ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEES
Steve Carter Timothy D. Hernly
Attorney General of Indiana John C. Smarrella
Barnes & Thornburg
Nandita G. Shepherd South Bend, Indiana
Deputy Attorney General
Indianapolis, Indiana
IN THE
SUPREME COURT OF INDIANA
STATE BOARD OF TAX COMMISSIONERS, )
)
Appellant (Respondent Below), )
)
v. ) No. 71S10-0108-TA-366
)
JUAN C. GARCIA and MARIA N. GARCIA,)
)
Appellees (Petitioners Below).)
APPEAL FROM THE INDIANA TAX COURT
The Honorable Thomas G. Fisher, Judge
Cause No. 71T10-9809-TA-104
April 12, 2002
SHEPARD, Chief Justice.
In a property grading system based upon comparables, what happens when
a property is incomparable?
In this case, the Indiana State Board of Tax Commissioners appeals the
Indiana Tax Court’s decision that the Board’s methodology for assessing
Juan and Maria Garcia’s home at a grade of “A + 6” for the 1993 tax year
was arbitrary and capricious. The State Board argues that the Tax Court
abused its discretion in overturning the grading.
We conclude that the Tax Court did not give adequate deference to the
Board’s method of calculation and thus affirm the grade of “A + 6” for the
Garcias’ residence.
Facts and Procedural History
The Garcias’ home was assessed as of March 1, 1993. The resulting
proceeding has involved two local assessments, two hearings before the
State Board, two published opinions from the Tax Court, and now our
decision. Garcia v. State Bd. of Tax Comm’rs, 694 N.E.2d 794 (Ind. Tax
1998) (“Garcia I”), appeal after remand, 743 N.E.2d 817 (Ind. Tax 2001)
(“Garcia II”), review granted, 761 N.E.2d 415 (Ind. 2001).
The Garcias reside in an 11,000 square foot dwelling in South Bend.
The Penn Township Assessor originally assigned a grade of “A + 10,” the
highest grade assignable. 50 Ind. Admin. Code 2.1-3-2(b), 4(f) (1992).
Displeased with this grade, the Garcias petitioned the St. Joseph County
Board of Review. In February 1994, the County Board determined that the
Garcias’ home was properly assessed.
The Garcias then filed a Form 131 Petition for Review of Assessment
with the State Board in March 1994, and the Board held a hearing on July
14, 1994. The Board heard evidence regarding the exterior of the
residence, the structural elements of the roof, and the high quality
amenities such as cabinets, light fixtures, plumbing fixtures, and multiple
heating systems, features that were all generally indicative of an “A”
grade dwelling. 50 IAC 2.1-3-2 (1992). The State Board agreed that the
Garcias’ home deserved an elevated “A” grade, but reduced the assessment to
“A + 4.”
The Garcias next filed an original tax appeal petition with the Tax
Court, which held the Board’s methodology in grading dwellings above an “A”
grade was arbitrary and capricious. Garcia I, 694 N.E.2d at 795. The Tax
Court remanded to the Board for further consideration. Id. at 800.
Following the Tax Court’s decision, the State Board held a remand
hearing on June 22, 1998. Using a methodology discussed in detail below,
the Board revised the grade of the Garcias’ dwelling to “A + 6.”
After this setback, the Garcias filed a second original tax appeal
petition to the Tax Court. The Tax Court again held that “neither the
regulations nor generally accepted appraisal standards provide for setting
a grade above an ‘A,’” and it directed the State Board to enter a grade of
“A” on the Garcias’ home for 1993. Garcia II, 743 N.E.2d at 821.
The Board petitioned this Court to review the final judgment of the
Tax Court pursuant to Indiana Appellate Rule 63. We granted review. 761
N.E.2d 415.
What Lies Ahead
This case arrives here as major developments in Indiana property
assessment law are underway. On March 1, 2002, a general reassessment of
all real property within Indiana began.[1] In response to our holding in
State Board of Tax Commissioners v. Town of St. John, 702 N.E.2d 1034 (Ind.
1998), and to satisfy the statutory and constitutional requirements of
property tax assessments, the State Board has developed a new manual and
guidelines. See 50 IAC 2.3-1-1 (2001).
At the heart of the new regulations is the State Board’s endeavor to
define “true tax value” so as to measure property wealth.[2] True tax
value is defined as “[t]he market value-in-use of a property for its
current use, as reflected by the utility received by the owner or a similar
user, from the property, less that portion of use value representing
subsistence housing for its owner.” State Board of Tax Commissioners, 2002
Real Property Assessment Manual 2 (2001).
The manual further explains true tax value as “the ask price of
property by the owner, because . . . the ask price represents how much
utility must be replaced to induce the owner to abandon the property.” Id.
Attempting to measure “value-in-use” as opposed to “value-in-exchange,”
the manual specifies three methods for determining the value of real
property: (1) cost approach,[3] (2) sales comparison approach,[4] and (3)
income approach.[5] Id. Using one of these methods, the manual states
that assessors will arrive at the true tax value, reduced by the applicable
shelter allowance for owner-occupied housing units. Id. at 3, 7, 23.
The manual goes on to say:
Appeal of assessments must operate within the rules and utilize data
in the same manner as provided in this manual. In general, this
requires that challenges to assessments be proven with aggregate data,
rather than individual evidence of property wealth. Since assessments
are calculated using aggregate data, it is not permissible to use
individual data without first establishing its comparability or lack
thereof to the aggregate data. By requiring taxpayers to make any
internal data “readily available” assessors are given the opportunity
to establish this comparability.
There shall be a presumption that the value determined according to
the rules prescribed in this manual is the true tax value of the
subject property. However, the taxpayer shall be permitted to offer
evidence relevant to the fair market value-in-use of the property to
rebut such presumption and to establish the actual true tax value of
the property as long as such information is consistent with the
definition of true tax value provided in this manual and was readily
available to the assessor at the time the assignment was made. Such
evidence may include actual construction costs, sales information
regarding the subject or comparable properties, appraisals that are
relevant to the market value-in-use of the property, and any other
information compiled in accordance with generally accepted appraisal
principles.
Id. at 5-6.
The State’s declared goal is to establish a more objectively
verifiable result that will satisfy the constitutional requirements of
uniform and equal property assessment. See id. at 2-3.
Tax Board and Tax Court practice are likewise changing. Effective
January 1, 2002, the State Board of Tax Commissioners was abolished and its
duties distributed to two new agencies: the Department of Local Government
Finance, which has tax collection authority,[6] and the Indiana Board of
Tax Review, which will review property tax appeals.[7]
As for the Tax Court, the legislature has abolished the Tax Court’s
former practice of re-creating the evidence that had been before the State
Board as a substitute for making a formal administrative record at the time
of the Board proceedings.[8] Instead, the Board of Tax Review must now
prepare a certified record of the proceedings related to the petition for
judicial review that includes:
1) Copies of all papers submitted to the Indiana board during the
course of the action and copies of all papers provided to the
parties by the Indiana board. For purposes of this subdivision,
the term “papers” includes, without limitation, all notices,
petitions, motions, pleadings, orders, orders on rehearing, briefs,
requests, intermediate rulings, photographs, and other written
documents.
2) Evidence received or considered by the Indiana board.
3) A statement of whether a site inspection was conducted, and, if a
site inspection was conducted, either:
(A) a summary report of the site inspection; or
(B) a videotape transcript of the site inspection.
4) A statement of matters officially noticed.
5) Proffers of proof and objections and rulings on them.
6) Copies of proposed findings, requested orders, and exceptions.
7) Either:
A) a transcription of the audio tape of the hearing; or
B) a transcript of the hearing prepared by a court reporter.
Ind. Code Ann. § 6-1.1-15-6(b) (West Supp. 2001)(effective Jan. 1, 2002).
A Tax Court appeal will now be heard on that record, subject to the
provisions of the Administrative Orders and Procedures Act in Indiana Code
Ann. chapter 4-21.5-5.[9] Relief will be granted if the Board of Tax
Review’s actions were arbitrary, capricious, an abuse of discretion,
unsupported by substantial evidence, or otherwise violate one of the
standards listed in Ind. Code Ann. § 4-21.5-5-14(d) (West 1991).
In short, Tax Court appeals will now bear strong resemblance to the
review of other agency determinations, like those of the Workers
Compensation Board or the Indiana Utility Regulatory Commission, presently
undertaken by the Court of Appeals. Judge Shields summarized these appeals
in language approximating the present basis for tax appeals:
Judicial review of an administrative decision is limited to a
determination of whether the agency has jurisdiction over the matter
and whether its order is in accordance with proper legal procedure, is
based on substantial evidence, and does not violate any
constitutional, statutory, or legal principle.
Ind. Civil Rights Comm’n v. Wellington Village Apartments, 594 N.E.2d 518,
529 (Ind. Ct. App. 1992)(citations omitted).
From these appeals heard by the Court of Appeals and the Tax Court,
this Court has discretion to grant further review. App. R. 4(A)(2).
The Garcias’ Assessment of “A + 6”
This case is thus a trailing example of assessment from the era
before Town of St. John, 702 N.E.2d 1034. In Garcia II, the Tax Court
found the State Board’s methodology for assessing the Garcias’ home above
the grade of “A” to be arbitrary and capricious. 743 N.E.2d at 818. The
Board argues that the Tax Court failed to give proper deference to the
State Board’s final determination. (Appellant’s Br. at 13-15.) In
response, the Garcias claim that the Board exceeded its authority by
adopting new assessment methodology and that the methodology was arbitrary
and capricious.[10] (Appellees’ Br. at 3-5.)
A. Assessment’s Basic Principles. For residential improvements, true
tax value is calculated by determining the whole dollar cost of reproducing
the improvement as determined under the State Board’s rules and
regulations. See 50 IAC 2.1-3-4 (1992). Assessors assign a grade factor
ranging from “A” to “E” to account for the dwelling’s particular
construction qualities and amenities. See 50 IAC 2.1-3-2 (1992).
“C” grade dwellings, defined as “[m]oderately attractive dwellings
constructed with average quality materials,” are considered average and
assigned a grade factor of 100 percent of the replacement cost as
determined by the State Board. 50 IAC 2.1-3-2(a), (b) (1992). The highest
major classification grade is “A,” which is defined as a dwelling of
“outstanding architectural style and design” that is “constructed with the
finest quality materials and workmanship throughout.” Id. at 2(b).
Further on, the regulation states that “[m]ansion type dwellings fall
within the upper limits of the grade ranging from AA to AAA [grades “A + 4”
to “A + 10”].” Id.; 50 IAC 2.1-3-4(f) (1992). “A” grade dwellings have a
grade factor of 160 percent of the base price. 50 IAC 2.1-3-2(b) (1992).
Because dwellings can fall between the major classifications, the
Board’s regulations provide a system of pluses and minuses to fine-tune the
grades.[11] See 50 IAC 2.1-3-4(f) (1992). Grades that fall above “A” are
indicated by “+1” through “+10,” with each increment representing an
increase in value over the base grade of twenty percent. Id. The Garcias’
grade of “A + 6” represents a factor of 280 percent. See id.
Within the State Board’s regulations, assessors must use models, which
are “conceptual tool[s] used to replicate replacement cost of a given
structure using typical construction materials.” 50 IAC 2.1-3-2(a) (1992).
Included within the regulations are “[g]raded photographs of
representative dwellings . . . [to] assist the assessor in selecting the
proper grade.” Id.; see also 50 IAC 2.1-3-6 (1992). Photographs of
comparable homes with grades from “A” to “E – 1” are shown in the
regulation. See 50 IAC 2.1-3-6 (1992). No home graded above an “A” is
pictured. See id. Additionally, a “Grade Specification Table” describes
the general characteristics of dwellings within each major
classification.[12] 50 IAC 2.1-3-2(b) (1992).
B. Methodology for Garcias’ Grade. In reaching the “A + 6” grade,
the State Board started with the actual construction cost of the Garcias’
home, $1,634,543. The State Board subtracted items not assessed in Indiana
or assessed as separate line items.[13] The net cost equaled $918,677.
The Board then determined that the applicable regulations concerning grade
were based upon 1985 reproduction costs.
Therefore, the State Board equated the Garcias’ 1991 construction
costs with the 1985 data. To do this, it discounted the 1991 construction
costs by a consumer price index deflator[14] to arrive at an adjusted 1985
cost of $741,005 for the Garcias’ home. Additionally, because the 1985
cost schedules in the State Board’s Manual were further reduced by fifteen
percent, the State Board then reduced the $741,005 by fifteen percent to
reach the figure of $629,854. This figure, the State Board determined,
represented the adjusted construction cost of the Garcias’ home.[15]
Finally, the State Board calculated that a grade of “C” on the
Garcias’ home would have equaled a reproduction cost of $217,900. To
arrive at an appropriate grade factor, the State Board divided $629,854 by
$217,900, which equaled approximately 289 percent. The State Board rounded
that figure to 280 percent for a final grade of “A + 6.”
In sum, the Garcias’ grade of “A + 6” was arrived at by deflating
their dwellings’ actual cost of construction to a 1985 cost level, then
dividing by the grade “C” reproduction costs from the State Board’s cost
schedules, to arrive at a rounded grade multiplier of 280 percent.
C. Review of the Tax Court’s Decision. We review Tax Court decisions
under a “clearly erroneous” standard of review. In doing so, we recognize
that the Indiana Tax Court was established to develop and apply specialized
expertise in the prompt, fair, and uniform resolution of state tax cases.
Ind. Dep’t of State Revenue v. Caylor-Nickel Clinic, P.C., 587 N.E.2d 1311
(Ind. 1992).
In reviewing the State Board’s approach in Garcia II, the Tax Court
again found fault with the State Board’s methodology and directed that a
grade of “A” be entered on the Garcias’ home. 743 N.E.2d at 821. Despite
acknowledging that the “State Board’s method of calculating grade in this
case does make some sense,” Id. at 820 n.7, the Tax Court held that “no
support exists in the regulation for the above calculation.” Id. at 820.
The court further stated, “[I]f the State Board wishes to use such a method
when dealing with future appeals . . . it must be included in the
regulations.” Id. at 820 n.7.
Like other courts conducting judicial review of administrative
actions, the Tax Court owes a certain deference to the executive body to
which is assigned the principal responsibility for carrying out the
mission. The Tax Court may reverse a final determination of the State
Board only when its decision is unsupported by substantial evidence, is
arbitrary or capricious, constitutes an abuse of discretion, or exceeds
statutory authority. Wetzel Enters., Inc. v. State Bd. of Tax Comm’rs, 694
N.E.2d 1259 (Ind. Tax 1998). The taxpayer bears the burden of
demonstrating that the State Board’s final determination is invalid. Clark
v. State Bd. of Tax Comm’rs, 694 N.E.2d 1230 (Ind. Tax 1998).
Indiana Code Ann. § 6-1.1-35-1 (West 1998) establishes the following
duties of the State Board:
(1) interpret the property tax laws of this state;
(2) instruct property tax officials about their taxation and
assessment duties and ensure that the county assessors, township
assessors, and assessing officials are in compliance with
section 1.1 of this chapter;
(3) see that all property assessments are made in the manner
provided by law; and
(4) develop and maintain a manual for all assessing officials and
county assessors concerning:
(A) assessment duties and responsibilities of the various
state and local officials;
(B) assessment procedures and time limits for the completion
of assessment duties;
(C) changes in state assessment laws; and
D) other matters relevant to the assessment duties of
assessing officials, county assessors, and other county
officials.
Given this clear legislative grant of authority to develop regulations and
interpret the property tax law within Indiana, the Tax Court should have
accorded more deference in this instance to the State Board’s actions.
The Tax Court’s ruling that any methodology not appearing within the
regulations would be arbitrary and capricious effectively prevents grading
of dwellings above “A.” The regulation at issue, however, 50 IAC 2.1-3-
4(f) (1992), clearly contemplates that dwellings will fall above grade “A.”
On this point, the regulation states:
Grades that fall above “A” (which represents a factor of 160%) are
indicated by “+1” through “+10” (each of which represents an increase
of the factor by 20%, so that “A + 10” equals a factor of 360%).
Grade “A + 4” may be designated “AA”, and grade “A + 10” may also be
designated as “AAA”.
50 IAC 2.1-3-4(f) (1992).
The Tax Court’s conclusion, therefore, flies in the face of the
regulations. First, regulation 2.1-3-4(f) explicitly contemplates ten plus
factors above “A.” Second, the regulation assigns specific percentage
increments to these higher grades. A “C” house has a grade factor of 100
percent, an “A” house has a grade factor of 160 percent, and an “A + 6”
house has a grade factor of 280 percent. And third, while not providing
pictorial representations, regulation 2.1-3-2(b) does describe houses at or
above “A + 4” as “mansion type dwellings.” 50 IAC 2.1-3-2(b) (1992).
Under this scheme, graded dwellings can be thought of as falling
somewhere on a bell-shaped curve, with the few houses of the poorest
quality construction (grades “E – 4” to “E – 1”) on one end of the curve
and the few mansions of the highest quality construction (“A + 4” to “A +
10”) on the opposite end. The average house (the “C” classification) falls
somewhere around the mean of the curve.
Because few homes fall within these fringe categories (below “E” and
above “A”), the regulations provide specific comparisons to guide assessors
only for grades between “A” and “E - 1.” This is understandable. If the
State Board tries to provide assessors with a picture of a dwelling it
considers of the highest quality, what happens when an even more expensive
and luxurious home is built in the future?
Predictably, it is only those few dwellings of especially high quality
that will be heard to complain. No homeowner is likely to challenge a tax
appraisal as too low.
In this rare situation, the Garcias built a home so upscale that the
“comparables” available to assessors were simply not comparable. There
were no general specifications or graded photographs to guide the local
assessors. But the State Board did have the general description of
“mansion type dwellings” and specific grade factors over the average “C”
classification from which to work. See 50 IAC 2.1-3-2(b), 4(f) (1992).
As the Tax Court agreed in Garcia II, the State Board’s methodology of
using discounted construction costs in comparison to reproduction costs
derived from the regulations for average “C” dwellings makes sense. 743
N.E.2d at 820 n.7. It is a reasonable approach that results in an
objectively verifiable grading. Given that the Garcias’ house was one of
the few dwellings falling within the elevated “A” category, it was within
the State Board’s discretion to identify the rationale for grading the
Garcias’ home at “A + 6.”
The Garcias argue, in essence, that because the State Board did not
contemplate a home of this caliber it must assess the Garcias’ home based
upon the best it did contemplate and assign a grade of “A.” We disagree.
The State Board found an objective, logical method to assess a literally
incomparable property within the existing guidance.[16] This was not
arbitrary or capricious.
We conclude that the State Board acted within its statutory authority
and assessed the Garcias’ residence using a methodology that was neither
arbitrary nor capricious.[17] The Garcias’ home was properly graded at “A
+ 6.”
Conclusion
We affirm the decision of the State Board of Tax Commissioners.
Dickson, Sullivan, Boehm, and Rucker, JJ., concur.
-----------------------
[1] See Linda Mullen, “Plymouth Native Poised for Challenge; Laramore Set
to Take Charge of Statewide Reassessment,” S. Bend Trib., June 27, 2001 at
D1.
[2] The Indiana Constitution requires “a system of assessment and taxation
characterized by uniformity, equality and just valuation based on property
wealth, but the Clause does not require absolute and precise exactitude as
to the uniformity and equality of each individual assessment.” Town of St.
John, 702 N.E.2d at 1040 (discussing Ind. Const. art. X, § 1). Indiana
Code Ann. § 6-1.1-31-6(c) (West 2001) states that “[w]ith respect to the
assessment of real property, true tax value does not mean fair market
value.”
[3] The “cost approach” attempts to “estimate[] the value of the land as if
vacant and then add[] the depreciated cost new of the improvements to
arrive at a total estimate of value.” Id. at 3.
[4] The “sales comparison approach” purports to “estimate[] the total value
of the property directly by comparing it to similar, or comparable,
properties that have sold in the market.” Id.
[5] The “income approach,” typically used for income producing properties,
attempts to convert an estimate of what the property is expected to produce
“into a value through a mathematical process know as capitalization.” Id.
[6] Ind. Code Ann. §§ 6-1.1-30-1.1, 14 (West Supp. 2001).
[7] Ind. Code Ann. §§ 6-1.5-1-3, 4-1 (West Supp. 2001).
[8] Ind. Code Ann. § 6-1.1-15-6 (West 2000)(repealed 2002) required the
board to assemble a certified transcript of the proceedings for judicial
review, but expressly stated that “the transcript shall not include the
evidence compiled by the board with respect to the proceedings.” Because
the evidence compiled by the board was not included in the transcript, “the
evidence must be reconstructed on judicial review through the introduction
of the same exhibits, the same testimony of the same witnesses, or the
testimony of the hearing officer.” State Bd. of Tax Comm’rs v. Gatling Gun
Club, Inc., 420 N.E.2d 1324, 1329 (Ind. Ct. App. 1981).
[9] See Ind. Code Ann. § 6-1.1-15-5(b) (West Supp. 2001)(effective Jan. 1,
2002).
[10] The Garcias also claim that the “A + 6” grade violated Indiana Code §
4-22-2-19.1. (Appellees’ Br. at 11.) The statute provides that it is
unlawful for a state agency to “retroactively apply a change in the
agency’s interpretation of a . . . regulation . . . if that change
increases a taxpayer’s liability.” Ind. Code Ann. § 4-22-2-19.1 (West
1998). As we discuss below, because the Garcias’ home was of such high
quality, the State Board had to extrapolate from its existing guidelines,
not change an interpretation, to grade the dwelling. The statute is
inapplicable in this case.
[11] The State Board’s regulations governing intermediate grading say:
Dwellings sometimes fall in between the major classifications, or at
intermediate grade levels. A method of interpolation is therefore
built into the system whereby intermediate grade levels are indicated
by suffixing the letter symbol (“A” through “E”) of the major
classification with one of the following.
+/-2 to indicate that the grade falls halfway between the assigned
grade classification and the grade immediately above or below it.
Example: a grade of “C + 2” indicates that the quality and
design grade classification is estimated to fall halfway between
“C” and “B” (average to good construction).
+/-1 to indicate that the grade falls slightly above or below the
assigned grade classification (or at a point approximately 25% of the
interval between the assigned grade classification and the grade
immediately above or below it).
Example: a grade of “C + 1” indicates that the quality and
design grade classification is estimated to be slightly better
than average or approximately halfway between a “C” grade and a
“C + 2” grade.
Grades that fall below “E” (which represents a factor of 40%) are
indicated by “-1” through “-4” (each of which represents a reduction
of the factor by 10%, so that “E – 4” equals a factor of 0%).
Grades that fall above “A” (which represents a factor of 160%) are
indicated by “+1” through “+10” (each of which represents an increase
of the factor by 20%, so that “A + 10” equals a factor of 360%).
Grade “A + 4” may be designated “AA”, and grade “A + 10” may also be
designated as “AAA”.
50 IAC 2.1-3-4(f) (1992).
[12] For instance, an “A” grade dwelling is described as having general
characteristics such as high grade plumbing fixtures, high quality
cabinets, hardwood or high quality carpet, and outstanding architectural
style. 50 IAC 2.1-3-2(b) (1992).
[13] Items not assessed included landscaping, fill dirt, extra concrete, a
fence, and a security system totaling $228,332. (Joint Exh. 50 at 8.) The
items separately assessed included the pool house, tennis court, tennis
pavilion, tool shed, pool, and spa, with a total value of $487,534. (Id.
at 9.)
[14] The consumer price index deflator was based on the consumer price
index from the Bureau of Labor Statistics. (Id.)
[15] The Garcias argue that the State Board’s use of consumer price index
data and an actual construction cost multiplier violate due process because
they did not have an opportunity to rebut the figures. (Appellees’ Br. at
15.) We disagree. Due process requirements can be adequately protected
“by procedures imposed after the government deprivation acts against the
property.” Clifft v. Ind. Dept. of State Revenue, 660 N.E.2d 310, 318
(Ind. 1995)(emphasis in original)(citation omitted). “[W]here property
rights are involved, mere postponement of the opportunity to be heard is
not a denial of due process if the opportunity ultimately given is
adequate.” Id. (citing Commissioner v. Shapiro, 424 U.S. 614, 631-32
(1976)). While the Garcias have argued to both this Court and the Tax
Court that they have had no opportunity to rebut the State Board’s
evidence, they have not presented alternative numbers or demonstrated how
the State Board’s calculations were wrong. (See Joint Exh. 51 at 40;
Appellees’ Br. at 15.) Conclusory assertions that the State Board’s
formula was erroneous are insufficient to meet the taxpayers’ burden of
demonstrating that the final determination is invalid. See State Bd. of
Tax Comm’rs v. Indianapolis Racquet Club, Inc., 743 N.E.2d 247, 252 (Ind.
2001) (citations omitted).
[16] The Garcias argue at length in their brief that “most of the homes in
the Garcias’ neighborhood were of comparable quality to the Garcias’ home.”
(Appellees’ Br. at 18.) However, the assessments of nearby properties,
which the Garcias cite, lead us to a different conclusion. (See Appellees’
App. at 21.) The six neighbors the Garcias reference received initial
assessments ranging from “A + 3” (220 percent) to “A” (160 percent). (Id.)
The County and State Boards lowered these assessments to between “A” (160
percent) and “B + 2” (140 percent). (Id.) The Garcias’ initial assessment
of “A + 10” (360 percent) was upheld on review by the County Board, then
lowered by the State Board to “A + 6” (280 percent). Before and after
review, the Garcias’ home was viewed as a higher quality property.
The Garcias also introduced the testimony of their home’s builder,
James Rans, who stated that the Garcias’ neighbors’ homes were of the “same
quality,” except that the Garcias’ home was “bigger.” (Id. at 56.) After
Rans testified that he had built several of the Garcias’ neighbors’ homes,
the State Board hearing officer requested that the Garcias provide any
available construction cost data on a particular neighborhood property.
(Id. at 80-82, 92.) The Garcias failed to provide this information.
(Joint Exh. 51 at 18.)
[17] The Board’s latitude in carrying out its responsibilities is not, of
course, unlimited. See, e.g., State Board of Tax Commissioners v. New
Castle Lodge #147, Loyal Order of Moose, Inc., No. 49S10-0011-TA-720, April
12, 2002, where the Board repeatedly applied an incorrect exemption
standard to the fraternal lodge, then switched focus mid-stream and argued
that the lodge did not meet the “predominate use” standard for partial
property tax exemption. We remanded for reconsideration of the exemption
allowed.
Here, in contrast, the Garcias built a home more luxurious than any
“comparables” pictured in the Board’s assessment manual. The Board
extrapolated from existing standards to assess the home at an “A + 6” grade
as contemplated by Board regulations and allowed the taxpayer a reasonable
opportunity to respond to its assessment methodology. This was an
appropriate exercise of the Board’s discretion.