Daw v. Hancock Cnty. Assessor

116 N.E.3d 1

Nancy A. DAW, Stephen L. Hoback, Co-Trustees of Sagacious Sentinel Sycamore Revocable Trust, Petitioners,

v.HANCOCK COUNTY ASSESSOR, Respondent.

Cause No. 18T-TA-00009

Tax Court of Indiana.

FILED December 5, 2018

PETITIONERS APPEARING PRO SE: NANCY A. DAW, STEPHEN L. HOBACK, Indianapolis, IN

ATTORNEYS FOR RESPONDENT: CURTIS T. HILL, JR., ATTORNEY GENERAL OF INDIANA, ZACHARY D. PRICE, MATTHEW R. ELLIOTT, DEPUTY ATTORNEYS GENERAL, Indianapolis, IN

FISHER, Senior JudgeNancy A. Daw and Stephen L. Hoback, the Co-Trustees of the Sagacious Sentinel Sycamore Revocable Trust, have appealed the Indiana Board of Tax Review's final determination regarding the assessment of their real property for the 2016 tax year. While the Co-Trustees raise several issues on appeal, the Court consolidates them and restates them as:

I. Whether the Court has subject matter jurisdiction over the Co-Trustees' annexation and storm water claims; and

II. Whether the Indiana Board erred in upholding the assessment of the Co-Trustees' farmland.

Upon review, the Court finds in favor of the Co-Trustees with respect to Issue I and in favor of the Assessor with respect to Issue II.

FACTS AND PROCEDURAL HISTORY

During the 2016 tax year, the Co-Trustees owned 54.05 acres of land located along a portion of West County Road 650 North in the Town of McCordsville, Hancock County, Indiana. (See Cert. Admin. R. at 99, 141.) They leased 37 acres of the land to a farmer who used no-till practices to cultivate and harvest field corn and soybeans. (See Cert. Admin. R. at 27-28, 60.) The remainder of the land was unsuitable for farming and thus remained in its natural state. (See, e.g., Cert. Admin. R. at 27-28.)

For the 2016 tax year, the Hancock County Assessor assigned the property an assessed value of $88,400. The Co-Trustees appealed the assessment, first to the Hancock County Property Tax Assessment Board of Appeals and then to the Indiana Board.

The Indiana Board held a hearing on the matter on August 18, 2017. During the hearing, the Co-Trustees claimed their property tax liability was incorrect because the ordinance that purported to annex their farmland to the Town of McCordsville (the "Town") was invalid. (See Cert. Admin. R. at 62-63, 181-82.) The Co-Trustees also claimed they did not owe nearly $3,000 in delinquent storm water charges and penalties that resulted from the Town's unauthorized imposition of a tax. (See Cert. Admin. R. at 25, 171-77.) The Co-Trustees further asserted that 1.05 acres of their land should have been assessed as nontillable land because it was incapable of being farmed, and that their overall assessment was too high given their land's actual crop production capacity. (See Cert. Admin. R. at 158-70.)

In response, the Assessor argued that the Co-Trustees' annexation and storm water claims should be dismissed because the Indiana Board lacked the statutory authority to address them. (See Cert. Admin. R. at 148-49, 226-27.) The Assessor also claimed that her assessment should be upheld in its entirety because it comported with Indiana's assessment guidelines for agricultural property. (See Cert. Admin. R. at 200-19, 227-28.)

On January 17, 2018, the Indiana Board issued its final determination that declined to address the Co-Trustees' annexation and storm water claims due to a lack of statutory authority. (See Cert. Admin. R. at 118-20 ¶¶ 12-13, 19.) The Indiana Board also determined that while the Co-Trustees had shown that 1.05 acres of their land should have been assessed as nontillable land, they failed to show that their assessment should be changed in any other manner. (See Cert. Admin. R. at 119-20 ¶¶ 15-19.)

On March 2, 2018, the Co-Trustees filed a petition for review with the Tax Court. The Tax Court heard oral argument on September 14, 2018. Additional facts will be supplied when necessary.

STANDARD OF REVIEW

The party seeking to overturn a final determination of the Indiana Board bears the burden of demonstrating its invalidity. Osolo Twp. Assessor v. Elkhart Maple Lane Assocs., 789 N.E.2d 109, 111 (Ind. Tax Ct. 2003). Thus, the Co-Trustees must demonstrate to the Court that the Indiana Board's final determination is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; contrary to constitutional right, power, privilege, or immunity; in excess or short of statutory jurisdiction, authority, or limitations; without observance of the procedure required by law; or unsupported by substantial or reliable evidence. See IND. CODE § 33-26-6-6(e)(1)-(5) (2018).

LAW AND ANALYSIS

I. Whether the Court has subject matter jurisdiction over the Co-Trustees' annexation and storm water claims

Subject matter jurisdiction, the power of a court to hear and determine a particular class of cases, is conferred upon a court by either the Indiana Constitution or statute. Grandville Co-op., Inc. v. O'Connor, 25 N.E.3d 833, 836 (Ind. Tax Ct. 2015). Consequently, " ‘[t]he only relevant inquiry in determining whether any court has [ ] subject matter jurisdiction is to ask whether the kind of claim which the plaintiff advances falls within the general scope of the authority conferred upon [the] court by the constitution or by statute.’ " Marion Cty. Auditor v. State, 33 N.E.3d 398, 400-01 (Ind. Tax Ct. 2015) (citation omitted). The Tax Court, pursuant to its enabling legislation, has subject matter jurisdiction over all "original tax appeals." IND. CODE §§ 33-26-3-1, -3 (2018).

A case is an original tax appeal if it arises under Indiana's tax laws and is an initial appeal of a final determination made by the Indiana Board. I.C. § 33-26-3-1. With respect to the first requirement, a case arises under Indiana's tax laws "if (1) ‘an Indiana tax statute creates the right of action,’ or (2) ‘the case principally involves the collection of a tax or defenses to that collection.’ " Grandville Co-op, 25 N.E.3d at 836 (citation omitted). The second requirement, that a case appeal the Indiana Board's final determination, includes the exhaustion of administrative remedies requirement. Id.

On appeal, the Co-Trustees contend that the Court has subject matter jurisdiction over their annexation and storm water claims because they are challenging the Indiana Board's final determination regarding the Town's unauthorized attempt to collect special benefit taxes.¹ (See Pet'rs' Br. at 13-14, 26-27, 29-30; Oral Arg. Tr. at 13-14.) The Assessor responds that the Co-Trustees' claims are improperly before the Court because they: 1) involve the collection of user fees, not taxes; 2) do not appeal an Indiana Board final determination; and 3) contravene the holding in City of Fort Wayne v. Southwest Allen County Fire Protection District, 82 N.E.3d 299 (Ind. Ct. App. 2017), trans. denied.² (See Resp't Br. at 8-12.)

A. Whether the Co-Trustees' annexation and storm water claims challenge the collection of a tax or a user fee

There is no dispute that the Town sought to annex the Co-Trustees' farmland pursuant to Ordinance No. 041001A and that it sought to impose storm water charges pursuant to the Storm Water Act, Indiana Code § 8-1.5-5-1 etseq. (Compare, e.g., Pet'rs' Br. at 5-8 with Resp't Br. at 5-6.) (See also Cert. Admin. R. at 62-63.) Thus, the first question the Court must answer is whether the Town's storm water charges are taxes, which may implicate the Court's jurisdiction, or user fees, which cannot.

The Storm Water Act allows certain municipalities to adopt ordinances that create special taxing districts comprised of all the territory within their corporate boundaries. See IND. CODE §§ 8-1.5-5-1, -4, -5(a)(2) (2018). The special taxing districts collect and dispose of storm water in a manner that protects the public health and welfare and may levy "special benefit taxes for purposes of storm water collection and disposal." See I.C. § 8-1.5-5-5(b). More specifically, the storm water facilities may be financed through "(1) proceeds of special taxing district bonds of the storm water district; (2) the assumption of liability incurred to construct the storm water system being acquired; (3) service rates; (4) revenue bonds; or (5) any other available funds." IND. CODE § 8-1.5-5-7(a) (2018). The assessment and collection of "user fees" from the owners of the district's property may be accomplished by a periodic billing system or by placing a charge on the semiannual property tax statements of the affected property owners. See I.C. § 8-1.5-5-7(b) - (c).

The Co-Trustees claim the actual language of the Storm Water Act indicates that the Town's storm water charges are taxes because it authorizes the creation of special taxing districts that may collect special benefit taxes to operate and maintain the storm water infrastructure. (See Pet'rs' Br. at 26-27.) The Assessor, however, construes the statutory language differently, claiming its express delineation of financing methods, particularly "service rates" and "proceeds of special taxing district bonds," indicates that the storm water charges are user fees, not taxes. (See Resp't Br. at 10 (stating that lumping the financing methods together would render the legislature's delineation of those methods meaningless).) The Assessor further maintains that the storm water charges are user fees because they are not derived from an exercise of the taxing power, based on "standard taxation considerations ... such as taxable income or even property value[,]" and "collected and paid along with a resident's other taxes[.]" (See Resp't Br. at 10-11 (citing Nat'l Fed'n Indep. Bus. v. Sebelius, 567 U.S. 519, 569, 132 S.Ct. 2566, 183 L.Ed.2d 450 (2012).)

When, as here, a statute is susceptible to more than one interpretation it is ambiguous and subject to judicial construction. City of Carmel v. Steele, 865 N.E.2d 612, 618 (Ind. 2007). In construing a statute, the Court's primary goal is to determine and implement the Legislature's intent. See Bd. of Comm'rs of Cty. of Jasper v. Vincent, 988 N.E.2d 1280, 1282 (...