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Thursday, January 13, 2005

Ind. Decisions - Supreme Court issues four tax decisions today

Dept. of Local Gov't. Finance v. Commonwealth Edison Co. of Ind., Inc. (1/13/05 IndSCt) [Taxation]
Sullivan, Justice

An electric utility requested that State property tax authorities provide it with property tax relief with respect to certain of its property in Lake County on grounds that residential property owners in the County paid less than Indiana property tax law required. As evidence, the utility relied on studies that showed that the assessed valuation of residential property in the County was well below its fair market value. Indiana property tax law in effect at the time—now significantly reformed—provided that property was to be assessed based on its “true tax value,” a basis unrelated to its fair market value. Because the studies offered by the utility in support of its requests were based on fair market value, not the statutory standard of true tax value, the State properly denied the requests.

Background. Over the past decade, the Indiana property tax system has been overhauled as a consequence of a series of judicial, legislative, and administrative decisions. Prior to this upheaval, property was not assessed on the basis of its fair market value (“FMV”) but according to a standard the Legislature called “true tax value” (“TTV”). True tax value, to repeat, was not FMV but rather the value of property determined under regulations promulgated by the State Board of Tax Commissioners (“State Board”). See footnote The new r egime purports to assess property based on its FMV.

This case arises under the old order. It requires us to examine the extent to which the FMV of property was relevant to determining assessed valuation in the TTV world. * * *

Conclusion. We affirm in part and reverse in part the decision of the Tax Court. The State Board properly dismissed Commonwealth’s petitions.

Shepard, C.J., and Dickson, Boehm, and Rucker, JJ., concur.

Lake County Property Tax Assessment Bd. of Appeals v. BP Amoco Corp. (1/13/05 IndSCt) [Taxation]
Sullivan, Justice
In May 1999, an industrial concern filed property tax appeals claiming that the taxes on its Lake County personal property covering the five-year period from 1995 through 1999 were “illegal as a matter of law.” The taxpayer’s specific claim was that the county had “systematically underassessed property in Lake County to [its] detriment.” Indiana law in effect at the time permitted challenges to assessments on this basis but required them to be made only to the current year’s assessment, not prior years’. As such, the local and state property tax authorities correctly dismissed the appeals covering 1995 through 1998. * * *

The decision of the Indiana Tax Court in this case is reversed. The decisions of the property tax authorities dismissing BP Amoco’s appeals on Form 133 are affirmed.

Shepard, C.J., and Dickson and Boehm, J.J., concur. Rucker, J., concurs in result.

Lake County Property Tax Assessment Bd. of Appeals v. U.S. Steel Corp. (1/13/05 IndSCt) [Taxation]
Sullivan, Justice

The amount of property taxes payable for an individual piece of property is set by allocating the total dollar amount anticipated to be required to meet the revenue needs of the taxing district among all pieces of property in proportion to their assessed valuations. As such, the amount of property taxes payable for an individual piece of property will be a function of three major variables: (1) the assessed valuation of the individual piece of property; (2) the total dollar amount of revenue to be raised; and (3) the total assessed valuation of all the pieces of property in the taxing jurisdiction.

The taxpayer here, United States Steel Corporation (“USS”), came to the view that local property tax officials had illegally reduced the aggregate assessed valuation of the property in the taxing jurisdiction during the “assessment years” 1994, 1995, and 1996. If so, USS’s property taxes for those years would have been too high. On May 5, 1998, USS filed papers (using forms denominated “Form 133, Petition for Correction of Error” and “Form 17T, Petition for Refund”) seeking refunds of the property taxes it contended had been illegally imposed and overpaid for the 1994-1996 period.

USS’s challenges were first denied by the Lake County Board of Review and then by the Indiana Board of Tax Review. USS then sought judicial review in the Indiana Tax Court. The Tax Court concluded that “[t]he only question is whether Lake County’s removal of assessed valuation from its tax rolls (and, hence, the resulting tax rate) was, as a matter of law, illegal—a question that falls squarely within the ambit of the 133 Petition.” U.S. Steel Corp. v. Lake County Prop. Tax Assessment Bd. of Appeals, 785 N.E.2d 1209, 1216 (Ind. Tax Ct. 2003). The local and state property tax authorities sought, and we granted, review of the Tax Court’s decision. Lake Co. Prop. Tax Assessment Bd. of Appeals v. United States Steel Corp., 804 N.E.2d 749 (Ind. 2003). * * *

Although USS presents a more sympathetic case than the taxpayer in BP Amoco, we reach the same result. [IC] 6-1.1-15-12(a)(6) and [IAC] Title 50, Regulation 4.2-3-12 authorize the use of Form 133 to obtain adjustments to assessments and property tax refunds where the taxes, as a matter of law, have been determined to be illegal. BP Amoco, slip op. at 8-9. But they are not available “to challenge the methodology used in generating an assessment.” We conclude that the legislative and regulatory scheme required USS to set forth in its contentions that local property tax officials had illegally reduced the aggregate assessed valuation in the relevant jurisdiction on Form 130, subject to the time limitations and other requirements of [IC] 6-1.1-15-1 and [IAC] Title 50 Section 4.2-3-4. Because USS did not do so, no timely determination was made that its taxes were illegal as a matter of law and relief under [IC] Section 6-1.1-15-12 and [IAC] Title 50 Sections 4.2-3-4, 12 and 14 on Form 133 was not available. The State Board of Tax Commissioners properly dismissed USS’s petitions.

Conclusion. The decision of the Tax Court in this case is affirmed in part and reversed in part. The decision of the State Board of Tax Commissioners dismissing USS’s appeals on Form 133 is affirmed.

Shepard, C.J., and Dickson and Boehm, JJ., concur. Rucker, J., concurs in result.

State of Indiana Ex Rel the Attorney General of the State of Indiana v. The Lake Superior Court and the Hon. Robert Pete, as Judge thereof and Governor of the State of Indiana, et al v. Miller Citizens Corp., et al (1/13/05 IndSCt) [Taxation]
Boehm, Justice

In 2001, the General Assembly passed two statutes that applied only in Lake County and provided for countywide reassessment of property for tax purposes to be conducted by the Department of Local Government Finance and by private contractors selected by the DLGF. The plaintiffs are a group of taxpayers who brought an action in April 2004 in Lake Superior Court seeking a declaratory judgment that these statutes are unconstitutional. The bills for taxes due in 2003 had not yet been mailed due to delays in the reassessment process and the plaintiffs asked that the taxing authorities in that county be enjoined from mailing bills for the property taxes due in 2003.

The trial court found the statutes to violate five separate provisions of the Indiana Constitution and granted the requested preliminary injunction. The Attorney General contended that exclusive jurisdiction over this case lies in the Tax Court and on that ground asked this Court for a writ of mandamus and prohibition. While that writ proceeding was pending, an appeal of the preliminary injunction was also initiated. This Court stayed the trial court’s preliminary injunction. As a result the taxing authorities were free to mail the bills for taxes due in 2003. We then ordered the writ proceeding and the appeal to be argued concurrently. This opinion addresses both.

We hold that the Lake Superior Court had no jurisdiction to entertain these claims. We recognize that ordinarily lack of jurisdiction of the trial court would preclude deciding any other issues. However, this case presents a challenge to the entire assessment process in Indiana’s second most populous county. For the reasons explained below, we think it is clear that the plaintiffs will ultimately fail in their effort to enjoin the tax bills produced by the 2002 countywide reassessment. It is not in anyone’s interest to preserve false hopes by resolving this appeal on jurisdictional grounds alone. In short, there is broad public interest in a prompt resolution of this case, and the parties ask us to address the merits of the plaintiffs’ claims without regard to jurisdiction. For these reasons we do so without delaying a final resolution of this matter.

We conclude that the statutes providing for private parties or the DLGF to assess certain assets in Lake County violate one of the provisions of the Indiana Constitution on which the plaintiffs rely, but not the other four. Although the 2001 laws violated Article IV, Section 22 of the Indiana Constitution as special legislation providing for the assessment of taxes, in 2004 the General Assembly passed a statute authorizing the assessment conducted pursuant to the 2001 legislation. This “curative” legislation validated the acts taken under the unconstitutional special legislation. Moreover, plaintiffs waited until reassessment was completed to seek injunctive relief. In the meantime, other taxpayers and local government units relied on the ongoing reassessment process provided by statute to supply funding for essential day-to-day functions of government. For that reason as well, plaintiffs’ claim for injunction was barred by the delay in seeking equitable relief. * * *

Conclusion. The preliminary injunction entered by the trial court is vacated. This case is remanded with instructions to dismiss the complaint for lack of jurisdiction.

Dickson, J. concurs. Shepard, C.J., and Sullivan J. concur in Part I with separate opinion by Sullivan, J. Rucker, J. concurs in Parts I, II, and IV, and dissents as to Part III with separate opinion. * * *

Posted by Marcia Oddi on January 13, 2005 02:31 PM
Posted to Ind. Sup.Ct. Decisions