Proceed With Caution, Part XII (Indiana Board of Tax Review property tax rulings – December 2013): shifting burden of proof; evidence of settlement discussions rejected; no jurisdiction over penalties; admission of misc. exhibits

Proceed With Caution, Part XII (Indiana Board of Tax Review property tax rulings – December 2013): shifting burden of proof; evidence of settlement discussions rejected; no jurisdiction over penalties; admission of misc. exhibits

Non-existent barn’s assessment eliminated; proof of settlement discussions rejected.  Popejoy v. Cass County Assessor, Pet. No. 09-017-10-1-1-00013 (December 5, 2013) (March 1, 2010 assessment date) [Small Claims Docket].  Popejoy challenged the assessment of a residential property, arguing that part of the land was swamp, with other parts wooded, and that the home (built in 1904) suffered various physical problems.   But Popejoy failed to show that the land was misclassified, and he offered no evidence to show how the home’s deterioration impacted its market value-in-use.  However, he did show that the property was assessed for a barn that was not standing as of the assessment date.  The Board ordered the removal of the barn’s assessment. (Page 5, ¶ 12(f).)

In a second ruling issued the same day involving these parties, Popejoy offered a partially executed stipulation agreement as evidence of the property’s value.  The Board rejected the evidence, noting that it “has previously rejected attempts to rely on settlement negotiations as evidence given the strong policy reasons for encouraging parties to engage in settlement negotiations.” Pet. No. 09-017-10-1-4-00014 (Page 5, ¶ 13(e) n.4.)  In this appeal, Popejoy again failed to submit probative evidence supporting a reduction in assessed value.

Where assessed value not challenged, burden-shifting not triggered and no remedy for defective notice available; no jurisdiction over penaltiesProperty Development Company Four, LLC v. Grant County Assessor, Pet. Nos. 27-002-09-1-5-00001 and 27-040-09-1-5-00001 (December 10, 2013) [Small Claims Docket].  This relatively short decision contains several interesting issues.  Owner filed appeals for two single-family homes. In both cases, Owner acquired and built a home on the property in 2003, but only the land was assessed for a period of years thereafter.  The assessor hadn’t received copies of building permits after construction was completed.  Once the omissions were discovered, however, the assessor valued the homes for multiple years – one for the 2004 to 2006 tax years, the other for the 2004 and 2005 tax years.  Owner didn’t receive copies of the assessment notices.  It discovered the “retroactive assessments” when it received its tax bills for later years, which included “retroactive taxes” and penalties.  The Indiana Board ruled:

  1. The assessment must be challenged to shift burden of proof.  Owner challenged the assessor’s right to assess the homes for prior years, not the values placed on the homes.  Because Owner wasn’t challenging the assessed values, the burden of proof did not shift to the assessor under Ind. Code § 6-1.1-15-17.2.  (Page 5, ¶ 15.)
  2. Notice and reassessment statutes didn’t conflict.  At issue was the alleged conflict between two statutes, Ind. Code §§ 6-1.1-9-4 (Notice Statute) and 6-1.1-4-12 (Developer’s Discount Statute).  The Notice Statute allows an assessor to increase a property’s assessed value in prior years, but “only if the notice required . . . is given within three (3) years after the assessment date for that prior year.”  The Developer’s Discount Statute promotes development of farmland by allowing land acquired by a developer to keep its lower assessed value until the assessment date following one of three events – (i) title to the land is transferred, (ii) construction of a structure begins on the land, or (iii) a building permit is issued for construction of a structure on the land.  The Board noted that the statutes “do not contradict each other” and “should be read together and harmonized.”  (Page 6, ¶ 16(b).)  Here, the Developer’s Discount Statute permitted reassessment of both properties in 2004.  (Pages 6, 7 ¶¶ 16(c) & (d).)  For one property, the assessor timely mailed assessment notices for the 2005 and 2006 tax years (the 2004 notice was too late); for the other property, timely notices were issued for 2004 and 2005. Id.
  3. Even if notice was deficient, no remedy was available.  That the assessor attempted to give notice was undisputed, but Owner argued the notice was defective.  The Board observed that “Indiana Courts have not yet addressed what constitutes proper notice under Ind. Code § 6-1.1-9-1.”  Regardless, the remedy for a defective notice would be to allow a review of the assessment – and Owner was not challenging the assessed value.  Thus, the Board could not “grant the relief as to the amount of the assessment.”  (Page 8, ¶ 16(g).)
  4. No jurisdiction over penalties.  Owner argued that the penalties were incorrect, but the Board is a “creation of the legislature” that “has only those powers conferred by statute.”  (Page 8, ¶ 16(h).)  The legislature gave the Board no authority to review penalties imposed for the late payment of property taxes. Id.  Accordingly, it lacked subject matter jurisdiction to grant the Owner the relief requested. Id.

Shifting the burden of proof to the assessor (but not really), where only land appealed and land value didn’t change. Eggleston v. Boone County Assessor, Pet. No. 06-003-12-1-5-00253 (December 17, 2013) (March 1, 2012 assessment) [Small Claims Docket].  In this appeal of a single family residence, the assessor had the burden of proof on appeal under Ind. Code § 6-1.1-15-17.2, because the property’s assessment had increased by more than 5% over the prior year’s value (from $588,600 in 2011 to $675,000 in 2012).  But Owner only challenged the property’s land value on appeal – which hadn’t changed (it was $172,100 for both years).  The Board ruled that the assessor had the burden of proof on appeal, but concluded that “if the [assessor] fails to meet her burden to prove the 2012 land assessment was correct, the assessment will not change because the 2011 land assessment was the same as the 2012 land assessment.”  (Page 3, ¶ 13) (emphasis added).  Further, the burden was “on the taxpayer to prove that a decrease below the prior year assessment is proper.” (Page 3, ¶ 14.)  Owner didn’t meet its burden.  It failed to show that its 2007 purchase price was relevant to determining the property’s 2012 assessed value.  (Page 5, ¶ 17(b).)  Owner’s reliance on the assessments of comparable properties under Ind. Code § 6-1.1-15-18 was unhelpful, because it failed to show they were, in fact, comparable to the property under appeal.  (Page 5, ¶ 17(e).)

Assessor had burden of proof where only land value challenged and its increased by 5%+; where assessor not prejudiced, failure to exchange exhibits didn’t prevent their admissionAssessor had burden of proof.  In Manship v. Delaware County Assessor, Pet. No. 18-021-11-1-5-00020 (December 31, 2013) (March 1, 2011 assessment date), the assessed value for the land under appeal increased by more than 5% due to the assessor’s decision to re-evaluate how he had previously classified the land.  Because the property remained the “same” between 2010 and 2011 – “there were no intervening changes either to the property’s physical make-up or to its use” – the assessor had the burden of proof on appeal under Ind. Code § 6-1.1-15-17.2. (Pages 7-8, ¶ 23.)  (The Board noted, however, that the assessed value of the land and improvements together also increased by more than 5%.)

Exhibits admitted over assessor’s objections.  Owners failed to provide the assessor copies of exhibits before the hearing.  “In a non-small-claims appeal, the Board’s procedural rules require the parties to exchange witness and exhibit lists at least 15 business days before a scheduled hearing and to exchange copies of their documentary evidence at least five business days before the hearing.”  (Page 4, ¶ 10) (citing 52 IAC 2-7-1(b)(1).)  But the Board is not required to reject the evidence if it is not timely exchanged.  Id.  The Board elected not to deny admission of certain exhibits, where the assessor wasn’t harmed by allowing them.  The Board reasoned:

The Board fails to see how the Assessor was prejudiced by the Manships’ failure to give him copies of Petitioners’ Exhibits 1-2, 6 -9, and 11 five business days before the hearing. Because the Manships served their exhibit list, the Assessor already generally knew what those exhibits were.  In many cases, he had ready access to the exhibits even without the Manships providing copies. For example, Exhibits 2, 6, and 7 are printouts showing aerial views of the subject property taken from websites. And the Manships attached copies of Exhibits 2, 6 and 11 to their Form 131 petition, which they served on the Assessor.  In fact, Exhibit 11 is a copy of the Form 11 R/A that the Assessor’s own office issued to notify the Manships of the subject property’s 2011 assessment.

Three other exhibits, 1, 8 and 9 are narratives that appear to have been prepared by Mr. Manship, who testified at the Board’s hearing. While those narratives might be objectionable on other grounds, the Assessor’s failure to receive them before the hearing does not require their exclusion.

(Page 4, ¶¶ 11-12.)  The Board emphasized that it “does not condone failures to abide by its exchange rules” but, under the circumstances where Owners’ failure to exchange was “inadvertent and did not prejudice the Assessor,” their exhibits were admitted.  (Page 5, ¶ 13)  The Board did reject photographs and a purchase agreement offered by Owners, because the assessor did not have access to them and therefore was “likely prejudiced” by Owners’ failure to provide them in advance of the hearing.  (Page 5, ¶ 14.)

The assessor offered no evidence to show that the land’s assessment reflected its market value-in-use.  (Page 8, ¶ 25.)  The land value, accordingly, was reduced to its 2010 value.  (Page 9, ¶ 28.)

Rebuttal exhibit not provided in advance of hearing allowed; other objections went to relevance, not admissibilityTwyckenham Village, Inc. v. Tippecanoe County Assessor, Pet. Nos. 79-032-10-1-4-00001 and 79-032-11-1-4-00001 (December 5, 2013) (March 1, 2010 and 2011 assessment dates).  In this appeal of a neighborhood shopping center, the assessor objected to owner’s exhibit, because it was not provided five business days before the hearing date.  The hearing officer initially sustained the objection, but “when it was clear that the exhibit was offered as rebuttal evidence, the [hearing officer] admitted the exhibit.”  (Page 3, ¶ 10.)  The Board adopted that ruling, without explanation.  Id.  Owner, in turn, objected to commercial listings and a lease agreement, because the listings were asking prices and the lease occurred after the valuation dates.  Concluding the objections went to the exhibits’ relevance and not their admissibility, the hearing officer admitted the evidence; the Board adopted the ruling.  (Page 4, ¶ 11.)

The Owner lost its appeal.  Its “income capitalization approach failed to comply with generally accepted appraisal principles because it did not consider rents and vacancy rates in the market.”  (Page 9, ¶ 32.)  It also failed to develop arguments under the cost and sales comparison approaches.  (Pages 9-10, ¶¶ 33-35.)

Owners’ evidence excluded, when not produced before hearingBrunson v. Lake County Assessor, Pet. No. 45-023-10-1-5-00003 (December 19, 2012) (March 1, 2010 assessment date) [Small Claims Docket].   In this appeal of a residential property, the assessor requested Owners’ evidence well in advance of the administrative hearing.  It was not produced, and the assessor objected to its admission.  The Board explained:  “Pursuant to 52 IAC 3-1-5(d), if requested not later than 10 business days prior to any hearing by any party, the parties shall provide to all other parties copies of any documentary evidence and the names and addresses of all witnesses intended to be presented at the hearing at least 5 business days before the small claims hearing.”  (Page 2, ¶ 11.)  And the hearing notice included this same information.  Because the instructions were clear and Owners had ample time to prepare for the hearing, the objection was sustained.  (Page 2, ¶ 13.)  Owners’ arguments focused on the alleged errors on the property record card; accordingly, they failed to prove a reduction was appropriate.

Though not authenticated, photographs taken by employee of public agency admitted908 Land Trust v. St. Joseph County Assessor, Pet. Nos. 71-026-08-1-5-04024 and 71-026-09-1-5-01861 (March 1, 2008 and 2009 assessment dates) [Small Claims Docket].  The assessor objected to two orders from the South Bend Department of Code Enforcement, which included 29 photographs of the property from 2007 and 2010.  Noting that it does not “strictly apply” the rules of evidence, the Board observed that the rules “promote determining the truth and justly resolving proceedings.”  (Page 4, ¶ 17.)  Regarding use of photographs, the Board elaborated:

Photographs can be offered for two purposes. Most often, they are offered as demonstrative evidence, meaning that they are merely a ‘nonverbal method of expressing a witness’ testimony.’ In those instances, a photograph is admissible only if the witness can testify that it truly and accurately represents a scene that the witness personally viewed.  Photographs may also be offered as substantive evidence to speak for themselves under the ‘silent witness theory.’ In those cases, more stringent authentication requirements apply.

(Page 4, ¶ 18) (quoting and citing Rogers v. State, 902 N.E.2d 871, 876 (Ind. Ct. App. 2009).)  The Trust failed to authenticate the photographs under either theory.  The Board nevertheless admitted them, because they were taken by an employee of a public agency and the Trust’s witness “independently, if vaguely, testified to the home’s condition.” (Page 4, ¶ 19.)

Trust proved the property’s assessment was excessive based on its sale price.  The Board rejected the assessor’s argument that the sale was not good because the Trust had acquired the property from Freddie Mac, which in turn had acquired it through foreclosure. (Page 5, ¶ 21(c).)


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