Hay v. Indiana State Bd. of Tax Com'Rs
| Decision Date | 20 December 2001 |
| Docket Number | No. CIV.3:01cv583AS.,CIV.3:01cv583AS. |
| Citation | 181 F.Supp.2d 961 |
| Parties | Stephen M. HAY, Wawasee Airport, Inc., Suzanne Bishop, and Michael Umbaugh, Plaintiffs, v. INDIANA STATE BOARD OF TAX COMMISSIONERS, Jon Laramore, as Chairman of the Indiana State Board of Tax Commissioners, Gordon McIntyre, as a member of the Indiana State Board of Tax Commissioners, and Lisa Acobert, as a member of the Indiana State Board of Tax Commissioners, Defendants. |
| Court | U.S. District Court — Northern District of Indiana |
Michael F. DeBoni, Goshen, IN, Brian L. Hoofer, Randy Spitaels, Nappanee, IN, David L. Pippen, Indianapolis, IN, for Plaintiffs.
David A. Arthur, Deputy Atty. Gen., Indianapolis, IN, for Defendants.
This matter is before the court on the Defendants' motion to dismiss pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. The Plaintiffs assert that jurisdiction is properly asserted over this action pursuant to 42 U.S.C. § 1983 and 28 U.S.C. § 1331. For the following reasons the court finds that subject matter jurisdiction over this matter is lacking pursuant to 28 U.S.C. § 1341. Therefore the Defendants' motion to dismiss is now GRANTED.
The Plaintiffs in this matter include various taxpayers who own real estate in Kosciusko and Elkhart County, Indiana. The Plaintiffs contend that the various regulations promulgated by the State Board of Tax Commissioners ("State Board") have violated their constitutional rights under the Due Process guarantees of the Fifth and Fourteenth Amendments to the United States Constitution. (See P's Compl. at ¶ 6). On August 15, 2001, these Plaintiffs filed a complaint seeking a declaratory judgment and other equitable relief in an effort to find that the State Board's continued use of its various regulations for property assessment to be violative of those constitutional guarantees.
The problems with the current property tax structure are long-standing and well documented. See Town of St.John v. State Bd. of Tax Comm'rs, 665 N.E.2d 965 (Ind.Tax 1996) ("St. John I"); Boehm v. Town of St. John, 675 N.E.2d 318 (Ind. 1996) ("St. John II"); Town of St. John v. State Bd. of Tax Com'rs, 690 N.E.2d 370 (Ind.Tax 1997)("St. John III"); Town of St. John v. State Bd. of Tax Comm'rs, 691 N.E.2d 1387, 1390 (Ind.Tax 1998) ("St. John IV"); State Bd. of Tax Com'rs v. Town of St. John, 702 N.E.2d 1034 (Ind. 1998)("St. John V"). As a result of the protracted litigation in the St. John series the State Board of Tax Commissioners issued new assessment regulations. The various rules, manuals, and guidelines for the upcoming 2002 general reassessment became effective on May 23, 2001 after being signed by the Governor.
The gravamen of the Plaintiffs' complaint centers around their contention that no remedy exists for their injuries as a result of the assessments that occurred prior to the enactment and implementation of these new assessment guidelines. Further, the Plaintiffs contend that no state remedy exists that allows them to put forward their federally protected constitutional rights in a "speedy" manner. In support of this contention the Plaintiffs allege that the Indiana Tax Court has ruled that current challenges to real property assessments must be made using the current (unconstitutional) regulations. (P's Compl. at ¶ 11). The Plaintiffs assert that because the Indiana courts have refused to address any federal constitutional arguments based upon a facial challenge to the current assessment system any exercise to utilize the appeal process by way of the State Board of Tax Examiners then to the Indiana Tax Court would be futile. Finally, they assert that their only relief for the alleged violations of their federal constitutional rights can be achieved through this court. See (P's Compl. at ¶ 15). On October 15, 2001, the Defendants filed a motion to dismiss the complaint for lack of subject matter; they rely primarily upon 28 U.S.C. § 1341 for their contention that this court is without jurisdiction.
Rule 12(b)(1) of the Federal Rules of Civil Procedure provides that a case will be dismissed if the court lacks the statutory authority to hear and decide the dispute. Under 28 U.S.C. § 1331 a case arises under federal law only if, from the face of the plaintiffs' complaint, it is apparent that plaintiffs' cause of action was created by federal law. O'Conner v. Commonwealth Edison Co., 13 F.3d 1090 (7th Cir.1994), cert. denied 512 U.S. 1222, 114 S.Ct. 2711, 129 L.Ed.2d 838 (1994). The United States Supreme Court has interpreted and applied the "Tax Injunction Act" as a "jurisdictional rule" and a "broad jurisdictional barrier." Arkansas v. Farm Credit Serv. of Cent. Arkansas, 520 U.S. 821, 825-26 117 S.Ct. 1776, 138 L.Ed.2d 34 (1997) citing Moe v. Confederated Salish and Kootenai Tribes of Flathead Reservation, 425 U.S. 463, 470, 96 S.Ct. 1634, 1640, 48 L.Ed.2d 96 (1976).
In evaluating a substantive attack on federal subject matter jurisdiction, the court will not presume the factual allegations made by the Plaintiffs as true. Bastien v. AT&T Wireless Sers. Inc., 205 F.3d 983, 990 (7th Cir.2000). The court can weigh the evidence before it and find the facts. Commodity Trend Serv. Inc. v. Commodity Futures Trading Com'n 149 F.3d 679, 685 (7th Cir.1998).
In an effort to promote the principles of federalism and comity between state courts and federal courts, Congress enacted the Tax Injunction Act in 1937. See Rosewell v. LaSalle National Bank, 450 U.S. 503, 505, 101 S.Ct. 1221, 67 L.Ed.2d 464 (1981). The act provides the following:
The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and effective remedy may be had in the courts of such State. 28 U.S.C. § 1341 (1993).
"The Act applies to declaratory relief as well as injunctive relief." Indiana Waste Sys., Inc. v. County of Porter, 787 F.Supp. 859, 865 (N.D.Ind.1992) citing California v. Grace Brethren Church, 457 U.S. 393, 408, 102 S.Ct. 2498, 2507, 73 L.Ed.2d 93 (1982).
In Rosewell, Justice Brennan goes to great length in analyzing what constitutes "a plain, speedy and effective remedy." See 450 U.S. at 512-524, 101 S.Ct. 1221. He notes that the such words appear "to require a state-court remedy that meets certain minimal procedural criteria." (Emphasis in original); 450 U.S. at 512, 101 S.Ct. 1221. In an effort to more fully understand this congressional enactment, Justice Brennan relies on several passages gleaned from the legislative history. 450 U.S. at 513, 101 S.Ct. 1221. Justice Brennan notes that "Senator Bone, the Act's primary sponsor, referred to the plain, speedy and efficient remedy: provision and then stated: Thus a full hearing and judicial determination of the controversy is assured." Id. citing 81 Cong. Rec. 1416 (1937)(Internal quotations omitted). Furthermore, Justice Brennan noted that the Senate Report added that "[a]n appeal to the Supreme Court of the United States is available as in other cases." Id. citing S.Rep. No. 1035, 75th Cong., 1st Sess., 2 (1937).
The Seventh Circuit has not only had the opportunity to address 28 U.S.C. § 1341 on several occasions; it has addressed that provision in the context of tax assessment on real property and personal property tax as applied under Indiana law. See Miller v. Bauer, 517 F.2d 27 (7th Cir.1975); Sacks Brothers Loan Co. v. Cunningham, 578 F.2d 172 (7th Cir.1978). As demonstrated by these two cases Indiana provides a system for relief that comports with the principles later espoused by Justice Brennan in Rosewell.
In Miller, a decision emanating from this court and this judge, the Seventh Circuit outlined the statutory procedures available to a taxpayer to challenge a property tax assessment. Miller, 517 F.2d at 32. Circuit Judge Pell noted that a taxpayer can appeal the assessment to the County Board of Review, then to the State Board, a county circuit court, and finally to the Indiana Supreme Court. Id. citing Indiana Code §§ 6-1.1-31-1 to 6-1.1-31-5. Furthermore, as noted in the opinion, "The taxpayer may, of course, appeal the decision of the Indiana Supreme Court to the United States Supreme Court." Id. at 32.
Furthermore, as discussed in Sacks Brothers Loan, the statutory scheme provides a refund procedure for property taxes assessed and that are later found to be illegal as a matter of law. Sacks Brothers Loan Co., 578 F.2d at 175 citing Indiana Code § 6-1.1 -26-1. That procedure provides the following:
A person ... may file a claim for the refund of all ... of a tax assessment which he has paid. However the claim must be:
(1) Filed with the auditor of the county in which the taxes were originally paid;
(2) Filed within three (3) years after the taxes were first due;
(3) Filed on the form prescribed by the state board of accounts and approved by the state board of tax commissioners; and
(4) Based upon one (1) of the following grounds: ...
(ii) The taxes, as a matter of law, were illegal. (Emphasis Added) Ind.Code § 6-1.1-26-1(1998)
As demonstrated by Sacks Brothers Loan and Miller, a taxpayer has two avenues in which to seek redress for any given property tax assessment, either through a direct challenge of the assessment or by paying the assessment and then seeking a refund based upon its illegality as a matter of law. Although some minor changes have resulted over the years to the direct appeal process, similar procedures exist today allowing for a taxpayer to contest their property tax assessment commensurate with the principles under Rosewell.
The current system used to challenge a property tax assessment is much like the one described in Sacks Brothers Loan. First, the taxpayer may seek review of the assessment by the County Property Tax Assessment Board of Appeals. See Ind. Code § 6-1.1-15-1b. If a taxpayer is unhappy...
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