Tax Court affirms Kohl’s reduction on property assessments

A Kohl’s department store will be allowed to keep the markdown on its property taxes after the Indiana Tax Court ruled the Marion County assessor failed to present a convincing argument or evidence for why the original assessment amounts should be charged.

In 1996, the retailer entered into a build-to-suit lease for the construction of a single-story, 94,699-square-foot store on 6.22 acres in the Fashion Mall Commons shopping center in Indianapolis. Fifteen years later, Kohl’s noticed its property assessments were increasing, starting with a 20% jump from the prior year to $6.02 million in 2011 and continuing to $7.79 million in 2012 and $7.90 million in 2013 and 2014.

The Indiana Board of Tax Review agreed with Kohl’s that the property had been over-valued and reduced the assessments to the store’s suggested amounts of $4.05 million for the 2011 and 2012 tax years as well as $4.10 million for the 2013 and 2014 tax years.

Appealing to the Indiana Tax Court, the Marion County Assessor raised several issues but was unable to get the rebate recalled. The tax court affirmed the Indiana board’s final determination in Marion County Assessor v. Kohl’s Indiana LP, 20T-TA-10.

Arguing the Indiana board had abused its discretion, the assessor made two claims on appeal. First, the assessor asserted that neither the law nor the evidence supported the Indiana board’s finding that Kohl’s had standing to seek review of the property’s assessments. Second, the assessor contended the Indiana board abused its discretion when it reduced the property’s assessments by millions of dollars each year.

The Tax Court examined Indiana Code § 6-1.1-15-1 and Indiana Code § 6-1.1-15-3 as well as Kohls’ lease and concluded the Indiana board did not abuse its discretion in finding Kohl’s was a taxpayer that could seek administrative review of the subject property’s assessments for the years at issue.

Likewise, the Tax Court ruled the evidence was either lacking or did not support the assessor’s argument for restoring the original assessment amounts.

In particular, the assessor claimed the sale of the Kohl’s property in 2011 for $15.3 million is evidence of its market value-in-use and should have been given weight, especially because the store did not show why the information should have been disregarded.

“During the Indiana Board hearing, the Assessor’s own expert witness, Dr. (Frank) Kelly, testified that when trying to ascertain whether a property’s sales price coincides with its market value, portfolio sales tend to ‘muddy the water[s]’ because of a specific property’s allocated sales price may include the value of the real property, personal property, and intangibles,” Tax Court Judge Martha Wentworth wrote. “… Dr. Kelly did not contact any of the parties related to the 2011 sale of the subject property, however, because he believed that doing so was outside the scope of his employment, and he did not review any balance sheets.

“Therefore, the Court will not find that the Indiana Board erred in disregarding the 2011 sales price of the subject property because the evidence does not show whether the sales price reflected more than the value of the real property (i.e. the ‘sticks and bricks’),” Wentworth concluded, citing Marion Cnty. Assessor v. Gateway Arthur, Inc., 45 N.E.3d 876, 880-81 (Ind. Tax Ct. 2015).

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