News Reports Proposed Tax Increase Dies in Shelbyville Council

From the Shelbyville News:

The Shelbyville Common Council voted down a measure Monday that would raise taxes for residents.

The council considered an ordinance that would re-establish the cumulative capital development fund rate at up to 5 cents per $100 of assessed valuation on properties. 

That fund is used to fund police cars, firetrucks, ambulance leases and other such emergency vehicles.

The rate for the fund decreases gradually on its own unless it is re-established, and is now 2.54 cents per $100. The fund can be used to receive about $500,000 per year and now receives about $270,000.

Re-establishing the rate to up to 5 cents per $100 would help increase that revenue.

The council hadn't seriously considered re-establishing the fund this year until Monday's meeting. Mayor Tom DeBaun mentioned that the city was using a financial consultant to help restructure the city's budget and finances. Re-establishing the rate was one of the consultant's recommendations to improve revenue.

"I think raising taxes should be our last option," said council member Ron Hamilton, R-Ward 4, who voted against the measure.

Voting nay with Hamilton was David Carmony, R-Ward 2, to make the vote 3-2 with Rob Nolley, R-Ward 3, and council President Brian Asher, R-At Large, absent. Since a majority of the seven-member council did not vote for the ordinance, it died. 

If either of those members had voted for the ordinance, it would have passed on the first reading. Another vote at another meeting and a 30-day remonstrance period were also needed to make the ordinance law.

The council had used racino money to bolster the cumulative capital development fund, allowing the police department to purchase several new squad cars a few months ago.

The ordinance is all but dead because of the time it would take to advertise the ordinance again, the remonstrance period and the two votes. All that would have to take place before August.

"Due to time constraints, it's unlikely to be brought back up again," City Attorney Trent Meltzer said.
...

Daily Journal Reports Greenwood Gives Preliminary Approval to Tax Hike

From the Johnson County Daily Journal:

The city of Greenwood gave a first approval to a tax increase that could be used to pay for future street repairs and equipment for the police and fire departments.

If given final approval next week, the city’s capital projects tax rate would increase from 4.75 cents per $100 in assessed value this year to 5 cents, which is the maximum the city is allowed to charge.

Residents could see their tax bills go up in 2014, depending on their property values and if they already have met their property tax cap.

http://www.dailyjournal.net/view/local_story/Greenwood-gives-preliminary-ap_1371607332/

DLGF Publishes Guidance on HEA 1145 - Reporting by Redevelopment Commissions Regarding TIF Districts

MEMORANDUM

TO:                 County Auditors, Clerk-Treasurers, and Redevelopment Commissions

FROM:           Micah G. Vincent, Commissioner

RE:                 Reporting by Redevelopment Commissions Regarding Tax Increment Financing Districts

DATE:           June 19, 2013

On April 29, 2013, Governor Mike Pence signed into law House Enrolled Act 1145 (“HEA 1145”). Sections 4 and 5 amend IC 36-7-14-13 and IC 36-7-15.1-36.3, respectively, which govern redevelopment commission reporting obligations. For purposes of IC 36-7-14-13, not later than March 15 of each calendar year, the redevelopment commissioners or their designees must file with the unit’s executive a report setting out their activities during the preceding calendar year. For purposes of IC 36-7-15.1-36.3, not later than March 15 of each calendar year, the redevelopment commission or its designee must file the same type of report with the mayor. Prior to these amendments, the reports had to be filed within 30 days of the close of the year.  These amendments are effective July 1, 2013.

On May 9, 2013, Governor Pence signed into law House Enrolled Act 1116 (“HEA 1116”). Sections 15 and 17 also amend IC 36-7-14-13 and IC 36-7-15.1-36.3, respectively. Specifically, IC 36-7-14-13 and IC 36-7-15.1-36.3, as amended, provide that redevelopment commissions are required to report certain information pertaining to each tax increment financing (“TIF”) district. These reports are due to the fiscal body before August 1 of each year. Before October 1 each year, the fiscal body must compile the reports received for all applicable TIF districts and submit a comprehensive report to the Department of Local Government Finance (“Department”) in the manner prescribed by the Department. The items required to be reported are as follows:

            (1) Revenues received in the previous year.
            (2) Expenses paid in the previous year.
            (3) Fund balances as of December 31.
            (4) The amount and maturity date for all outstanding obligations as of December 31.
            (5) The amount paid on outstanding obligations in the previous year.
            (6) A list of all the parcels included in each TIF district allocation area and the base assessed value and incremental assessed value for each parcel in the list during the most recent tax year.

These amendments are effective July 1, 2013.

To facilitate these reporting requirements, the Department will be launching Gateway TIF Management on July 1, 2013. User manuals and online training for Gateway TIF Management will be released at a later date. In order to ensure complete reporting, the Department is requiring all counties, cities, and towns to complete the submission process, regardless of whether or not the county, city, or town has a redevelopment commission. Those political subdivisions that do not have a redevelopment commission will be required to indicate that in Gateway TIF Management.

Reporting on revenues received, expenses paid, fund balances

Due to the recent creation of the reporting requirement, districts may not have been tracking categorized revenues or expenditures. Therefore, for reporting due on October 1, 2013, the Department will only require a total revenue and expenditure by each TIF district. Fund balances will be reported as of December 31, 2012.

Reporting on outstanding obligations

Reporting on outstanding obligations will be facilitated by the data currently in Gateway Debt Management. Units will be required to pull data from the amortization schedules in Gateway Debt Management to report the amount and maturity date for all outstanding obligations as well payments made in 2012. As required by IC 5-1-18, all outstanding obligations are required to be reported in Gateway Debt Management.

Reporting on parcels in each TIF district

The Department will release an Excel document template that units will use to create parcel lists for each TIF district. The file will be uploaded in Gateway. Parcels and values that were included in the TIF district during the 2012 pay 2013 cycle must be reported. The file specifications can be found at the following link: http://www.in.gov/dlgf/files/TIF_file_specs.pdf.

Gateway submitters for the fiscal bodies are encouraged to work with the redevelopment commissions to ensure all data required by the Department are filed with the fiscal body. Additionally, the fiscal body may work with its redevelopment commissions to delegate access to reporting in Gateway. The fiscal body may delegate access in Gateway to the redevelopment commission or a vendor by completing a limited delegation form.

County auditor’s responsibility

TIF districts must be numbered by the county auditor using the following specifications: codes should begin with the letter T, followed by the two-digit county number, followed by a three-digit number created to uniquely identify the TIF within the county (i.e. T81001). The code must be a total length of six consecutive characters. The Department will be requiring those reporting on TIF districts in Gateway to have this unique code from their county auditor before beginning to report in Gateway. Additionally, these new TIF codes will be used in the upcoming transition of the Form 22 to Gateway, as the Department previously released in the 50 IAC 26 vendor certification standards.

Redevelopment Commission and TIF reporting after 2013

Due to the time constraints resulting from the enactment of the above statutory amendments, certain functionality will be added for reports filed in 2014. In future years, detailed revenue and expenditures will be required. The Department will use the unified code list of revenues and disbursements created in conjunction with State Board of Accounts. Units are advised to begin tracking revenues and expenditures in these categories in anticipation of this modification. Information on further additions will be forthcoming.

Please note that this memorandum is intended to be an informative bulletin; it is not a substitute for reading the law. If you have any questions, please contact Eric Bussis, Director of Data Analysis, at (317) 232-3759 or erbussis@dlgf.in.gov.

DLGF Publishes Guidance on SEA 517 - Protected Taxes

MEMORANDUM

TO:                 All Taxing Units

FROM:          Micah G. Vincent, Commissioner

RE:                 Protected Taxes

DATE:           June 18, 2013

On May 11, 2013, Governor Mike Pence signed into law Senate Enrolled Act 517 (“SEA 517”).  Section 29 of SEA 517, effective retroactive to January 1, 2013, clarifies the distribution of property taxes to funds that collect protected taxes. Protected taxes are defined in IC 6-1.1-20.6-9.8(b)(2) and include property taxes collected on funds that are exempt from circuit breaker credits and property taxes collected for the payment of debt service obligations. Please note, this memorandum is intended to be an informative bulletin, not a substitute for reading the law.

Under IC 6-1.1-20.6-9.8(c), the total amount of revenue to be distributed to a fund that collects protected taxes must be determined as if no circuit breaker credits were granted. These funds must be fully funded. The loss in property tax revenue associated with the circuit breaker credits may be allocated in the amounts determined by the political subdivision using any combination of the funds that collect unprotected taxes within the taxing district in which the circuit breaker credit was generated. The loss in property tax revenue associated with the circuit breaker credits of a particular political subdivision must not affect any other political subdivision. 

If the loss in property tax revenue associated with the circuit breaker credits is more than the amount that will be collected by the funds that collect unprotected taxes or a political subdivision does not have a fund that collects unprotected taxes, then the revenue to be distributed to the funds collecting protected taxes must be reduced to account for the loss in property tax revenue associated with the circuit breaker credits. If this occurs, a political subdivision may transfer money from one or more other funds to the funds that collect protected taxes to offset the loss in revenue and allow the political subdivision to meet its obligations in these funds. This transfer is limited to the amount necessary to fully fund the funds that collect protected taxes and must be specifically identified as a debt service obligation transfer for each affected fund.

In addition to the foregoing, Section 29 adds subsection (e) to IC 6-1.1-20.6-9.8.  Subsection (e) specifies that for taxes due and payable in 2013, the allocation of circuit breaker credits must reduce the property tax distributions of all funds proportionally, regardless of whether or not the fund collects protected taxes. This language essentially delays the implementation of protected taxes to 2014.

Questions may be directed to Staff Attorney Mike Duffy at (317) 233-9219 or mduffy@dlgf.in.gov.

IBJ Reports DD Dannar Offered Incentives for Investment in Muncie

From the Indianapolis Business Journal:

A new manufacturer of heavy equipment that uses clean energy plans to move its corporate headquarters from South Carolina to Muncie, invest $4.6 million in an engineering and assembly facility, and create as many as 288 jobs within four years.

DD Dannar LLC, based in Greenville, S.C., announced Wednesday that it planned to relocate and produce a vehicle named the Dannar Mobile PowerStation, according to Muncie-Delaware County Economic Development Alliance.

The company initially will occupy 25,000 square feet in the Business Center facility at 4620 W. Bethel Ave. The firm plans to add space as its operations grow, investing as much as $4.6 million in equipment, technology and other improvements over four years.
...

Indiana Economic Development Corp. offered DD Dannar up to $2.6 million in conditional tax credits and $25,000 in training grants based on the company’s job-creation plans, according to the alliance. The firm cannot claim the credits until jobs are created.

Delaware County Redevelopment Commission is considering a package of incentives including a $150,000 low-interest loan, free rent in the Business Center and $500,000 in improvements to the facility.

Mobile PowerStation is a hybrid-electric maintenance vehicle aimed at government and military customers.

http://www.ibj.com/manufacturer-to-relocate-to-muncie-add-288-new-jobs/PARAMS/article/42007

Revenue Declines Taxpayer's Invitation to Expand Definition of Research and Development Equipment

Excerpts of Revenue's Determination follow:

Taxpayer is an international corporation headquartered in Indiana. Taxpayer is engaged in the business of manufacturing and distributing medical implants and instruments utilized in medical industries. Taxpayer has manufacturing facilities in Indiana. After an audit, the Indiana Department of Revenue ("Department") determined that Taxpayer owed additional use tax and made assessments of tax and interest for the 2008, 2009, and 2010 tax years. The Department found that Taxpayer had made purchases of tangible personal property without paying sales tax at the time of purchase or remitting use tax to the Department. Taxpayer protests the assessment of tax on its purchases of prototypes.
...

The Department found that Taxpayer had purchased certain items without paying sales tax at the time of purchases, and assessed use tax on the purchases. Taxpayer asserts that the Department erred in determining that its purchases of prototypes are subject to sales and use tax. Taxpayer believes that its purchases of completed prototypes from outside vendors are eligible for the "research and development equipment exemption."
...
 

Taxpayer asserts that the prototypes qualify for the "research and development equipment exemption." Taxpayer maintains that even though it accounts for its prototypes by expensing them, the prototypes qualify as equipment because they have a useful life of much longer than one year.
...
 

Notwithstanding that the research and development exemption is to be applied narrowly, it remains that IC § 6-2.5-5-40 provides an exemption for "research and development equipment" in certain circumstances. The Department notes that IC § 6-2.5-5-40(b) provides a specific definition of what constitutes "equipment" for purposes of the Indiana research and development equipment exemption. Specifically, the exemption applies when the "research and development equipment:" (1) consists of or is a combination of "laboratory equipment, computers, computer software, telecommunications equipment, or testing equipment;" (2) has not previously been used in Indiana for any purpose; and (3) is acquired by the purchaser for the purpose of research and development activities devoted directly to experimental or laboratory research and development for new products, new uses of existing products, or improving or testing existing products. The legislature specifically used the term "research and development equipment" and included only equipment that fits into the five specifically listed categories.
 

Therefore, regardless of whether or not the prototypes meet the generic definition of equipment, the prototypes must fit into one of the five specifically listed categories of equipment that are used to perform the research and development activities–i.e., "laboratory equipment, computers, computer software, telecommunications equipment, or testing equipment." However, the prototypes–i.e., the products that are being tested themselves–do not fit into any of the listed categories. If the legislature wanted these types of items to be included in the exemption, the legislature would have not only enacted the provisions in the statute that exempted the categories of equipment that are used to perform the research and development testing, but would have also included a category for the items that make up the tested product themselves like the legislature did when enacting the manufacturing exemptions. See IC § 6-2.5-5-6 (enacting a manufacturing exemption that includes the tangible personal property that is incorporated as a material part of the manufactured product). See IC § 6-2.5-5-3 (enacting a manufacturing exemption that includes manufacturing machinery, tools, and equipment that are used to manufacture the product). See also IC § 6-2.5-5-5.1 (enacting a manufacturing exemption that includes the tangible personal property that is consumed during the manufacture of a product).
 

Taxpayer invites the Department to expand the statutory definition of "research and development equipment" to include its purchases of prototypes as purchases of one of the five categories of exempt equipment. Taxpayer, therefore, invites the Department to exceed the statutory authority granted in IC § 6-2.5-5-40. Taxpayer has not referenced any statute or regulation which clearly requires the Department to grant, or which allows the Taxpayer to claim such an exemption for its prototypes. In fact, the originally proposed statutory language attempted to exempt a broader category of purchases by referring in general to all purchases of "tangible personal property," including items such as utilities in the definition. S.B. 649, 1999 Gen. Assem., Reg. Sess. (Ind. 1999). However, this broad exemption was not enacted by the legislature. The legislature, after considering this broad exemption, enacted a narrow exemption that included only "equipment" that is defined in five specific categories. If the "research and development equipment exemption" is to be broadened to include the prototypes–i.e., the products that are being tested themselves, such action must come from the Indiana General Assembly. See also H.B. 1369, 2012 Gen. Assem., Reg. Sess. (Ind. 2012) (attempting to amend IC § 6-2.5-5-40 to include tangible personal property in general in which the bill did not leave committee.) See also H.B. 1171, 2013 Gen. Assem., Reg. Sess. (Ind. 2013) (attempting to amend IC § 6-2.5-5-40 to include tangible personal property in general in which the bill did not leave committee.)

 

http://www.in.gov/legislative/iac/20130529-IR-045130199NRA.xml.html

NWI Reports Delinquent Property Owners in Porter County Told to Set up Payments

From the Northwest Indiana Times:

Porter County Treasurer Mike Bucko announced Tuesday his office is preparing for a fall tax sale, but delinquent property taxpayers can avoid the cost of that process by setting up a payment plan now.

Those who failed to pay the first round of their property taxes by the May 10 deadline, will be notified by certified mail in August that their properties are scheduled to be part of the Oct. 29 sale, he said.

Delinquent taxpayers may be able to avoid the tax sale by arranging a extended payment plan with the treasurer's office, Bucko said. The payment plan will include the taxes owed, along with penalties.

"This is not an alternative to the annual payment method," he said.

Taxpayers who make a down payment and make all monthly payments on or before the 10th of each month may be removed from the tax sale list, Bucko said. Late payments will result in the agreement being voided.

Debt sold during the fall tax sale will compound the amount owed by 10 percent, he said.

For more information, contact the treasurer's office at (219) 465-3470.

http://www.nwitimes.com/news/local/porter/hebron/set-up-payments-delinquent-porter-county-taxpayers-told/article_29f8072f-0358-52d3-bafa-10e1dd425630.html

Herald-Times Reports PRD, Inc. Offered Incentives for Investment in Springville

From the Bloomington Herald-Times:

New equipment led to an injection of new jobs at a Springville plastics manufacturer.

PRD, Inc. has hired 23 people in the last 12 months, bringing the company’s total number of employees to 134, according to its president, John Passanisi.

The hiring came as PRD added new manufacturing equipment. The company has purchased 13 new pieces of equipment. PRD is a custom injection molder of plastics that uses specifications to create products for customers.

“We are investing in new equipment, also new technology,” Passanisi said. “We actually hired people to operate it.”

PRD plans to bring in three more pieces of equipment for installation in August or September. They will be replacement pieces that take the place of older technology. Those pieces, along with the 13 units that are already in place, are part of a $3 million investment the company said it would make by 2015. PRD is paying for its investment using a funding mix that includes its own cash and equipment manufacturer financing.

...

PRD has a tax abatement from Lawrence County, and the Indiana Economic Development Corp. has put training grants totaling up to $40,000 on the table for the firm. The grants were structured so they could not be claimed until hiring took place.

...

http://www.heraldtimesonline.com/stories/2013/06/18/business.new-equipment-more-jobs-at-springville-plastics-manufacturer-prd.sto?1371573218

NWI Reports Pence Ties State Agency Budgets to Performance

From the Northwest Indiana Times:

State agencies meeting or beating performance targets will be permitted to spend nearly their full appropriations under a management plan announced Monday by Gov. Mike Pence.

The Republican told agency leaders that instead of being required to return 3 percent of their budgets to the state's general fund during the 2014 budget year, which starts July 1, 2013, agencies that hit or exceed performance goals will get quarterly "reserve relief" of up to 0.5 percent.

"State government should fund excellence in every regard, and Hoosier taxpayers should hold their government accountable for the services it provides," Pence said. "The strategies announced today in our performance-based management agenda are critical to achieving this goal and propelling Indiana from reform to results."

The governor and Office of Management and Budget officials recently have met with the 22 cabinet-level agency leaders to set "key performance indicators."

Fully 57 percent of the indicators are new or more stringent than agency goals under former Gov. Mitch Daniels, according to OMB Director Chris Atkins.

The performance standards include:

• Department of Child Services, reducing the number of children experiencing maltreatment.
• State Department of Health, cutting the infant mortality rate.
• Department of Correction, ensuring the most serious offenders serve the longest prison terms.

Other agencies, such as the Bureau of Motor Vehicles, Family and Social Services Administration and Department of Transportation, are expected to cut their costs, reduce wait times or boost Hoosier job prospects.

Starting in January, OMB will measure improvement or decline on the indicators to determine whether each agency has earned reserve relief.

Altogether, state agencies may get back up to $9 million to fund one-time technology investments, employee bonuses or training programs.

http://www.nwitimes.com/news/local/govt-and-politics/pence-ties-state-agency-budgets-to-performance/article_3380fa19-7af5-55c3-b67f-1213c9968fbc.html

Star Reports Council Committee Revives Stalled Meadowoods TIF in Indianapolis

From the Indianapolis Star:

A City-County Council committee today moved to restart discussions about a stalled tax-increment financing district that could help attract a grocery and other businesses to the redeveloping Avondale Meadows area.

The Metropolitan and Economic Development Committee had voted along party lines to table the proposal in January. That led to a partisan fight over how best to attract a grocery story to the area, near 38th Street and Keystone Avenue, with Democrats pushing unsuccessfully to tap $3 million from the city’s RebuildIndy road work-and-infrastructure fund instead.

Mayor Greg Ballard, a Republican, has said he favors a TIF district. A TIF district generally captures the growing portion of property taxes within its boundaries as the tax base expands so the city can spend the proceeds on efforts that support new development.

During a meeting this evening, Democrat Pam Hickman told the committee that she would lead a 60-day review of the TIF district idea, aimed at addressing what some see as shortcomings in the original proposal.

She said she would meet with Republican Christine Scales, the original sponsor, after committee Chairman Leroy Robinson suggested they discuss the issue. The committee unanimously voted to keep the proposal alive and set a new hearing on the proposal for Aug. 26.

http://www.indystar.com/apps/pbcs.dll/article?AID=2013306170073

Star Reports L&E Engineering Offered Incentives for Expansion in Greenwood

From the Indianapolis Star:

When another Indianapolis manufacturing company closed up and moved overseas a few years ago, L & E Engineering President Greg Sandberg found a golden growth opportunity.

International Aerospace Tubes moved to Singapore in 2009, so L & E bought its old equipment, hired some of its former workers and started calling its former customers.

Picking up this slack has been so profitable that L & E plans to nearly double its existing factory and workforce over the next decade.

“We hired guys with 25, 30 years of experience,” Sandberg said. “So tubes are relatively new to us but not to our employees.”

L & E, owned by Franklin, Ohio-based Ferco Aerospace Group, has been turning sheet metal into brackets and small parts since 1956. It was located on the Southside of Indianapolis until 1999, when it moved to 254 N. Graham Road in Greenwood.

In addition to brackets, the firm now shapes metal tubes that become fuel supply lines in jet engines.

The Indiana Economic Development Corp. last month awarded L & E up to $400,000 in conditional tax credits and up to $50,000 in training grants to help with the expansion of its 23,000-square-foot factory. The company employed 54 people in May when the expansion was announced and plans to hire 52 more workers by 2016.

Greenwood also awarded L & E a $259,000 tax abatement to help with the construction and equipment costs.
...

http://www.indystar.com/apps/pbcs.dll/article?AID=2013306170060

IBJ Reports Incentives Draw Industrial Developer to Ameriplex

From the Indianapolis Business Journal:

A city initiative that uses tax incentives to attract industrial development to a massive distribution park near Indianapolis International Airport is beginning to show results.

Atlanta-based Industrial Developments International Inc. completed construction of a 794,608-square-foot speculative building within the AmeriPlex Business Park in March and now plans to build a 460,000-square-foot building within the same complex.

IDI bought 26 acres this month to construct the second building there and has two more lots under contract, which ultimately would raise its presence at AmeriPlex to four buildings.

The IDI projects are the first to take advantage of the automatic 10-year real property tax abatement established in 2009 by the city of Indianapolis for World Connect sites at AmeriPlex, envisioned as a seven-building complex on 200 acres.

The World Connect project is expected to add about $84 million to the tax base over the 10 years.

“You have to have a tax abatement to be competitive, or we wouldn’t be building,” said Doug Armbruster, senior vice president and regional managing director of IDI. “It’s just that important.”

South Bend-based Holladay Properties pursued the tax abatement that the city’s Metropolitan Development Commission approved in 2009. In exchange, Holladay is planning to invest $120 million in the World Connect development. The company says the investment could create 1,700 jobs with an average annual salary of $45,000.

City officials say the abatements are necessary to attract industrial development within AmeriPlex, which sits between Interstate 70 and Indiana 67, to stay competitive with neighboring Plainfield. Incentives offered by Plainfield and Hendricks County since Holladay developed AmeriPlex in 1998 have swayed industrial developers to build west of Indianapolis.

“With Hendricks County and the land over there, we needed to follow suit, and that’s what we did with World Connect,” said Deron Kintner, deputy mayor of economic development.

...

http://www.ibj.com/incentives-draw-industrial-developer-to-ameriplex/PARAMS/article/41980

Revenue Declines Taxpayer's Invitation to Conduct Third Audit of Purchases

Excerpts of Revenue's Determination follow:

Taxpayer is an Indiana business which sells, services, and installs furnaces and air conditioning equipment. The Department of Revenue ("Department") conducted an audit review of Taxpayer business records and sales/use tax returns. The audit concluded that Taxpayer owed additional sales/use tax.

Taxpayer disagreed with the assessment and submitted a protest to that effect. In addition to filing the protest, Taxpayer delivered to the Department's Legal Division numerous documents which – according to Taxpayer – would refute the original audit's assessment.
 

Taxpayer's objection was that "the discrepancies are related to all the Duncan Supply invoices for the years in question. The statements did not show the sales tax paid on it but upon looking at the actual sales, the sales tax amount was on there."
 

Those records were transferred to the Audit Division which conducted a supplemental review. That successive review found that the amount of the assessment should be reduced based on those supplemental documents.
 

Taxpayer remained unsatisfied.
...
 

Taxpayer argues that it does not owe tax because it pays sales tax each and every time it acquires materials used to fulfill lump sum construction contracts.
 

At the outset, it is useful to set out the Department guidance on this issue found in Sales Tax Information Bulletin 60 (April 2011), 20110427 Ind. Reg. 045110247NRA.
 

If a construction contractor purchases construction materials pursuant to a lump sum contract, the construction contractor pays either (1) sales tax at the time the construction materials are purchased; or (2) use tax at the time the construction materials are incorporated into real property if the contractor purchased or acquired the construction materials exempt from sales tax and the owner of the real property could not have purchased the materials exempt from sales tax (as evidenced by a customer's properly completed ST-105 General Sales Tax Exemption Certificate).
 

Taxpayer maintains that it paid sales tax on all of the materials it bought to complete its lump sum contracts and that all of the contracts it enters into with its customers are lump sum contracts. According to Taxpayer, the evidence establishes that it owes neither sales nor use tax.
...
 

According to the audit report, "It should be noted that the [T]axpayer did not remit any Use Tax to the Department." Taxpayer agrees that it did not remit use tax during the audit years.
 

Since Taxpayer did not collect sales tax from its customers and did not self-report sales tax, Taxpayer must have – by simple elimination – paid sales tax to its vendors each and every time it purchased materials incorporated into the lump sum contracts Taxpayer indicates it entered into with its customers.
 

However, the audit report found that Taxpayer engaged in both "time and material" contracts and "lump sum" contracts. In addition, the audit found that some of Taxpayer's vendors charged sales tax and some did not.
 

The audit found instances of "numerous missing invoices evidenced by many gaps in the numeric sequence of the sales invoices made available."
 

The supplemental audit addressed Taxpayer's initial objection that the additional assessment is entirely attributable to a misreading of the invoices received from Duncan Supply. The Department stated that it "was in agreement that an additional $734 sales tax paid to vendors should be allowed as credit in the audit report." However, the supplemental audit found that there was no evidence – as Taxpayer asserted – that Taxpayer did not "mark-up" the cost of the materials consumed in completing lump sum jobs. In addition, the Department's supplemental audit was unable to verify or document "over $100,000 in purchases" and noted the absence of original documentation such as "general ledgers, trial balances, [and] job folders."
 

Taxpayer asks that the Hearing Officer conduct yet a third audit of Taxpayer's records, make a competent decision that both the original audit and supplemental audit were faulty, and conclude that Taxpayer has met its statutory burden of demonstrating that the additional assessment of sales/use tax was "wrong." The Department must decline Taxpayer's invitation. The original audit began December 2011 and concluded July 2012; the supplemental audit conducted an extensive review of the documentation provided subsequent to the original audit. The administrative hearing is not an appropriate venue to second-guess the result of those audits where a Taxpayer has not made a compelling, documented argument that the assessment was wrong.

 

http://www.in.gov/legislative/iac/20130529-IR-045130198NRA.xml.html

Court of Appeals Rules IC 6-1.1-7-10 Which Requires Real Property Owner to Pay Personal Property Taxes on Another's Mobile Home Prior to Removal Was Not an Unconstitutional Taking

Lake Shore Estates MHC, LLC (“Lake Shore”), rents lots in its Mishawaka mobile home park to tenants who own their own mobile homes. A trio of tenants failed to pay rent, failed to pay personal property taxes on their mobile home, and then abandoned the home on Lake Shore’s property. Lake Shore sued the tenants for eviction and back rent. In the past, Lake Shore had paid delinquent property taxes on abandoned mobile homes to the St. Joseph County Treasurer (“the Treasurer”), who then issued Lake Shore a statutory permit to remove the homes from its property. In this case, however, the tax arrearage amounted to several thousand dollars, which was more than Lake Shore was willing to pay. Consequently, Lake Shore also sued the Treasurer, the Treasurer’s collection agent, and various other local government entities, alleging constitutional takings clause and civil rights violations as well as slander of title. The government defendants and the collection agent filed motions for summary judgment, which the trial court granted. Lake Shore now appeals, and we affirm.

…

Lake Shore raises six issues, the first of which is stated as follows:

Does a statute [Indiana Code Section 6-1.1-7-10] which requires a real property owner to pay the personal property taxes on someone else’s mobile home in order to secure a permit to remove the mobile home from the real property constitute an exaction which violates the takings clause of the Fifth Amendment?

Appellant’s Br. at 1.  Quite simply, Indiana Code Section 6-1.1-7-10 does not require a real property owner to pay the personal property taxes on someone else’s mobile home in order to remove it. Several options were (and perhaps still are) available to Lake Shore to facilitate the removal of the Lanes’ mobile home from Lot 53 without Lake Shore having to pay the delinquent personal property taxes. For example, Lake Shore could have filed an interpleader action pursuant to Indiana Trial Rule 22.  Alternatively, Lake Shore could have sold, auctioned, or salvaged the abandoned mobile home pursuant to the procedures outlined in Indiana Code Chapter 9-22-1.5. Finally, we note that Indiana Code Section 6-1.1-7-9 provides,

If a semi-annual installment of taxes imposed for a year upon a mobile home is not paid on or before the due date prescribed under section 7 of this chapter, the same penalties apply that are imposed under IC 1971, 6-1.1-37-10 for the late payment of property taxes. In addition, the mobile home and the personal property of a delinquent taxpayer shall be levied upon and sold [by the county treasurer] in the same manner that a taxpayer’s personal property is levied upon and sold under IC 1971, 6-1.1-23 for the non-payment of personal property taxes.

(Emphasis added.) Thus, Lake Shore could have initiated a mandate action pursuant to Indiana Code Section 34-27-3-1 to require the Treasurer to fulfill his statutory obligation to levy upon and sell the mobile home. In sum, we find no constitutional crisis here.  

Lake Shore’s second issue is this: “Did the County Treasurer’s transfer of the mobile home owner’s personal property tax payment obligation to the landowner of the real estate constitute a violation of the plaintiff’s due process rights?” Appellant’s Br. at 1. No such obligation was transferred, and thus no due process violation occurred.

Third, Lake Shore asks, “Did the County Treasurer’s transfer of the mobile home owner’s personal property tax payment judgment to the landowner of the real estate constitute a violation of the plaintiff’s due process rights including the right to be heard?” Id. No such judgment was transferred, and thus no due process violation occurred.

In framing its fourth and fifth issues, Lake Shore contends that the Treasurer and his agent, American Financial, violated the Fair Debt Collection Practices Act. Lake Shore made no such allegations in its amended complaint, and, in any event, neither entity attempted to collect any debts from Lake Shore. It is undisputed that the debts belonged solely to the Lanes and that the Treasurer merely informed Lake Shore of the amount of those debts at Lake Shore’s request. Lake Shore was not obligated to pay those debts, though it had voluntarily paid similar (and smaller) debts in the past. As mentioned earlier, Lake Shore had other means at its disposal to remove the Lanes’ mobile home from its property, but it failed to use them.

Finally, Lake Shore asks whether the Treasurer’s “wrongful transfer of the personal property tax payment obligation and persona[l] property judgment constitute[s] slander of the landowner’s title?” Appellant’s Br. at 2. Again, no tax obligations or judgments were transferred to Lake Shore. Moreover, Lake Shore cites no authority for the proposition that a judgment against personal property may slander a title to real property. Having disposed of all six issues in favor of the appellees, we affirm the trial court’s summary judgment rulings in their favor.

http://www.in.gov/judiciary/opinions/pdf/06181302tac.pdf

Tax Court Finds Income Taxpayer Received as a Partner of a General Partnership Doing Business in Indiana was Income Derived from Sources within Indiana

Vodafone is required to pay a tax on that part of its adjusted gross income derived from sources within Indiana. See IND. CODE § 6-3-2-1 (2005) (amended 2011). During the years at issue, “adjusted gross income derived from sources within Indiana” meant:

(1) income from real or tangible personal property located in [Indiana];

(2) income from doing business in [Indiana];

(3) income from a trade or profession conducted in [Indiana];

(4) compensation for labor or services rendered within [Indiana]; and

(5) income from . . . intangible personal property if the receipt from the intangible [was] attributable to Indiana under [Indiana Code § 6-3-2-2.2].

IND. CODE § 6-3-2-2(a)(1)-(5) (2005) (amended 2011).

In its Motion, Vodafone argues that the income it received as a result of its partnership interest in Cellco is not adjusted gross income derived from sources within Indiana under Indiana Code § 6-3-2-2(a) and is therefore not taxable. In arriving at that conclusion, Vodafone explains that because a partner’s interest in a partnership is defined as intangible personal property, the income it received from Cellco was adjusted gross income derived from sources within Indiana only if it was attributable to Indiana under Indiana Code § 6-3-2-2.2(g), “the most applicable” portion of Indiana Code § 6-3-2-2.2. (See, e.g., Pet’rs’ Am. Pet. Refund Adjusted Gross Income Tax (“Pet’rs’ Am. Pet.”) at 4-5 (citations omitted); Pet’rs’ Mot. Summ. J. (“Pet’rs Mot.”) at 2 (citations omitted); Pet’rs’ Reply Br. Supp. Mot. Summ. J (“Pet’rs’ Reply Br.”) at 6 (citations omitted).) Indiana Code § 6-3-2-2.2(g) provides that “[r]eceipts in the form of dividends from investments are attributable to this state if the taxpayer’s commercial domicile is in Indiana.” IND. CODE § 6-3-2-2.2(g) (2005). Given that it is not commercially domiciled in Indiana, Vodafone argues that its income – dividends it received from investing in Cellco – is not derived from sources within Indiana and therefore not taxable. (See, e.g., Pet’rs’ Am. Pet. at 4-5 (citations omitted); Pet’rs’ Mot. at 2 (citations omitted); Pet’rs’ Br. Supp. Mot. Summ. J. (“Pet’rs’ Br.”) at 8-12; Pet’rs’ Reply Br. at 6 (citations omitted).)

Income in the form of “dividends from investments” is sourced pursuant to Indiana Code § 6-3-2-2.2(g). The term “dividends from investments” is cloaked with meaning that is different than that of the general term “dividends” that is used in Indiana Code § 6-3-2-2, Indiana’s sourcing statute. See I.C. § 6-3-2-2(g), (j). See also USAir, Inc. v. Indiana Dep’t of State Revenue, 623 N.E.2d 466, 470 (Ind. Tax Ct. 1993) (explaining that each and every word used in a statute must be read as having meaning). Indeed, the use of the term “dividends from investments” reflects the distinction between operational income and investment income, a key constitutional concept in the attribution of income among the states.2 See, e.g., Allied-Signal, Inc. v. Dir. of Taxation, 504 U.S. 768, 784-87 (1992) (explaining that the relevant inquiry in sourcing intangible income is whether the intangible asset serves an operational function or an investment function) (footnote added). Thus, the critical question is whether the income Vodafone received as a partner of Cellco had the character of operational income or investment income because if it was operational income, it was not income in the form of “dividends from investments” under Indiana Code § 6-3-2-2(g).

A general partnership is “an association of two (2) or more persons to carry on as co-owners a business for profit[.]” IND. CODE § 23-4-1-6(1) (2005). In its most elemental form, a general partnership is “[a] partnership in which all partners participate fully in running the business and share equally in profits and losses (though the partners’ monetary contributions may vary).” BLACK’S LAW DICTIONARY 1230 (9th ed. 2009). See also IND. CODE § 23-4-1-24 (2005) (stating that the property rights of a partner in a general partnership are “(1) his rights in specific partnership property, (2) his interest in the partnership, and (3) his right to participate in the management”) (emphasis added).4 Thus, the mere fact that Vodafone was a partner in a general partnership gives its income from that partnership the character of operational income. As such, Vodafone’s income is not income in the form of “dividends from investments” under Indiana Code § 6-3-2-2.2(g).

Nevertheless, Vodafone argues that the substance of its participation in Cellco’s business, and not the business form by which Cellco is organized, should control how its income is characterized. More specifically, Vodafone argues that despite the fact it was a partner in a general partnership, a “lack of control” placed it in essentially the same position as being a limited partner of, or a true “passive investor” in, Cellco. (See Pet’rs’ Br. at 4; Pet’rs’ Reply Br. at 9, 19.) As support for this argument, Vodafone explains that

[p]ursuant to Section 3.2 of the Cellco Partnership Agreement . . . the business and affairs of Cellco were managed by its Board of Representatives. The Board consisted of nine members. Verizon Communications, as holder of the majority of the partnership interests, appointed five representatives while Vodafone was entitled to appoint four representatives[.] Corporate actions . . . required only a majority vote of the Board.

(Pet’rs’ Br. at 4-5 (citations omitted) (footnote added).)

A limited partner is a partner in a partnership whose liability is limited to the extent of his original investment in the business enterprise. See BLACK’S at 1229. A limited partner is considered a passive investor because the “quid pro quo” for his limited liability is his sacrifice of his right to participate in the management of the enterprise. See id. at 1229 (defining a limited partner as “[a] partner who receives profits from the business but does not take part in managing the business and is [therefore] not liable for any amount greater than his or her original investment”), 1230 (defining limited partnership as “[a] partnership composed of one or more persons who control the business and are personally liable for the partnership’s debts (called general partners), and one or more persons who contribute capital and share profits but who cannot manage the business and are liable only for the amount of their contribution (called limited partners)”).

While Vodafone has spent a great deal of time emphasizing the point that as the minority partner it does not “control” Cellco’s Board of Representatives or a vote thereof, (see Pet’rs’ Br. at 4-5; Pet’rs’ Reply Br. at 9, 15-16, 19; Hr’g Tr. at 5-6, 14-16, 47; Pet’rs’ Des’g Evid., App. C at ¶¶ 8-9), that does not mean that it was a “passive investor” in Cellco as a limited partner would be. Vodafone has already acknowledged that, in accordance with its rights as stated in the Cellco Partnership Agreement, it participates in Cellco’s management by appointing members to the Board of Representatives. See infra. Vodafone has also acknowledged that pursuant to its rights as stated in the Cellco Partnership Agreement, it participated in Cellco’s management by appointing Cellco’s chief financial officer. (See Hr’g Tr. at 41.) Finally, Vodafone has acknowledged that it participates in Cellco’s management by holding certain veto rights by which it can block Cellco from taking specifically identified and extraordinary actions, such as entering into entirely new lines of business, entering a voluntary bankruptcy, or otherwise terminating Cellco’s existence. (Pet’rs’ Br. at 4-5 (citations omitted); Pet’rs’ Reply Br. at 18 (citation omitted); Hr’g Tr. at 15; Pet’rs’ Des’g Evid., App. C at ¶ 9 (footnote added).) Consequently, Vodafone’s “lack of control” by reason of its minority interest is insufficient to show that it does not participate in the management of Cellco and thus that it was a mere “passive investor” in Cellco.

http://www.in.gov/judiciary/opinions/pdf/06181301tgf.pdf

Republic Reports Clay Township Limits Poor Relief Due to Dwindling Budgets

From the Columbus Republic:

Clay Township officials have had to cut spending on poor relief for the past two years because of dwindling budgets, but they still hope to help as many people as need aid.

The township has tightened application procedures, limited the amount each person can receive and disappointed some former recipients who had come to expect the aid.

Clay Township is just east of Columbus on 25th Street and includes the unincorporated town of Petersville and the Jewell Village neighborhood. The township’s previous trustee, Christa Acton, left office in May 2012 and has been under investigation by the Indiana State Police for financial problems during her tenure. Prosecutor Bill Nash has asked for a special prosecutor in the case.

http://www.therepublic.com/view/local_story/Clay-OKs-limits-on-poor-relief_1371436300

IBJ Reports FTP Hosting Offered Tax Credits for Investment in Indianapolis

From the Indianapolis Business Journal:

Secured FTP Hosting LLC, which does business as SmartFile, said Monday that it plans to invest $2.1 million to expand its Indianapolis operations and add up to 30 jobs by 2016.

The Indianapolis-based online file-sharing company said the investment will help make a 7,500-square-foot facility at 212 W. 10th Street operational by September.

SmartFile has begun hiring software engineers, web developers and system administrators.
...

The Indiana Economic Development Corp. is offering SmartFile up to $300,000 in tax credits and up to $20,000 in training grants based on the company's job-creation plans.

http://www.ibj.com/file-sharing-firm-to-invest-21m-add-up-to-30-jobs/PARAMS/article/41968

Board Finds Respondent with Burden Failed to Support Assessment; Petitioner Failed to Support Assessment Lower Than Previous Year's Value

Excerpts of the Board's Determination follow:

Here, the Respondent’s representative contends that the subject property was properly valued for 2007 based on the sales of comparable properties. Respondent Exhibits A and B. In making this argument, Mr. Metz essentially relies on a sales comparison approach to establish the market value-in-use of the property. See MANUAL at 3 (stating that the sales comparison approach “estimates the total value of the property directly by comparing it to similar, or comparable, properties that have sold in the market.”) In order to effectively use the sales comparison approach as evidence in a property assessment appeal however, the proponent must establish the comparability of the properties being examined. Conclusory statements that a property is “similar” or “comparable” to another property do not constitute probative evidence of the comparability of the two properties. Long, 821 N.E.2d at 470. Instead, the proponent must identify the characteristics of the subject property and explain how those characteristics compare to the characteristics of the purportedly comparable properties. Id. at 471. Similarly, the proponent must explain how any differences between the properties affect their relative market values-in-use. Id.

In support of his contention, Mr. Metz submitted “iDox sales information” for properties in Griffith, Merrillville and Gary that sold in 2005. Mr. Metz also presented MLS sales information for sales in Gary and Griffith that occurred in 2005 and 2006. Mr. Metz testified that the subject property was valued in the range of these sales. Mr. Metz, however, made no attempt to show how the properties were similar or how the properties differed; he only showed that they were all vacant land sales. But whether properties are similar enough to be considered “comparable” depends on a number of factors including the size, shape, topography, accessibility and use of the properties. See Beyer v. State, 280 N.E.2d 604, 607 (Ind. 1972) (“One need only examine the multitudinous factors which make separate tracts of land similar or dissimilar to realize that the variation in the character of land is limitless. No two tracts of land are identical”). And in fact, the sales presented by the Respondent’s representative ranged from $100 to $155,000 – which suggests that the properties differed substantially. The Board, therefore, finds that the Respondent failed to raise a prima facie case that the Petitioner’s property was correctly valued for the 2007 assessment year.

Because the Respondent failed to raise a prima facie case, the property’s 2007 assessment must be reduced to the previous year’s assessed value of $14,200 under Indiana Code § 6-1.1-15-17.2. The Petitioner, however, requested an assessed value of $5,000 for the 2007 assessment year. As explained above, the Petitioner has the burden of proving that he is entitled to any additional reduction. The Board therefore turns to Mr. Sullivan’s evidence.

The Petitioner contends that the subject property’s value for the 2007 assessment year should have been $5,000. Sullivan testimony. In support of this contention, Mr. Sullivan submitted an appraisal prepared by Thomas J. Serratore that estimated the value of the property to be $5,000 as of May 4, 2011. Attachment to Board Exhibit A. The appraiser attested that he prepared the appraisal in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP). Id. An appraisal performed in conformance with generally recognized appraisal principles is often enough to establish a prima facie case that a property’s assessment is incorrect. See Meridian Towers, 805 N.E.2d at 479.

Here, however, the appraisal valued the Petitioner’s property more than five years after the relevant valuation date. Neither the appraiser, nor Mr. Sullivan, attempted to explain how the appraisal related to the subject property’s market value-in-use as of January 1, 2006. The appraisal therefore lacks probative value. See Long 821 N.E.2d at 471 (holding that an appraisal that estimated a property’s value for December 10, 2003, lacked probative value in an appeal from a 2002 assessment).

Mr. Sullivan also contends that several issues negatively affect his property’s value. According to Mr. Sullivan, his property is smaller now than it had previously been because the government took a portion of it in order to widen the road. Mr. Sullivan, however, did not present any evidence indicating when the government took a portion of his property; nor did he present any evidence that the taking affected the use of the remainder of the property.

Mr. Sullivan also contends that the construction of a church on an adjacent lot negatively affected his property because his land is now lower than the church property and it would require fill in order to build on it. Further, Mr. Sullivan contends the subject property’s neighborhood is in decline. But while Mr. Sullivan testified these conditions “negatively impacted” the market value of the property under appeal, he presented little evidence of the property’s market value-in-use as of the March 1, 2007, assessment date.

Finally, Mr. Sullivan presented a settlement agreement with the Department of Local Government Finance for the March 1, 2002, assessment date, valuing the subject property at $5,000. However, that agreement is not probative evidence that future assessments should be $5,000 for the property. First, each assessment and each tax year stand alone. Fleet Supply, Inc. v. State Bd. of Tax Comm’rs, 747 N.E.2d 645, 650 (Ind. Tax Ct. 2001) (citing Glass Wholesalers, Inc. v. State Bd. of Tax Comm’rs, 568 N.E.2d 1116, 1124 (Ind. Tax Ct. 1991)). Thus, evidence as to a property’s assessment in one tax year is not probative of its true tax value in a different tax year. See, Id. More importantly, the 2002 value was based on an agreement reached with the Department of Local Government Finance settling the Petitioner’s 2002 appeal. Indiana’s Supreme Court has held that  “[t]he law encourages parties to engage in settlement negotiations in several ways. It prohibits the use of settlement terms or even settlement negotiations to prove liability for or invalidity of a claim or its amount.” Dep’t of Local Gov’t Fin. v. Commonwealth Edison Co., 820 N.E.2d 1222, 1227 (Ind. 2005). The strong policy justification for denying settlements precedential effect in a property tax case is that allowing parties to use the settlement would have a chilling effect on the incentive of the parties to resolve cases outside of the courtroom. Id. at 1228. Thus, the Petitioner failed to prove that his assessment for the March 1, 2007, assessment year should based on its negotiated 2002 assessed value.

http://www.in.gov/ibtr/files/Sullivan_45-001-07-1-5-00012.pdf

Sun Commercial Reports Duke Energy Abatement to Come in "Halves"

From the Vincennes Sun-Commercial:

As part of the package to entice Duke Energy to build its new power plant here, county officials way back in 2005 offered tax breaks to the company totaling some $64 million, including tax abatement on the plant, which was then estimated to cost $1 billion.

This month the plant, now valued at around $3.3 billion, officially went online, meaning that tax abatement will kick in causing a drop in assessed valuation within the North Knox school district.

However, it won’t be as drastic a drop as first thought.

Yvette Kirchoff, a partner in the Vincennes law firm of Kolb Roellgen & Kirchoff which represents Duke locally, this week explained to members of the county council that only a part of the plant will actually qualify for tax abatement this year.

Only what’s been assessed so far will qualify now, she said.

What’s referred to as the tower block, which is basically the most-visible section of the plant and valued at almost $1.8 billion, will come off the tax roll this year.

The rest of the plant, included the section that actually develops the synthetic gas used to fuel the generators and produce electricity, will remain on the tax roll.

Next year, that will come off while 10 percent of the tower block will be added back.

The abatement is the standard 10-year process in which during the first year the qualifying property’s value for taxing purposes is zero, to be incrementally increased over the course of the abatement until the full value is taxed.

Kirchoff reminded council members that even with the abatements taking effect Duke Energy will continue to be the largest property-tax payer in the county.

Removing the property from the tax roll will have an impact on property taxes in the school district as well as Vigo Township.

The reduction in assessed valuation will mean a higher tax rate will be needed to raise the money the school and township need.

Darrel Bobe, superintendent of at North Knox, was glad to hear that the abatement was actually going to occur in two phases.

He said if the whole plant were to come off the tax roll at one time, it would be hard for the school corporation to raise the property-tax money it needs without bumping into the tax caps that are now part of the state constitution.

That the abatements will be staggered means that in all likelihood isn’t going to happen.
...

http://suncommercial.com/articles/2013/06/15/news/local_news/doc51bd1c600c91d508318076.txt