Friday, November 30, 2012

Editorial Argues that Indiana's Sales Tax "Remains Unfair"

From the Madison Courier:

We believe that consumers should make every effort to shop locally.

Unfortunately, online shopping is cutting deeply into the profits of our local merchants.

There is no question that online shopping is convenient and the selection might be greater than what we find in some brick-and-mortar businesses.

We need to give our local business owners every advantage, but Indiana's sales tax code makes that difficult.

Under federal law, unless a retailer has a physical presence in Indiana, it is not required to collect Indiana's 7 percent sales tax. Instead, Hoosiers are expected to report the purchases on their income tax returns and pay the sales taxes then.

Few people do that.

Two lawmakers - Rep. Ed DeLaney, a Democrat from Indianapolis, and Tom Dermody, a Republican from LaPorte - plan to introduce legislation to try to force many Web-based businesses to collect taxes on their sales. They are joined by members of the Indiana Merchants for Tax Fairness, which has called for an end to an "unfair advantage" online retailers have over brick-and-mortar stores.

Indiana loses about $77 million a year from un-taxed online sales, according to a study released last year by the Indiana Fiscal Policy Institute.

And don't forget that local retailers pay property taxes and pay people to complete the paperwork necessary to report the sales tax. These are responsibilities that many online retailers avoid.

It seems unfair to demand that one store assess a tax on behalf of the state while allowing its competitor to avoid that duty.

We urge lawmakers to take up the debate when they begin meeting in January.

Editorial Argues Tax Cuts and Refunds Come at a Cost

From the Indianapolis Star:

Who is going to scoff at $222 (for married couples) or $111 (for those who file individually)? Who wouldn’t stop to pick up $222 they saw on the sidewalk, and get very excited while doing so? For many people, this is a chunk of change that will substantially change their financialsituation next year. For others, it’ll pay for a nice dinner at St. Elmo.

But don’t be confused. This is not found money, and it doesn’t land back in Hoosier pockets without a cost. Every dollar the state sends back to taxpayers is another dollar that won’t be invested in, say, early childhood education. The collective cost of the refund — roughly $360 million — will make it harder for the state to address many of its shortcomings when lawmakers convene in January.

The refund news comes just weeks after the election of Daniels’ successor, Mike Pence, whose fluffy campaign centered on an unnecessary promise to reduce the state’s income tax rate by 10 percent, a promise that will make it more difficult for the state to tackle big problems.

And it’s hard to deny that the state has big problems. Just ask the Department of Child Services.

This all leads to an important question, one I’ve asked before: Is anybody out there really complaining about Indiana’s 3.4 percent income tax rate? Seriously, when’s the last time you heard someone say that the state’s flat tax — applied to income after all sorts of deductions and exemptions — was out of hand?

Think about that number — 3.4 percent. That sure seems like a fair price for all of the services a state provides, even when you factor in other state taxes we all pay. After eight years of Daniels as governor, if nothing else, it’s hard to find many people complaining about overspending, or overtaxing.

In the end, it’ll be nice to receive $222 from the government. That will pay my Starbucks bill for a month or so. But I look forward to the day when someone at the top of our state’s government tells Hoosiers the truth.

And here is that truth: Our tax rates are reasonable, and our problems are daunting. A refund sounds good, but investments in our state would be more worthwhile.

Porter County Council Denies Approval for Loan to Lake County

From the Chesterton Tribune:

While funding for Portage appeared to have a split reaction, the Council was unanimous, 6-0, in nixing the idea of lending $15.5 million to Lake County Government even though the intention would be to gain a higher interest rate on the funds for Porter County than what banks could offer.

Treasurer Mike Bucko, who was not present during Tuesday’s discussion, has been in discussions with the Lake County Council about “purchasing municipal debt” which he said he would only do if Porter County stands to benefit. Previously Bucko loaned money to the City of Hammond with average net earnings being as much as 3.85 percent.

Conover made a motion to encourage Bucko not to loan out money, saying that she does not favor moving the funds to cover Lake’s operating costs. Biggs seconded the motion saying that Porter County has its own needs to attend to.

The Lake County Council cast a split vote 5-2 on selling $15.5 million in bonds which signaled to Whitten they do not have a strong consensus on whether or not they can pay back the money.

Tenneco Offered Incentives for Expansion in Ligonier

From the Fort Wayne Journal-Gazette:

Tenneco, a vehicle parts supplier, will spend $18.7 million to expand its operations in Ligonier and create up to 105 jobs by 2013, the company announced Thursday.

Tenneco Automotive Operating Co. Inc., based in Lake Forest, Ill., will lease and equip a 50,000-square-foot facility in Ligonier. The building will house robotic welding machinery used to produce emission control parts, including mufflers, catalytic converters and emission systems for customers including Chrysler and Ford, the company said.

The Indiana Economic Development Corp. offered Tenneco up to $600,000 in conditional tax credits and up to $68,000 in training grants based on the company’s job creation plans. The tax credits are performance-based, meaning that until Hoosiers are hired, the company is not eligible to claim incentives, the company said.

Uni-Ref Offered Incentives for Relocating to Brookville

From the Batesville Herald-Tribune:

Officials at Uni-Ref Inc., a refractory products manufacturer, announced plans Nov. 28 to relocate its headquarters from Sharonville, Ohio, to Brookville, creating up to 50 new jobs by 2015, reported Indiana Economic Development Corp. spokesperson Katelyn Hancock.

The company, which is a subsidiary of United Refractories Co., McMurray, Pa., will purchase and renovate a 270,000-square-foot facility on a 23-acre campus at 8031 Golden Road. The facility will be fully operational by early next year.

IEDC offered Uni-Ref  up to $500,000 in conditional tax credits and up to $70,000 in training grants based on the company’s job creation plans. These tax credits are performance-based, meaning until Hoosiers are hired, the company is not eligible to claim incentives. Franklin County will support the project through additional incentives at the request of the Franklin County Economic Development Commission.

Board Finds Taxpayer Fails to Prove Land Value Incorrect Based on Assessed Values of Neighboring Properties

The Petitioner’s representative generally claims that the subject property’s land value was assessed too high in 2008 and 2009 compared to other parcels in his area. In support of his contentions, Mr. Smith submitted “Property Assessment Detail Reports” which provide a total assessed value of the land and the improvements for each of seven other properties in the area of the Petitioner’s property. From those reports, Mr. Smith calculated the assessed value per square foot of each lot. Mr. Smith also provided a map to show where the lots were located in relation to the subject property.

Pursuant to Indiana Code § 6-1.1-15-18(c), “To accurately determine market-value-in-use, a taxpayer or an assessing official may … introduce evidence of the assessments of comparable properties located in the same taxing district or within two (2) miles of a boundary of the taxing district…” Ind. Code § 6-1.1-15-18. The statute states that “the determination of whether properties are comparable shall be made using generally accepted appraisal and assessment practices.” Id.

To compare the assessed values of comparable properties, however, at a minimum the proponent must provide property record cards to show how the various properties were assessed in the years at issue. Here, the Petitioners provided no such data. The Petitioner’s “Property Assessment Detail Reports” are not the kind of report that would allow the Board to determine how a property was assessed and whether the subject property was assessed differently. While Mr. Smith calculated some of the Petitioner’s comparable properties to have a land value below the value he calculated for the subject property, Mr. Smith failed to present any evidence to show what base rate was applied to each parcel and what adjustments were applied to that base rate for each property. Thus, the Board has no means of comparing the Petitioner’s land assessment to the land assessments on the other properties that Mr. Smith argues are comparable. Moreover, contrary to Mr. Smith’s arguments, the Respondent’s evidence shows that another similarly situated corner lot in the Petitioner’s property’s neighborhood was assessed at the same base rate as the Petitioner’s property and received the same 100% influence factor for its location.

To the extent that the Petitioner’s representative argues that its property should not have had an influence factor applied to the land based on the property’s market value, the Board notes that the Petitioner’s representative failed to provide any market evidence of the property’s value. He merely alleged that the county assessor should remove the 100% positive influence factor applied to the Petitioner’s land. Thus, the Petitioner’s representative failed to raise prima facie case that the Petitioner’s property’s land was over-valued for the 2008 and 2009 assessment years.

Where the Petitioner’s representative has not supported the Petitioner’s claim with probative evidence, the Respondent’s duty to support the assessment with substantial evidence is not triggered. See Lacy Diversified Indus. v. Department of Local Government Finance, 799 N.E.2d 1215, 1221-1222 (Ind. Tax Ct. 2003).

Tax Court Schedules One Hearing for December

Alloy Custom Products, Inc. v. Indiana Department of State Revenue (View)
Monday, December 03, 2012 10:00 AM - 11:00 AM

This is a hearing on the parties' motions for summary judgment.

For a description on the merits of the case see the Tax Summaries at

State House, Room 413
Indianapolis, IN 46204

Taxpayers Failed to Show that Additional Income Tax Assessment was Incorrect

Taxpayers, as husband and wife, filed joint income tax returns for the 2009 and 2010 tax years. Husband operated a home maintenance service company as a sole proprietorship and reported the income on Schedule C with their federal income tax returns. The Indiana Department of Revenue ("Department") conducted an audit of Taxpayers' income tax returns and assessed additional income tax, interest, and penalty for the tax years. The Department determined that Taxpayers had underreported their taxable income. 

Taxpayers disagreed with the Department determination that Taxpayers had more income than Taxpayers reported. Taxpayers assert that they did not know that when they sold personal property that it counted as income and, therefore, did not keep the receipts or documents for these transactions. Taxpayers state that they have kept good records for their business and that they live more economically than the average family of their size as reported in the Consumer Expenditure Survey.

While the Department did use the Consumer Expenditure Survey during its investigation of Taxpayers, the Department did not use it to make the assessment. The Department compared the Taxpayer's reported income to the amount of expenditures that the Consumer Expenditure Survey reported a family of Taxpayer's size would make in a year. That comparison showed significant disparity between the amounts of income reported by Taxpayers and the amount a taxpayer would have needed to earn to have met their living expenditures for the year. Therefore, the Department decided to investigate further and derive a method to account for and address this disparity.

The Department applied the "Cash T Method" to Taxpayers' available information to arrive at a revised total audited income figure. Taxpayers' documentation presented during the audit was used to determine the amount of Taxpayers' actual expenses for the year ("actual expenses"). These actual expenses were compared to the amounts of reported federal income, documented loans, and/or other reported income ("reported income"). The difference between Taxpayers' actual expenses and Taxpayers' reported income is the figure the Department determined to be equal to the unreported income.

During the hearing, Taxpayers' presented a check register with hand-written notations regarding the transactions in the register. While the check register with hand-written notations attempted to close the gap between Taxpayers' reported income and the income determined by the audit, Taxpayers did not provide any additional documentation to support either these handwritten notations or their position regarding the underreporting of income.

A taxpayer has the obligation to prepare a careful, methodical, and detailed factual presentation of the evidence sufficient to refute the conclusions contained within the audit report. In order to meet its burden, a taxpayer must "walk" the Hearing Officer through each element of the taxpayer's proffered evidence; Taxpayer does not meet its burden by presenting a check register with hand-written notations, without invoices, receipts, or other supporting documentation. The check register with hand-written notations, without more, only serves as conclusory statements in the hope that the check register with hand-written notations will speak for itself.

Taxpayers' check register with hand-written notations and additional explanations proffered during the hearing do not sufficiently refute the information or the results reached in the Department's audit report. Pursuant to IC 6-8.1-5-1(c), all tax assessments are presumed to be accurate, and the taxpayer bears the burden of proving that an assessment is incorrect. Since Taxpayers failed to produce documentation that demonstrates that the Department's assessment was incorrect, Taxpayers have failed to meet their burden. Therefore, Taxpayers' protest is denied.

Thursday, November 29, 2012

Revenue Publishes 2013 Interest Rates


Departmental Notice #3
November 2012
Interest Rates for Calendar Year 2013

This document does not meet the definition of a "statement" required to be published in the Indiana Register under IC 4-22-7-7. However, under IC 6-8.1-10-1, the Commissioner is required to establish the applicable interest rates for tax overpayments and underpayments that will take effect for the immediately succeeding calendar year. The purpose of this notice is to inform the public of the interest rates that will be effective beginning January 1, 2013.

The rate of interest for an underpayment of tax and an excess tax payment is the percentage rounded to the nearest whole number that equals two percentage points above the average investment yield on state money for the state's fiscal year ending June 30, 2012, excluding pension fund investments, as provided by the State Treasurer's office. The rate of interest for an underpayment of tax and an excess tax payment for calendar year 2013 will be 3%.

A historical list of the above calculated percentages is attached to this document.

Indiana Department of Revenue
Michael J. Alley

 1989 10% 10% 
 1990 10% 10% 
 1991 10% 10% 
 1992 8% 8% 
 1993 7% 7% 
 1994 7% 7% 
 1995 4% 6% 
 1996 5% 7% 
 1997 5% 7% 
 1998 5% 7% 
 1999 5% 7% 
 2000 5% 7% 
 2001 6% 8% 
 2002 6% 8% 
 2003 4% 6% 
 2004 2% 4% 
 2005 1% 3% 
 2006 2% 4% 
 2007 (Jan.1 to June 30) 3% 5% 
 2007 (July 1 to Dec. 31) 5% 5% 
 2008 7% 7% 
 2009 7% 7% 
 2010 4% 4% 
 2011 9% 9% 
 2012 4% 4% 
 2013 3% 3%

Board Finds Sale Price - Which Included FF&E - Insufficient to Support Increased Value for Property

In this appeal, both parties agreed that the Respondent has the burden to prove the assessment is correct.

The Respondent correctly pointed out that many cases have recognized an arm’s-length sale of the subject property as the best evidence of its market value-in-use.  Hubler Realty Co. v. Hendricks Co. Assessor, 938 N.E.3d 311, 315 (Ind. Tax Ct. 2010).  Most of those cases have been situations where nothing but the real estate itself was involved in the transaction.  In situations where more than the value of the real property is represented in the selling price, it is necessary to determine the part of the selling price that actually is for the real property.  See Grant Co. Assessor v. Kerasotes Showplace Theatres, 955 N.E.2d 876, 881-2 (Ind. Tax Ct. 2011) (recognizing that Indiana’s assessment system “does not ‘allow [] assessors to assess things other than real property rights for ad valorem taxation.’”)  This case analysis requires recognition and application of that same limitation.  Therefore, relying on the sale price of the subject property to prove an accurate assessed value is not always as simple as it might first appear.

In this case, there is no dispute that that in December 2008 the Petitioner paid $3,575,000 in a transaction where it acquired the subject property.  But there is also no dispute about the fact that that total included some amount for value other than the real property itself.  The sales disclosure form says that amount was $655,000.  If that amount were deducted, the purchase price of the real estate would be $2,920,000.

According to the Respondent, however, the amount of that deduction should be much less than the figure reported on the sales disclosure form.  The Respondent relied on Mr. Mills’ testimony and the data he gathered about other nursing home sales in attempting to prove that an appropriate deduction would only be 10% ($357,500) of the total transaction.  Although Mr. Mills testified about his credentials as an appraiser, he explained that he had not done an appraisal of the subject property and was not testifying as an appraiser.  “All I am doing is presenting data.  I did not do an appraisal on the property and it would be wrong for me to indicate that I am testifying here… as an appraiser.”  Mr. Mills compared data from the sales of eleven other nursing homes with data from the purchase of the subject property.  Respondent Exhibit D contains a summary of his comparison data as well as several pages of supporting data.  For the Respondent’s position, the most important part of the evidence is Mr. Mills’ conclusion that the eleven other sales indicate the deduction from the total purchase price should be only 10% for furniture, fixtures and equipment (FF&E).  Even though Mr. Mills testified that things such as age and type of equipment are a “very major factor” in determining FF&E value, there is no evidence that his 10% conclusion is based on a substantial, meaningful, detailed comparative analysis of the FF&E in those comparables and the subject property.  In fact, it appears that Mr. Mills simply accepted the FF&E amounts most of those other buyers estimated.  Furthermore, his supporting data shows a tremendous range on the percentage of FF&E.  For example, in one sale the total price was $4,160,000 while the FF&E was $108,435.  It might be true that the average reported FF&E figure for those sales is somewhere around 10%, but the Respondent failed to establish that such methodology conforms to generally accepted appraisal principles for valuing the real property.  Ultimately, determining a proposed valuation by simply deducting 10% for FF&E from the Petitioner’s purchase price is not credible or probative evidence.  It does not help to prove what an accurate valuation of the subject property is.

Furthermore, the attempt to compare the per bed value derived from that calculation to per bed values derived from similar calculations for other facilities without providing a meaningful comparison of the similarities and difference of the facilities does not provide probative information.  Long, 821 N.E.2d at 471.  Even if it is true that other facilities have sales prices that range from $13,227 to $56,634 per bed and the purported mean and median values claimed by Mr. Mills are accurate and the Respondent’s proposed valuation falls slightly below both the mean and median values, that point does not help to prove that a value of $32,175 per bed for the subject property is actually accurate.

The Respondent failed to make a prima facie case to support the current assessed value.  The Respondent failed to make a prima facie case to support a value of $3,217,500.

In other cases where the Respondent had the burden to prove the assessment is correct and the Respondent failed to carry that burden, the Board has ordered that the assessment be returned to the assessed value of the year before.  In this case, doing so would reduce the assessment to $1,746,800.  But that amount is less than the Petitioner claimed on its Form 131, which claimed the total assessment should be $2,063,100, or at hearing, where the Petitioner claimed the total assessment should be in the $20,000 per bed range.  In other cases, the Board has determined that it will not reduce the assessment to less than a petitioner request.  See Castleman v. Steuben Co. Assessor, Petition No. 76-006-08-1-5-00001 (IBTR decision issued Feb. 6, 2012).  A similar conclusion is appropriate for the case now before us.

Richmond Community Schools Considers Borrowing $8 Million

From the Richmond Palladium-Item:

Richmond Community Schools could be headed toward borrowing $8 million in 2013 to pay for what the administration is calling overdue building upgrades and repairs.

But school board members agreed Wednesday that they should meet in work session to scrutinize the necessity of each project.

RCS plans to sell that scenario by telling the community that borrowing funds will stabilize the tax rate, which is currently at 64 cents per $100 assessed valuation. That would be possible because the school corporation has seven months remaining on payments on bonds that paid for the renovation of Test Intermediate School in 2003.

RCS is also paying on a pension bond through January 2020 with costs totaling $12,939,841, but the administration believes many of these projects cannot wait until then.

That scenario also would not lower the tax rate.

“I don’t want to lie to the public,” board member Jeff Slifer said. “We’re not doing this and not raising the tax rate.”

Board members said each project merits discussion, but Slifer and Board President Kelly Baumgartner mentioned the Charles project in particular.

“We just closed three schools,” Baumgarnter said, referring to the cost-cutting master plan that closed Garrison, Highland Heights and C.R. Richardson elementary schools due to ongoing enrollment and revenue decline.

IEDC Announces Record Development in Indiana

From the Fort Wayne Journal-Gazette:

The Indiana Economic Development Corporation announced today that this year it has already worked with 220 companies that have made decisions to expand or establish new business operations in Indiana, outpacing the 219 decisions by companies announced at year-end last year and every other year on record.

“With nearly five weeks left in the year, 2012 has already broken the state’s all-time record for number of deals won,” said Dan Hasler, Secretary of Commerce and chief executive officer of the Indiana Economic Development Corporation. “This is especially remarkable considering the ongoing concerns over the ‘fiscal cliff’ that have caused many companies to curtail investment plans.”

The 220 companies anticipate investing $3.6 billion in their Indiana operations and creating 20,866 new jobs in the coming years. These new positions pay an expected average hourly wage of $22.35, above the state’s current hourly wage of $19.66. Meanwhile, the average amount of state conditional tax incentives offered to companies on a per job basis is $8,916, down from around $37,000 in previous administrations.

“Under Governor Daniels’ leadership, this administration has taken pride in tackling challenging but common sense issues to make Indiana the most sought-after business location in the country,” Hasler said. “From its right-to-work status to its falling corporate and property taxes to its AAA credit rating, these results are proof that Indiana works for business.”

INDOT Seeks Additional Funding for Road Maintenance

From the Fort Wayne Journal-Gazette:

Indiana transportation officials told a key budget committee Wednesday that an additional $200 million a year is needed to maintain the state’s highways and bridges.

Indiana Department of Transportation Commissioner Michael Cline said that money could save $2 billion in more extensive repairs over a 20-year period.

INDOT revenue is expected to be about $1.5 billion in each of the next two fiscal years. The total for the upcoming two-year spending cycle is down 23 percent from the current biennium ending in June, Cline told members of the State Budget Committee.

A large part of the loss is that virtually all proceeds from the Indiana Toll Road lease have been spent or obligated. And the state’s gas tax collections – along with consumption of gas – have dropped due to more fuel-efficient vehicles.

The latter is a long-term sustainability problem lawmakers need to address.

“It’s a question every state is facing,” State Budget Director Adam Horst said.

A number of ideas exist to tackle the declining road dollars. One is raising the 18 cent-a-gallon gas tax. But each penny brings in less money every year – currently about $30 million – and the trend wouldn’t change.
Other suggestions are increasing license plate fees, indexing the gas tax to inflation for automatic adjustments and creating a new system of taxation based on how much drivers use the roads.

INDOT officials provided models on how much revenue would be created by attaching the gas tax to various measures of inflation. The state’s models showed that revenue would be between $120 million and $200 million more annually.

House Ways and Means Chairman Tim Brown, R-Crawfordsville, asked about the dollars the state gets from charging sales tax on gasoline purchases, none of which goes to pay for road improvements.

Indiana is also one of only a handful of states that still collect sales tax on gasoline, and Cline said it would help if some of that money were diverted from general state funding to roads.

The sales tax collected on gas currently brings in more dollars than the state’s gas tax.

Counties receive some state and federal dollars and have the ability to implement a wheel tax on vehicles. Some counties still haven’t used that authority or haven’t increased it to keep up with needs.

Rep. Terry Goodin, D-Crothersville, suggested giving cities the same authority to adopt wheel taxes.

DLGF Publishes Amendments to Rules Concerning Public Notices of Adoption of Library Capital Projects Fund Plans


Proposed Rule
LSA Document #12-552


Amends 50 IAC 9-2-5 concerning public notices of adoption of library capital projects fund plans.
See the provisions of the rule here:

Notice of Public Hearing
LSA Document #12-552

Notice of Public Hearing

Under IC 4-22-2-24, notice is hereby given that on December 20, 2012, at 10:30 a.m. EST, at the Indiana Government Center North, 100 North Senate Avenue, Room N1058, Department of Local Government Finance Conference Room, Indianapolis, Indiana, the Department of Local Government Finance will hold a public hearing on the proposed rule to amend the rules adopted by the Department in 50 IAC 9-2 regarding notices of adoption for capital projects funds.
Under IC 36-12-12-12, the Department may adopt rules for the implementation of procedures for public libraries to follow in adopting capital projects funds. The Department finds the proposed rule necessary to notify both public libraries and taxpayers that public libraries must publish a notice of adoption under IC 36-12-12-5. The Department estimates that the proposed rule will not impose requirements or costs under IC 4-22-2-24(d)(3). Because no financial impact is expected as a result of this rule, no supporting data, studies, or analyses were relied upon by the Department in its determination that the rule will have no, or minimal, fiscal impact on state or local government since no new responsibilities have been added by the rule.
Copies of the proposed rule are available on the Department of Local Government Finance website at:
Copies of these rules are now on file at the Indiana Government Center North, 100 North Senate Avenue, Room N1058 and Legislative Services Agency, Indiana Government Center North, 100 North Senate Avenue, Room N201, Indianapolis, Indiana and are open for public inspection.
The Economic Impact Statement is available here:

DLGF Publishes Amended Rule for Oil and Gas Assessments


Proposed Rule
LSA Document #12-548


Amends 50 IAC 26-20-7 concerning file formatting requirements for oil and gas assessments. Amends 50 IAC 26-20-8 concerning file formatting requirements for real and personal property tax data.
See the amended rule here:
Notice of Public Hearing
LSA Document #12-548

Notice of Public Hearing

Under IC 4-22-2-24, notice is hereby given that on December 20, 2012, at 10:00 a.m. EST, at the Indiana Government Center North, 100 North Senate Avenue, Room N1058, Department of Local Government Finance Conference Room, Indianapolis, Indiana, the Department of Local Government Finance will hold a public hearing on the proposed rule to amend the rules adopted by the Department in 50 IAC 26-20 regarding the file formats for oil and gas assessments.
Under IC 6-1.1-31.5, the Department shall adopt rules for the certification of computer systems used in the administration of property tax assessments. The Department finds the proposed rule necessary to facilitate the billing process for oil and gas property assessments. The Department estimates that the proposed rule will not impose requirements or costs under IC 4-22-2-24(d)(3). Because no financial impact is expected as a result of this rule, no supporting data, studies, or analyses were relied upon by the Department in its determination that the rule will have no, or minimal, fiscal impact on state or local government since no new responsibilities have been added by the rule.
Copies of the proposed rule are available on the Department of Local Government Finance website at:
Copies of these rules are now on file at the Indiana Government Center North, 100 North Senate Avenue, Room N1058 and Legislative Services Agency, Indiana Government Center North, 100 North Senate Avenue, Room N201, Indianapolis, Indiana and are open for public inspection.
The Economic Impact Statement is available here:

Indiana Supreme Court to Decide if Tax Sale Notice Statute is Unconstitutional

From Indiana Legal News:

The Indiana Supreme Court granted transfer to just one case last week, taking a Bartholomew County ruling involving a tax sale. The Indiana Court of Appeals in July held that Indiana Code 6.1-1-24-3(b) violates the 14th Amendment guarantee of due process.

M&M Investment Group petitioned for a tax deed after it bought property at a tax sale. Monroe Bank was the mortgagee. The county auditor gave notice of the tax sale to the previous owner of the land Ahlemeyer Farms, but not to Monroe Bank before the sale. Even though the bank didn’t request notice of the tax sale as the statute describes, the Court of Appeals found it had been denied due process.

Oral arguments have not been set for M&M Investment Group LLC v. Ahlemeyer Farms Inc., Monroe Bank, 03S04-1211-CC-645.
The justices denied taking 21 other cases.

Merrillville to Consider Abatement Request for Office Development

From the Northwest Indiana Times:

The Town Council has designated AmeriPlex at the Crossroads as an economic revitalization area.
Town Administrator Howard Fink said the designation was needed before the council could consider approving 10-year real estate and personal property tax abatement for a project to build a 20,000-square-foot office in the development near 101st Avenue and Broadway.

Holladay Properties would build the facility, which would be rented by Horizon Financial Management, a Merrillville company that provides billing and practice management services to health care providers across the country.

Horizon currently operates from six suites in the Chase building at 8585 Broadway, but more space is needed for the growing business, said Frank Termini, managing partner at Horizon.

The council could consider approving the tax abatement request during its Dec. 11 meeting.

Legislators Hear Budget Requests From Agencies

From the Northwest Indiana Times:

Indiana's budget picture is slowly taking shape, but the big questions about tax collections, tax cuts and how much will be spent on education remain to be seen.

Members of the State Budget Committee spent a second day Wednesday hearing from the State Budget Agency about how state department heads crafted their biennial budget requests and from the department chiefs themselves on what they would need over the next two years.

Lawmakers expect to get an updated tax collection forecast next month and another in April, shortly before they wrap up their legislative session, that should tell them how much money they have to work with. Legislators will also wait to see what priorities Gov.-elect Mike Pence spends on in his first budget, including a proposal to cut the state's personal income tax.

This week's meetings gave lawmakers an opportunity to talk with state agency leaders, but the hard questions are likely to come later, after the legislative session begins and once an actual budget has been submitted for consideration. Members of the budget committee also pointed out that the agencies make up very little of the state's overall spending picture.

"The general services of state government are a small portion of the state budget. The lion's share is still K-12, higher education, Medicaid and the social services," House Ways and Means Committee Chairman Tim Brown, Crawfordsville Republican, said Wednesday. "I think it's just a starting a point, so we'll go forward and see how April and December look."

The State Budget Agency ordered most other departments to work up "baseline" proposals that amounted to roughly 3 percent less than what lawmakers afforded them last year. In many cases, the agency heads offered a broadly positive picture with a handful of requests for increased spending.

Wednesday, November 28, 2012

Dispute Over $7.5 Million in Capital Improvement Funds Simmering in Columbus

From the Columbus Republic:

A simmering dispute between Columbus Mayor Kristen Brown and the City Council has roiled into public view.

The sparring match is about who should control $7.5 million in spending on capital improvement projects for 2013.

The friction dates to Oct. 2, when the council approved the 2013 city budget, with $46.2 million in spending. It also passed an amendment — proposed by council member Jim Lienhoop — that requires the mayor to seek council approval for certain expenditures from the capital improvement and cumulative capital funds.

Johnson County Residents Question Assessments

From the Johnson County Daily Journal:

More than 1,300 property owners questioned or disputed the new value the county decided their home, land or building was worth.

Last week, the county sent out notices showing property owners how the value of their property changed in a countywide reassessment, and the phone calls questioning the changes began.

About half of property values went up. Most of the rest went down.

Editorial Urges Caution Before Passing On-Line Sales Tax Bill

From the Fort Wayne News-Sentinel:

Members of the General Assembly seemed inclined to rush something they probably should slow down and think about a bit. There seems strong support for a bill to be introduced by two legislators that would require and other online retailers to start collecting sales tax six months earlier than the deal brokered by Gov. Mitch Daniels last January.
The bill has the support of a number of conservatives, who ordinarily live by the common-sense rule that a tax – any tax – discourages the activity it is attached to; make retail purchases more expensive, and people will make fewer retail purchases. And they are supporting this tax proposal with the same reasoning liberals are fond of deploying in favor of taxes: The current system is “unfair” because some brick-and-mortar retailers are forced to collect the sales tax and online retailers aren’t.
Conservatives normally understand two things about taxes: 1. Any money taken out of the private sector and placed in public coffers, by whatever means, is money the private sector no longer has the use of and, 2. the best way to achieve fairness is to reduce the high rate, not increase the low one.
But it’s hard not to give in when those being “punished” are home-grown stores, and those “getting away with it” are giant corporations that respect no borders. When populist resentment hooks up with “local is better” sentimentality, it’s hard to stay on the conservative straight and narrow.
But emotion aside, economic reality still must be considered. And forcing more companies to collect a tax (the equivalent in this case of “increasing the low rate” instead of lowering the high), will discourage consumers from buying more, which will frustrate efforts to keep a healthy state economy going. Somebody needs to be suggesting that if “fairness” is so important, perhaps we ought to be considering ways to offset the costs of achieving it.
Here, for example, is but one idea: If more retailers are forced to collect sales tax, more money will come to the state from the sales tax. If there is more money, wouldn’t it be possible to lower the rate collected by all retailers? In fact, lowering the sales tax a cent or two might even create enough economic activity so that the net effect is better than revenue-neutral.
You wouldn’t think a penny or two would make a difference, but in the aggregate the effects could be enormous. At 7 percent, Indiana has among the highest sales tax rates in the country. If you really want to talk about unfairness, let’s talk about how that puts our retailers at a competitive disadvantage with other states.

Shelby County Property Values Fall for 2013

From the Shelbyville News:

Shelby County's assessed value, as a whole, is down, according to the results of a reassessment conducted over the past three years.

The Shelby County Assessor's Office mailed results of the reassessment to nearly 29,000 property owners last week.The previous reassessment was in 2002; a reassessment is on average conducted every five years, more or less.

Some residents, unhappy with their valuation, have asked for an appeal of the amount quoted them, which can be filed in the assessor's office through Jan. 3.

County Auditor Amy Glackman said that the county's assessed value for next year was $2.09 million, down from $2.12 million, the assessed value in 2012.

Shelby County's total assessed property value in recent years:

2013: $2,091,468,246

2012: $2,119,798,712

2011: $2,065,335,322

2010: $2,069,806,543

2009: $2,034,966,202

See the full article here:

Richmond Community Schools Seek to Maintain Tax Rate After Bond Paid

From the Richmond Palladium-Item:

Richmond Community Schools wants to maintain its property tax rate in future years to pay for what school officials call overdue capital projects.

Superintendent Allen Bourff said Tuesday that the administration is looking at its financial options for updating classrooms and lighting at Dennis Intermediate School and paying for other facility upgrades totaling an estimated $8 million. Among them, he said, is having taxpayers continue to pay the current tax rate that paid for the bond to renovate Test Middle School. RCS’ current tax rate is set at 64 cents per $100 assessed valuation.

The school board will have a conversation about that financial option with the administration when it meets at 6:30 p.m. Wednesday in the RCS Administration Building, 300 Hub Etchison Parkway.

“It’s a discussion to begin a consideration of a timeline beginning now to about 2020,” Bourff said.

RCS owes $1.43 million for the Test bond, including interest payments, through July 31, 2013. RCS is also paying on a pension bond through January 2020 with costs totaling $12,939,841, but Bourff said many projects cannot wait until then.

Besides the Dennis project, which Bourff said is “crucial,” the administration has released a list of other projects to the board that it wants to complete. They are:

• Repairing roofs and the facade of Richmond High School, along with updating the school’s pool, football bleachers and athletic fields;

• Adding classrooms to Charles Elementary;

• Installing new heating and cooling systems at Vaile Elementary School and the Hibberd Program Building; and

• Installing security enhancements at the Community Youth Services complex, the central office administration building, and Vaile.

Union Township Schools to Seek Tax Increase in Porter County

From the Northwest Indiana Times:

Union Township Schools will either have to raise money or cut programs, Superintendent John Hunter said Tuesday during a presentation at Wheeler High School.
About 200 residents, teachers and students attended the event, which was billed as an informational session to educate the public about decreases in school funding and the impact of a proposed referendum to raise taxes.
“My No. 1 goal is to maintain our programs for our kids,” Hunter said. “That's why we're here tonight."
The schools are seeking to raise $1 million over a seven-year period through a maximum property tax increase of 22 cents on each $100 of assessed valuation.
If approved by voters, a home assessed at $100,000 would have an increase of $65.17 a year, or $5.43 per month. A $200,000 home would be $194.53, or $16.21 per month. A $300,000 home would be $323.88, or $26.99 per month.
Hunter said the money will go toward the schools' general fund, which covers day-to-day expenses. Some 86.8 percent of the fund is used to pay salaries and benefits. Special education, vocational education, utilities and supplies comprise the balance.
See the full article here:

Editorial Argues Income Tax Rebate Will "Buy a Lot of Cheese"

From the Northwest Indiana Times:

When it comes time to get your $111 share of Indiana's surplus, take the money and run.
The refund is automatically triggered by law when the budget reserve tops 10 percent of the next year's budgeted spending.
Which it has.
There are some suggesting or outright asserting that this budget surplus of $360.6 million was pretty much stolen from the public schools.
But it wasn't.
In fact, outgoing Gov. Mitch Daniels said it was state revenue growth and restrictions on state spending.
It's money derived from you. The average Hoosier pays $850 annually in state income taxes.
It's only $111, you say? Send it to the public schools, where one person who claimed teachers now spend $35,000 to $40,000 on supplies because of budget cuts.
That might shock the average teacher, who makes about $50,801 in Indiana, according to teacher/portal, a website aimed at teachers.
It was amazing how much unsubstantiated "fact" was generated by the story over the rebate.
Maybe people just don't trust rebates.
In 1982, President Ronald Reagan, not having any cake handy, released about 30 million pounds of warehoused government cheese.
Then there was the Economic Stimulus Act of 2008, the brainchild of George W. Bush, which doled out on your tax form 1040 from $300 (filing singly) to $1,200 (married filing jointly).
But the king of the rebates was former Mayor Chester Stranczek, of nearby Crestwood, Ill., who gave back nearly all municipal taxes as well as giving back his $6,000 mayoral salary.
Strange thing about all this, though. Reagan, Bush, Stranczek and Daniels are all Republicans, those greedy politicians who want to keep your tax money and spend it on themselves and their friends.
Could it be we've had it wrong all along? How much free cheese did you get from President Barack Obama this year?

East Chicago Taps Indiana Bond Bank

From the Northwest Indiana Times:

The City Council on Monday offered preliminary approval for a line of credit to hedge against the possible late distribution of property taxes next year.
Each year for more than a decade, East Chicago, like many Indiana communities, has sold so-called tax anticipation warrants so that payroll can be met and bills paid even if Lake County is tardy in releasing the city's share of tax revenues collected this fall.
Council members without comment unanimously approved borrowing up to $35.2 million from the Indiana Bond Bank to ensure funding for next year, with a final vote scheduled for Dec. 10.
The bond bank, a state agency, annually loans more than $700 million on these tax anticipation warrants to local Indiana governments, and those loans are then repaid when property taxes are distributed.
Money available on the warrants is based on the city's assessed valuation, though East Chicago used only $15 million in advance this year, and $19 million in 2010.
The state bank generally offers lower interest rates than private financial institutions. The ordinance preliminarily approved Monday provides for a maximum rate of 6.5 percent, but the exact rates are set when the bonds are sold.
Tax anticipation warrants sold by East Chicago for this year's funding carried an interest rate of just under 3 percent.

Revenue Finds Taxpayer is a 'Retail Merchant'

Taxpayer is an Indiana company in the business of marketing, advertising, and event planning. The Indiana Department of Revenue ("Department") conducted a sales/use tax audit of Taxpayer for 2008, 2009, and 2010 tax years and issued proposed assessments for additional amounts of sales tax, use tax, and interest. The Department determined that Taxpayer failed to collect and remit sales tax when Taxpayer transferred tangible personal property to its customers with a mark-up included above what Taxpayer paid for the property when it was procured. Taxpayer was also billed for the tax year 2011 after the audit was concluded. Since the 2011 assessment is based on the conclusions of the audit, the 2011 assessment is also included in this protest.

Taxpayer has not registered with the Department as a retail merchant. Taxpayer argues that it is a service provider, and not a retail merchant. Taxpayer purchases items for its clients, and it pays sales tax on the purchase of the items. Taxpayer's invoices to its customers sometimes include separately stated charges for products and services; in other instances, the products and services are listed as one charge. In either case, when Taxpayer invoiced its clients for the products, the amount Taxpayer charged its clients for tangible personal property was greater than what Taxpayer paid for the tangible personal property. Taxpayer did not collect sales tax on the charges for the tangible personal property. Taxpayer maintains that additional amount charged is a "procurement fee," meaning that this is a service charge for the work that Taxpayer put into researching the best priced items for its client, the time it took to purchase and possibly picking up the item, and so on. The Department disagreed, and determined that this was simply "markup." 

Taxpayer argues that tax should not be charged on the "procurement fee," because this is a service, and not a "markup." One could make the argument that the additional amount added to the purchase price is to cover the costs of procurement, but that would still fit the definition of "markup" ("An amount added to a cost price in calculating a selling price, esp. an amount that takes in to account overhead and profit." Webster's II New Riverside University Dictionary 728 (1st ed. 1988)). Even if the markup were a service, as mentioned above, a service provided prior to transfer of the property is subject to sales tax. Further, this "service" is also included on the invoice as one unitary transaction with property with which it is associated. Again, as mentioned above, when services are part of a retail unitary transaction, the service is subject to sales tax. IC § 6-2.5-1-2.

In the case at hand, if Taxpayer had been a registered retail merchant, it would not have had to pay sales tax on items that it would be reselling to Taxpayer's customers (see 45 IAC 2.2-8-12). Nevertheless, Taxpayer would then have to charge and collect sales tax when it resold the items on the full amount charged, including the markup or "procurement fee."

In summary, Taxpayer has failed to meet its burden of proof to show that the audit's assessments are incorrect. Taxpayer is a retail merchant and must register with the Department as a retail merchant. It may then purchase tangible personal property without paying sales tax using the exemption certificate it obtains from the Department. When the tangible personal property is sold to its customers, Taxpayer must collect sales tax on the tangible personal property and services performed prior to transfer of the property, regardless of whether the amounts for the property and services are separately stated. Taxpayer must also collect sales tax on the markup it includes in the transfer price of the property. Taxpayer provided two examples of invoices from 2012, and while Taxpayer has apparently started to charge sales tax on the markup, it appears Taxpayer is also still paying sales to its vendors when it purchases items for resale.