Indiana Tax Court “cannot ignore the parties’ and the Indiana Board’s misapprehension of the law” – applies 1% tax cap to residence that was eligible for (but not entitled) to homestead standard deduction.

Indiana Tax Court “cannot ignore the parties’ and the Indiana Board’s misapprehension of the law” – applies 1% tax cap to residence that was eligible for (but not entitled) to homestead standard deduction.

Indiana Tax Court held that 1% property tax cap applied to a residence that was eligible for, but not entitled to, the homestead standard deduction for 2013.

Name: Purdom v. Knox County Assessor, Knox County Property Tax Assessment Board of Appeals, and Indiana Board of Tax Review

Date Issued: Feb. 11, 2020

Property Type: Single-family residence

Assessment Date: March 1, 2013

Owner was denied the homestead standard deduction for 2013 for a home that she purchased in 2011. The property received the deduction for 2011, 2012 and 2014 – but not for 2013. That oversight was initially challenged by Owner in her First 2013 Appeal. In 2015, the Indiana Board of Tax Review agreed the property qualified as a homestead as Owner’s principal place of residence, but Owner failed to show that she either had properly applied for or was exempt from applying for the deduction. Owner did not further appeal the Board’s ruling in the First 2013 Appeal.

Owner sought the 1% tax cap applied to homesteads for 2013. In 2016, Owner filed a Second 2013 Appeal; this time she challenged the property tax cap applied to the same property for the 2013 assessment date (for taxes payable in 2014) by filing a Form 133 Petition for Correction of Error. (That Form is no longer available, but essentially taxpayers can make the same claims using the current Form 130 petition.) The issue raised: whether a 1% tax cap should apply to the property as a “homestead” or, instead, a 2% tax cap as “other residential property.” Assessor argued that the property tax cap for a “homestead” should not apply because the same property did not receive the homestead standard deduction for the same year. The Indiana Board agreed, rejecting Owner’s Second 2013 Appeal.

Eligibility requirements for the 1% tax cap changed in May 2013, after the March 1st assessment date. The Tax Court first noted that, for purposes of applying the 1% tax cap, 2013 was a transitional year in the eligibility requirements. From January 1st through May 10th of 2013, to receive the 1% tax cap the property had to be eligible for the standard deduction. Effective May 11th, the property must have been granted the deduction.

The Indiana Board misapprehended the law. The Indiana General Assembly changed the eligibility requirements for the homestead standard deduction – more than two months after the March 1, 2013 assessment date. Thus, the new requirement – i.e. that the residential property have been granted the standard deduction and not merely eligible for it – was not in effect for the 2013 assessment. The Court held that “the record evidence and the Indiana Board’s own finding indicate [Owner’s] property was eligible, although not entitled, to the 2013 standard deduction because she did not properly apply.” (emphasis added). The Court reversed, ordering application of the 1% tax cap.

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