Wigwam Holdings LLC v. Madison Cnty. Assessor

• Decision Date: 08 May 2019
• Docket Number: Cause No. 18T-TA-00015
• Parties: WIGWAM HOLDINGS LLC, Petitioner, v. MADISON COUNTY ASSESSOR, Respondent.
• Court: Indiana Tax Court

125 N.E.3d 7

WIGWAM HOLDINGS LLC, Petitioner,

v.MADISON COUNTY ASSESSOR, Respondent.

Cause No. 18T-TA-00015

Tax Court of Indiana.

FILED May 8, 2019

ATTORNEYS FOR PETITIONER: MATTHEW S. CARR, JACOB V. BRADLEY, COURTNEY S. FIGG, QUARLES & BRADY LLP, Indianapolis, IN

ATTORNEYS FOR RESPONDENT: CURTIS T. HILL, JR., ATTORNEY GENERAL OF INDIANA, ZACHARY D. PRICE, DEPUTY ATTORNEY GENERAL, Indianapolis, IN

WENTWORTH, J.

Wigwam Holdings LLC ("Holdings") challenges the Indiana Board of Tax Review's final determination that upheld the assessment of its real property for the 2015 tax year. Upon review, the Court affirms the Indiana Board's final determination.

FACTS AND PROCEDURAL HISTORY

On September 2, 2014, Holdings was formed as a limited liability company pursuant to the Indiana Business Flexibility Act. (See Cert. Admin. R. at 11 -45.) See also, e.g., IND. CODE § 23-18-2-4(a) (2019) (providing that a person "may form a limited liability company by causing articles of organization to be executed and filed for record with the office of the secretary of state"). That same day, Holdings, the Anderson Community School Corporation, and the City of Anderson Department of Redevelopment executed a series of interrelated agreements by which Holdings acquired four parcels of land in Anderson, Indiana. (See Cert. Admin. 193, 273-92.) Only one of those parcels is at issue in this case: an 8.56 acre parcel containing a 220,000 square foot building with, among other things, an 8,996 seat basketball facility (the "Wigwam"). (See Cert. Admin. R. at 189, 218-20, 473-76.) For the 2015 tax year, the Madison County Assessor assigned the parcel an assessed value of $ 11,415,000 ($ 428,000 for land and $ 10,987,000 for improvements).

On December 12, 2015, Holdings appealed the 2015 assessment to the Madison County Property Tax Assessment Board of Appeals (PTABOA). On September 19, 2016, after a hearing, the PTABOA reclassified the entire property as utility/storage and reassessed it based on that use type under Indiana's assessment guidelines, reducing its assessed value to $ 2,115,200 ($ 423,700 for land and $ 1,691,500 for improvements). (See Cert. Admin. R. at 74-77, 298-301, 682-84.)

Unsatisfied with the reduction, Holdings sought review with the Indiana Board on November 3, 2016. The Indiana Board conducted a hearing on April 18, 2017, during which Holdings presented an Appraisal that was completed in conformance with the Uniform Standards of Professional Appraisal Practice (USPAP). (See Cert. Admin. R. at 187-267.) The Appraisal, which valued the property at only $ 68,500 as of May 30, 2014, provided in substance that the Wigwam's "highest and best use" was as vacant land because its building was "functionally and economically obsolete" due to a variety of physical deficiencies. (See Cert. Admin. R. at 243-47 (indicating, among other things, that portions of the building contained asbestos, were not ADA compliant, lacked air conditioning, and lacked a sprinkler system).) (See also Cert. Admin. R. at 477-80.) Holdings also presented the documentation associated with its acquisition of the property and explained that it 1) acquired the property for $ 0 on September 2, 2014, in a "fair, arm's length [market] transaction[;]" 2) agreed to repair, restore, and maintain the gymnasium by December 31, 2018; and 3) received access to an escrow account containing $ 630,000 to use to restore the property.¹ (See Cert. Admin. R. at 273-92, 396-97, 605-16.) In addition, one of the Appraisal's preparers testified that the assessment was incorrect because the property was classified under the wrong use type (i.e., utility/storage) and did not account for abnormal obsolescence² in its cost approach.³ (See Cert. Admin. R. at 508-10, 761-66, 777-78.) Holdings asserted that the totality of its evidence demonstrated that the 2015 assessment should be reduced to $ 68,500. (See Cert. Admin. R. at 395-401, 460.)

In response, the Assessor asserted that Holdings' Appraisal should be disregarded because it estimated the property's market value rather than its market value-in-use, even though the two standards were not equivalent in this case. (See Cert. Admin. R. at 378-84, 701-06.) The Assessor also claimed that the Appraisal had "issues" because it valued the property as vacant land, ignoring the restriction in Holdings' acquisition documentation that required the Wigwam gymnasium to be restored. (See Cert. Admin. R. at 709, 717-18, 723-25.) Moreover, the Assessor asserted that the September 2014 sale was not a market transaction because the seller, a governmental entity, was atypically motivated by its desire to restore the Wigwam for the community's future use. (See Cert. Admin. R. at 378 n.2, 706-09.) Finally, the Assessor maintained that assessing the property as utility/storage under the cost approach was proper because 1) the Wigwam is a special purpose property and 2) the cost approach methodology typically produced the lowest possible assessment for unoccupied commercial properties like the Wigwam. (See Cert. Admin. R. at 710-18, 729.)

On March 29, 2018, the Indiana Board issued its final determination, finding that Holdings "failed to make a prima facie case for reducing its assessment" because it did not support its claim with probative evidence. (See Cert. Admin. R. at 421 ¶ 52 (emphasis added).) Accordingly, the Indiana Board upheld the property's assessment of $ 2,115,200. (See Cert. Admin. R. at 422 ¶ 53.)

On May 11, 2018, Holdings initiated an original tax appeal and filed a Petition to Enjoin the Collection of Tax pursuant to Indiana Code § 33-26-6-2. On December 14, 2018, after holding a hearing, the Court denied Holdings' Petition to Enjoin. See Wigwam Holdings LLC v. Madison Cty. Assessor, 115 N.E.3d 531 (Ind. Tax Ct. 2018). After the matter was fully briefed on March 1, 2019, the Court took the case under advisement. Additional facts will be supplied when necessary.

STANDARD OF REVIEW

The party seeking to overturn an Indiana Board final determination bears the burden of demonstrating its invalidity. Osolo Twp. Assessor v. Elkhart Maple Lane Assocs., 789 N.E.2d 109, 111 (Ind. Tax Ct. 2003). Accordingly, Holdings must demonstrate to the Court that the Indiana Board's final determination is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law; contrary to constitutional right, power, privilege, or immunity; in excess of or short of statutory jurisdiction, authority, or limitations; without observance of the procedure required by law; or unsupported by substantial or reliable evidence. See IND. CODE § 33-26-6-6(e)(1)-(5) (2019).

ANALYSIS

On appeal, Holdings asks the Court to reverse the Indiana Board's final determination, claiming it is arbitrary, capricious, an abuse of discretion, unsupported by substantial evidence, and in excess of its statutory authority. (See, e.g., Pet'r Br. at 7.) More specifically, Holdings contends that the Indiana Board erred in upholding the Wigwam's assessment because it: 1) made a prima facie case by introducing into evidence a USPAP-compliant appraisal; 2) established that it acquired the property for $ 0 in a market transaction in September 2014; and 3) demonstrated that the assessment failed to account for the significant abnormal obsolescence that diminished the value of its property. (See Pet'r Br. at 7-23; Pet'r Reply Br. at 2-11.)

1. Prima Facie Case

Holdings first maintains that for purposes of Indiana's property tax assessment system, the law of the land is that a taxpayer's "[p]resentation of a USPAP-compliant appraisal establishes a prima facie case of [the property's] true tax value" and triggers an assessing official's duty to rebut the appraisal with his own market-based evidence. (See Pet'r Br. at 7-12 (emphasis added); Pet'r Reply Br. at 2-4.) Holdings therefore claims that because it presented a USPAP-compliant appraisal and the Assessor did not present any market-based evidence to rebut the appraised values of both its land and improvements, the Indiana Board erred in concluding that its Appraisal lacked probative value. (See Pet'r Br. at 8-9, 11-18.)

Holdings cites nine cases as authority for its proposition that a taxpayer makes a prima facie case for reducing an assessment merely by presenting an appraisal completed in conformance with USPAP. (See Pet'r Br. at 7-8 (citing Fisher v. Carroll Cty. Assessor, 74 N.E.3d 582, 585 (Ind. Tax Ct. 2017) ; Marion Cty. Assessor v. Washington Square Mall, LLC, 46 N.E.3d 1, 7-8 (Ind. Tax Ct. 2015) ; French Lick Twp. Tr. Assessor v. Kimball Int'l, Inc., 865 N.E.2d 732, 739 (Ind. Tax Ct. 2007) ; Eckerling v. Wayne Twp. Assessor, 841 N.E.2d 674, 677 (Ind. Tax Ct. 2006) ; Hometowne Assocs., L.P. v. Maley, 839 N.E.2d 269, 277 (Ind. Tax Ct. 2005) ; Meadowbrook N. Apts. v. Conner, 854 N.E.2d 950, 957 (Ind. Tax Ct. 2005) ; Meridian Towers E. & W. v. Washington Twp. Assessor, 805 N.E.2d 475, 479 (Ind. Tax Ct. 2003) ; Inland Steel Co. v. State Bd. of Tax Comm'rs, 739 N.E.2d 201, 216 (Ind. Tax Ct. 2000), review denied; Canal Square Ltd. P'ship v. State Bd. of Tax Comm'rs, 694 N.E.2d 801, 807 (Ind. Tax Ct. 1998) ).) Holdings' reliance on these cases, however, is misguided for the following reasons.

First, the majority of the cited cases address matters involving Indiana's old system of property assessment (i.e., pre-2002) that, unlike Indiana's current system, did not measure a property's market value-in-use. See Hometowne Assocs., 839 N.E.2d at 271 (regarding the 2001 tax year); Meadowbrook N. Apts., 854 N.E.2d at 952 (regarding the 1995 tax year) ; Meridian Towers, 805 N.E.2d at 476 (regarding the 1998 tax year) ; Inland Steel, 739 N.E.2d at 208 (regarding the 1993 tax year) ; Canal Square, 694 N.E.2d at 802 (regarding the 1992 tax year). See also P/A Builders & Developers, LLC v. Jennings Cty. Assessor, 842 N.E.2d 899, 900 (Ind. Tax Ct. 2006) (explaining why Indiana's former and current systems of property assessment differ), review denied...