Spencer Cnty. Assessor v. AK Steel Corp.
Decision Date | 05 October 2016 |
Docket Number | No. 49T10–1306–TA–00057.,49T10–1306–TA–00057. |
Citation | 61 N.E.3d 406 |
Parties | SPENCER COUNTY ASSESSOR and Grass Township Assessor, Petitioners, v. AK STEEL CORPORATION, Respondent. |
Court | Indiana Tax Court |
Philip A. Whistler, Mark J. Richards, Matthew J. Ehinger, Ice Miller LLP, Indianapolis, IN, Attorneys for Petitioners.
Anne L. Cowgur, Todd C. Lady, Nathan J. Hagerman, Taft Stettinius & Hollister LLP, Indianapolis, IN, Attorneys for Respondent.
Indiana Code § 6–1.1–3–23 provides integrated steel mills with the option of using “Pool 5” to value their personal property for purposes of taxation. The statute defines an “integrated steel mill” as “a person ... that produces steel by processing iron ore and other raw materials in a blast furnace in Indiana[.]” See IND.CODE § 6–1.1–3–23(a)(3) (2008) (amended 2011). On appeal, the parties have asked the Court to examine whether the “in Indiana” language contained in that definition is constitutional. The Court finds that AK Steel has not shown a constitutional infirmity.
Carbon steel is produced at either an integrated steel mill or a “minimill.” (See, e.g., Cert. Admin. R. at 481–84.) At an integrated mill: (1) coal is purified into a high-carbon fuel called coke; (2) the coke is then combined with iron ore and limestone in a blast furnace to produce pig iron; (3) the molten pig iron is combined with some steel scrap in a basic oxygen furnace to produce liquid steel; (4) the liquid steel is then cast into slabs; and (5) the slabs are processed, or “finished,” into a variety of end products.1 (See Cert. Admin. R. at 378–80, 383–90, 1009, 2024–2028.) At a minimill, however, liquid steel is made by melting scrap steel or scrap substitutes in an electric arc furnace. (See Cert. Admin. R. at 1009, 2029.) The liquid steel produced at a minimill is then cast into slabs that are finished into a variety of end products, just like the liquid steel produced at an integrated mill. (See Cert. Admin. R. at 2029.)
While integrated steel mills produce a higher quality carbon steel than minimills, they are no longer the more prevalent carbon steel producers. (See Cert. Admin. R. at 481, 1009.) Indeed, during the 1970's, 90% of all carbon steel was produced at integrated steel mills; now, however, only 40% of carbon steel is produced at integrated steel mills. (Cert. Admin. R. at 481.) That change in production resulted from the fact that the older technology utilized at an integrated steel mill (i.e., the blast furnace process) took “more steps (i.e., coke batteries, blast furnaces), [was] more capital intensive, and traditionally require[d] more man-hours per ton” than the newer technology used to produce carbon steel at minimills (i.e., the electric arc furnace process). (Cert. Admin. R. at 2029.)
AK Steel, headquartered in West Chester, Ohio, produces carbon steel. (Cert. Admin. R. at 377, 629.) AK Steel produces its steel at multiple facilities located throughout the Midwest. For instance, it has two blast furnace facilities, one in Middletown, Ohio and the other in Ashland, Kentucky. (Cert. Admin. R. at 378.) AK Steel also has a finishing facility in Rockport, Indiana (Grass Township, Spencer County), known as “Rockport Works.” (Cert. Admin. R. at 632.)
Rockport Works opened in 1998. (Cert. Admin. R. at 1359 ¶ 44.) AK Steel constructed and equipped Rockport Works, at a cost of nearly $1.1 billion, because it no longer could finish all of its carbon steel, post hot-rolling, at its blast furnace facility in Middletown, Ohio. (See Cert. Admin. R. at 390–99, 1356 ¶ 17.) Consequently, AK Steel designed Rockport Works to receive, by rail, coils of its hot-rolled steel from the Middletown facility for final finishing. (Compare generally supra note 1 with Cert. Admin. R. at 392–98 and 1356–58 ¶¶ 21–31.) AK Steel received a significant property tax abatement/incentive package from Spencer County for locating Rockport Works in Rockport. (See Cert. Admin. R. at 1356 ¶ 16, 2845–49 ( ).)
In 2003, the Legislature enacted Indiana Code § 6–1.1–3–23. See P.L. 120–2003, § 1 (2003). That statute provided that:
See generally P.L. 120–2003, § 1 (2003). AK Steel reported the 2004 value of its personal property located at Rockport Works using Pool 5. (See Cert. Admin. R. at 255 ¶ 69 ( ).)
In 2005, the Legislature amended its statutory definition of “integrated steel mill” twice. Those two amendments, which were given retroactive effect to January 1, 2004, altered the definition of an integrated steel mill to read “a person, including a subsidiary of a corporation, that produces steel by processing iron ore and other raw materials in a blast furnace in Indiana [.]” See P.L. 228–2005, § 2 (2005); P.L. 246–2005, § 59 (2005). Even though it did not have any blast furnaces in Indiana, AK Steel continued to report the value of its personal property at Rockport Works using Pool 5. (See, e.g., Cert. Admin. R. at 257–58 ¶ 83 ( ).)
In 2008, the Legislature enacted a comprehensive non-code provision3 that stated:
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