Lake County Council v. State Bd. of Tax Com'rs

• Decision Date: 19 January 1999
• Docket Number: No. 45T10-9807-TA-00084,45T10-9807-TA-00084
• Parties: LAKE COUNTY COUNCIL, as the governmental fiscal body of Lake County, Indiana, Troy Montgomery, Robert Crossk, William Smith, Bernadette Costa, John Aguilera, Lance Ryskamp, and Larry Blanchard, in their official capacity as members of the Lake County Council and individually as taxpayers residing in Lake County, Indiana, Board of Commissioners of Lake County, Indiana, Frances Dupey, Rudolph Clay, and Gerald Scheub, in their official capacities as members of the Lake County Board of Commissioners and individually as taxpayers residing in Lake County, Indiana, and Lake County, a political subdivision of the State of Indiana, individually and on behalf of all other property owning taxpayers within the jurisdictional limits of Lake County, Indiana, Petitioners, v. STATE BOARD OF TAX COMMISSIONERS, Indiana Family & Social Services Administration, Morris Wooden, Auditor, State of Indiana, Joyce Brinkman, Treasurer, State of Indiana, and State of Indiana, Respondents.
• Court: Indiana Tax Court

Page 270

706 N.E.2d 270

LAKE COUNTY COUNCIL, as the governmental fiscal body of Lake County, Indiana, Troy Montgomery, Robert Crossk, William Smith, Bernadette Costa, John Aguilera, Lance Ryskamp, and Larry Blanchard, in their official capacity as members of the Lake County Council and individually as taxpayers residing in Lake County, Indiana, Board of Commissioners of Lake County, Indiana, Frances Dupey, Rudolph Clay, and Gerald Scheub, in their official capacities as members of the Lake County Board of Commissioners and individually as taxpayers residing in Lake County, Indiana, and Lake County a political subdivision of the State of Indiana individually and on behalf of all other property owning taxpayers within the jurisdictional limits of Lake County Indiana, Petitioners, v. STATE BOARD OF TAX COMMISSIONERS, Indiana Family & Social Services Administration, Morris Wooden, Auditor, State of Indiana, Joyce Brinkman, Treasurer, State of Indiana, and State of Indiana, Respondents.

No. 45T10-9807-TA-00084.

Tax Court of Indiana.

Jan. 19, 1999.

Peter L. Benjamin, Merrillville, Gerald M. Bishop, Greco Pera & Bishop, Merrillville, for Petitioners.

Jeffrey A. Modisett, Attorney General of Indiana, Angela L. Mansfield, Deputy Attorney General, Beth H. Henkel, Deputy Attorney General, Indianapolis, Indiana, for Respondents.

ORDER ON MOTION TO DISMISS

FISHER, J.

The petitioners have filed this original tax appeal challenging the constitutionality of the Health Care for the Indigent (HCI) property tax levy.

BACKGROUND

The HCI program was enacted to provide cost-free emergency medical care for the poor. See Lutheran Hosp., Inc. v. State Department of Pub. Welfare, 571 N.E.2d 542, 544 (Ind.1991); St. Mary's Med. Ctr. v. Warrick County, 671 N.E.2d 929, 931 (Ind.Ct.App.1996), trans. denied. The program is funded through a tax levy on the property located in each county and distributions from the Financial Institutions Tax and the Motor Vehicle Excise Taxes. See IND.CODE § 12-16-14-1 (1998). The tax levy is imposed by the fiscal body ¹ of each county and is treated like any other state and county ad valorem property tax. See id. § 12-16-14-2 (1998). In imposing the tax levy, the county fiscal body has no discretion as to the rate of tax because it is determined by a statutory formula. ² See id. § 12-16-14-3 (1998). The State Board is charged with reviewing each county's property tax levy and enforcing the requirements of the HCI property tax levy. See id. § 12-16-14-4 (1998). Once the property taxes are collected, they are deposited in the county HCI fund. See id. § 12-16-14-5 (1998). The money in the county HCI fund is then deposited in the state HCI fund. See id. § 12-16-14-6 (1998). Payments to emergency medical care providers are made from the state HCI fund. See id. § 12-16-7-3 (1998).

Under the HCI program, the HCI property tax levy (i.e., property tax rate) is not uniform across the State; it varies from county to county. Additionally, a county's property tax levy is not correlated to how much of the state HCI fund is spent in the particular county. Two of the petitioners, Mr. Troy Montgomery and Ms. Frances DuPey were concerned about this, and they each wrote a letter to Mr. Frank J. Sabatine, Chairman, State Board of Tax Commissioners (State Board) to express their concerns. In their letters, Mr. Montgomery and Ms. DuPey, stated that Lake County's HCI property tax levy was too high and specifically requested a refund of the "HCI overpayment" by Lake County taxpayers over the past three years.

Mr. Sabatine responded to Mr. Montgomery and Ms. DuPey in a letter dated June 5, 1998. The letter was not unsympathetic to Mr. Montgomery's and Ms. DuPey's concerns and acknowledged that "it is apparent that the amount of reimbursements received by Lake County providers has not grown as quickly as the HCI property tax levy." Letter From Frank J. Sabatine, Chairman, State Board of Tax Commissioners, to Troy Montgomery, President, Lake County Council and Ms. Frances DuPey, President, Lake County Commissioners 2 (June 5, 1998) (Petitioners' Exh. A) [hereinafter Sabatine Letter]. However, Mr. Sabatine stated that the State Board had no power to alter the statutory formula, no power to declare the statutory formula unconstitutional, and therefore had no power to issue a refund on the alleged "HCI overpayment." Sabatine Letter at 4.

On July 20, 1998, the petitioners filed the instant original tax appeal. They contend that the property tax component of the HCI program violates article I, section 23 and article X, section 1 of the Indiana Constitution because Lake County taxpayers allegedly pay a disproportionate share of the HCI property taxes collected in Indiana due to the high HCI property tax levy in Lake County. On October 9, 1998, the respondents filed a motion to dismiss alleging that the Court did not have subject matter jurisdiction over this case and challenging the standing of some of the petitioners. On December 2, 1998, the Court heard the arguments of counsel regarding the respondents' motion. Additional information will be provided as necessary.

ANALYSIS AND OPINION

In support of their motion to dismiss, the respondents contend that the Court does not have subject matter jurisdiction over this case and that the governmental petitioners lack standing to challenge the constitutionality of the HCI property tax levy. Both contentions will be addressed in turn.

It is axiomatic that "[t]he tax court is a court of limited jurisdiction." IND.CODE § 33-3-5-2(a) (1998); see also State Bd. of Tax Comm'rs v. Mixmill Mfg. Co., 702 N.E.2d 701, 702 (Ind.1998). Its jurisdiction is limited to cases that "arise under the tax laws of this state and that [are] initial appeal[s] of final determination[s] made by" either the Department of State Revenue with respect to a listed tax ³ or the State Board, as well as "any other jurisdiction conferred by statute." ⁴ IND.CODE § 33-3-5-2(b) (1998). As a further limit on this Court's jurisdiction, the General Assembly has provided: "If a taxpayer fails to comply with any statutory requirement for the initiation of an original tax appeal, the tax court does not have jurisdiction to hear the appeal." Id. § 33-3-5-11(a) (1998); see also Mixmill Mfg. Co., 702 N.E.2d at 704 ("In view of the explicit language of these provisions, we can only conclude that the legislature intended to require the taxpayer to follow all statutory procedures for review before going to the Tax Court.").

With these principles in mind, the Court turns to an analysis of the respondents' motion. The parties do not dispute that this case "arises under" the tax laws of Indiana. However, because subject matter jurisdiction cannot be conferred upon the Court by the parties, see Sons v. City of Crown Point, 691 N.E.2d 1237, 1239 (Ind.Ct.App.1998), the Court will evaluate the issue. See City Securities Corp. v. Department of State Revenue, 704 N.E.2d 1122, 1125 (Ind. Tax Ct. 1998).

A case "arises under" the tax laws of Indiana if: "1) an Indiana tax statute creates the right of action; or 2) the case principally involves collection of a tax or defenses to that collection." Sproles, 672 N.E.2d at 1357; see also Common Council v. Matonovich, 691 N.E.2d 1326, 1329 (Ind.Ct.App.1998), trans. denied. Under IND.CODE § 12-16-14-1, the HCI fund consists of "1) [a] tax levy on the property located in each county [and t]he financial institutions tax (IC 6-5.5) and motor vehicle excise taxes (IC 6-6-5) that are allocated to the fund." The petitioners contest the constitutionality of that tax. Consequently, this case "arises under" the tax laws of this state. See Sproles, 672 N.E.2d at 1357 (constitutional challenge to tax "arises under" tax laws of Indiana).

The second jurisdictional prerequisite is the necessity of a State Board final determination. ⁵ In this case, there is nothing in the record specifically denominated as a final determination of the State Board with respect to the petitioners' constitutional challenge to the HCI property tax levy. This, the petitioners contend, does not deprive the Court of jurisdiction for three reasons: 1) the letter dated June 5, 1998 from the Chairman of the State Board, Mr. Frank J. Sabatine, regarding the HCI property tax levy constitutes a final determination of the State Board and thus satisfies the statutory prerequisite; 2) resort to the administrative process would be futile; and 3) the administrative remedies are inadequate.

The Letter from Mr. Sabatine

As described above, Mr. Frank J. Sabatine, Chairman of the State Board, sent a letter in response to correspondence from two of the petitioners. This letter, in the petitioners' view, constitutes a final determination of the State Board. The Court cannot agree. First and foremost, the Court notes that Mr. Sabatine, acting alone, cannot issue a State Board final determination. See IND.CODE § 6-1.1-30-1 (1998) (requiring a quorum of two members for the State Board to conduct business). Second, there is no indication that the letter from Mr. Sabatine is a final order "determin[ing] the rights of, or impos[ing] obligations on, the parties as a consummation of the administrative process." Mills v. State Bd. of Tax Comm'rs, 639 N.E.2d 698, 701 (Ind. Tax Ct.1994) (citing Downing v. Board of Zoning Appeals, 149 Ind.App. 687, 691, 274 N.E.2d 542, 544-45 (1971)). As the respondents correctly observe, the letter is merely a response to inquiries from two of the petitioners. ⁶ (Rept's Mem. in Supp. Mot. to Dismiss at 5).

Is Resort to the Administrative Process Futile?

The petitioners base their futility argument on the inability of the State Board to declare the HCI system unconstitutional. Therefore, in the petitioners' view, they should be allowed to circumvent the administrative process because it does not make sense to require them to have the State Board pass on a question that is beyond its institutional competence.

A...