To decide whether Ind. Code § 6-1.1-15-17.2 shifts the burden of proof to the Assessor in this case, the Board must compare the assessment under appeal to the amount that the Assessor determined for the previous year. The Assessor originally valued the property at $2,313,200 for March 1, 2009, which is actually more than the assessment currently under review. Granted, the parties later agreed to settle Habuck’s appeal of the property’s 2009 assessment by reducing that assessment to $1,600,000. But strong policy reasons dictate against using that compromised amount as the baseline for determining whether Ind. Code § 6-1.1-15-17.2 applies.
Thus, because the assessment under appeal actually represents a decrease from the amount that the Assessor originally determined for the immediately preceding year, Habuck has the burden of proof.
Turning to the merits, Habuck did not make a prima facie case for reducing the subject property’s assessment. Indiana assesses real property based on its true tax value, which the 2002 Real Property Assessment Manual defines as “the market value-in-use of a property for its current use, as reflected by the utility received by the owner or a similar user, from the property.” 2002 REAL PROPERTY ASSESSMENT MANUAL 2 (incorporated by reference at 50 IAC 2.3-1-2 (2009)). A party’s evidence in a tax appeal must be consistent with that standard. See id. For example, a market-value-in-use appraisal prepared according to Uniform Standards of the Professional Appraisal Practice often will be probative. See id.; see also, Kooshtard Property VI, LLC v. White River Twp. Assessor, 836 N.E.2d 501, 506 n.6 (Ind. Tax Ct. 2005). A party may also offer actual construction costs, sales information for the subject or comparable properties, and any other information compiled according to generally acceptable appraisal principles. MANUAL at 5.
Habuck offered none of the types of evidence that the Manual contemplates. Instead, Habuck pointed mainly to Abdul’s purchase of the Key Bank loans and to the balance of the SBA loan at the time of the Board’s hearing in October 2012. Habuck did not offer anything to show that such a methodology complies with generally accepted appraisal principles for valuing real property. Apparently, Habuck contends that the transaction between Abdul and Key Bank shows what Key Bank thought about the subject property’s value. But the record does not reveal how Key Bank arrived at that opinion. Similarly, the transaction between Key Bank and Abdul did not involve the sale of the property itself, but only of Key Bank’s lien interest in the property. And there is no evidence that either the property or the lien interest was exposed to the market. Instead, the transaction was made under the duress of an impending bankruptcy.
That does not mean that Habuck failed to offer any evidence that is relevant to the subject property’s market value-in-use. Habuck offered a summary of its 2008-2010 federal tax returns, which contains income and expense information. That type of information may be used in the income approach—a generally recognized method for estimating a property’s market value-in-use. But the income approach involves far more than simply looking at raw income and expense data. Instead, that approach calls for taking the net income that a property is expected to earn and discounting that income to present value using a capitalization rate that reflects things such as “apparent risk, market attitudes toward future inflation, the prospective rates of return for alternative investments, the rates of return earned by comparable properties in the past, the supply of and demand for mortgage funds, and the availability of tax shelters.” Lacy Diversified Industries, Ltd. v. Dep’t of Local Gov’t Fin., 799 N.E.2d 1215, 1224 (Ind. Tax Ct. 2003) (quoting AM. INST. OF REAL ESTATE APPRAISERS, THE APPRAISAL OF REAL ESTATE, 417 (10th ed. 1992).
Thus, while Habuck’s raw income and expense data might be a start, it falls well short of showing the subject property’s market value-in-use, or even a likely range of values. For example, expenses that are allowable in estimating net operating income for purposes of valuing real estate do not necessarily include all expenses that are allowable in computing federal income tax liability. Because the descriptions of the various expenses listed in Habuck’s tax summary are too blurry to be legible, the Board cannot determine whether they would be appropriate for an analysis under the income approach. Similarly, Habuck did not even attempt to capitalize the property’s net income.
Because Habuck did not offer sufficient probative evidence to show the subject property’s market value-in-use, or even to show a likely range of values, it failed to make a prima facie case for reducing the property’s assessment. The Board’s finding in that regard makes it unnecessary to address the Assessor’s claim that Habuck failed to timely appeal the property’s assessment at the local level.
