Heart City Chrysler v. State Bd. of Tax Commissioners

• Decision Date: 24 June 1999
• Docket Number: No. 49T10-9701-TA-00020.,49T10-9701-TA-00020.
• Citation: 714 N.E.2d 329
• Parties: HEART CITY CHRYSLER, Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.
• Court: Indiana Tax Court

714 N.E.2d 329

HEART CITY CHRYSLER, Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.

No. 49T10-9701-TA-00020.

Tax Court of Indiana.

June 24, 1999.

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

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

FISHER, J.

Heart City Chrysler (Heart City) appeals the final determinations of the State Board of Tax Commissioners (State Board) fixing the assessed value of one parcel of real estate it owned located in Elkhart County, Indiana as of March 1, 1990, 1991 and 1995.

ISSUES

I. Whether the State Board's decision to change the physical depreciation factor as a result of a sua sponte assessment was erroneous.

II. Whether the State Board's final determinations with respect to the grade assigned to the subject properties lacked substantial evidentiary support.

III. Whether the State Board's final determinations with respect to obsolescence depreciation lacked substantial evidentiary support.

FACTS AND PROCEDURAL HISTORY

Heart City¹ owns one parcel of real estate located in Elkhart County, Indiana. The parcel consists of land and improvements.² This parcel is designated as # XX-XX-XX-XXX-XXXX(Parcel 31).³ On June 28, 1991, August 4, 1992, and August 4, 1996, Heart City filed three Form 131⁴ petitions for the tax years 1990, 1991, and 1995. These petitions challenged the assessments for Parcel 31.

Hearings on these petitions were held on May 30, 1996 and on July 28, 1997 in Elkhart County. The State Board issued its final determinations with respect to the Form 131 petitions on November 22, 1996 and October 29, 1997. In its final determinations, the State Board made adjustments to the earlier assessments. Deeming the adjustments made by the State Board to be erroneous, Heart City filed this original tax appeal on January 3, 1997. On May 18, 1998, the parties tried this case before this Court. Additional facts will be supplied as necessary.

ANALYSIS AND OPINION

Standard of Review

The State Board is afforded great deference when it acts within the scope of its authority. See King Indus. Corp. v. State Bd. of Tax Comm'rs, 699 N.E.2d 338, 339 (Ind. Tax Ct.1998)

. Accordingly, the Court will reverse a final determination made by the State Board only when that determination is unsupported by substantial evidence, is arbitrary or capricious, constitutes an abuse of discretion, or exceeds statutory authority. See id.

Discussion

I. The State Board's Sua Sponte Assessment of the Subject Property.

Heart City takes issue with the State Board's decision to increase the assessed value of the subject property via a sua sponte modification of the physical depreciation factor for the tax years 1990 and 1991.⁵ Heart City contends that its due process rights were violated as a result of not having the opportunity to rebut the findings provided in the State Board's final determination regarding the sua sponte assessment. See Castello v. State Bd. of Tax Comm'rs, 638 N.E.2d 1362, 1364 (Ind. Tax Ct.1994)

.

However, the Court need not reach this issue because the Court finds another issue dispositive: Whether the State Board complied with IND.CODE ANN. § 6-1.1-30-12 (West 1989) (amended 1997, effective Jan. 1, 1999) in issuing its final determination. Section 6-1.1-30-12 states:

Sec. 12. With respect to a review conducted by a field representative or supervisor under section 10 of this chapter or a hearing conducted by a hearing officer under section 11 of this chapter, the field representative, supervisor, or hearing officer shall submit a written report of his findings to the state board of tax commissioners. After reviewing the report, the board may take additional evidence or hold additional hearings. The board shall base its final decision on the report, any additional evidence taken by the board, and any records that the board considers relevant.

In the case at bar, Heart City contended at the administrative hearing that one of the subject improvements, the 1,248 square foot used car sales office (built in 1986) should receive "10% for physical depreciation." (Pet'r Ex. 1). Subsequent to the hearing, the State Board's hearing officer inspected Heart City's property, agreed with Heart City's contentions, and recommended that the used car sales office receive a total physical depreciation factor of 10%. The State Board adopted the recommendation and granted Heart City a total factor of 10% for physical depreciation in its final determination.

The State Board then proceeded with a sua sponte assessment of another building, a structure built in 1966 (1966 structure). Heart City did not raise the issue of physical depreciation with respect to the 1966 structure in its petition or at the administrative hearing, nor did the hearing officer give any indication to Heart City that he would make a recommendation to the State Board regarding the 1966 structure.⁶ At trial, the hearing officer stated that he did not make a recommendation regarding the 1966 structure. (Trial Tr. at 11). After the sua sponte assessment, Heart City found itself with a 35% physical depreciation factor⁷ applied to the 1966 structure,⁸ which resulted in an increased assessment.

The State Board is correct in its assertion that it may conduct a sua sponte assessment to "address and correct" all errors not raised in a taxpayer's petition for review pursuant to section 6-1.1-15-4.⁹ See Wirth v. State Bd. of Tax Comm'rs, 613 N.E.2d 874, 879 (Ind. Tax Ct.1993)

. However, in doing so, the State Board must also adhere to the strictures of section 6-1.1-30-12. In this case the State Board did not.

The Court is unable to determine from the record the basis of the State Board's findings with respect to the 1966 structure. In addition to the hearing officer's failure to submit a written report regarding the 1966 structure, the record is also devoid of any information that would indicate to the Court that the 35% physical depreciation factor was based on any relevant records, or any additional evidence taken by the State Board. The State Board's failure to adhere to the requirements of section 6-1.1-30-12, invalidates the State Board's final determination. Accordingly, the State Board's final determination is reversed and remanded.

II. Grade

Heart City complains that because the regulations governing grade have no ascertainable standards any final determination of grade must be reversed. See IND. CONST. art. I, § 12; Harrington v. State Bd. of Tax Comm'rs, 525 N.E.2d 360, 362 (Ind. Tax Ct.1988). Despite the fact that the regulations governing the 1995 general reassessment were declared unconstitutional¹⁰ and the regulations governing the 1990 and 1991 assessments are almost identical to those regulations, this Court has held that the mere fact that a subject improvement may have been assessed under an unconstitutional regulation does not guarantee a reversal of a State Board final determination. See Phelps Dodge v. State Bd. of Tax Comm'rs, 705 N.E.2d at 1104

. This is true because "[r]eal property must still be assessed, and, until the new regulations are in place, must still be assessed under the present system." Whitley Prods., Inc., 704 N.E.2d at 1121.

Although Heart City correctly identifies the shortcomings of the regulations governing grade, this Court has also held that a taxpayer may not simply point out the inadequacies of the regulations governing grade and expect to secure a reversal. See White Swan Realty v. State Bd. of Tax Comm'rs, 712 N.E.2d 555, 559 (Ind. Tax Ct.1999)

(citing Phelps Dodge, 705 N.E.2d at 1104), petition for review filed, Jun. 23, 1999; Town of St. John v. State Bd. of Tax Comm'rs, 691 N.E.2d 1387 (Ind. Tax Ct.) (order and judgment entry), rev'd in part, aff'd. in part, 702 N.E.2d 1034 (Ind.1998); Whitley Prods., Inc., 704 N.E.2d at 1121; Dana Corp., 694 N.E.2d at 1247. This Court has consistently required more on the part of the taxpayer. The taxpayer must offer probative evidence relating to the issue of grade. See Whitley Prods., Inc., 704 N.E.2d at 1121. In this case, instead of presenting probative evidence Heart City presented only conclusions that referenced grade factors. For example, as part of its presentation, Heart City submitted photographs without adequately explaining how they affect grade. However, this Court has rejected attempts by taxpayers to put forth evidence such as photographs without explanations. See Whitley Prods., Inc., 704 N.E.2d at 1119-20 & n. 12; see also North Park Cinemas v. State Bd. of Tax Comm'rs, 689 N.E.2d 765, 769 (Ind. Tax Ct.1997) ("A party who stands to be adversely affected by a petition for review has an obvious responsibility to . . . present evidence and argument in support of its position.") (emphasis added). Also, for one of the subject properties, the auto service center, Heart City concluded that it should receive a grade of C-1 for the reason that it is "inferior to the base model described in the assessment manual." (Pet'r Ex. 1). Heart City fails to show, however, how the subject property is inferior to the base model.¹¹ Likewise, with respect to another subject property, the auto showroom, Heart City asserts that a "grade of C+1 more accurately describes the overall quality of the [showroom]" without explaining why or offering any evidence to support its assertions. (Pet'r Ex. 1). These statements are conclusory, and this Court will not substitute conclusory statements for probative evidence.¹²

See Whitley Prods., Inc., 704 N.E.2d at 1119.

Moreover, in Petitioner's Exhibit 2, Heart City asserts more conclusions and also includes a photocopy of the model and the regulations with variances from the model highlighted. Yet Heart City fails to present evidence as to what exactly the variances are. Heart City's trial testimony was similar to the documentary evidence...