ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
Steve Carter Larry J. Stroble
Attorney General Michael Rosiello
Jennifer A. Dunfee
Nandita G. Shepherd Barnes & Thornburg
Deputy Attorney General Indianapolis, Indiana
Indianapolis, Indiana
In The
INDIANA SUPREME COURT
STATE BOARD OF TAX )
COMMISSIONERS, )
Appellant, (Respondent below), )
)
v. ) 49S10-0202-TA-152
)
INLAND CONTAINER )
CORPORATION, )
Appellee , (Petitioner below). )
________________________________________________
APPEAL FROM THE INDIANA TAX COURT
The Honorable Thomas G. Fisher, Judge
Cause No. 49T10-9609-TA-109
________________________________________________
On Petition For Review
March 21, 2003
DICKSON, Justice
Finding that legislation amending a state tax deduction statute
violated the Property Taxation Clause of the Indiana Constitution as
applied in this case, the Indiana Tax Court reversed the determination of
the State Board of Tax Commissioners, granted the taxpayer's motion for
summary judgment, and remanded to the State Board with instructions to
grant the taxpayer's deduction claim. Inland Container Corp. v. State Bd.
of Tax Comm'rs, 756 N.E.2d 1109 (Ind. Tax 2001). We reverse.
The facts of the case are undisputed and set out in detail in the
opinion of the Tax Court. Inland Container Corporation ("Inland")
manufactures corrugated cardboard containers. Its mill in Vermilion
County, Indiana, disposes of waste materials by converting them into
recycled paper. In 1994, Inland applied for and was granted a Resource
Recovery System ("RRS") property tax deduction,[1] which permitted Inland
to take a deduction for 95% of the assessed value of the Vermillion County
mill.
In 1995, the legislature amended the RRS statute to provide that,
effective May 1, 1995, the RRS deduction "would only be available for
systems certified for the 1993 assessment year or earlier, and it phased
out the deduction entirely after the 1997 assessment year." Id. at 1112.
The 1995 amendment further provided that any RRS "that was assessed in 1994
and deducted for the first time in 1994" could not receive the deduction
for property taxes due and payable in 1995 or later, but could instead
claim a significantly smaller deduction as "new manufacturing equipment."
P.L. 25-1995 § 104(b).
Inland did not pay the additional amount subsequently listed in the
supplemental property tax statement that reflected the changes implemented
with the 1995 amendments. Instead, Inland appealed to the Vermillion
County Board of Review, which denied relief. Inland then unsuccessfully
appealed to the State Board of Tax Commissioners and thereafter filed its
original tax appeal with the Indiana Tax Court. On cross motions for
summary judgment, the Tax Court denied the State Board's motion and granted
Inland's motion, concluding:
When the legislature amended the RRS deduction statue in May 1995, it
created a classification based upon the date that a taxpayer first had
its RRS certified by IDEM. This classification, however, was
arbitrary because it was not based on differences "naturally inhering"
within the RRS property itself. This classification allowed some
taxpayers with comparable properties to obtain the RRS deduction on a
phased out basis for the 1994 to 1997 assessment years, while other
taxpayers, such as Inland, were altogether denied the RRS deduction
for the 1994 assessment year. Because the classification created an
artificial distinction, the assessed value of Inland's RRS property is
not equal or uniform with comparable RRS properties. Accordingly, the
amended RRS statute violates Article 10, § 1 of the Indiana
Constitution as applied to Inland.
756 N.E.2d at 1119 (included citations and footnote omitted).
We granted the State's petition for review. Inland Container Corp. v.
State Bd. of Tax Comm'rs, 774 N.E.2d 509 (Ind. 2002). When we grant review
of a decision of the Tax Court, we address only the issues presented in the
petition for review. Boehm v. Town of St. John, 675 N.E.2d 318, 320 (Ind.
1996). Unlike our procedure on petitions for transfer from the Court of
Appeals,[2] our grant of review of a Tax Court case does not automatically
vacate the opinion, but instead modifies it pursuant to our opinion. Id.
The State contends that the 1995 amendment to the RRS statute does
not violate the Property Taxation Clause, Article 10, Section 1, of the
Indiana Constitution, which requires "a uniform and equal rate of property
assessment and taxation." The State primarily argues that tax deductions
are not components of either assessment or rate of taxation. Defending
the Tax Court opinion, Inland does not challenge the authority of the
legislature to phase out the RRS deduction, but asserts that by allowing
RRS deductions (albeit gradually phased out) for systems certified before
1994 and simultaneously denying them to systems first certified in 1994,
the amendment violates the Property Taxation Clause's requirement for
substantially uniform and equal rates of property assessment and taxation.
Inland argues that, "[w]hether a taxpayer sought to qualify an RRS for the
deduction in a prior year is simply irrelevant to determining the
qualification for the deduction in the current year." Br. of Appellee at
21.
The alleged disparate treatment in this case arises because the
legislature modified tax policy and provided a transitional phase-out
period for the prior policy. Here the legislature changed tax policy by
eliminating the RRS deduction beginning with systems first certified for
the 1994 assessment year and by allowing but gradually phasing out the
deduction for systems previously certified. While properties certified
before 1994 are substantially similar to those first certified in 1994, the
disparate tax treatment results from the implementation of the change in
tax policy.
Most, if not all, legislative changes in tax policy arguably create
interim temporal disparities. Article 10 contemplates legislative
modifications of tax policies and is not automatically violated whenever
tax policies change. While many modifications in tax statutes may create a
point in time after which the same type of property would be assessed
and/or taxed at a different rate than that preceding the change, this
cannot prevent the legislature from enacting changes in tax policy.
Likewise, Article 10 is not violated when changes in a tax deduction
statute create inequalities because comparable property is treated
differently during the same year due to a transitional phase-out of prior
deductions.
Despite possible resulting brief interim disparities, there is no
constitutional violation simply because tax policies applicable in one year
are different from those applicable in another year, or because tax
legislation may employ a transitional or graduated elimination of prior tax
policies or implementation of new ones.
The amended RRS deduction statute as applied to Inland does not
violate the Property Taxation Clause, Article 10, Section 1, of the Indiana
Constitution. We reverse and remand to the Tax Court for further
proceedings consistent with this opinion.
SHEPARD, C.J., and SULLIVAN, BOEHM, and RUCKER, JJ., concur.
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[1] At the time Inland qualified for the deduction, "resource recovery
system" meant "tangible property directly used to dispose of solid waste or
hazardous waste by converting it into energy or other useful products."
Ind. Code § 6-1.1-12-28.5(a) (1993).
[2] See Ind. Appellate Rule 58(A).