The shifting burdens of Indiana assessment appeals: New “5% rule” may shift the burden of proof multiple times

Who has the burden to prove a property tax assessment is correct on appeal?  Before July 1, 2009, the answer was nearly always the taxpayer at both levels of appeal – local and state.  But the Indiana General Assembly passed a “burden-shifting” statute that placed the burden on the assessor if the property’s value increased by more than 5% over its prior year’s assessment.  The Indiana Board of Tax Review (IBTR, the agency responsible for reviewing assessment appeals) interpreted the law as applying only to appeals at the local level (i.e. before the County Board, also known as Property Tax Assessment Board of Appeals or PTABOA), not to appeals before it.  So, the General Assembly modified the law effective July 1, 2011 to clarify:

This section applies to any review or appeal of an assessment under this chapter if the assessment that is the subject of the review or appeal increased the assessed value of the assessed property by more than five percent (5%) over the assessed value determined by the county assessor or township assessor (if any) for the immediately preceding assessment date for the same property. The county assessor or township assessor making the assessment has the burden of proving that the assessment is correct in any review or appeal under this chapter and in any appeals taken to the Indiana board of tax review or to the Indiana tax court.

Ind. Code § 6-1.1-15-17.2 (previously Ind. Code § 6-1.1-15-17) (emphasis added).

The IBTR issued several decisions in late 2011 and early 2012 regarding this burden-shifting provision. Examples of these recent rulings include:

1.  Burden shifting provision was a procedural change that applied to pending appeals, not a change in substantive law that could be applied only prospectivelyEcho Lake, LLC v. Morgan County Assessor, Pet. Nos. 5-016-09-1-4-00001 et al. (Nov. 4, 2011). Where the value of a mobile home park increased by more than 5% (from approximately $1.3 million to $2.95 million), the taxpayer argued that the assessor had the burden to prove the assessment was correct.  The parties argued whether the statute (which was effective July 1, 2011) should be applied retroactively or prospectively.  The Board, however, stated it was “unconvinced that the application of Indiana Code § 6-1.1-15-17 to this case would, in fact, be a retroactive application of the law.”  Page 8, ¶ 23.  To the extent it was a retroactive application, the Indiana Board found that the burden of proof was a procedural amendment that could be applied retroactively.  Page 8, ¶ 2 n.4.  In reaching this conclusion, the Indiana Board reasoned that the “burden of proof” exists only in the field of litigation and has no application in the regulation of conduct among members of society in general.” Id.  Thus, the change was not a change in the substantive law. The General Assembly included no language stating that the change of burden applied only to future assessments. Page 9, ¶ 26.

The Indiana Board held that the Assessor failed to make a prima facie case that the property was correctly assessed for the March 1, 2009 assessment date. Page 17, ¶ 34.  However, the taxpayer offered “rebuttal” evidence that the property’s value as of March 1, 2009 was $2.3 million – higher than its March 1, 2008 assessed value.  Taxpayer argued that this evidence should only be considered if the assessor had met her burden or the Taxpayer was found to have had the burden.  The Indiana Board held:  “[O]nce probative evidence is submitted on the record, the Board cannot turn a blind eye to its value.”  Page 18, ¶ 35.  Thus, the Indiana Board accepted that data (an income analysis) and assigned a value of $2.3 million for the March 1, 2009 assessment.  Page 19, ¶ 37.  See http://www.in.gov/ibtr/files/Echo_Lake_LLC_55-016-09-1-4-00001_2_3_.pdf  See also Driver v. Steuben County Assessor, Pet. No. 76-002-08-1-5-00005, Page 6, ¶ 13(e) (March 14, 2012) [Small Claims Docket] (concluding that assessor had burden on appeal, where the assessment had increased by more than 5% over prior year, but Indiana Board reduced assessment only to the property’s appraised value, which was higher than the prior assessment but lower than the PTABOA’s assessment). http://www.in.gov/ibtr/files/Driver_76-002-08-1-5-00005.pdf

2.  Where the assessor fails to meet her burden, the Taxpayer is not required to introduce substantial valuation evidence.  Stout v. Orange County Assessor, Pet. No. 59-007-09-1-5-00001 (Nov. 7, 2011)  [Small Claims Docket].  Taxpayer claimed that the assessor had the burden to prove the value of a one-acre home site and 8.12 acres of additional land for the March 1, 2009 assessment date, because the value had increased more than 5% over prior year’s assessment.  The assessor had the burden to prove the assessment. Page 7, ¶ 13(i).  The Board held: “When the Respondent has the burden of proving the assessment is correct and fails to provide probative evidence supporting the assessment, the Petitioner’s obligation to introduce substantial valuation evidence is not triggered.” Page 9, ¶ 14(i).  See  http://www.in.gov/ibtr/files/Stout_59-007-09-1-5-00001.pdf

3.  To shift the burden, there must be evidence of the prior year’s assessed value.  Madden v. Marion County Assessor, Pet. Nos. 49-801-02-1-5-07175 and 49-801-04-1-5-00995 (Nov. 14, 2011).  Taxpayers challenged the assessment of their residential land for the March 1, 2002 and 2004 assessments.  They claimed the land value increased 13.5% between 2002 and 2004, a fact which shifted the burden to the assessor to prove the correct value.  But the taxpayers failed to submit evidence of the property’s value in 2001 and 2003 – the years preceding the assessment dates at issue. Thus, there was no evidence as to whether the property’s assessed value had increased more than 5% between assessment dates.  Page 8, ¶ 20.  The burden did not shift to the assessor.  See http://www.in.gov/ibtr/files/Madden_49-801-02-1-5-07175_et_al.pdf

4.  Even where the assessor has the initial burden of proof, the Taxpayer has the burden to show that a value lower than the prior year’s assessed value is appropriate.  Kloepper v. Steuben County Assessor, Pet. Nos. 76-011-07-1-5-00092 & 76-011-08-1-5-00007 (Dec. 22, 2011) [Small Claims Docket]. Taxpayers appealed the March 1, 2007 and 2008 assessments of their land used to access storage buildings and as green space.  The land was part of a lot that had been split in the 1950s, with both halves being the same size and having the same use.  The assessor applied a 50% influence factor to the other half lot but no factor to the contested half lot.  The PTABOA applied a 20% factor to the contested half lot.  Both the initial and modified assessments were greater than 5%, so the Indiana Board concluded that it “need not decide whether the operative assessment to compare to the prior year’s assessment is (1) the assessment originally made by the county or township assessor, or (2) the PTABOA’s determination.” Page 7, ¶ 18 n.4.  The assessor had the burden of proving the March 1, 2007 assessment was correct. Page 7, ¶ 18.  The assessor failed to do so, and the taxpayers failed to prove any adjustment below the March 1, 2006 value was justified. Page 11, ¶ 23.  The assessment was thus reduced to its March 1, 2006 value. Id.  However, the assessor did not change the half lot’s assessment from the March 1, 2007 to the March 1, 2008 assessment dates.  The PTABOA reduced both years’ assessments to the same amount.  “Thus, the Kloeppers bore the burden of proving that they were entitled to any reduction in the subject property’s March 1, 2008 assessment.” Page 7, ¶ 19.  The 2008 assessment remained the same, because the taxpayers did not meet their burden of proving that the value should be reduced.  Page 11, ¶ 24.  http://www.in.gov/ibtr/files/Kloepper_76-011-07-1-5-00092_and_08-00007.pdf

5.  Where the property has changed from the prior assessment date, evidence should show the value of those changes.  Indiana Bank & Trust Company v. Scott County Assessor, Pet. No. 72-003-09-1-4-00001 (Jan. 20, 2012) [Small Claims Docket]. Taxpayer challenged the March 1, 2009 assessment of its bank.  The property record card showed an increase of the property’s assessment of more than 5% between the March 1, 2008 and 2009 assessment dates.  Taxpayer claimed that the assessor had the burden of proof. Page 1, ¶ 9.  The assessor agreed and presented her case first. Id.  The assessor failed to make a prima facie case. Page 5, ¶ 15.  However, the bank had added special features to the property between the assessment dates.  Taxpayer agreed that the value of these features should be added and admitted that an assessment of approximately $250,000 would be appropriate.  “Lacking probative, market-based evidence about what the actual market value-in-use really is, the Board will accept the value admitted by the Petitioner.” Pages 5-6, ¶ 16. http://www.in.gov/ibtr/files/Indiana_Bank_and_Trust_Company_72-003-09-1-4-00001.pdf

 

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