When Indianapolis attorney Larry Stroble read two recent rulings from the Indiana Tax Court, he saw one consistent message
that speaks broadly to an overall inadequacy of the legal system.
That lesson: Courts don't always provide enough guidance when issuing decisions, and that leads to more litigation in
order to flesh out a final resolution.
Now, the pair of tax rulings reaches back more than a decade to when the Indiana Supreme Court threw out the state's
property-tax infrastructure, which led to what attorneys describe as confusion for tax practitioners, assessors, appraisers,
and property owners.
"The lack of guidance on this issue has shown a weakness of our system," the Barnes & Thornburg partner said.
"These are important decisions, but I wouldn't go as far as saying they're landmark rulings. I'd say it's
a step forward in clarifying a basic principle in determining property value using market valuation."
Indiana Tax Court Judge Thomas Fisher issued rulings March 26 in Meijer Stores Limited Partnership v. Betty Smith, Wayne
Twp. Assessor, et al., No. 49T10-0609-TA-89, and Sue Ann Stinson, in her official capacity as the Washington Township
Assessor, et al. v. Trimas Fasteners, Inc., No. 49T10-0702-TA-4, which both help lay out more guidance since the landmark
Indiana Supreme Court decision in 1998.
In State Board. of Tax Comm'rs v. Town of St. John, 702 N.E.2d 1034, 1043 (Ind. 1998), justices held that the
tax statutes at the time violated the Indiana Constitution's property-taxation clause. The court determined that real
property must be assessed on the basis of "market value inuse," which is the value "of a property for its current
use, as reflected by the utility received by the owner or a similar user, from the property," according to the state
assessment manual. That system began in 2002. But the ruling didn't spell out how appraisals should be used to determine
the "in-use" standards for the non-residential property-tax assessments.
Since then tax attorneys say the process has remained unclear about how the valuations are actually to be determined. That
may be changing with these recent Tax Court rulings, though.
Stroble and his colleagues agree that these decisions are part of a larger puzzle spelling out how the property-tax assessment
process and subsequent litigation should be handled.
Judge Fisher rejected assessor appraisals and found in favor of the property owners, based on specific market data. In both
cases, the property owners cited external obsolescence – a loss of value that may be caused by an oversupply of the type of
space it provides, light or noise pollution, crime, or other issues.
In Meijer, the retailer appealed its property assessments, charging they were too high. The Wayne County Property
Tax Assessment Board of Appeals subsequently valued the property as: $10,954,800 for 2002; $12,420,400 for 2003; and $12,132,000
for 2005. Meijer then appealed to the Indiana Board of Tax Review and hired a licensed Indiana appraiser to complete an independent
appraisal, which showed the value at $6.3 million for those years.
The appraiser Meijer hired used a cost approach, a sales comparison approach and an income approach, but in reconciling the
value estimates, he concluded the sales comparison approach was the most reliable. The Wayne Township Assessor didn't
present any evidence at a hearing but rejected those methods. In ruling on the issue, the tax board held the appraiser had
utilized properties that weren't "comparable" to the Meijer property.
Judge Fisher reversed the tax board's judgment, finding that Meijer's appraisal was based on more reliable evidence
presented in the case. Those representing Meijer were Baker & Daniels attorneys Brent Auberry, Jon Laramore, and Stephen
Paul; they declined to comment on the rulings because the lawyers weren't certain if rehearings or appeals would be sought.
In the Trimas decision, Judge Fisher heard a case involving the Washington Township Assessor's office in Clinton
County and an industrial complex in Frankfort. For the 2002 assessment, the assessor valued the 200,000-square-foot Trimas
facility on 44 acres to be worth $7.7 million, though it was later reduced to $7.2 million. Trimas appealed and argued – based
on an appraisal conforming to the Uniform Standards of Professional Appraisal Practice – the property's market value-in-use
was $2.9 million. The assessor presented an appraisal along with testimony of the appraiser that the market value-in-use of
Trimas' property was $8 million on March 1, 2002.
The state's tax board later decided the company's appraisal was more probative than the assessor's data and reduced
Trimas' assessment to $2.9 million. The local assessor appealed, and Judge Fisher ruled that other comparable properties
since vacated could be used in the analysis.
"Generally speaking, market value-inuse, as determined by objectively verifiable market data, is the value of a property
for its use, not the value of its use," Judge Fisher wrote.
Trimas' attorneys, David Suess and Thomas Atherton at Bose McKinney & Evans, described the rulings a triumph for
the property owners. They said it was entirely consistent with what the Supreme Court had said in the 1998 decision, that
market value means more than looking at the sticks and bricks.
"I don't see this as a revolutionary decision," Atherton said. "In 1998 we were sent on a voyage of complete
subjectivity to objectivity, and this case is an important stop on that voyage," he said. "If you look at the two
cases jointly, this will eliminate a theory being advanced that vacant properties are inherently less valuable than those
occupied as far as what you could sell it for."
Suess said from a practitioner's point of view, the rulings reinforce that it's important for any party to get appraisals
and evidence in on a timely fashion. That didn't happen in the Meijer case when the board excluded the assessor's
late filings, he said.
Analyzing the decisions, Stroble said this isn't the end of the issues. More lawsuits will need to go before the appellate
courts, he said.
"This is a growing problem, as assessors and taxpayers continue trying to arrive at the best market value," he
said. "It will take several other decisions to completely establish a clear picture and a full set of rules for assessors
and appraisers to follow."