April 2003
Indiana Property Tax Reassessment

Indiana taxpayers will soon receive from county assessors Form11- Notices of Assessment of Land and Structures. These Form11's will compare Indiana's previous assessment with a new assessment, and the difference between them might be shocking. In fact, the Indiana Department of Local Government Finance ("DLGF") is advising Hoosiers "Don't panic!" Some taxpayers might not receive a Form 11 Notice and, instead, are about to or have already received a final tax bill. Like the Form 11 Notice, this tax bill will inform you of the reassessment. Your notice - whether a Form 11 or a tax bill - is important because it sets a deadline for you to appeal your reassessment. If you disagree with your reassessment, then you have but forty-five (45) days from the date on which your notice was mailed to file an appeal. Time is of the essence. So, if you are considering appealing your assessment, please don't delay.

Many taxpayers will have questions about this reassessment. Your Form 11 Notice could reflect an increased assessment that is the result of the groundbreaking Town of St. Johns case. In the Town of St. Johns, the Indiana Supreme Court mandated reform of Indiana's unconstitutional property tax system. For over five (5) years Indiana's taxing authorities have struggled to fix the system so that it would comply. Indiana's constitution provides that "the General Assembly shall provide, by law, for a uniform and equal rate of property tax assessment and taxation and shall prescribe regulations to secure a just evaluation for taxation of all property, both real and personal." The DLGF - which assumed the authority of the dissolved Indiana Board of Tax Commissioners on January 1, 2002 - has promulgated regulations that are purported "to secure a just evaluation for taxation of all property, both real and personal." It is under these new regulations that the county assessors have reassessed taxpayers' property and are sending out Form 11 Notices.

The old assessment calculated a true tax value of property based upon its "reproduction cost." That is, the cost to reconstruct a duplicate of the property. This value was arrived at through tables promulgated by the State Board of Tax Commissioners that were based upon seventy-five percent (75%) of the value of the 1991 construction data. The current assessment, however, is based upon values that are one hundred percent (100%) of 1999 construction data taken from the Marshall & Swift Assessment Manual. The Marshall & Swift 1999 data is based upon the "replacement cost" of the property rather than the reproduction cost. This change is a major conceptual shift that is probably reflected in the increased assessment that you have by now or are about to receive.

While the methodology - assessing a property by referring to cost tables - has not changed, the concept of "replacement cost" is intended to measure the "market value-in-use" of the property. This is the DLGF's attempt to move Indiana's system to one that measures property wealth by a kind of market value. This quasi market-value assessment is objectively verified by comparing it to sales data that is compiled in an "assessment ratio study." The assessment ratio study is calculated and drafted by an independent private firm. This avoids conflicts of interest that may arise if the study were developed by the DLGF. It is intended to ensure that Indiana's "market value-in-use" system objectively measures property wealth and is intended to instill confidence in the system.

Nevertheless, the differences between an assessment under the old system and an assessment under the new system should be viewed skeptically. This new system is unusual and untested. The DLGF advises you to evaluate your new assessment by asking "would I sell my property for this amount?" It suggests that "if the assessed value is close to the market value of your property for its actual use, then [the assessed value] is right." This advice, however, is not applicable to every assessment. If the utility that you derive from your property is less than the utility at which the market prices your property, then the assessment may not accurately evaluate your "property wealth." The assessment may also inconsistently assess "special use" properties for which there is no "active market." Thus, a property owner should examine his or her assessment critically. If you have questions or concerns regarding your reassessments, then we recommend that you consult with one of our tax team members as soon as possible. Remember, you have only forty-five (45) days to file an appeal before you waive that right for taxes due this year.

Consulting with an attorney early is especially important in light of the fact that the DLGF is expecting to receive six thousand (6,000) to eight thousand (8,000) more appeals than average. Many Indiana county assessors are expecting an increase as well. In order to manage this potential avalanche of work, one might expect that county Property Tax Assessment Boards of Appeals ("County Board's") might from necessity give each appeal a less thorough treatment than usual. This could lead to more assessments being appealed to the Indiana Board of Tax Review ("State Board"), a state agency that hears and decides appeals from County Boards.

Because of this environment in which more State Board appeals are more likely, we recommend that our clients prepare their cases well in advance of appearing before the County Board. Under the new rules affecting such tax appeals, unless a sound record of evidence is entered before their County Board, a State Board appeal will likely be futile. Kahn, Dees, Donovan & Kahn, LLP ("KDDK") has a long tradition of representing and advising its clients in property tax matters. We are experienced at every level of the assessment and appeals process including the township and county assessor, County Board, the State Board, the Tax Court, and the Indiana Supreme Court. Furthermore, Mike Schopmeyer, a member of KDDK's tax team, has hands-on experience in mass appraisals and reassessments. If a property tax matter arises that you need assistance with, or if you have questions about the property tax process and how to ensure an accurate reassessment, call or email Mike Schopmeyer (mschopmeyer@kddk.com) or Mark Samila (msamila@kddk.com ), two members of the KDDK tax team.