 1, 2001
    ...Comm’rs, 525 N.E.2d 360, 361 (Ind. Tax Ct. 1988) (citing Ind. Const., Art. 10, § 1); see also GTE North Inc. v. State Bd. of Tax Comm’rs, 634 N.E.2d 882, 886 (Ind. Tax Ct. 1994). “[W]hen, for any reason, [taxation] becomes discriminative between individuals of the class taxed, and selects s......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT