Let the decisions stand! On September 7, 2016, the Indiana Tax Court relied on the well-established principle of stare decisis – the “foundation stone of the rule of law” – in refusing to overrule the Court’s prior decisions regarding use of comparable sales to so-called “secondary users” and sales of vacant stores.
Both parties agreed the original assessments were excessive. Taxpayer in Howard County Assessor v. Kohl’s Indiana LP occupied an 88,242 square foot retail store and challenged the property’s 2010 to 2012 assessments. Before the Indiana Board of Tax Review, both Taxpayer and Assessor offered appraisals concluding to values lower than the original assessments. The appraisals differed in the comparable sales relied upon. Taxpayer’s appraisal used fee simple sales of nine Midwestern “big box” retail stores. These comparable sales were vacant at the time of sale, and the properties were used for retail purposes before and after their sales. Assessor’s appraisal, in contrast, used only leased fee sales.
Taxpayer’s appraisal was more probative. The Indiana Board adopted the values advocated by Taxpayer. The Tax Court explained:
After reviewing the evidence presented, the Indiana Board found that because the Assessor 1) acknowledged that properties like the subject property frequently trade in the market for a general retail use, 2) indicated that the subject property’s current use was its highest and best use, and 3) failed to demonstrate that the subject property was in fact a special purpose property, [Taxpayer’s] appraisal better reflected the subject property’s market value-in-use.
The Assessor’s appraisal, on the other hand, improperly “measured the value of a property that was better than, and not similar to, the subject property.” Slip op. at 5.
Tax Court relies on longstanding case law to support Taxpayer’s use of comparable sales. Indiana assessors are required to determine a property’s market value-in-use, defined as the value “of a property for its current use, as reflected by the utility received by the owner or a similar user, from the property.” Slip op. at 7 (citing 2002 Indiana Manual at 2). Under that standard, Indiana “taxes the value of real property – and not business value, investment value, or the value of contractual rights.” Slip op. at 7. The Court explained, “[M]arket value-in-use, as determined by objectively verifiable market data, is the value of a property for its use, not the value of its use.” Slip op. at 7 (quoting Stinson v. Trimas Fasteners, Inc., 923 N.E.2d 496, 501 (Ind. Tax Ct. 2010), emphasis in original). The Court further observed that “when a property’s current use is consistent with its highest and best use and there are regular exchanges within its market so that ask and offer prices converge, a property’s market value-in-use will equal its market value because the sales price fully captures the property’s utility.” Slip op. at 7 (quoting Millennium Real Estate Inv., LLC v. Assessor, Benton Cnty., 979 N.E.2d 192, 196 (Ind. Tax Ct. 2012).) The Court noted that it “has repeatedly interpreted the meaning of ‘current use’ broadly, rejecting the contention that with respect to commercial and industrial properties, properties that have been sold to ‘secondary users’ cannot be considered comparable.” Slip op. at 8 (citing multiple decisions). And the Court “has also disavowed the contention that vacant properties cannot be comparable to occupied properties.” Slip op. at 9 (citing Trimas Fasteners, Inc., 923 N.E.2d at 501).
The Tax Court’s decisions were not “wrongly decided.” The Assessor on appeal offered one argument, i.e. that the Tax Court should abandon its “wrongly decided” prior decisions. Slip op. at 9-10. But the Court found “no infirmities in its decisions” and therefore declined the Assessor’s invitation to overturn those decisions. Slip op. at 10.
