Opinion
Cause Nos. 49T10-9601-TA-00005, 49T10-9601-TA-00006
March 12, 1998
On Appeal from Final Determinations of the State Board of Tax Commissioners.
JOHN R. RUMPLE, SHARPNACK, BIGLEY, DAVID RUMPLE, Columbus, Indiana, Attorney for Petitioners.
JEFFREY A. MODISETT, Attorney General of Indiana, JOEL SCHIFF, Deputy Attorney General, Indianapolis, Indiana, Attorneys for Respondent.
These consolidated cases come to this Court on the Petitioners' original tax appeals filed January 23, 1996 challenging final determinations of the State Board of Tax Commissioners (State Board) assessing apartment buildings owned by the Petitioners as of March 1, 1994. In both cases, the Petitioners contend that it was improper to use the Residential Pricing Schedule with a Row-Type Adjustment, instead of the General Commercial Residential (GCR) Pricing Schedule, to assess the subject improvements.
The parties agreed to consolidate the instant cases because the factual and legal issues involved are virtually identical. See Ind. T.R. 42.
The set of regulations that controlled the assessments at issue in this case were those that governed the March 1, 1989 general reassessment. See Ind. Admin. Code tit. 50, r. 2.1-1-1 (1992).
STANDARD OF REVIEW
This Court affords the State Board great deference when the State Board acts within the scope of its authority. Indiana Sugars, Inc. v. State Bd. of Tax Comm'rs, 683 N.E.2d 1383, 1385 (Ind.Tax Ct. 1997). Accordingly, this Court will only reverse a final determination by the State Board when the determination is unsupported by substantial evidence, is arbitrary or capricious, constitutes an abuse of discretion, or exceeds statutory authority. Id. Like any other party appealing an administrative order, a taxpayer in this Court bears the burden of demonstrating that the State Board's final determination is improper. See Componx, Inc. v. State Bd. of Tax Comm'rs, 683 N.E.2d 1372, 1374 (Ind.Tax Ct. 1997).
FACTS AND ANALYSIS
The facts of this case are largely undisputed. The Petitioners own apartment buildings that contain a series of adjoining (side by side) apartments connected by common sidewalls. These buildings resemble row houses or row-type dwellings. Row-type dwellings are defined as "multi-family (two or more families) dwellings in which the individual dwelling units are separated vertically by means of `common' or `party' walls." Ind. Admin. Code tit. 50, r. 2.1-3-4(b) (1992).
At issue in this case is the propriety of assessing the subject improvements by using the Residential Pricing Schedule with a Row-Type Adjustment. According to the Petitioners, the State Board should have used the GCR Pricing Schedule instead. Ind. Admin. Code tit. 50, r. 2.1-4-3 (1992). In support of this proposition, the Petitioners argue that the regulations forbid the use of the Residential Pricing Schedule to assess the subject improvements and that the GCR Pricing Schedule most closely fits the subject improvements. The GCR Pricing Schedule
includes those use-types generally associated with commercial operated residential accommodation, which are more typical of residential type construction as opposed to those which are more characteristic of commercial type construction. This schedule should only be used for structures that are one or two stories. Multiple story structures should be priced from the GCM schedule.
Ind. Admin. Code tit. 50, r. 2.1-4-3(a) (1992). The GCR Pricing Schedule includes "Apartments. Commercial Flats (1-3 stories)." Ind. Admin. Code tit. 50, r. 2.1-4-4 (1992).
That the GCR Pricing Schedule includes three-story apartment buildings is somewhat mystifying in light of the fact that the GCR Pricing Schedule "should only be used for structures that are one or two stories." Ind. Admin. Code tit. 50, r. 2.1-4-3(a).
The Residential Pricing Schedule starts with a base price derived from, inter alia, the size of the dwelling, the type of exterior walls, and the number of stories and then provides for a series of adjustments to reach the true tax value of a dwelling. See Bender v. State Bd. of Tax Comm'rs, 676 N.E.2d 1113, 1116 (Ind.Tax Ct. 1997) (citing Ind. Admin. Code tit. 50, r. 2.1-3-4 (1992)). One of these adjustments is the Row-Type Adjustment (Schedule B):
This Schedule applies only to row-type dwellings, defined as multi-family (two or more families) dwellings in which the individual dwelling units are separated vertically by means
of "common" or "party" walls. Row[-]type dwellings are different from duplexes in which the individual dwelling units are separated horizontally. This category includes any row-type configuration with two or more family units, townhouses, and semi-detached condominium units.
Row-type dwelling units, because they can be owned individually, shall be priced uniformly as individual dwelling units regardless of whether they are owned individually or in combination. Schedule B is used to adjust the base price to account for the variation in the cost of erecting row-type units as compared to free standing single family units.
Ind. Admin. Code tit. 50, r. 2.1-3-4(b).
The Petitioners rely on the following language contained in the Row-Type Adjustment to support their contention that the regulations forbid the use of the Residential Pricing Schedule with a Row-Type Adjustment to assess the subject improvements: "Row-type dwelling units, because they can be owned individually, shall be priced uniformly as individual dwelling units regardless of whether they are owned individually or in combination." Ind. Admin. Code tit. 50, r. 2.1-3-4(b) (emphasis added). They argue, in effect, that the ability to own the individual dwelling units individually is a necessary condition to the use of the Residential Pricing Schedule with a Row-Type Adjustment to assess the subject improvements.
In Bender v. State Bd. of Tax Comm'rs, 676 N.E.2d 1113 (Ind.Tax Ct. 1997), this Court faced a question very similar to that raised by the Petitioners. In Bender, the taxpayer owned property consisting of four dwelling units, each sharing a common wall with the adjoining unit. The property was assessed in the same manner as the subject improvements. The taxpayer claimed error. This Court upheld the final determination of the State Board. Bender, however, did not discuss whether the individual dwelling units at issue in that case could be owned individually.
This Court need not resolve this question in order to decide this case. Even if the Petitioners are correct in their interpretation of the regulation, they must still meet their burden of demonstrating factually that the individual dwelling units in the subject improvements cannot be owned individually in order to succeed. They have not done so.
In support of their position, the Petitioners presented the testimony of Mr. Milo E. Smith. Mr. Smith is a property tax consultant who receives compensation based on the amount that the Petitioners' property tax assessment is reduced. This Court reviews Mr. Smith's testimony in light of the contingent nature of his compensation. See Wirth v. State Bd. of Tax Comm'rs, 613 N.E.2d 874, 876-77 (Ind.Tax Ct. 1993). In his testimony, Mr. Smith offered his conclusion that the individual dwelling units in the subject improvements could not be owned individually. In support of this conclusion, Mr. Smith stated that the individual dwelling units did not have separate deeds. Additionally, Mr. Smith testified that the individual dwelling units did not have double walls separating them.
This testimony is unconvincing. The Petitioners offered no facts to corroborate Mr. Smith's assertion that the individual dwelling units could not be owned separately. The fact that the individual dwelling units did not have separate deeds does not mean that they cannot be deeded separately if the owner so decides. Moreover, the Petitioners did not bring any law, regulation, or local ordinance that would prevent the individual dwelling units from being owned individually to this Court's attention. Mr. Smith's testimony that the subject improvements lack double walls separating the individual dwelling units is meaningless without a showing that the lack of double walls would preclude the individual dwelling units from being owned individually. All Mr. Smith's testimony on this point has done is to show that at the time of the assessment, the individual dwelling units were not owned individually. That is a far cry from showing that they could not be owned individually.
Mr. Smith also testified that he would have assessed the subject improvements by using the GCR Pricing Schedule, instead of the Residential Pricing Schedule with the Row-Type Adjustment. In this case, the Petitioners have failed to demonstrate that the State Board was forbidden to use the Residential Pricing Schedule with a Row-Type Adjustment to assess the subject improvements. The effect of this failure is that this Court must give deference to the State Board's choice of pricing schedules.
Mr. Smith's testimony does not demonstrate an abuse of discretion by the State Board. He merely offered his opinion that the use of the GCR Pricing Schedule was the proper means of assessing the subject improvements. The Petitioners offered no corroborating evidence to support this opinion. In light of the fact that Mr. Smith receives compensation based on the outcome of this case, his unsupported opinion is accorded little weight and is "insufficient to overcome the wide latitude given the State Board and the presumption that the State Board acted properly." Wirth, 613 N.E.2d at 878.
CONCLUSION
In this case, the Petitioners have not met their burden of demonstrating that the final determinations of the State Board were erroneous. Consequently, this Court AFFIRMS the final determinations of the State Board.