13. The parties agreed that between 2011 and 2012 the
assessment of the subject property increased more than 5%—from $51,200 to
$60,200. The Respondent therefore has the burden of proving that the 2012
assessment is correct. To the extent that the Petitioners seek an assessment
below the previous year’s level, however, they have the burden of proving a
lower value.
B. Discussion
14. The Respondent failed to make a prima facie case that
the 2012 assessment is correct. The Board reaches this conclusion for the
following reasons:
a) Indiana assesses real property based on its true tax
value, which the 2011 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.” 2011 REAL PROPERTY
ASSESSMENT MANUAL 2 (incorporated by reference at 50 IAC 2.4-1-2). In an
assessment appeal, a party may offer “[a]ny evidence relevant to the true tax
value of the property as of the assessment date. . . .” Id. at 3. The gross
rent multiplier, however, is the preferred method for valuing property with between
one and four rental units. Ind. Code § 6-1.1-4-39(b).
b) In any case, a party must explain how its evidence
relates to the property’s market value-in-use as of the relevant valuation
date. O’Donnell v. Dep’t of Local Gov’t Fin., 854 N.E. 2d 90, 95 (Ind. Tax Ct.
2006); Long v. Wayne Twp. Assessor, 821 N.E.2d 466, 471-72 (Ind. Tax Ct. 2005).
Otherwise, the evidence lacks probative value. Id. For 2012 assessments, the
valuation date was March 1, 2012. See I.C. § 6-1.1-4-4.5(f).
c) Here, the Respondent’s witness, Mr. Shultz, attempted to
support the subject property’s assessment by comparing it to the assessments
five other multi-family homes. Other assessments do not automatically show the
market value-in-use of a property under appeal. The party relying on those
assessments must (1) show that the other properties are comparable to the
property under appeal, and (2) explain how relevant differences affect the
properties relative values. See Ind. Code § 6-1.1-15-18(c)(2) (requiring the
use of generally accepted appraisal and assessment practices to determine
whether properties are comparable); see also Long, 821 N.E.2d at 471 (finding
sales data lacked probative value where the taxpayers did not explain how purportedly
comparable properties compared to their property or how relevant differences
affected value).
d) Beyond explaining that his purportedly comparable
properties are multi-family homes, Mr. Shultz did not meaningfully compare any
of those properties to the subject property much less account for any relevant
ways in which they differ from each other. For instance, while the Petitioners
offered undisputed testimony and photographs to show that the subject home is
in worse condition than Mr. Shultz’s comparables, Mr. Shultz did not attempt to
adjust any of the assessments to account for that difference.
e) Thus, the Respondent failed to make a prima facie case
that the 2012 assessment of $60,200 is correct. The Petitioners are therefore
entitled to have that assessment reduced to its 2011 level of $51,200. Because
the Petitioners seek an even lower assessment, the Board now turns to their
evidence.
15. The Petitioners failed to make a prima facie case for
reducing the assessment below $51,200. The Board reaches this conclusion for
the following reasons:
a) The Petitioners first point to the condition of their
property. But simply identifying examples of deferred maintenance does little
to prove a property’s market value-in-use or even a range of values. The
Petitioners offered additional evidence, such as the price they paid for the
property in 2008 as well as sale and listing prices for what they believe are
comparable properties.
b) Although the Petitioners bought the subject property more
than three years before March 1, 2012, they failed to explain how the sale
price relates to the value as of the relevant valuation date. Therefore, that
sale price therefore lacks probative value.
c) Some of the Petitioners’ purportedly comparable
properties sold close enough in time to the valuation date to be relevant. But
the Petitioners compared those properties to the subject property in terms of
only a few characteristics while omitting other relevant characteristics, such
as location. The Petitioners similarly failed to explain how various relevant
differences affect the relative values. Thus, the Petitioners’ sale and listing
evidence ultimately does not suffice to prove the subject property’s market value-in-use.
d) Finally, the Petitioners offered some basic income and
expense information for the subject property. Such information is generally
relevant to proving a rental property’s market value-in-use. Indeed, the income
capitalization approach is one of the three generally accepted approaches for
valuing real property. And using a gross rent multiplier is the statutorily
preferred method for valuing rental properties with four or fewer units. But
those approaches contemplate more than simply offering raw data for the
property being valued. They require converting the anticipated future income to
a present value based on risk and various other factors that market
participants typically consider. See Indiana MHC, LLC v. Scott County Assessor,
987 N.E.2d 1182, 1185-86 (Ind. Tax Ct. 2013) (describing the income
capitalization approach). By itself, the Petitioners’ raw income and expense
data does not sufficiently prove their property’s market value-in-use.
e) Because they did not offer probative evidence to show the
market value-in-use, the Petitioners failed to make a case for reducing the
disputed assessment below $51,200.
