I. Indiana Will Enforce Economic Nexus Requirements after Wayfair

On June 21, 2018, the Supreme Court of the United States issued a landmark opinion impacting state sales and use tax regimes across the country in South Dakota v. Wayfair et. al., 138 S.Ct. 2080 (2018). The decision allows for states to constitutionally impose sales and use tax registration and collection requirements on remote retailers, even online retailers. Under prior law, states could not impose these requirements on a seller unless it had “physical presence” in the state. By overruling the physical presence requirement, the Supreme Court has effectively allowed for states to impose the collection and remission obligations on out-of-state retailers based on their economic nexus with, rather than physical presence in, the state.

The Court in Wayfair upheld the South Dakota economic nexus law at issue. This law required out-of-state retailers with no physical presence in the state to collect and remit sales tax if: the seller delivered more than $100,000 of goods or services into South Dakota or engaged in 200 or more separate transactions for the delivery of goods or services. The Court also looked favorably on the fact that South Dakota was a member of the Streamlined Sales and Use Tax Agreement (“SSUTA”).

Indiana had previously passed economic nexus legislation essentially identical to that of South Dakota’s, which was effective as of July 1, 2017. Pursuant to Ind. Code § 6-2.5-2-1, Indiana requires remote retailers to collect sales and use tax if, in the previous or current calendar year, their gross receipts from Indiana sales exceeded $100,000 or they had 200 or more separate in-state sales transactions. Prior to the Court’s decision in Wayfair, the American Catalog Mailers Association and Netchoice challenged Indiana’s law as unconstitutional, but the case was dismissed on August 27, 2018 after the retailers settled with the Department. See American Catalog Mailers Assoc. et al. v. Krupp, Cause No. 49D01-1706-PL-025964.  The Indiana Department of Revenue has stated that it will begin enforcing the economic nexus registration and collection requirements beginning on October 1, 2018.

Thus, retailers, especially online retailers, meeting these sales thresholds in Indiana are required to register and collect Indiana sales and use tax. Indiana is also a full member of the SSUTA, which allows remote sellers to register through the central registration system in all twenty-four SSUTA member states in one process. If the taxpayer needs to comply only with Indiana, it can register at www.inbiz.com. Taxpayers can also sign up for email updates from the Indiana Department of Revenue regarding new administrative policy.

The Court’s Wayfair decision will have far-reaching implications, and taxpayers should take the time to evaluate how their businesses may be affected. Taxpayers with concerns about Indiana’s October 1, 2018 compliance date should contact their tax advisors, especially considering the often-complex nature of registration requirements, availability of collection solutions, availability of potential defenses and the need to become familiar with many states’ tax laws quickly and simultaneously.

II. Select Administrative and Case Updates

Income Tax

Letter of Findings Number: 02-20170109 (Jan. 31, 2018) (Adjusted Gross Income Tax) – Indiana Throwback Sales

Taxpayer maintained that sales to customers in Canada should not be thrown back to Indiana because Taxpayer has nexus in Canada. Taxpayer manufactures, fabricates and distributes products and services for the rail, construction, energy and utility markets. Taxpayer operates a rail fabrication and distribution facility in Indiana. In its protest and during the administrative hearing, Taxpayer gave a detailed account of its rail activity in Canada. Taxpayer supplies standard lengths of rail as well as continuous welded rail ("CWR") in 1,600 foot lengths. Taxpayer owns a fleet of modified flat-bed train cars used to transport the CWR to customer job sites. Taxpayer also owns a specialized unloading car, which is used at the jobsite to unload the CWR from the train. When CWR is delivered to a customer's job site, a Taxpayer employee will travel to the destination to supervise the process and operate the unloader car, and work in unison with the rest of the crew to pull the rail off the weld train as a locomotive pulls the weld train in the opposing direction. Unloading CWR takes roughly three days without any delays. During the years at issue, taxpayer had no property, rented locations or payroll within Canada. Taxpayer asserted that its activities exceeded mere solicitation and constituted "doing business" in Canada. The Department agreed, finding that Taxpayer's employees were not sales people and were not engaging in solicitation while in Canada. The Department also noted that Taxpayer's use of its unloader car and its unloading services falls under the definition of "doing business" in a state under 45 IAC 3.1-1-38(4) and (5). Viewing Taxpayer's activities as a whole, the Department concluded that Taxpayer had sufficient nexus with Canada to eliminate those sales from Indiana throwback sales.

Letter of Findings Number: 02-20150440 (Jan. 31, 2018) (Corporate Income Tax) – Indiana Research Expense Credits

Taxpayer is a parent company of an American multinational conglomerate, which provides high technology products and services to building systems and aerospace industries. Taxpayer and its subsidiaries (together, “Taxpayers”) claimed that they had conducted qualified research activities in Indiana and had incurred approximately $1.63 million dollars of the Indiana Research Expense Credits ("RECs"). When a taxpayer claims that it is entitled to the research credits, the taxpayer is required to maintain and provide sufficient contemporaneous evidence in usable form and detail to support its qualified research activities, its qualified research expenses ("QREs"), and the factual connection (namely "nexus") between such qualified research activities and QREs. To be entitled to the Indiana RECs, in addition to satisfying the requirements established in I.R.C. § 41(b) and (d), a taxpayer must further demonstrate that it incurred the QREs for qualified research activities that occurred in Indiana. The Department concluded that the data provided by Taxpayers to substantiate the credit was not adequate. This data consisted of news releases on new products, names of employees performing the research, job titles, and salary information, along with a description of the research activity taking place. The information lacked specificity, such as location of these employees as well as whether supervisory personnel were directly involved with research. Without the required usable and verifiable records to establish the "nexus" for the QREs or detail information of employees' involvement of certain qualified activities and relevant expenses that occurred in Indiana, the Department concluded that Taxpayer was not entitled to the claimed Indiana RECs.

Elmer v. Ind. Dep’t. of State Revenue, 49T10-1110-TA-00064 (Ind. Tax Ct. Jan. 4, 2018), rev. denied – Expense Deductions

Department assessed Adjusted Gross Income Tax (“AGIT”) for 2005 through 2008, disallowing certain expense deductions claimed for Taxpayer’s businesses. Taxpayer started two businesses, Pharmakon Long Term Care Pharmacy, Inc. (“Pharmakon”) and Hamilton Consulting Group, Inc. (“Hamilton”). Pharmakon served as the primary pharmacy for certain long term care facilities operated by Magnolia Health Systems, Inc. (“Magnolia”) and its affiliates.  Taxpayer conducted this business with “little formality”, and generally did not utilize written contracts. Beginning in 2007, some of Pharmakon’s customers, including some of Magnolia’s affiliates, failed to pay for amounts invoiced to them.   By 2008, those uncollected amounts totaled approximately $650,000. Taxpayer also reached agreements with another company, Augusta Corporation (“Augusta”), to provide certain services previously performed by Pharmakon, and Augusta would order certain supplies from Pharmakon.  From 2005 through 2007, Pharmakon had been Hamilton’s only customer.  Pharmakon paid Hamilton approximately $9 million for “contract labor”, and Hamilton, in turn, paid Augusta about $7 million for “consulting” services.  At some point, the companies stopped doing business, but the date of this was unclear. After an audit, the Department issued separate audit reports for Pharmakon and Hamilton, in each case disallowing some of their expense deductions because the Taxpayer had not demonstrated that the requirements for deductibility were met.  The Department proposed over $400,000 in additional AGIT, interest and penalties.  The Court noted that written documentation is not necessarily required for determining such expense deductions, and Indiana does not prohibit oral contracts. However, the probative value of, and weight afforded to, trial evidence would control.  Taxpayer conceded that he could not substantiate a large portion of his expense deductions, leaving at issue the claimed deductions for contract labor and uncollectible debt.  The Court held that the evidence included numerous infirmities, including a lack of detail as to services provided, which the Court noted was “especially troubling” since Pharmakon was Hamilton’s only customer in 2008. As to the uncollected debt expense deduction, the Court noted that taxpayers must establish that they have exhausted the usual and reasonable means of collection before they are entitled to the deduction.  The Court found that there was no evidence in the record as to what collection measures, if any, were made. The Court found that there was no reliable or credible evidence of the terms of oral agreements, as well as inconsistencies in the evidence as to such debts.  The Court affirmed the Department’s final determination.

Popovich v. Ind. Dep’t. of State Revenue, 49T10-1010-TA-00053 (Ind. Tax Ct. Dec. 29, 2017), rev. denied – Deduction of Gambling Losses

Taxpayer claimed to be a professional gambler for purposes of certain gambling-related deductions from his Indiana adjusted gross income for the 2004 tax year.  The Court found that the taxpayer was not a professional gambler for such purposes, and was thus not entitled to such deductions. Taxpayer participated in several businesses over several years, including an aviation repossession firm with his wife, and a “transactional business” involved with short-term independent contractor and entrepreneurial work. In 2002, Taxpayer began pursuing a business plan which he “mapped out in his head” for the pursuit of professional gambling.  During this time, he did not have his own checking account, but used his wife’s checking account for purposes of establishing a casino line of credit. He gambled at a casino on 40 occasions in 2002, losing over $200,000 in that year. In 2003 he tracked his gambling activities on spreadsheets, which indicated that he gambled 69 times and lost over $450,000. In 2004, his net winnings totaled $44,200.  In 2004, Taxpayer established his own personal checking account to conduct his gambling activities.  Taxpayer made several “loans” to his wife, but had poor recordkeeping and did not prepare promissory notes. In October of 2004, Taxpayer’s line of credit with the casino was terminated and he stopped gambling entirely and “moved onto another deal”.   In 2005, Taxpayer filed his federal and state income tax returns separately from his wife.   He deducted $6.4 million in losses from his gambling winnings of $6.8 million.  He also carried forward a 2003 gambling loss which reduced his adjusted gross income to negative $411,031.  As a result, Taxpayer reported his 2004 Indiana Adjusted Gross Income Tax (“AGIT”) liability as $0.  In an audit, the Department disallowed his deduction of gambling losses, imposing nearly $300,000 in AGIT, interest and penalties.  Taxpayer appealed to the Tax Court, which employed a two part test utilized by the U.S. Supreme Court: a taxpayer claiming to be engaged in the business of professional gambling must demonstrate (1) that he is involved in the activity with continuity and regularity and (2) that his primary purpose for the activity is for income or profit.  See C.I.R v. Groetzinger, 480 U.S. 23, 35 (1987). The Tax Court also considered as part of its analysis nine factors employed in Treas. Reg. § 1.183-2(a)-(b). The Tax Court found that the Taxpayer’s records were incomplete, possibly inaccurate, not contemporaneously prepared, and generally lacked the consistency necessary to be considered reliable.  The Tax Court also noted that under Groetzinger, gambling activity may be continuous and regular if the taxpayer has no other source of employment or livelihood.  However, the Court noted that the Taxpayer was involved in various other income producing activities during the time he claimed to be a professional gambler, including as indicated in an article written about his aircraft repossession business with his wife. The Court found that the Taxpayer did not present a prima facie case with respect to either of the Groetzinger factors above, and upheld the Department’s proposed assessment of AGIT.

Sales and Use

Final Order Denying Refund: 04-20170227R (Jan. 31, 2018) (Gross Retail Tax) – Public Transportation Exemption

Taxpayer is an out-of-state company in the business of providing transportation services. The issue was whether the property in question was consumed directly in public transportation and was therefore exempt from sales tax under Ind. Code § 6-2.5-5-27. Taxpayer explained that it purchases boxes, envelopes, etc., from a third party. Taxpayer then delivers the property to its customers. Taxpayer does not charge its customers for these items. It is Taxpayer's practice to provide these boxes to its customers free of charge. Customers then fill the boxes, and Taxpayer then ships the boxes, charging the customer for shipping services and not for the boxes, envelopes, etc. The Department reasoned that while Taxpayer is engaging in public transportation when it ships customer-filled boxes, it retains ownership of the boxes at the time it purchases them from a third party but does not itself use the boxes to transport property. Taxpayer then gives the boxes and envelopes to the customers free of charge. The customers then own the boxes and can do what they please with the boxes. Thus, the Department concluded that the property purchased by Taxpayer is not used or consumed in public transportation. Therefore, Taxpayer properly paid sales tax at the time of purchase and was not entitled to a refund.

Revenue Ruling #2017-02ST (Nov. 30, 2017) (Sales and Use Tax) – Service or Lease of Tangible Personal Property

Company is a limited liability company based outside Indiana that provides energy-efficiency products. Company purchases efficiency technology from a vendor. The new technology system is subsequently installed by one of Company's licensed service providers. Company pays the vendor for any hardware, software, and installation labor at the Customer location. Company's energy efficiency upgrades deliver energy savings to the Customer; however, Company's Service Contract does not guarantee energy savings. Instead, the contract guarantees function, or performance. Company requested a determination that its Customers are exempt from paying sales tax on the Service Contract monthly payments in accordance with 45 IAC 2.2-4-2. As for whether Company's transaction is for a service (generally not taxable under 45 IAC 2.2-4-2) or a lease of tangible personal property (generally taxable under 45 IAC 2.2-4-27(c)), the Department considered five distinctions presented by Company in order to differentiate the transaction from a lease or sale. The first was that Company retains title and ownership in the technology; however, that is often the case with leases of technology. Further, Company may sell the technology to their Customers at the end of the term, which can also occur in leases. The second distinction is that Customers are charged for meeting performance criteria instead of being charged a fee for the equipment, and may not be charged anything if the performance of the equipment is not to the level stated in the Service Contract. However, as 45 IAC 2.2-4-27(d)(1) states, "[t]he rental or leasing of tangible personal property, by whatever means effected and irrespective of the terms employed by the parties to describe such transaction, is taxable." Turning to the third distinction that the contract does not provide a list of the technology to be installed, the technology involved is still tangible personal property, whether specific items are listed upfront or not. The fourth distinction is that the technology is not permanently installed, but many things rented or leased by a business, such as printers, are not permanently attached to a business's property. Finally, the fifth distinction is that utility fees are not included in the Customer's monthly payment, and therefore Company maintains that the monthly service payment should not be subject to sales tax as it applies to utility/electric charges. However, in situations where someone rents or leases a water softener or water heater, for instance, the lessee would be expected to pay their own utility fees, but the lease or rental payments would still be subject to sales tax. The Department found that the true object of the transaction was the technology, which Customers want because of the potential for energy savings. To that point, Company "does not guarantee energy savings," but instead it "guarantees function," which further implies that Customers are paying for the technology. For all of these reasons, the Department concluded that the Company's transactions are a lease of tangible personal property, which is considered a gross retail transaction per Ind. Code § 6-2.5-4-10. Therefore, the Service Contract’s monthly fee is subject to Indiana sales and use tax as a fee charged for leasing tangible personal property.

Revenue Ruling #2017-05ST (Dec. 20, 2017) (Sales and Use Tax) – Product Membership Fee

Company is a Washington state corporation that sells a variety of products over the internet. Company had previously obtained a Prior Revenue Ruling (2014-01ST) regarding its Product. Product Members pay a single annual fee, which allows them access to every feature and benefit that Product offers. There are no separately stated charges for access to each feature or benefit. Company requested an updated ruling as to whether its Product Membership fee is still exempt from sales and use tax with the inclusion of certain Additional Benefits. The Additional Benefits consist of a Spoken Audio Streaming Channel, a Reading Service, and a Video Game Platform. The Department reasoned that while Customers have access to all of these features, a customer will not necessarily utilize each feature. As with optional warranty contracts, which are not subject to sales tax because there is no certainty whether any tangible personal property will be provided, there is no certainty that all of the features offered under a Product Membership will be utilized by each Product Member that pays an annual membership fee, and thus there is no certainty whether tangible personal property or specified digital products will be transferred either. A Product Member could choose only nontaxable features, such as the Streaming Video Benefit, once the membership period begins. Based on the information provided regarding the Additional Benefits, the Department concluded that, as in the Prior Revenue Ruling, the annual fee for a "Product Membership" is not subject to sales or use tax, as the transaction would not meet the definition of a retail transaction under Ind. Code § 6-2.5-4-1(b) since no property is transferred for consideration upon the purchase of the annual fee. The inclusion of the Additional Benefits does not change the determination, as the payment of the annual fee still does not with certainty constitute or include sales of tangible personal property, specified digital products, prewritten computer software, or telecommunication services.

Letter of Findings Number: 04-20170525 (Feb. 28, 2018) (Gross Retail Tax) - Manufacturing

Taxpayer is in the business of manufacturing and processing stone and aggregate materials. These aggregate materials are heated in the kiln to be dried to a specific moisture content. Without proper cleaning, the quality of product being heated in the kiln will begin to suffer (and may no longer meet the quality standards of customers) as the ash buildup in the kiln increases. The inside of the kiln is shot with shotgun shells to remove ash rings that develop periodically. Taxpayer argues that under 45 IAC 2.2-5-8, it should not be required to pay gross retail tax on the shotgun shells because they are used in the direct production of tangible personal property. However, the kiln has to be turned off and is not operational when this cleaning process is being done, and the cleaning process does not come in direct contact with the product being sold to the end user. The Department concluded that however essential the shotgun shells may be, these shells do not have an "immediate effect" on Taxpayer's stone and aggregate products and are not utilized within and during the production process. The shotgun shells are used before or after the actual process of producing stone and aggregate products and therefore are not exempt.

Letter of Findings Number: 04-20170108 (Mar. 28, 2018) (Use Tax) – Labels and Label Applicators

Taxpayer claimed that its purchase and use of labels and label applicators was essential and integral to the production process, because without the labels the products do not meet customer specifications. While the products may not meet customer specifications without the labels, this "does not itself mean that the property 'has an immediate effect upon the article being produced.'" 45 IAC 2.2-5-8. The labels in question are not incorporated into the Taxpayer's product and the fact that the labels are required by both the FDA and Taxpayer's customers does not mean that the labels are an integral part of an integrated process which produces tangible personal property. Rather, the labels are placed on shipping cartons, outside of the integrated production process. Therefore, the Department concluded that the labels and label applicators were not exempt.

Letter of Findings Number: 04-20170443 (Mar. 28, 2018) (Use Tax) – Exempt Use of Utilities

An audit determined that Taxpayer's restaurant did not qualify for the predominant use exemption and recalculated the percentage of exempt use of the utilities. If 50 percent or more of electricity sold from a single meter is used in an exempt manner, the purchaser/taxpayer is considered to have predominantly used the electricity for exempt purposes and the electricity sold through that meter is wholly exempt from sales tax and use tax. In order to qualify for the exemption, a taxpayer must show that "1) it is engaged in production, 2) it has an integrated production process, and 3) the electricity is essential and integral to its integrated production process." Aztec Partners, LLC v. Indiana Dep't of State Revenue, 35 N.E.3d 320, 324 (Ind. Tax Ct. 2015). After audit, the Department recalculated the exempt usage rate as 42 percent, based on the standard utility study used by the Department for similar establishments. Taxpayer was able to provide manufacturer documentation along with statements from manufacturers and franchise equipment installers and repairmen to protest the Department's understated load factors for the electrical usage of various items of equipment. This was sufficient for the Taxpayer to meet its burden of proving the Department's proposed assessment was wrong.

Revenue Ruling #2016-03ST (May 3, 2018) (Sales and Use Tax) – Tangible Personal Property or Real Property

The Company is an out-of-state corporation that is in the business of designing, making, installing, and servicing custom signs. The Department considered whether signage bolted to a foundation should retain its character as tangible personal property and signage embedded in the ground should constitute real property for Indiana sales & use tax purposes. The Department concluded that signage that is embedded in the ground or that is bolted or screwed to a foundation or building would constitute construction material that has been converted into real property because one would reasonably believe the sign has been permanently affixed to the property. However, if the sign is affixed with tape, it would remain tangible personal property. The Department considered the Indiana state and local sales and use tax consequences of the sale, installation and repair of the signage that qualifies as tangible personal property to the Company and its customers. Because the Company operates using time and material contracts, the Company is a retail merchant and must collect sales tax on the materials portion of the contracts. Ind. Code § 6-2.5-4-9(b). The Company's installation charges are separately stated on their invoices, so these charges would not be subject to sales tax per Ind. Code § 6-2.5-1-5(b)(6). On the other hand, the freight charge would be subject to sales tax as a delivery charge because it constitutes a charge for transportation.  Ind. Code § 6-2.5-1-5(a). The charge for a survey, a permit, and the charge for an engineering stamp would all be taxable as gross retail income as well, as service costs or expenses of the seller.  Ind. Code § 6-2.5-1-5(a)(2). Finally, the Department considered the Indiana state and local sales and use tax consequences of the sale, installation and repair of signage that qualifies as real estate to the Company and its customers. As for any repair work, repair charges are typically exempt as a charge for a service. However, if the property being repaired is real property, then the tax treatment would depend on whether the repairs are performed pursuant to a lump sum contract or a time and materials contract. Separately stated repair parts in a time and materials contract would be subject to sales tax. If the repair parts are not separately stated and the true object of the transaction was the service, the cost of the parts would have to be ten percent or less of the cost of the service for the unitary charge to be exempt from sales tax, and Company would be required to pay sales or use tax on the parts. If the cost of the parts is more than ten percent, or the true object of the transaction was not a service, then the whole unitary charge is subject to sales tax. (See  Ind. Code § 6-2.5-1-11.5; 45 IAC 2.2-4-1 and -2). Regarding charges for the services of cleaning, washing, or painting, this same "ten percent test" would apply if the charges for service and materials are not separately stated.

Revenue Ruling #2017-10ST (May 24, 2018) (Sales and Use Tax) – Real Property Contracts with the Federal Government

The Company, a Kentucky limited liability company, is a construction contractor that performs contracts exclusively for the United States federal government. The Company offers design-build and design-bid-build general contracting and construction management services at existing government facilities, often at those which are actively operating. The Department noted that use tax does not apply to conversions of construction material if "the person for whom the construction material is being converted could have purchased the material exempt from the state gross retail and use taxes, as evidenced by a properly issued exemption certificate, if that person had directly purchased the construction material from a retail merchant in a retail transaction." Ind. Code § 6-2.5-3-2(c). The federal government and its agencies are exempt from the gross retail and use taxes. The Company's contracts contemplate that the federal government will be the party ultimately responsible for any gross retail and use taxes imposed upon the Company as a result of its fulfillment of the contracts. As such, the Company has previously been provided and expects to continue to receive an executed Indiana General Sales Tax Exemption Certificate Form ST-105 with respect to federal projects in Indiana. Thus, provided the Company is properly registered as a retail merchant in Indiana, the Department concluded that the Company may issue its own Form ST-105 to its vendors to purchase construction materials to be incorporated into real property under contracts with the federal government.

Letter of Findings Number: 04-20180001 (June 8, 2018) (Gross Retail Tax and Use Tax) – Manufacturing Exemption

Taxpayer maintains that it operates local biofuel blending equipment at sixteen of its travel centers and that the electricity used to operate this equipment is entitled to the manufacturing or processing exemption because the local equipment operates in the same manner as its Indiana bulk blending facilities. The Department found that Taxpayer did not meet its burden of demonstrating that the blending devices are exempt from sales/use tax because the equipment is not used for "direct use in the direct production . . . [or] processing . . . of other tangible personal property." Ind. Code § 6-2.5-5-3(b). The facility is equipped to blend different grades of liquid fuels which, although altering the characteristics of the final product, does not produce an end product which is "substantially different from the components used." 45 IAC 2.2-5-10(k). The Department reasoned that blended fuel or diesel is still essentially fuel or diesel. The Taxpayer’s protest was denied.

Letter of Findings Number: 04-20181449 (June 28, 2018) (Gross Retail and Use Tax) – Not-For-Profit Hospital Exemption

This Letter of Findings addresses whether Taxpayer, an Indiana not-for-profit hospital, was exempt from sales and use taxes on purchases of equipment, supplies, and materials. The Department's audit concluded that only those items directly used in providing hospital patient care (e.g. patient beds, diagnostic equipment) were exempt from sales tax; Taxpayer argued that anything it bought was exempt because everything it purchases is used either directly or indirectly in fulfilling its non-profit purposes. The Department disagreed that Taxpayer has met its statutory burden under Ind. Code § 6-8.1-5-1(c) of establishing that each and every purchase it makes is "used primarily in carrying out the non-for-profit purpose of the organization . . . ." 45 IAC 2.2-5-55(a). Taxpayer is a hospital established for the care and treatment of sick, injured, and disabled persons. Taxpayer was not established for purposes of providing parking spaces, clothing, landscaped lawns, or opportunities to view fine art. These are all functions ancillary to Taxpayer's primary not-for-profit purposes. Although all such purchases were likely necessary to Taxpayer's function, they were not "primarily" used to advance Taxpayer's non-profit purpose of providing comfort and healing to sick, injured, and disabled persons. The Taxpayer's protest was denied.

Property Tax

Nova Tube Indiana II LLC v. Clark County Assessor, 49T10-1708-TA-00013 (Ind. Tax Ct. May 18, 2018)

Taxpayer appealed the Indiana Board of Tax Review (Indiana Board) decision which upheld the assessment of Taxpayer’s real property for assessment years 2011-2013.  Upon review, the Court reversed the Indiana Board’s determination.  In 2014, while the appeals were still pending before the County Property Tax Assessment Board of Appeals (PTABOA), Taxpayer sold the real property to the Port of Indiana for $6.1 million, or approximately $1.4 million higher than the assessed values at issue in each year.  The Assessor had the burden of proof, and the Indiana Board had determined that the Assessor met this burden by establishing that the property was sold at market value. Taxpayer asserted that the May, 2014 sale was not a market value transaction because (1) the buyer was atypically motivated since it was a governmental entity that already owned the land adjacent to Taxpayer’s land, (2) the Assessor’s property record card described the sale as “invalid”, and (3) an appraisal presented by the Taxpayer valued the property at $2.9 million for 2011. The Taxpayer also argued that the Assessor had failed to relate the property’s May, 2014 sale price to the relevant valuation dates.  The Court rejected the Taxpayer’s first argument, noting that the buyer’s status as a government entity does not, by itself, establish atypical motivation, and even though the Assessor had notated the sale as “invalid”, the record showed that subsequent “in-depth” analysis demonstrated that the May, 2014 sale was in fact equivalent to a market value transaction. However, the Court agreed with the Taxpayer that the Assessor had not shown that the May, 2014 sale price was related to the valuation dates at issue, or why it was appropriate for the assessment to increase as much as it did when the market’s growth was “relatively flat” from 2009 through 2014. The Court noted that the Indiana Board did not base the probative value of the 2014 sale on a temporal proximity to the March 1 valuation dates at issue, and thus found that the Indiana Board had abused its discretion in affirming the PTABOA.  The Tax Court thus reversed and remanded the matter to the Indiana Board.

Garrett LLC v. Noble County Assessor, 49T10-1712-TA-00022 (Ind. Tax Ct. Sept. 24, 2018), opinion corrected Oct. 1, 2018

Taxpayer owned a contaminated former foundry facility purchased for $1.00 and entered into a Voluntary Remediation Program agreement.  Shortly thereafter, Taxpayer sold a portion of the property to a school corporation, using the proceeds for demolition on the property and for cleanup costs. As of 2015, the Assessor valued the property at $200,000 and the taxpayer appealed. Before the Indiana Board, the Taxpayer claimed, inter alia, that the land had a $0 value due to the contamination.  The Indiana Board concluded that the Taxpayer had provided undisputed evidence for reducing the 2016 assessment by demonstrating that no buildings existed on the property as of that assessment date, but that the Taxpayer’s evidence was not probative of the property’s 2016 market value-in-use.  Thus, the Indiana Board left the land valuation unchanged.  Upon review, the Tax Court noted that evidence of property contamination does not, by itself, necessitate a finding that property lacks value. Evidence must be submitted to quantify the impact of the contamination upon value, and the Court found that no such evidence had been provided in this case.  In fact, the Court found that the sale of a portion of the land to a school corporation established that the land had some value.  The Taxpayer also had provided information concerning several sales of property, apparently intending to make a comparable sales argument, but the Court found that the Taxpayer failed to make a cogent argument on this point.  The Indiana Board’s final determination was affirmed.

L&R Enterprises, LLC v. Hancock County Assessor, Pet. Nos. 30-009-15-1-4-01262-16, et al. (Ind. Bd. Tax Rev. July 2, 2018)

In L&R Enterprises, LLC v. Hancock County Assessor, the subject property of this assessment appeal was an approximately 5,561-square-foot freestanding restaurant building, a parking lot, and other related improvements on an approximately 1.66-acre site. The Board rejected the sales comparison approach of the taxpayer’s appraiser, Mr. Correll, because he justified many of his adjustments to comparables, especially those relating to location, solely by referring to his experience and judgment, which cannot serve as a substitute for market data. The Board rejected Correll’s income approach because he used the subject property’s actual lease rate to determine net operating income and his estimated capitalization rates without surveying the market to determine these values. The Assessor’s appraiser, Mr. Hall, developed a sales comparison approach based heavily on leased-fee sales. Hall did little to show that the leased-fee sales he treated as being leased at market rent actually were leased at market rent or that he made appropriate adjustments. The Board explained that where key judgments underlying an opinion are questioned, the appraiser should be prepared to address those questions, which may require portions of the appraiser’s file to be submitted as evidence so that the appraiser can explain the appraiser’s analysis of that data. The Board rejected Hall’s income approach because Hall neither accounted for vacancy and collection loss in estimating net operating income nor loaded his capitalization rate to account for the owner’s share of property taxes during periods of vacancy. Hall also presented a valuation using the cost approach. The taxpayer did little to challenge Hall’s cost approach methodology, and the taxpayer’s appraiser believed that Hall’s land valuation was well done. Ultimately, the Board found that Hall’s cost approach was the most persuasive and adopted that value.

Wigwam Holdings LLC v. Madison County Assessor, Pet. No. 48-003-15-1-4-01882-16 (Ind. Bd. Tax Rev. Mar. 29, 2018), on appeal, 18T-TA-00015

In Wigwam Holdings LLC v. Madison County Assessor, the subject property of this assessment appeal was a “special-purpose property” commonly referred to as “the Wigwam,” consisting of approximately 220,000 square feet of improvements and structures on 8.56 acres, including a natatorium, boiler room, auditorium, band and choir rooms, classrooms, and a gymnasium with a high school basketball arena that seated approximately 9,000. The taxpayer’s appraisers concluded that the improvements must be demolished. The entire appraisal hinged on the premise that “there is no identifiable market for a purchase and re-use of the subject property without a substantial capital investment which may not be recoverable.” However, the Board found that the property is a large structurally sound facility, and the necessity of demolition was not supported by the facts. Thus, the taxpayer’s appraisal was given no weight. The taxpayer also sought to use the purchase price of the subject property, but the restrictions in the deed revealed that the sale was contingent on non-demolition and redevelopment in a short span of time. Failure would result in the seller getting the property back. Because the seller retained substantial control of the property, the Board concluded that this was not a typically motivated transaction and gave the sale price no weight. The Board made no change to the assessment.

Nahum Enterprises LLC v. Madison County Assessor, Pet. Nos. 48-003-14-1-3-00374-17, et al. (Ind. Bd. Tax Rev. Mar. 1, 2018)

In Nahum Enterprises LLC v. Madison County Assessor, the subject property of this assessment appeal was an approximately 336,000 square foot manufacturing warehouse situated on 59 acres. The Assessor’s appraiser, Mr. Garrison, did not certify that he complied with USPAP in performing his analysis. The Board found his sales comparison approach to be insufficiently reliable because he failed to adequately support his adjustments. Similarly, Garrison’s income approach failed to comply with generally accepted appraisal principles. He attempted to develop a market rent using properties from all over Indiana, but without making any adjustment for location, size, or any other factor. The taxpayer’s appraiser, Ms. Coers, presented a valuation based on the sale of the subject property. However, she chose to make an adjustment based on “seller motivation” to close the transaction by year end. Given this question of whether the transaction was fully arms-length, the Board accepted Coers’ opinion of value that was developed using a USPAP-compliant sales comparison approach.

Supreme Properties North, Inc., et al. v. Elkhart County Assessor, Pet. Nos. 20-015-12-1-3-00091, et al. (Ind. Bd. Tax Rev. April 12, 2018)

In Supreme Properties North, Inc., et al. v. Elkhart County Assessor, the subject property of this assessment appeal was a campus including approximately 120 acres of land and 566,186 square feet of industrial building area spread across 30 buildings, used to assemble bodies for trucks, buses, and trolleys. The campus was bisected by a road into north and south sections. The parcels were physically integrated to a substantial degree. In some instances, buildings either encroached on or invaded setbacks from other parcels. They shared road access and access to utilities and fire suppression. There would have been significant costs involved in separating the campus into smaller, independent properties. Based on this integration, the Board was more persuaded by the valuation presented by the taxpayer’s appraiser, Mr. Mitchell, than the Assessor’s appraiser, Mr. Hall, who valued the subject property as nine independent uses. Hall’s valuation failed to adequately account for the costs of physically separating the properties to be sold independently and failed to address how a buyer could establish the legal and practical access to necessary to utilize each separately sold portion of the property. Although the Board found Mitchell’s cost approach valuation most persuasive, the Board did not believe that Mitchell had sufficiently justified and quantified his external obsolescence adjustment. As a result, the Board adjusted Mitchell’s valuation by removing the external obsolescence adjustment, and adopted the resulting value.

Altschaeffl v. Tippecanoe County Assessor, Pet. No. 79-026-16-1-5-00040-17 (Ind. Bd. Tax Rev. Jan. 17, 2018)

In Altschaeffl v. Tippecanoe County Assessor, the subject property of this assessment appeal was a single-family home. Because the home’s value increased by more than 5% from the prior year, the Assessor bore the burden of proof under Ind. Code § 6-1.1-15-17.2. To value the property, the Assessor used a regression model that identified the variables that drive value and determined how much they contribute to value. In this case, the regression model identified time of sale, grade and usable area as the significant variables. All of the comparable sales were adjusted for these variables. The Assessor stated that his linear regression model constitutes an Automated Valuation Model (“AVM”). USPAP Advisory Opinion 18 describes an AVM as a computer software program that analyzes data using an automated process. While Opinion 18 allows use of an AVM, appropriate use depends on the answer to five critical questions: 1. Does the appraiser have a basic understanding of how the AVM works? 2. Can the appraiser use the AVM properly? 3. Are the AVM and the data it uses appropriate given the intended use of assignment results? 4. Is the AVM output credible? 5. Is the AVM output sufficiently reliable for use in the assignment? The Assessor provided no answers to any of these questions. Therefore, the Board concluded that the Assessor failed to meet his burden of proof, and the subject property’s value reverted back to the prior year’s value under Ind. Code § 6-1.1-15-17.2(b).

Sedd Realty Company, et al. v. Madison County Assessor, Pet. Nos. 48-006-09-1-4-10017, et al. (Ind. Bd. Tax Rev. Feb. 20, 2018), on appeal, 18T-TA-00012

In Sedd Realty Company, et al. v. Madison County Assessor, the subject property of this assessment appeal was a retail shopping center commonly known as River Ridge Plaza, consisting of 10 buildings (totaling approximately 350,000 sq. ft.) and approximately 75 acres of land, much of which was undeveloped. The Assessor’s appraiser, Mr. Hall, essentially divided the strip-center buildings into two different uses. However, in making adjustments to comparables, he did not view two distinct market occupancy levels but instead considered the overall occupancy of River Ridge in its entirety. The Board concluded that this likely overestimated the value of River Ridge. Hall also failed to adequately account for the impact of floodway restrictions. The taxpayer’s appraiser, Mr. Allardt, did not follow the classic steps for working from potential gross income to net operating income. He did little to research income and expense data for comparable properties and compare it to River Ridge’s data. Instead, he decided that River Ridge competed in a submarket with just one other property—for which he did not have any data. Allardt did not estimate potential gross income or market vacancy and collection loss. Thus, the Board concluded that Allardt essentially valued a leased-fee interest, rather than a fee-simple interest, in the property. Although finding Hall’s opinion generally more persuasive, the Board used its own judgment to derive a capitalization rate, looking to three sales used by Allardt’s market-extraction analysis and loading that rate using Hall’s determination of the landlord’s share of the property taxes. The Board then adopted Hall’s opinion as adjusted by applying the capitalization rate determined by the Board.

St. Mary’s Building Corporation, et al. v. Warrick County Assessor, Petition Nos. 87-019-14-2-8-10222-15, et al. (Ind. Bd. Tax Rev. Feb. 23, 2018), on appeal, 18T-TA-00013

In St. Mary’s Building Corporation, et al. v. Warrick County Assessor, the subject property, known as Epworth Crossing, is a 44,015 sq. ft. medical building. The taxpayer sought a charitable and religious purposes exemption under Ind. Code § 6-1.1-10-16 and an exemption for property substantially related to or supportive of the inpatient facility of an Indiana non-profit hospital under Ind. Code § 6-1.1-10-18.5. The evidence showed that only several hundred referrals are made to the Hospital’s inpatient facility from Epworth Crossing each year, out of 17,000 hospital patients. While the Hospital operated outpatient facilities at Epworth Crossing as part of the Hospital’s overall mission, there was little evidence of how the operations at Epworth Crossing related to the Hospital’s inpatient facility. As for charitable activities, the Hospital was not aware of any records being kept to show the percentage of patients receiving charity care at Epworth Crossing. As for religious activities, Epworth Crossing is not chiefly engaged in inherently religious activities like worship or evangelization. It is not a ministry funded by a church or congregation. It is not substantially staffed by members of a religious order or volunteer congregants of a local parish. The Board concluded that healing the sick through modern medicine is not implicitly or overtly religious in nature. The Board held that Epworth Crossing was not entitled to any exemption.

Southlake Indiana, LLC v. Lake County Assessor, Pet. Nos. 45-046-07-1-4-00001, et al. (Ind. Bd. Tax Rev. May 10, 2018), on appeal, 18T-TA-00016

In Southlake Indiana, LLC v. Lake County Assessor, the subject property of this assessment appeal was the Southlake Outlot—a 7.22 acre parcel with a roughly 90,000 sq. ft., two-story, free-standing retail building that was leased by Kohl’s and operated as a department store. The Board was persuaded that the income approach to value was most applicable and noted that the fundamental disagreement was whether build-to-suit leases must be excluded or adjusted in determining market rent. The most persuasive testimony on this point was from Mr. Lees, a Kohl's executive, who stated that Kohl's very closely watches rent markets and tries to enter into leases at market rates. He stated that some Kohl's leases might be above market due to chasing a particular location for reasons unique to the company's business model. While he characterized a build-to-suit lease as a financing arrangement, he did not state that it was used to raise capital or to finance personal property. The Board identified the 15 most helpful comparable leases to determine market rent (some used by the Assessor’s appraiser and some used by the taxpayer’s appraiser). The Board found that this data mostly supported the income approach developed by the Assessor’s appraiser, and the Board was persuaded by those opinions of value. However, for certain of the years under appeal, the Board was more persuaded by the capitalization rate used by the taxpayer’s appraiser. For those years, the Board determined the value by applying the taxpayer’s capitalization rate to the Assessor’s income approach.

CVS 6475-02 v. Elkhart County Assessor, Pet. Nos. 20-012-12-1-4-00001, et al. (Ind. Bd. Tax Rev. May 25, 2018), on appeal, 18T-TA-00018

In CVS 6475-02 v. Elkhart County Assessor, the subject property of this assessment appeal was roughly 1.26 acres containing a freestanding retail building of 10,880 square feet that operated as a CVS brand store. The Assessor’s appraiser, Mr. Hall, used leased fee sales in his sales comparison approach, noting that those sales must be at market rent in order to represent the fee simple value of the property, but he did very little to support his contention that the sales were leased at market rent. For Hall’s income approach, he did not provide any serious analysis of market rent for the markets that the sales came from. The Board found that Hall’s rent conclusions had insufficient support, and thus disregarded his entire income approach. Although the taxpayer’s appraiser, Ms. Coers, provided a mostly persuasive cost approach to value, the Board found both her justification and quantification of external obsolescence entirely unsupported. As a result, the Board adopted Coers’ cost approach but adjusted the value by removing her external obsolescence adjustment.

Hebron-Vision, LLC v. Porter County Assessor, Pet. Nos. 64-002-12-2-8-00001, et al. (Ind. Bd. Tax Rev. May 23, 2018), on appeal, 18T-TA-00019

In Hebron-Vision, LLC v. Porter County Assessor, the subject property, known as Misty Glen, is a low-income housing facility. The taxpayer sought a charitable purposes exemption under Ind. Code § 6-1.1-10-16(a). The taxpayer provided services including neighborhood watch meetings, self-defense training, fitness and nutrition training, scam education, various social events, resumé writing and job search assistance, free blood pressure tests, and help with tax preparation. The Board concluded that while these services may be admirable, those activities failed to prove the predominant use of the subject property is for charitable purposes. The Board noted that charging below market rent would not suffice to establish a charitable purpose. The Board was also concerned about the founders of the non-profit parent company profiting from Misty Glen by using their separate for-profit company to manage the property. The Board concluded that the taxpayer failed to prove it relieved the government of an expense that otherwise would have been borne by the government, and the Board concluded that the taxpayer failed to prove that the property was predominantly used for charitable purposes.

Housing Partnerships, Inc. v. Bartholomew County Assessor, Pet. Nos. 03-003-08-2-8-00003, et al. (Ind. Bd. Tax Rev. June 29, 2018), amended July 19, 2018, on appeal, 18T-TA-00021

The subject property in Housing Partnerships, Inc. v. Bartholomew County Assessor consisted of various single-family homes and multi-unit properties, referred to as "scattered-site housing." The taxpayer sought a charitable purposes exemption under Ind. Code § 6-1.1-10-16(a). The taxpayer rents the scattered-site housing to low-income individuals and families, and it referred its tenants to various service providers to help the tenants become more self-sufficient. The taxpayer showed that various levels of government have undertaken the burden to provide affordable housing to low-income families. This led the Board to determine whether the taxpayer relieved the government's burden of meeting the community's affordable housing needs, or whether the government itself met those needs through its grants. The Board concluded that while the federal government shouldered a significant part of the burden of providing affordable housing at the subject properties, it did not shoulder the entire burden. Through the combined effects of the taxpayer’s matching contributions and its continued operation of the properties while complying with, and even exceeding the grant restrictions, and to a lesser extent, its referral activities, the taxpayer relieved the government of a meaningful part of the burden of providing affordable housing to low-income tenants. The Board also noted that the taxpayer did not seek to charge tenants more than the costs of maintaining the properties. Nor did the taxpayer have a profit motive, as it is a non-profit corporation. In this case, the Board granted a charitable purpose exemption for the subject property.

Mac’s Convenience Stores, LLC v. Monroe County Assessor, Pet. No. 53-013-17-1-4-01528-17 (Ind. Bd. Tax Rev. July 30, 2018)

Taxpayer appealed to the Indiana Board, and did not request a specific assessed value on its appeal petition. At the hearing, Taxpayer’s representative alleged that he was only challenging the land value of the property.  The Assessor presented an appraisal report prepared by an outside commercial appraiser, valuing the property at $925,000. Taxpayer focused solely upon the land value, failing to address the total market value-in-use of the property.  Taxpayer also alleged comparability of the subject to certain properties, but failed to submit any evidence to establish such alleged comparability. Taxpayer also claimed that the assessment was not “accurate and uniform” as required by Indiana’s assessment manual.  The Indiana Board found that Taxpayer had failed to explain any meaningful inference as to the uniformity of equality of assessments within a jurisdiction.  The Indiana Board found that the Assessor had met the burden of proof, establishing a prima facie case that the assessment should be $925,000. 

Administrative/Procedural

Final Order Denying Refund: 04-20170598R (Feb. 23, 2018) (Sales and Use Tax)

At the hearing, Taxpayer's representative argued that the individual creating the taxable event and the entity applying for the refund were in effect the same because the Taxpayer is an LLC (limited liability company) with a single individual owner. The individual owner bought equipment for Taxpayer (i.e., the LLC) and erroneously paid sales tax. The Taxpayer argued that there is no distinction between Taxpayer as LLC and the individual owner for federal income tax purposes. However, the Department noted that disregarding the distinction between a business entity and its single owner for income tax purposes is a product of federal income tax law. The disregarding does not apply to the Indiana sales tax law. The taxable event was created by the individual owner, yet the claim for refund was being applied for by the LLC. Pursuant to Ind. Code § 6-8.1-9-1, Taxpayer (the LLC) did not pay "more tax than the person determines is legally due," thus the Department concluded that Taxpayer did not have standing to request the refund.

Memorandum of Decision: 04-20170905R (Feb. 13, 2018) (Gross Retail Tax)

The issue is whether the Department violated a settlement agreement entered into with Taxpayer as authorized by Ind. Code § 6-8.1-3-17(a). Although the agreement did not require abatement of the original $146,000 sales tax liability, it did require that the Department "release" and "withdraw" the warrants. The Department released the warrants but did not abate or cancel the underlying sales tax liabilities. Several years later, the Department chose - for reasons unknown - to initiate collection actions to satisfy the original sales tax liability. Those collection actions resulted in the levy of the Taxpayer's bank accounts. It was determined that the Department acted without authority in enforcing the warrants and was required to return Taxpayer's $87,000, plus any collection fees imposed, with interest.

Memorandum of Decision: 04-20180547R (Mar. 20, 2018) (Gross Retail Tax)

Taxpayer concluded that the Department underestimated the amount of electricity consumed by its exempt three-phase equipment motors. According to Taxpayer, the Department employed the wrong mathematical formulation in calculating that consumption amount. That particular formulation (Volts x Amps x 1.73/1000) was found on the Department's website. However, the Department maintained at the administrative hearing that the website formulation was wrong; the correct formulation was Volts x Amps x 1.73 x .85/1000. It was determined that, in this particular case, the Department was required to stand by the information promulgated on its website and relied on by the Taxpayer, even though the information may not have been correct.

Final Order Denying Refund: 02-20180059R (April 27, 2018) (Corporate Income Tax - Statute of Limitations)

The Internal Revenue Service ("IRS") audited Taxpayer's federal returns. The IRS found Taxpayer's "collaboration agreement" with a third-party drug manufacturer to be a "deemed partnership" for federal tax purposes, and that the income from the drug sales should have been treated as if Taxpayer had received a distributive share of income from a partnership instead of royalty income. The IRS issued a "Notice of Adjustment" on September 16, 2014 to reflect this. In light of this federal adjustment, Taxpayer filed an amended 2010 IT-20X Indiana income tax return reporting the "partnership" income and claiming a refund of approximately $493,000. In response, the Department denied the $493,000 refund and issued Taxpayer a "proposed assessment" of approximately $24,000 in additional 2010 corporate income tax, stating that the federal return adjustment from the recent federal audit demonstrated an increase to Indiana adjusted gross income. The Department assessed the additional tax for reasons not directly related to the IRS's decision requiring Taxpayer to report its income as partnership income rather than royalty income. Instead, the assessment was related to the apportionment of that income. The Department requested that its Audit Division review certain information belatedly submitted by the Taxpayer on this issue and to adjust the assessment as warranted. Separately, the Department found that the Taxpayer’s refund claim, submitted as an amended return on June 29, 2017, was not timely. Since Taxpayer's amended return was based on a federal adjustment, the question of timeliness is addressed by Ind. Code § 6-8.1-9-1(f) and Ind. Code § 6-3-4-6, as in effect at the time the IRS notified Taxpayer of the adjustment on September 16, 2014. Under those statutes, if the taxpayer's federal return is modified, the taxpayer is required to give the Department notice within 180 days of the modification and is required to file an amended return within 180 days of the modification. The Taxpayer here did not do so, and the amended return was not timely.

Letter of Findings Number: 04-20181394 (July 13, 2018) (Use Tax—Negligence Penalty)

Taxpayer incorrectly exempted items and equipment not directly used in production, such as paper towels and janitorial supplies, light fixtures, and computer software and hardware used for administrative purposes. The Department found that these items did not qualify for the manufacturing exemption and assessed additional use tax because sales tax was not paid at the time of the sales. Taxpayer did not dispute the assessment of additional tax; rather, Taxpayer asked the Department to abate the negligence penalties imposed on the audit assessment. However, a prior recent audit by the Department had found similar deficiencies. In the course of that prior audit, which involved a prior protest, Taxpayer assured the Department that it had instituted practices designed to mitigate further errors. Because the non-exempt purchases here were similar to those revealed by a prior audit, the Department did not waive penalties.

Kooshtard Property I, LLC v. Monroe County Assessor, Pet. No. 53-017-16-1-4-01891-16, et al. (Ind. Bd. Tax Rev. July 30, 2018)

Taxpayer appealed assessment years 2016 and 2017 to the Indiana Board, which scheduled a hearing for April 30, 2018.  Shortly before the hearing date, Taxpayer learned that the Assessor intended to present an appraisal conducted by a commercial appraiser, and based on said appraisal, intended to seek higher values than the assessed values under appeal.  Settlement negotiations ensued, but were unsuccessful.  On April 26, Taxpayer’s representative sought to withdraw the appeal petitions, and the Assessor objected to such withdrawal.  The Assessor pointed out that substantial expenses had been incurred in obtaining the appraisal of Taxpayer’s property, and asserted that under the circumstances, the Taxpayer should not be allowed to withdraw from the case, citing Joyce Sportswear Co. v. State Bd. Of Tax Comm’rs, 684 N.E.2d 1189 (Ind. Tax Ct. 1997).  In Joyce, a case had proceeded through two hearings before the State Board of Tax Commissioners (State Board), and subsequently the State Board’s hearing officer had advised the Taxpayer that she intended to propose an increase in assessment.  At this late point in the proceedings, the Taxpayer sought to withdraw from the case.  The Tax Court in Joyce found that allowing the taxpayer to withdraw as a matter of right at such an advanced stage in the proceedings would have caused a substantial waste of time and effort. The Indiana Board reached the same conclusion as did the Tax Court in Joyce.  The Indiana Board noted that the Assessor had not presented any evidence as to whether it had incurred a substantial expense in preparing its case, but noted that such expenses would be typical where an Assessor hired an outside appraiser to prepare a report.  In light of the lateness of the attempt to withdraw, and the expense incurred by the Assessor, the Indiana Board disallowed the Taxpayer’s withdrawal.  The Board went on to analyze the evidence from the hearing, finding the Assessor’s evidence probative and finding further that the Taxpayer had failed to make a case for reducing the assessments.  Accordingly, the Indiana Board ordered that the property assessments be increased to the values presented by the Assessor.

Key Enterprises, Inc. v. Delaware County Assessor, Pet. Nos. 18-019-15-3-5-00925-17, et al. (Ind. Bd. Tax Rev. Mar. 20, 2018)

In Key Enterprises, Inc. v. Delaware County Assessor, the taxpayer argued that local officials improperly assessed penalties for late or unpaid taxes. The Board held that it lacked authority to address that claim, citing Irwin Mortgage Corp. v. Ind. Bd. of Tax Review 775 N.E.2d 720, 723-24 (Ind. Tax Ct. 2002); Whetzel v. Dep’t of Local Gov’t Fin., 761 N.E.2d 904 (Ind. Tax Ct. 2002). The taxpayer also claimed it was charged for tax delinquencies that were illegally premised on the original assessments from 2012-2015 rather than on the stipulated assessments reached after an earlier appeal. However, because the taxpayer did not attempt to break down how the delinquent taxes were calculated, the taxpayer failed to show any error upon which the Board could grant relief.