Indiana Board of Tax Review Denies Real Property Tax Exemptions for Early Childhood Educational Facilities for Lack of Proper Certifications

Indiana Board of Tax Review Denies Real Property Tax Exemptions for Early Childhood Educational Facilities for Lack of Proper Certifications

Abraham Benson explains why the Indiana Board of Tax Review denied a real property tax exemption for an Early Childhood Education Facility

Name: Rainbow Rascals Warsaw, LLC v. Kosciusko County Assessor

Date Issued: April 10, 2019

Property Type: Childcare Facility

Assessment Year(s): 2015-2018

Point of Interest: Tangible property owned, occupied, or used by a for-profit provider of early childhood education services to children ages 4-5 years old may qualify for an educational exemption only if the requirements set forth in Ind. Code § 6-1.1-10-16(p) and Ind. Code § 6-1.1-10-46 are met.

Synopsis: Rainbow Rascals Warsaw, LLC (“Rainbow”) timely filed Form 136 exemption applications on two of its early childhood educational facilities in Warsaw for the 2015 to 2018 assessment dates. The Kosciusko Property Tax Assessment Board of Appeals (the “PTABOA”) denied each of the applications. Rainbow contested the denials, filing Form 132 appeal petitions with the Indiana Board of Tax Review for all four assessment dates.

Motion to dismiss not addressed. Rainbow had 45 days to appeal the PTABOA’s exemption denials. The Assessor asked the Indiana Board to dismiss the 2015 to 2017 appeals, because Rainbow had filed those petitions more than 45 days past the date listed on the PTABOA’s Form 120 notices denying the exemptions. Rainbow claimed it never received the PTABOA’s notices. The Indiana Board observed that Rainbow did “little to show” that it had not received, but then discarded, the notices. However, because the Indiana Board ultimately determined Rainbow failed to make its case on the merits, it declined to address the motion to dismiss.

Lacking required program ratings, Taxpayer failed to show it qualified for exemption. Indiana Code § 6-1.1-10-46 (“Section 46”) provides the requirements that a for-profit early childhood educational provider must meet to be eligible for a property tax exemption. Section 46 provides in part:

(a) Tangible property owned, occupied, or used by a for-profit provider of early childhood education services to children who are at least four (4) but less than six (6) years of age is exempt from property taxation under section 16 of this chapter only if all the following requirements are satisfied:
(1) The primary purpose of the provider is educational.
(2) The provider is the property owner and the provider also predominantly occupies and uses the tangible property for providing early childhood education services to children who are at least four (4) but less than six (6) years of age.
(3) The provider meets the standards of quality recognized by a Level 3 or Level 4 Paths to QUALITY program rating under IC 12-17.2-2-14.2 or has a comparable rating from a nationally recognized accrediting body.

(emphasis added). Additionally, the exemption percentage is calculated based on the percentage of children (out of the total enrollment of children) that are ages 4-5.

The Indiana Board pointed to the requirement set forth by Ind. Code § 6-1.1-10-46(a)(3) requiring that the provider meet the standards of quality recognized by a Level 3 or Level 4 Path to QUALITY program rating under Ind. Code § 12-17.2-2-14.2 or has a comparable rating from a nationally recognized accrediting body. One of Rainbow’s facilities did not receive its Level 3 certification until October 2018 – well after the assessment dates at issue — and the other facility had only a Level 1 certification. Moreover, even had the certifications been in place, Rainbow failed to provide necessary information to prove what an appropriate exemption percentage would have been. Having failed to show that the childcare facilities were properly certified on the assessment dates, the two facilities did not qualify for an educational exemption for any of the assessment dates at issue.

Image by Alawai.

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