Twelve Days of Property Tax Protections for Indiana Taxpayers – Day No. 2: The Burden Shifting Rule for Changed Land Classification

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The Indiana General Assembly has gifted Hoosier landowners another property tax protection by assigning the burden of proof on appeal to the assessor responsible for changing a property’s land classification.  The notice of change must do two things: it must “specify” (i) the change of classification and (ii) the reasons for the change.  If the assessor cannot support the change on appeal, the land assessment must be modified to reflect a value based on the prior classification.

What does it say? Indiana Code § 6-1.1-15-17.1 is short and direct:

In the case of a change occurring after February 28, 2015, in the classification of real property:

(1) the county assessor or township assessor must on the notice required by IC 6-1.1-4-22 specify any changes in land classification and the reasons for the change; and

(2) the county assessor or township assessor making the change in the classification has the burden of proving that the change in the classification is correct in any review or appeal under this chapter and in any appeals taken to the Indiana board of tax review or to the Indiana tax court.

Why is it important? Changing the classification of land can result in large swings to value, particularly if that classification changes from an agricultural use to a commercial use.  To avoid sudden changes to land value (and the next year’s tax bill), the legislature requires the assessor responsible for the spike in value to put the taxpayer on notice of the change and to support that change with evidence.  In other words, assessors have to, first, tell the landowner of the changed classification and, second, explain why the change of classification was made – basic and immensely fair protections to which no assessor could reasonably object.

In Charles G. and Jacqueline S. Wismiller Revocable Living Trust v. Lake County Assessor (January 8, 2021), the Indiana Board of Tax Review demonstrated the importance of this taxpayer protection.  In this case, the Trust in August 2018 purchased a 4.25-acre parcel in Lowell, and the Assessor changed the property’s land classification from agricultural to residential for the January 1, 2018 assessment date (increasing taxes due and payable in 2019).  The Indiana Board concluded that the Assessor had the burden of proof to show that the change of classification was proper and failed to meet that burden.  Assessor claimed that the Trust acquired the land for recreational purposes, i.e. hunting.  Trust, in turn, claimed that the landlocked parcel was on the back side of a 50-acre parcel that it owned and actively farmed.

The Indiana Board addressed the different treatment of how agricultural land is valued versus other land types:

[A]ssessment appeals addressing agricultural land are treated differently than other assessment challenges. While a party must normally present market-based evidence to prove the value of the property at issue, agricultural land is assessed according to specific statutes and regulations. The legislature has directed the [Department of Local Government Finance] to use distinctive factors, such as soil productivity, that do not apply to other types of land. Ind. Code § 6-1.1-4-13. The DLGF determines a statewide base rate by taking a rolling average of capitalized net income from agricultural land. Assessors then adjust that base rate according to soil productivity factors. Depending on the type of agricultural land at issue, assessors may then apply influence factors in predetermined amounts.

(citations omitted).

The Indiana Board observed, “[Assessor] first needed to provide us with probative evidence demonstrating that changing the property’s classification from agricultural to residential was justified.”  The DLGF’s assessment guidelines, the Indiana Board further noted, defined “residential property” as “vacant or improved land devoted to, or available for use primarily as a place to live” and that it “is normally construed to mean a structure where less than three families reside in a single structure.”   By comparison, “land purchased and used for agricultural purposes includes cropland or pasture land (i.e., tillable land) as well as woodlands.” Agricultural land can also include “idle cropland” or non-tillable land “covered with brush or scattered trees.”

The Indiana Board failed to make a prima facie case that the Assessor’s assessment increase was supported.  According to the Board, it could not “find any support for the proposition that an agricultural classification depends solely on whether the property is actively farmed.”  In this appeal, where the assessor had the burden of proof twice over (because the assessment had been increased by more than 5% year-over-year and because of the change in land classification) the assessment was returned to the prior year’s value.  See also Susan Mudge-Trustee/Trust v. Bartholomew County Assessor (March 11, 2019) (where Assessor had the burden to support re-classification of land from agricultural valued at $8,000 to residential valued at $100,100 – and offered nothing to support the reclassification – the Indiana Board ruled that he “must change the property’s classification back to agricultural and assess it accordingly”).

In both examples, this reasonable taxpayer protection statute effectively did its intended job.

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