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Clark County loses request to impose excess property tax levy

June 26, 2014

Noting that the Clark County Council made the conscious decision to not levy the maximum amount of property taxes allowed by statute for the 2008 budget year, it cannot now claim that decision is somehow a data error that the Department of Local Government Finance could later correct, the Indiana Tax Court ruled Wednesday.

In Clark County, Indiana v. Indiana Department of Local Government Finance, 39T10-1102-TA-9, citing a nearly $4 million rainy day fund in 2007, the council decided not to tax homeowners the maximum amount permitted by law because it wanted to “take some of the burden off of the homeowners.” The DLGF advised the council at that time that such action would negatively impact what the county would be able to levy in the future based on a formula in the statute that incorporates a “use it or lose it provision.”  

The formula is cumulative in its effect. The “maximum permissible ad valorem property levy” calculated under the formula in one year provides the starting point for calculating the successive year’s “maximum permissible ad valorem property levy.” That provision has since been removed.

Clark County argued that the DLGF abused its discretion by arbitrarily and capriciously determining that the council did not make a data error, correctable under Indiana Code 6-1.1-18.5-14, when it approved its 2008 property tax levy for $2.7 million less than what was statutorily permitted. Second, Clark County argued that the DLGF contravened the law when it failed to apply retroactively the 2011 statutory amendment that eliminated the “use it or lose it” provision from the formula contained in Indiana Code 6-1.1-18.5-3. Third, Clark County claimed that the DLGF violated its due process rights.

Statute allows for correction of an objective error only, not a subjective error, Judge Martha Wentworth wrote. Despite the DLGF’s warning, the council proceeded to approve the property tax level for less than what was statutorily allowed in 2008.

“This was not an ‘error in data,’ nor was it even an error in interpreting data. Instead it was simply a failure on the part of the Council to plan for budgetary contingencies.”

The statute was not amended to eliminate the “use it or lose it” provision retroactively, Wentworth held. Also, the statute does not require DLGF to hold a hearing on Clark County’s level appeal and since the county did not provide any other legal analysis to support its claim that it has been deprived due process, Wentworth declined to reverse the DLGF’s final determination on that basis.

 

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