Proceed with Caution, Part IX (May 2013):  Indiana Board remains neutral; Affidavit is hearsay; Board threatens to disqualify “local government representative”; Update on 5% burden-shifting rule; New issues in small claims appeals prohibited

Proceed with Caution, Part IX (May 2013): Indiana Board remains neutral; Affidavit is hearsay; Board threatens to disqualify “local government representative”; Update on 5% burden-shifting rule; New issues in small claims appeals prohibited

In battle of appraisals with “significant weaknesses,” Indiana Board refuses to make the case for either party.   Engler v. Washington County Assessor, Pet. No. 88-009-11-1-5-00002 (March 21, 2013) (March 1, 2011 assessment).  Owner challenged the assessment of a single family residence on 93.66 acres that included grain bins, multiple pole barns and hog farm structures.  Assessor supported her value with an appraisal and testimony from the appraiser.  Owner also presented an appraisal.  The Board observed, “Ultimately, this final determination boils down to whether the Board is more persuaded by the [Assessor’s] appraisal and testimony about the entire property or by the [Owner’s] appraisal of only the house and 1-acre homesite.”  (Page 8, ¶ 30.)  Neither party’s evidence was “particularly convincing.”  Id.  The evidence on both sides “may have significant weaknesses,” but the Board exceeds its authority where it attempts to make a case for a party.  Id. (citing Meridian Towers East & West v. Washington Twp. Assessor, 805 N.E.2d 475, 480 (Ind. Tax Ct. 2003).  The Board found in favor of the Assessor’s appraisal, despite “troubling responses about [the appraiser’s] knowledge regarding the selling price of different types of agricultural land in Washington County.”  (Page 9, ¶ 34.)  The Board stressed that its decision was “primarily the result of satisfying minimum requirements” and emphasized that its ruling was “not an indication of anything that a party should strive to achieve.”  (Pages 9-10, ¶ 35) (emphasis in original).

Affidavit admitted over hearsay evidence, but couldn’t be sole basis for determination; property tax for home reduced to value in USPAP appraisal.  Whitney v. Elkhart County Assessor, Pet. No. 20-026-09-1-5-00130 (March 1, 2013) (March 1, 2009 assessment).  The Assessor’s counsel objected to an affidavit as hearsay.  The Board admitted the affidavit with the following explanation: 

Hearsay evidence, as defined by the Indiana Rules of Evidence (Rule 801), may be admitted. If the hearsay is not objected to, the evidence may form the basis for a determination. However, if the evidence is: (1) properly objected to; and (2) does not fall within a recognized exception to the hearsay rule, the resulting determination may not be solely based upon the hearsay evidence. 52 IAC 2-7-3.  Therefore, the Judge admitted Petitioner Exhibit K over objection.

(Page 11, ¶ 24.)  In this appeal of a single-family residence, the Assessor had the burden of proof under Ind. Code § 6-1.1-15-17.2 because the home’s assessment had increased by more than 5% over the 2008 assessment.  The Assessor met her burden with a USPAP compliant appraisal.  The appraised value was lower than its assessed value, and the Board lowered the assessment to the appraised value.  (Page 4, ¶ 13.)

Homeowner argued that her use of the waterfront property was motivated by non-market factors, because she continued to use it for her “minimal house,” rather than selling the property for development of a mansion.  But she “failed to show what effect the [non-market] motivation would have on the market value of the property.”  (Page 9, ¶ 21.)  Further, Homeowner presented various ratio analyses regarding the land and improvements for neighboring properties.  She “presented no authority that recognized this as an acceptable method of appraising or assessing residential properties, or, in fact, any property.”  (Page 10, ¶ 22.)  And she did not show that the neighboring properties were either similar or assessed differently, which failed to prove a lower assessment was appropriate under Ind. Code § 6-1.1-15-18 (allowing use of the assessments of comparable properties as evidence in property tax appeals).

Indiana Board threatens to disqualify previously admonished “local government representative.” Turoski v. White County Assessor, Pet. No. 91-010-10-1-5-00006 (March 1, 2010 assessment). To appear before it as a local government representative, the Board requires a person to verify that he or she is a “professional appraiser” approved by the Department of Local Government Finance.  (Page 1, n.1) (citing 52 IAC 1-1-3.5(b)).  The Assessor’s representative failed to provide the required verification, but the Taxpayer did not object to the representative’s appearance.  The Board observed that it had previously admonished the representative for failing to provide the proper verification and further warned, “If [the representative] fails to comply with the Board’s rules on representation in future cases, the Board may disqualify him.”  Id.

5% burden-shifting rule applies to change in assessments – not taxes; Board hears appeals of assessment valuations – not tax burdens.  SBYC, Inc. v. Steuben County Assessor, Pet. No. 76-011-10-1-5-00016 and 76-011-10-1-5-00058 (March 12, 2013) (March 1, 2010 assessment) [Small Claims].  Indiana Code § 6-1.1-15-17.2 shifts the burden to the Assessor to prove her valuation is correct, if the property’s assessment has increased by more than 5% over its prior year’s assessment.  In this assessment appeal of two off-water lots, Owner argued that its property taxes had increased substantially from 2009 to 2010.  The Indiana Board explained that the burden-shifting statute “refers to assessments that increase by more than 5%, not taxes.”  (Page 6, ¶ 14.)  Here, the 2010 assessments for the lots were lower than their 2009 values.  Owner maintained the burden of proof on appeal.  The Board further noted:  “In fact, to the extent that [Owner] seeks to contest its taxes – opposed to the subject parcels’ assessments – the Board lacks authority to hear SBYC’s claim.”  (Page 6, ¶ 15(c).)   The Board may consider claims that “taxes, as a matter of law, were illegal” under Ind. Code § 6-1.1-15-12 (the basis for a Form 133 Petition for Correction of an Error), but Owner didn’t bring a claim under this provision.  (Page 6, ¶ 15(c) n.4.)  

Owner argued that the lower assessments of two adjoining parcels supported its request for reductions.  Indiana Code § 6-1.1-15-18 allows parties to use assessments of comparable properties as proof in property tax assessment appeals.  The statute states, “The determination of whether properties are comparable shall be made using generally accepted appraisal and assessment practices.”  Owner did not “meaningfully compare” the appealed lots to the adjacent lots (at best, Owner showed only that the lots were very close; it did not explicitly compare other factors like size, shape, topography, accessibility, and use).  (Page 7, ¶ 15(f).)   The Board affirmed the assessment.  (Page 9, ¶ 16.)

Hearing officer compares the wrong assessments in applying the 5% burden-shifting rule.  Borsodi v. Marshall County Assessor, Pet. Nos. 50-005-10-1-5-00023 et al (March 18, 2013) (March 1, 2010 and 2011 assessments).  To determine whether a property’s assessment increased by more than 5% year-over-year, the Indiana Board must compare two assessed values.  Which two?  In this appeal, the Indiana Board’s hearing officer incorrectly compared the final assessment determination of the disputed parcel by the local County Board (the Property Tax Assessment Board of Appeals or “PTABOA”) from 2010 to its determination for 2011, finding a 5% plus increase that shifted the burden of proof to the Assessor for Owners’ 2011 appeal.  (Page 11, ¶ 21.)  The Board corrected this error in its ruling, explaining that it “compares the PTABOA determination for 2011 [i.e. the “the assessment that is the subject of the review”] to the property’s assessed value in 2010 [i.e. “the assessed value determined by the county assessor” for the prior year].”  (Pages 11-12, ¶ 21.)  Owners retained the burden of proof, because the Assessor’s 2010 value was equal to the PTABOA’s 2011 determination for the property.  The Board further noted that, even if the burden had shifted to the Assessor for 2011 and the Assessor had failed to meet her burden, the result (assuming Owners could not prove a lower value) would have been a return to the 2010 value – which was the same.  (Page 12, ¶ 21 n.5.) 

Petitioner in a small claims proceeding cannot raise new issues on appeal (but different phrasing of appeal issues didn’t constitute new issues).  MSW Enterprises, LLP / Sutherland  v. Allen County Assessor, Pet. No. 02-070-11-1-4-00024 to -26 (March 20, 2013) (March 1, 2011 assessment) [Small Claims].  In this appeal of a bowling alley, the Assessor claimed that the Board’s proceedings are limited to the issue raised by Taxpayers on their Form 130 petitions to the PTABOA, i.e. that “[t]his assessment should be based on [the subject property’s] current use.”  (Page 6, ¶ 11.)  The Board agreed that, under its small claims procedures, the parties agree that: “(1) the issues contained in the appeal petition are substantially the same as those presented to the PTABOA; and (2) no new issues will be raised before the [B]oard.”  Id. (quoting 52 IAC 3-1-2(b)).  The Board concluded, however, that Taxpayers hadn’t raised new issues.  Id.  Taxpayers’ Form 131 petitions asserted that the subject property’s assessment “exceeds its market value-in-use,” which was “consistent with the claims asserted on the Petitioners’ Form 130 petitions [i.e. the initial local appeals].”

(Photo used under Creative Commons from Eugene Zemlyanskiy.)

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