Has your Indiana property tax assessment increased? Four reasons the burden of proof may have shifted to the Assessor to prove the higher value should stick. Appeals due no later than June 15th.

Faegre Drinker Biddle & Reath LLP

Faegre Drinker Biddle & Reath LLP

Did you or your company open your property tax bill or assessment notice from an Indiana assessor this spring and experience sticker shock? If so – whether retail, office, apartments, industrial, or something else – you can file a petition to challenge that higher value on or before June 15, 2020. Depending on the facts of your property, its use, and the reason for the increase, the assessor may be obligated to prove on appeal that the new, higher value is correct. If the increase is not adequately supported by probative, credible evidence, the new assessment could be reduced to the prior year’s value. To preserve its right to claim a reduction – or to compel the assessor to defend an increased value – an Indiana taxpayer must file an appeal on or before June 15, 2020. (Depending on the county, the appeal is either for the January 1, 2019 or 2020 assessment date.)

Four laws shifting the burden of proof to the assessor. Typically, a taxpayer challenging an assessment has the burden of proof to demonstrate that (i) the new assessment is improper and (ii) what the correct value should be. In at least four circumstances, however, Indiana law assigns responsibility to the assessor to defend the propriety of the change before the taxpayer, in turn, must submit its own evidence supporting a lower value.

1. The assessment has increased by more than 5% — without a material change in the property or its use. If the assessor raises a property’s assessment by more than 5% year-over-year, the assessor likely has the burden of proof in an assessment appeal if the increase is not due to (i) “substantial renovations or new improvements,” (ii) zoning or (iii) uses that were not considered in the prior year’s assessment of the property. If the assessor fails to meet this burden, at minimum the assessment should revert to the prior year’s original value or its value as corrected (by the assessor, by joint stipulation or on appeal). Taxpayer has the burden of proof to show an even lower value is appropriate. See Ind. Code § 6-1.1-15-17.2(a)-(c). This burden-shifting requirement has been tested in numerous administrative appeals. This post is too brief to review the law’s nuances, but it has teeth, particularly before the Indiana Board of Tax Review.

2. Unless valued using the income approach, any assessment increase following a prior year’s successful appeal. If a property’s assessment was decreased as part of a prior year’s appeal under Ind. Code §§ 6-1.1-15 et al. – regardless of the amount of the increase for the next year – the assessor has the burden of proof to show that the higher value is correct. But no burden shift occurs “if the real property was valued using the income capitalization approach in the [prior] appeal.” See Ind. Code § 6-1.1-15-17.2(d).

3. The assessor reclassifies the land. The Assessor “making the change in the [land] classification has the burden of proving that the change in the classification is correct” in an assessment appeal. If, for example, land previously assessed using the low agricultural base rates now is valued using much higher commercial or industrial rates, the assessor must explain the basis for the change and provide evidence showing the change was appropriate. See Ind. Code § 6-1.1-15-17.1.

4. The assessor changes the “underlying parcel characteristics.” The assessor is obligated to document each change and the reason for each change of a property’s “underlying parcel characteristics” – including changes to the property’s “age, grade, or condition . . . from the previous year’s assessment date.” For such changes, on appeal “the assessor has the burden of proving that each change was valid.” See Ind. Code § 6-1.1-4-4.4.

A recent example: Assessor had the burden of proof, failed to support the increase, and the assessment was reduced to the prior year’s value. On January 12, 2020, the Indiana Board issues its final determination in Ciasto v. Monroe County Assessor, involving the January 1, 2019 assessment (for taxes payable in 2020) of a residential property in Bloomington, Indiana. The home’s assessment increased by more than 5% over the property’s assigned value for January 1, 2018. The Assessor conceded that she had the burden of proof on appeal. In an effort to meet that burden, the Assessor offered the testimony of a private contractor. The contractor was not a licensed appraiser and did not prepare an appraisal report. Nevertheless, the contractor presented a sales comparison analysis which, after adjustment, purportedly showed that the home’s value should be increased. The contractor also developed a so-called “uniformity comparison” to calculate a slight downward “uniformity adjustment.”

The sales comparison approach was not convincing, because the contractor failed to show that his adjustments to the sales complied with generally accepted appraisal principles. His analysis did not constitute “probative valuation evidence.” Likewise, the contractor did not show that his “uniformity comparison” complied with generally accepted appraisal principles. The Indiana Board ruled: “Because the Assessor did not offer any probative valuation evidence, she failed to make a prima facie case that the property’s current assessment is correct. [Taxpayer] is therefore entitled to have her 2019 assessment reduced to its 2018 assessed value of $173,700. Because [Taxpayer] did not request a lower value, this ends our review.”

Taxpayers must file appeals by June 15, 2020 to preserve rights to a reduction. Failure to file on time risks waiving a taxpayer’s rights to a potential assessment reduction for the date at issue. While taxpayers have a longer three-year window to petition for the correction of certain errors, there may be ambiguity about which errors qualify for such treatment. Filing by the June 15th deadline may avoid delay caused by any confusion as to the appropriate vehicle to address the valuation issue.

Taxpayers are cautioned to seek advice from their legal or tax professionals before filing any property tax appeals.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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