State Bd. of Tax Com'rs v. Town of St. John

• Decision Date: 04 December 1998
• Docket Number: No. 49S10-9806-TA-340,49S10-9806-TA-340
• Citation: 702 N.E.2d 1034
• Parties: STATE BOARD OF TAX COMMISSIONERS, Appellant (Respondent below), v. TOWN OF ST. JOHN, et al., Appellees (Petitioners below).
• Court: Indiana Supreme Court

Page 1034

702 N.E.2d 1034

STATE BOARD OF TAX COMMISSIONERS, Appellant (Respondent below), v. TOWN OF ST. JOHN, et al., Appellees (Petitioners below).

No. 49S10-9806-TA-340.

Supreme Court of Indiana.

Dec. 4, 1998.

Jeffrey A. Modisett, Attorney General, Jon Laramore, Deputy Attorney General, Indianapolis, for Appellant.

Thomas M. Atherton, Dutton & Overman, Indianapolis, Kenneth J. Falk, Indiana Civil Liberties Union, Indianapolis, Peter H. Donahoe, Hill Fulwider McDowell Funk & Mathews, P.C., Indianapolis, James K. Gilday, Wood Tuohy Gleason Mercer & Herrin, Indianapolis, Richard A. Waples, Indianapolis, for Appellees.

Landmark Appraisals, David L. Pippen, Indianapolis, Amicus Curiae.

DICKSON, Justice.

ON PETITION FOR REVIEW

The State Board of Tax Commissioners ("State Board") appeals from the Indiana Tax Court's judgment regarding the validity of the Indiana property tax assessment system. We affirm in part and reverse in part.

This case initially arose in the Indiana Tax Court on individual petitions by three taxpayers from Marion County, James K. Gilday, Dimple Clarine Shelton, and William E. Wise, and a petition by the Town of St. John on behalf of a class of approximately fifty-seven of its residents. The Tax Court consolidated the petitions, conducted a bench trial in July of 1995, and found that Indiana's current statutory system of property taxation was unconstitutional. Town of St.John v. State Bd. of Tax Comm'rs, 665 N.E.2d 965 (Ind.Tax 1996) ("St. John I"). Upon appeal by the State Board, we affirmed the Tax Court's holding that the General Assembly must provide for a uniform and equal rate of property assessment and taxation based on property wealth, noted that legislative discretion in the selection of valuation method is subject to judicial review, reversed the Tax Court's conclusion that the Indiana Constitution exclusively requires an absolute and precise fair market value system, and returned the case to the Tax Court to resume consideration of the remaining issues. Boehm v. Town of St. John, 675 N.E.2d 318, 328 (Ind.1996) ("St. John II"). On remand, the Tax Court issued a preliminary opinion finding that components of Indiana's property tax valuation system violated the constitutional requirements, and it ordered the State Board to "make future real property assessments for purposes of taxation under a system that incorporates an objective reality." Town of St. John v. State Bd. of Tax Comm'rs, 690 N.E.2d 370, 398 (Ind. Tax 1997) ("St. John III"). Following a hearing to determine an appropriate deadline for bringing the assessment system into constitutional compliance, the Tax Court entered its final judgment which ordered the State Board to consider all competent evidence of property wealth in appeals filed with the county review boards on or after May 11, 1999, and remanded to the State Board for further consideration of the specific claims of the petitioners. Town of St. John v.State Bd. of Tax Comm'rs, 691 N.E.2d 1387, 1390 (Ind.Tax 1998) ("St. John IV"). The State Board has petitioned for our review of the Tax Court decision, which is reflected in St. John III and St. John IV. ¹

To seek our review of a Tax Court decision, a party adversely affected must file a petition for review. Ind. Appellate Rule 18. If the petition is granted, we will ordinarily consider only the issues presented in the petition for review, and we thereafter modify the prior Tax Court decision only to the extent determined in our opinion on these issues. St. John II, 675 N.E.2d at 320. ²

The State Board's petition for review alleges that the Tax Court's decision was in error in numerous respects. We granted review and construe the State Board's petition to present the following issues: (1) whether Indiana Code section 6-1.1-31-6(c) is unconstitutional; (2) whether the cost schedules used by the State Board to determine property value are unconstitutional; (3) whether the State Board must consider all competent evidence of property wealth in appeals filed on or after May 11, 1999; and (4) whether the Town of St. John had standing.

The authority and limitations regarding Indiana's system of property assessment and taxation are found in the Property Taxation Clause of the Constitution of Indiana:

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. art. X, § 1(a). ³ To discharge this constitutional responsibility, the General Assembly created an administrative agency, the State Board, and delegated to it the responsibility for establishing rules to classify and assess tangible property according to its "true tax value." IND.CODE §§ 6-1.1-30-1, 6-1.1-31-1, 6-1.1-31-5. The legislature does not explicitly define the term "true tax value" but delegates to the State Board the authority to define the term. IND.CODE § 6-1.1-31-6(c) ("True tax value is the value determined under the rules of the state board of tax commissioners."). However, it must be based upon specified statutory factors ⁴ "and any other factor that the board determines by rule is just and proper." IND.CODE § 6-1.1-31-6(b)(7). Thus, the assessment regulations and schedules prescribed by the State Board determine "true tax value." IND. ADMIN. CODE tit. 50, art. 2.2 ("Title 50").

1. Constitutionality of the Statute

The State Board contends that the Tax Court erred in ruling that Indiana Code section 6-1.1-31-6(c) violates the Indiana Constitution.

Our standard of review for alleged violations of the Indiana Constitution is well established. St. John II, 675 N.E.2d at 321. Every statute stands before us clothed with the presumption of constitutionality until clearly overcome by a contrary showing. State v. Rendleman, 603 N.E.2d 1333, 1334 (Ind.1992); Adoptive Parents of M.L.V. & A.L.V. v. Wilkens, 598 N.E.2d 1054, 1058 (Ind.1992); Eddy v. McGinnis, 523 N.E.2d 737, 738 (Ind.1988); Miller v. State, 517 N.E.2d 64, 71 (Ind.1987). The party challenging the constitutionality of the statute bears the burden of proof, and all doubts are resolved against that party. Rendleman, 603 N.E.2d at 1334; Wilkens, 598 N.E.2d at 1058; Miller, 517 N.E.2d at 71. If two reasonable interpretations of a statute are available, one of which is constitutional and the other not, we will choose that path which permits upholding the statute because we will not presume that the legislature violated the constitution unless the unambiguous language of the statute requires that conclusion. Price v. State, 622 N.E.2d 954, 963 (Ind.1993); Smith v. Indianapolis St. Ry. Co., 158 Ind. 425, 427-28, 63 N.E. 849, 850 (1902).

Applying the Property Taxation Clause, the Tax Court found "the present system is unconstitutional" because, according to the State Board's own admission, "it [is] impossible under the present system to determine the system's compliance with the uniformity provision." St. John III, 690 N.E.2d at 376-77 (emphasis added). The Tax Court further found that, "[b]ecause the present system does not allow comparison of assessments to objective data, it cannot satisfy the constitutional requirements of uniformity and equality in the property assessment." Id. at 378 (emphasis added). The court observed, "True Tax Value is a figure produced by the application of a closed set of self-referential rules and formulas contained in Title 50. Everything needed to calculate True Tax Value is set forth in Title 50; evidence of value external to Title 50 is irrelevant." Id. at 374. Emphasizing its belief that the Indiana Constitution "requires a system of property assessment and taxation based upon a real world, objective measure of property wealth," the Tax Court concluded that "Indiana's True Tax Value system of property taxation under section 6-1.1-31-6(c) and Title 50 violates the Indiana Constitution...." Id. at 398. In its implementing judgment entry in St. John IV, the Tax Court expressly characterized its prior opinion in St. John III as holding that the statutory provision, Indiana Code section 6-1.1-31-6(c), "is unconstitutional." St. John IV, 691 N.E.2d at 1388.

We first observe that the clear thrust and rationale of the Tax Court's general determination of unconstitutionality is directed at the Title 50 regulatory system implementing "true tax value," not the statute itself. The statutory provision expressly referenced by the Tax Court in its finding of unconstitutionality states (c) With respect to the assessment of real property, true tax value does not mean fair market value. True tax value is the value determined under the rules of the state board of tax commissioners.

IND.CODE § 6-1.1-31-6(c). This subsection appears in the context of Indiana Code section 6-1.1-31-6 which establishes the standards for the State Board's real property assessment regulations. Although the Tax Court in St. John III does not explicitly identify the constitutional infirmity it finds in subsection 6(c),the language of this provision suggests that the Tax Court may understand Indiana Code section 6-1.1-31-6(c) to be contrary to this Court's decision in St. John II. We stated:

While a careful and accurate fair market value assessment may well be the system closest to our constitution's requirements for uniform and equal rates of assessment and taxation and for just valuation, a system based solely upon strict fair market value is not expressly required either by the text of the constitution, by the purpose and intent of its framers, or by the subsequent case law.

St. John II, 675 N.E.2d at 327 (emphasis added).

If interpreted as an absolute prohibition upon considering fair market value as "true tax value," subsection 6(c) would be constitutionally infirm. ⁵ However, we observe that the language of this subsection is not unambiguous. Two reasonable interpretations are possible. It may be read either to...