Riley-Roberts Park, LP v. O'Connor

186 N.E.3d 162

RILEY-ROBERTS PARK, LP, Petitioner,

v.Joseph O'CONNOR, in his official capacity as Marion County Assessor, Respondent.

Cause No. 21T-TA-00024

Tax Court of Indiana.

March 18, 2022

ATTORNEYS FOR PETITIONER: JAMES F. BEATTY, KATHRYN MERRITT-THRASHER, LANDMAN BEATTY LAWYERS, Indianapolis, IN

ATTORNEY FOR RESPONDENT: JESSICA R. GASTINEAU, SPECIAL COUNSEL – TAX LITIGATION, OFFICE OF CORPORATION COUNSEL, Indianapolis, IN

WENTWORTH, J.

Riley-Roberts Park, LP challenges the Indiana Board of Tax Review's final determination upholding the revocation of its charitable purposes exemption for the 2010 tax year and finding its real property was not owned, occupied, and predominately used for charitable purposes during the 2010 through 2016 tax years. Riley-Roberts raises several issues on appeal, however, the dispositive issue is whether the Marion County Property Tax Assessment Board of Appeals ("PTABOA") had the statutory authority to revoke Riley-Roberts's 2010 charitable purposes exemption. Upon review, the Court finds it did not.

FACTS AND PROCEDURAL HISTORY

In May of 1999, Riley-Roberts was formed as an Indiana limited partnership. (Cert. Admin. R. at 317, 404.) In general, its purpose was "to transact any and all lawful business for which corporations may be incorporated under" the Indiana Business Corporation Law. (See Cert. Admin. R. at 319, 430.) More specifically though, its purpose was to invest in real property and to provide low-income housing "through the construction, renovation, rehabilitation, operation ... and leasing" of an apartment complex. (See Cert. Admin. R. at 430, 1736-37.)

To that end, on November 29, 1999, Riley-Roberts purchased a seven-story, mixed-use development located along Massachusetts Avenue in downtown Indianapolis from Riley Area Development Corporation, one of its former limited partners,¹ for the nominal price of $10.00. (See Cert. Admin. R. at 310, 632, 1737-38.) The mixed-use development, now known as The Davlan, had been "operated as a project-based HUD subsidized [apartment complex] by an out-of-state owner-operator[.]" (See Cert. Admin. R. at 1723-24, 1734.) When Riley-Roberts purchased the property, however, it was "completely vacated, completely boarded up, [and] was in a high state of disrepair." (Cert. Admin. R. at 1734-35.) (See also Cert. Admin. R. at 1739 (stating that "there was actually crime scene tape on one of the apartments along with what appeared to be blood on the threshold of that apartment"), 1740 (explaining that The Davlan's pocket park was "in a high state of disrepair" and not usable).) Riley-Roberts used funds from a variety of private and public sources to redevelop, rehabilitate, and revitalize The Davlan and its pocket park, which had an "immediate trickle-down effect" that led to the revitalization of other commercial establishments in the area. (See Cert. Admin. R. at 431-32, 520-24, 1180-1209, 1736, 1741-44.) (See also Cert. Admin. R. at 1763-65 (indicating that the Section 42 tax credits² that Riley-Roberts obtained were entirely consumed during the first ten years of operations).)

When the renovations of The Davlan were complete, the first floor of the building contained approximately 13,000 square feet of retail space. (See Cert. Admin. R. at 310, 616-17.) The other six floors contained a mix of 50 one- and two-bedroom apartments; Riley-Roberts charged market rent for 14 of the units and below-market rent for the remaining 36 units. (See, e.g., Cert. Admin. R. at 310, 616, 1334, 1745-47.) During the 2010 to 2016 tax years, the retail space was leased to various for-profit businesses and the below-market apartments were occupied by individuals with annual incomes at or below 60% of the area median income for Marion County (adjusted for family size). (See Cert. Admin. R. at 635-806, 1741-42, 1745-52, 1767, 1774-75, 1797.) (See also Cert. Admin. R. at 814, 1745-47 (providing that 12 units were reserved for tenants living at 60% of the area median income for Marion County, 16 units for those living at 50% of the area median income, and 8 units for those living at 40% or below the area median income).)

On May 15, 2006, Riley-Roberts filed its first "Application for Property Tax Exemption" ("Form 136") seeking a charitable purposes exemption on 100% of The Davlan for the 2006 tax year. (See Cert. Admin. R. at 306-41.) The PTABOA, however, determined that The Davlan only qualified for a 54% exemption because "14 units [were] rented out at market rate[s] and [the retail] space [was] leased to [for-profit] businesses."³ (Cert. Admin. R. at 342-43.) On May 7, 2008, Riley-Roberts filed an exemption application for the 2008 tax year again seeking a 100% exemption for The Davlan. (Cert. Admin. R. at 344-85.) As before, however, the PTABOA found the property only qualified for a 54% exemption. (Cert. Admin. R. at 386-87.) Riley-Roberts did not file an exemption application for the 2009 tax year, but it retained its partial exemption on The Davlan for that year. (See Cert. Admin. R. at 1837.) (See also Cert. Admin. R. at 1958-59.) Believing that its partial exemption continued to be valid for the 2010 tax year as well, Riley-Roberts did not file an exemption application for that year either. (See Cert. Admin. R. at 1726, 1931-33.)

On January 31, 2011, an Exemption Deputy from the Marion County Assessor's Office sent a letter to Riley-Roberts on behalf of the PTABOA. (Cert. Admin. R. at 388.) The letter, which indicated it was about Riley-Roberts's purported 2010 exemption application, stated:

The PTABOA has requested your compliance in filling-out the attached Worksheet in order to help them better understand the services your organization provides to your tenants. Please fill out the attached Worksheet and return it to our office by February 15, 2011. In addition, please read the "PTABOA Worksheet – General Information" section in order to understand the purpose behind the requested documentation.

The PTABOA will review the Worksheet you provide. If they have questions concerning your organization, you will be notified by February 23, 2011, and your presence will be requested at the February 25, 2011[,] PTABOA meeting. If the PTABOA has no questions concerning the information you have provided they do not intend to hold a hearing concerning the property, but will determine the [property's] eligibility for an exemption based on all the information [that] you have provided.... [T]he PTABOA does not intend to grant any continuances for low-income housing applications, and all low-income housing will be going at the February 25, 2011[,] PTABOA meeting.

If you are an attorney and are receiving this letter, please be advised that all your clients who received an exemption in 2008 and/or 2009 based on IC 6-1.1-10-16, as low-income housing are going to be reviewed at this meeting. If you did not submit an application on their behalf for 2010[,] their property will still be heard at the February 25, 2011[,] meeting, but if you did not file the 2010 [Form] 136 [exemption] application we may not [have] a power of attorney entered into our records for 2010.

(Cert. Admin. R. at 388.) The PTABOA, via its attached six-page Worksheet, sought general information about The Davlan, including its address, parcel number(s), and 2010 total assessed value. (See Cert. Admin. R. at 389-94.) The PTABOA also sought detailed information about evictions, late fees, and rental rates; the receipt of government subsidies; the fair market value of the property based on a Market Analysis; and the charitable services that were provided to the tenants.⁴ (See Cert. Admin. R. at 391-94.)

On March 8, 2011, after conducting its February 25 meeting, the PTABOA issued a "Notice of Action on Exemption Application" that revoked Riley-Roberts's 2010 charitable purposes exemption. (See Cert. Admin. R. at 395-96.) The PTABOA's Notice stated:

Exemption Disallowed. 54% was granted in 2008. Many units are rented out at market rate and space is leased to for[-]profit businesses. Have not provided any information which would show that the property provides a benefit to the public sufficient to justify the loss of tax revenue. Further, applicant receives a subsidy in the form of Section 8.

(Cert. Admin. R. at 395-96.)

On April 5, 2011, Riley-Roberts sought review with the Indiana Board alleging, among other things, that the PTABOA lacked the statutory authority to revoke its 2010 charitable purposes exemption. (See Cert. Admin. R. at 1 - 13.) Over the next ten years, the parties litigated that issue with the Indiana Board as well as whether Riley-Roberts owned, occupied, and predominately used The Davlan for charitable purposes during the 2010 through 2016 tax years.⁵ (See, e.g., Cert. Admin. R. at 1931-2072 (materials for first summary judgment proceeding beginning in 2011); 2080-2110 (materials for motion to reconsider filed in 2014).) (See also Cert. Admin. R. at 14 -42 and 53-74 (Riley-Roberts's 2011-2016 appeal petitions), 87-135 (materials for second summary judgment proceeding commencing in 2018).)

On September 28, 2020, the Indiana Board conducted an administrative hearing during which Riley-Roberts claimed that neither the Assessor nor the PTABOA had the statutory authority to revoke its 2010 exemption. (See, e.g., Cert. Admin. R. at 1569-71, 1711-16.) Riley-Roberts also asserted that the PTABOA's unprecedented revocation process violated its rights to both due process and equal privileges and immunities. (See, e.g., Cert. Admin. R. at 1571-75, 1714-15.) Lastly, Riley-Roberts claimed that its evidence showed that 54% of The Davlan was owned, occupied, and predominately used for charitable purposes during all the years at issue.⁶ (See, e.g., Cert. Admin. R. at 1577-92, 1716-19.)

In response, the Assessor asserted that the PTABOA's review and subsequent revocation of Riley-Roberts's 2010 charitable purposes exemption were authorized by Indiana Code § 6-1.1-11-1 et seq. ("Chapter 11"), just as the Indiana...