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Tax Court affirms calculated property tax cap on Kokomo property

May 14, 2019

The Indiana Tax Court has affirmed the property tax liability assessed against a Howard County urban development company, finding issue with the company’s argument concerning Indiana’s definition of gross assessed value.

Kokomo Urban Development, LLC owns a moderate-income apartment complex in an economic revitalization area, or ERA, of Kokomo. As a result, Kokomo Urban was entitled to 100 percent ERA deduction for the 2015 tax year and a 50 percent deduction for the 2016 tax year.

In 2016, the Howard County auditor determined Kokomo Urban’s property tax liability was $47,720.46, which did not exceed the calculated 2 percent tax cap amount of $49,134. Kokomo Urban, however, argued its liability should have been capped at $25,000 under Indiana Code section 6-1.1-20.6-7.5. The issue, the company argued, was whether the 2 percent tax cap under that statute should have been applied to the property before or after the ERA deduction.

The Indiana Board of Tax Review issued a final determination in favor of the Howard County assessor, so Kokomo Urban appealed to the Indiana Tax Court. On appeal, the development company argued the board’s final determination must be reversed because the 2 percent cap should have been applied to the gross assessed value of its real property after, not before, the ERA deduction was applied.

Kokomo Urban asserted the Indiana Legislature defined “gross assessed value” under I.C. § 6-1.1-20.6-1.6 with the intent of finding the term “exemptions” to include “deductions.” However, Judge Martha Blood Wentworth was unpersuaded by that suggestion.

Pursuant to Indiana code, deduction is defined as “a situation where a taxpayer is permitted to subtract a fixed dollar amount from the assessed value of his property.” Exemption is defined as “a situation where a certain type of property, or the property of a certain kind of taxpayer, is not taxable.”

“Indeed, for purposes of Indiana’s whole property tax statutory system, the Legislature provided discrete statutory definitions for the terms ‘exemption’ and ‘deduction,’” Wentworth wrote.  “…Given these independent and substantively distinct definitions, the Legislature could not have intended the term ‘exemptions’ to include the differently defined term ‘deductions’ or to use the two terms interchangeably for purposes of Indiana Code § 6-1.1-20.6-1.6.”

Wentworth instead found the Legislature’s plain language demonstrated its intent to exclude deductions from the formula for calculating “gross assessed value” and, therefore, from the resulting maximum property tax to be imposed under I.C. § 6-1.1-20.6-7.5.

Wentworth further rejected Kokomo Urban’s argument that the intent of the phrase “or any other provision” meant “any other provision that reduces a property’s gross assessed value.” She declined to add words to the definition “that simply are not there” and said Kokomo Urban’s argument ignored the statute’s actual grammatical structure.

The case is Kokomo Urban Development, LLC v. Mindy Heady, in her official capacity as Howard County Assessor,18T-TA-20.

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