High court rules for Hobart mall in tax dispute, lowers tax assessments

A longtime northern Indiana shopping mall won a victory at the Indiana Supreme Court on Wednesday when the justices ordered the reinstatement of a tax assessment that is tens of millions less than the assessed values upheld by the Indiana Tax Court.

Justice Geoffrey Slaughter wrote for the unanimous court in reversing the Tax Court in Southlake Indiana, LLC v. Lake County Assessor, 21S-TA-239.

Beginning with the 2014 tax year, the Ross Township assessor in Lake County increased the tax assessment for Hobart’s Southlake Mall, owned by Southlake Indiana LLC. At the same time, the assessor notified Southlake that it would be changing its property tax assessments for the 2011-2013 tax years, as well, raising the assessments to about $240 million per year — more than double the original amounts imposed in 2010-2013.

After losing at the Lake County Property Tax Assessment Board of Appeals, Southlake appealed all four assessments to the Indiana Board of Tax Review. Both Southlake and the assessor presented testimony from professional appraisers, but the board found deficiencies in both. Thus, the board adjusted the assessments to range from $173.5 million in 2011 to $190.6 million in 2014.

Southlake then appealed to the Indiana Tax Court, which affirmed the state board in all respects except for two reimbursements not at issue in the instant appeal. The Supreme Court, however, reversed the Tax Court’s holding, remanding for Southlake’s 2010 assessment value — about $110 million — to be applied to the 2011-2014 tax years.

The parties agreed that the case centered in Indiana Code § 6-1.1-15-17.2(b), which holds, in part, that if “neither the assessing official nor the taxpayer meets the burden of proof under this section, the assessment reverts to the assessment for the prior tax year, which is the original assessment for that prior tax year.” That statute applies “to any review or appeal of an assessment under this chapter if the assessment that is the subject of the review or appeal is an increase of more than five percent (5%) over the assessment for the same property for the prior tax year.”

“Here, the state board found that both parties’ assessment were lacking … meaning that neither party met its burden of proof,” Slaughter wrote Tuesday. “Because neither party met its burden, section 17.2 required the tax court to hold that the assessment reverts to the assessment for the prior tax year.

“… Here, this means that the 2011 assessment reverts to the 2010 assessment, the 2012 assessment reverts to the 2011 assessment, and so on,” he continued. “By failing to apply the reversionary clause, the tax court erred as a matter of law.”

Slaughter wrote that according to the Tax Court, applying the plain language of Section 17.2 “would mean the state board could not resolving conflicting probative evidence … .” Even so, the justice wrote, “that result, whatever its policy merits, is the legislature’s call and not ours.”

The high court also rejected the Tax Court’s holding that the burden of proof under Section 17.2 is only a “burden of production.” The justices rejected the Tax Court’s reliance on Orange County Assessor v. Stout, 996 N.E.2d 871 (Ind. Tax Ct. 2013), to support that view.

Finally, “The tax court also erred by rendering two of the statute’s phrases meaningless: ‘proving that the assessment is correct’ (as to the assessor’s burden) and ‘prove the correct assessment’ (as to the taxpayer’s burden),” the high court held. “These terms require the parties not only to present probative evidence of the assessment but also to prove that their proffered assessment is correct. Again, the tax court’s view ignored the unambiguous meaning of the statute’s plain terms.

“… Because neither party met its burden of proof, section 17.2’s reversionary clause controls. Under that clause, the assessments revert to the assessment for each prior tax year — ending here with the 2010 assessment,” Slaughter concluded. “We thus reverse the tax court’s judgment with instructions to remand to the state board, which must enter assessments for tax years 2011 to 2014 in the amount of Southlake Mall’s 2010 assessment.”