Justices find defunct tax appeal forms proper in HOA common area dispute

A dispute involving the use of a now-defunct tax appeal form challenging assessments to three Marion County homeowners’ associations common areas over several years was partially reversed by the Indiana Supreme Court on Thursday.

In 2014, Muir Woods Section One Association Inc., Muir Woods Inc., Spruce Knoll Homeowners Association Inc., and Oakmont Homeowners Association Inc. filed 141 “Petitions for Correction of an Error” or “Form 133,” alleging property tax assessments from 2001, 2002, and 2003 were illegal because certain common areas of their properties were so encumbered by restrictions that the land had zero value.

The Marion County Property Tax Assessment Board of Appeals denied all of the Forms 133 on the basis that they were untimely filed. The Indiana Board of Tax Review later granted the Marion County Assessor’s motion to dismiss, but the Indiana Tax Court affirmed in part and reversed in part.

In its decision, the tax court found that the HOAs’ claim that the tax was paid more than once, accepted as true, was capable of correction using a Form 133.

However, it affirmed the Indiana board’s final determination dismissing the HOA’s claims that their common area property was exempt from property tax under the exemption statute and that the assessed values of their common areas did not include the proper discount prescribed in the land order and the assessment guidelines.

Indiana Supreme Court justices in an Aug. 26 decision agreed with the HOA argument that the Marion County Assessor’s failure to apply the 1995 Marion County Land Order for the year 2001 and the Residential Neighborhood Valuation Forms used for the years 2002 and 2003 hinges on an inherently objective factor such that it can properly be challenged by Form 133.

“The Tax Court below found, and the Assessor ostensibly agrees, that ‘the assessment and valuation of real property is – and has always been – inherently subjective,'” Justice Steven David wrote for the unanimous high court. “While this is perhaps true of the Assessor’s initial determination of the base rate, this is not true with regard to application of the discount factor to homeowners’ association land. That is, once the base rate is subjectively determined, common areas must be valued at twenty percent of the base rate. Whether a discount was applied is inherently objective: it was either applied or it wasn’t.

“…The Assessor argues that the HOAs should have first filed Forms 130/131 to challenge the subjective determination of the properties’ base rates,” he wrote. “But focusing only on the narrow challenge before us today, we find the HOAs are challenging the objective application of a prescribed discount rate to an already-determined base rate. Therefore, Form 133 was a proper avenue to appeal this objective determination and, with respect to this issue, dismissal of the HOAs’ petition before the Board was improper.”

As such, the high court reversed Section 2 of the tax court’s opinion and summarily affirmed the remainder of its decision. Justices then remanded the matter to the Indiana Board of Tax Review for further proceedings consistent with its opinion, as well as the tax court’s opinion.

The case is Muir Woods Section One Association, Inc., Muir Woods, Inc., Spruce Knoll Homeowners Association, Inc., and Oakmont Homeowners Association, Inc. v. Marion County Assessor, Joseph P. O’Connor, 21S-TA-158.