IN Tax Court affirms review board’s decision in Elkhart property assessment dispute

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An Elkhart multibuilding apartment property’s disputed tax assessments for 2016, 2017 and 2018 should revert to the property’s 2015 assessed value, the Indiana Tax Court affirmed Friday in upholding the Indiana Board of Tax Review’s ruling.

According to court records, in September 2016, Lexington Square LLC purchased a multibuilding apartment complex in Elkhart.

While that property had been assessed at $3,490,500 for tax year 2015, the Elkhart County assessor increased the property’s assessment to $7,683,000 for tax year 2016, $7,028,200 for tax year 2017 and $7,059,800 for tax year 2018.

The increases in value were attributable, in part, to the assessor’s removal of an obsolescence adjustment that the property had formerly received.

Alleging that the 2016 to 2018 assessments were not only incorrect, but also were unfair when compared to the assessments of other apartment complexes in Elkhart County, Lexington Square initiated appeals first with the Elkhart County Property Tax Board of Appeals and then with the Indiana Board of Tax Review.

The Indiana board conducted a consolidated hearing on all of Lexington Square’s appeals on May 18, 2021.

During the Indiana board hearing, the assessor admitted that because she increased the subject property’s assessment by more than 5% between 2015 and 2016, Indiana Code § 6-1.1-15-17.2 dictated that she bore the burden of proof on the valuation issue.

The parties agreed, however, that the burden of proof on the uniformity issue resided with Lexington Square.

To demonstrate that her assessment valuations were correct, the assessor submitted an appraisal, completed in conformance with the Uniform Standards of Professional Appraisal Practice, that valued the subject property between $7,277,349 and $7,990,000 during each of the years at issue.

In rebuttal, Kevin Donohoe, the vice president of Lexington Square’s property management company, testified that he believed the subject property’s assessed value should have been between $6,776,466 and $7,535,545 during each of the years at issue.

Donohoe explained that he arrived at those values by applying a capitalization rate to the average of the property’s actual net operating income for tax years 2015 through 2017.

With respect to the uniformity issue, Lexington Square presented the Indiana board with evidence that compared recent sales prices of numerous other apartment complexes in Elkhart County to their assessment values, asserting that it demonstrated that those properties were “underassessed” on average by more than 26%.

Lexington Square asserted that its property, in contrast, was underassessed by only 4%.

The Indiana board’s final determination, issued on March 24, 2022, was based on the Indiana Tax  Court’s decision in Southlake Indiana, LLC v. Lake County Assessor (Southlake II), 181 N.E.3d 484, 489 (Ind. Tax Ct. 2021), finding that the assessor did not prove her assessment was “correct” because her appraisal evidence did not conclude “exactly and precisely” to the actual assessed values she applied during the years at issue.

Likewise, the Indiana board found that Lexington Square had failed to show what the proper value of its property should have been because “Don[o]hoe based his analysis solely on the subject property’s historical income, expenses, and occupancy without comparing that data to the market.”

Regarding the uniformity issue, the Indiana board determined that Lexington Square failed to demonstrate that it was unfairly assessed in comparison to other similarly situated properties, explaining that its evidence failed to comport with any of the standards for ratio studies as set forth by both the Indiana Department of Local Government Finance and the International Association of Assessing Officers.

Accordingly, because neither party proved the property’s correct assessed value, the Indiana board ordered that each of Lexington Square’s contested assessments revert to the property’s 2015 assessed value in accordance with I.C. 6-1.1-15-17.2.

The assessor petitioned for a rehearing, claiming that the Indiana board had erroneously applied the burden of proof.

The Indiana board denied the assessor’s petition for rehearing.

The assessor appealed and the Indiana Tax Court heard the parties’ oral arguments on Oct. 6, 2022.

The Tax Court affirmed the Indiana board’s final determination.

Writing for the Tax Court, Judge Martha Blood Wentworth said in its final determination, the Indiana board concluded that under Indiana Code § 6-1.1-15-17.2, the assessor bore, but failed to meet, her burden of proving that her 2016 to 2018 assessments of Lexington Square’s property were correct.

According to Wentworth, the Indiana board also found that Lexington Square failed to demonstrate what the correct assessment should be.

As a result, the Indiana board applied the reversionary clause and ordered Lexington Square’s 2016 to 2018 assessments to revert to the property’s 2015 assessed value of $3,490,500.

Wentworth wrote that, on appeal, the assessor argued that the Indiana board got it all wrong.

The assessor asserted that I.C. 6-1.1-15-17.2 no longer applied to this case once the statute was repealed on March 21, 2022, three days before the Indiana board issued its final determination.

In support of her position, the assessor listed several Indiana cases stating that “‘in the absence of a legislative enactment to the contrary, the repeal of a statute without a saving[s] clause, where no vested right is impaired, completely obliterates it, and renders the same as ineffective as if it had never existed.’”

“The Assessor’s ‘analysis’ fails to recognize, however, the line of Indiana cases that explain an express savings clause is not required to prevent the destruction of rights existing under a repealed statute if the Legislature’s intention to preserve and continue those rights is otherwise clearly apparent,” Wentworth wrote.

Wentworth wrote that if the Tax Court were to declare the repeal of I.C. 6-1.1-15-17.2 had retroactive effect, “the rules of play” would be unfairly changed midstream.

A re-do in every single one of the still-pending cases would be necessary to provide taxpayers an opportunity to develop and implement new litigation strategies aligned with the new allocation of the burden of proof, Wentworth wrote.

“Reworking all pending appeals is absurd because the amount of time needed to resolve them would be significantly prolonged, an undue strain would be placed on administrative level resources, and costs of litigation would greatly increase.  This is surely not the result the Legislature, as a reasonable body, would have intended.  Accordingly, the Court declines the Assessor’s invitation to apply the repeal of Indiana Code § 6-1.1-15-17.2 retroactively,” Wentworth wrote.

The case is Elkhart County Assessor v. Lexington Square, LLC, 22T-TA-7.

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