Tax Court: Length of stay does not change character of hotel

A property owner could not convince the Indiana Tax Court that because its business offered rooms for extended stays, the property should be classified as residential and subjected to the lower 2% tax cap credit.

Buckeye Hospitality Dupont LLC owned a four-story building in Fort Wayne that contained 124 private rooms, all equipped with living and kitchen facilities. Guests stayed at the business for varying lengths of time but most for less than 30 days. Sandpiper Fort Wayne LLC acquired the property from Buckeye in August 2016.

After the Allen County assessor classified the property as nonresidential and applied the 3% tax cap credit to the overall gross assessed value for the 2013, 2014, 2015 and 2016 tax tears, Buckeye petitioned the Allen County auditor in May and July 2017. Buckeye claimed the portion of its property annually occupied by long-terms guests should have been classified as residential property and assigned the 2% tax cap credit for the years at issue.

The auditor denied the petition. Subsequently, the Indiana Board of Tax Review denied Buckeye’s motion for summary judgment, finding the property was not residential because it provided temporary accommodation as a hotel.

Buckeye appealed, but the Tax Court upheld the assessor’s classification of the property as nonresidential in Buckeye Hospitality Dupont, LLC, nka Sandpiper Fort Wayne LLC v. Stacey O’Day, in her official capacity as Allen County Assessor, 19T-TA-11.

Before the Tax Court, Buckeye argued the “Indiana Board arbitrarily created an unworkable test that required an inquiry of ‘intent’ for use [as a ‘dwelling unit’] rather than actual use.” The property owner asserted the term “dwelling unit” should be understood based on a property’s actual use and, accordingly, the portion of Buckeye’s property that was used for more than 30 days by an occupant as a place to “reside” or “actually live” is “residential property.”

Pointing to the tax cap statutes, the Tax Court noted the Indiana General Assembly amended the residential property statute in 2013 and 2014 to define “residential property.” Specifically, the amendment states that “residential property” does not include real property that consists of a commercial hotel, motel, inn, tourist camp or tourist cabin.

Consequently, the Tax Court found Buckeye’s property was a “hotel” and its character was not changed by the length of a guest’s stay.

“The designated evidence in this case shows that Buckeye’s property consists of a four-story building with 124 private rooms that contain … accommodations for transient and semi-transient travelers,” Judge Martha Wentworth wrote. “The designated evidence further shows that Buckeye does not treat guests different based on their length of stay.

“… Moreover, the designated evidence does not indicate whether any of Buckeye’s long-term guests used the property’s address as their mailing, voter registration or driver’s license address,” Wentworth concluded. “Consequently, the Indiana Board did not err in concluding that Buckeye’s entire property was a hotel and did not quality as ‘residential property’ amenable to the 2% tax cap credit.”