Friday, May 30, 2014

Revenue Finds Taxpayer Failed to Maintain Adequate Records to Prove Income Tax Assessment Incorrect

Excerpts of Revenue's Determination follow:

Taxpayer is a shareholder of an Indiana S corporation ("Corporation"), which operates a convenience store/gas station in Indiana. In late 2012, the Indiana Department of Revenue ("Department") audited the Corporation's business records. Pursuant to the audit, the Department found that the Corporation failed to maintain adequate records as statutorily required. Based on the best information available at the time of the audit, the Department thus determined that the Corporation had additional taxable sales, which resulted in additional income of the Corporation. The Corporation's income flowed through to its shareholder, Taxpayer, as a result. The Department's audit assessed the Corporation's additional sales tax. In a separate audit investigation, the Department assessed Taxpayer additional income tax.

The Department's sales/use tax audit led to an investigation of Taxpayer's income tax filings. The Department found that the Corporation failed to maintain its source documents, including cash register tapes (also known as z tapes) and determined that the Corporation had additional income from sales inside the store, resulting in additional income tax against Shareholder. Taxpayer, to the contrary, claimed that the Department's assessment is incorrect. Specifically, Taxpayer disagreed with the Department's audit methodology, claiming that the Department's audit did not consider some of Corporation's purchases were exempt, which would have reduced its tax liability.

During the audit period, both the Corporation and Taxpayer failed to maintain and produce adequate records despite of the Department's field auditor's repeated requests. The Department's audit noted that, in relevant part, that:

Taxpayer did not present for audit source sales documents (cash register tapes /z-tapes). From the early stages of the audit, the auditor instructed POA to advise Taxpayer to retain all z-tapes so Taxpayer could provide source documents for audit. Because notification of the audit was in late 2012, the reporting year 2012 was included in the audit period and as such Taxpayer had sufficient notification to retain source documents for October through December 2012. Additionally, POA was also advised to instruct Taxpayer to retain all future z-tapes as some early month 2013 z-tapes may be . . . relied upon to lend support to reported or audited sales.

Ultimately, Taxpayer did not retain or provide any z-tapes during the audit even when the auditor on March 1, 2013, requested the February 2013 Close Report (z-tape). Taxpayer stated [that] it was not available.
As an alternative, the Department eventually reviewed records of the Corporation's purchases and bank accounts although both records were incomplete. Based on the best information available at the time of the audit, the Department proceeded to conclude the audit. The audit determined that the Corporation had additional taxable sales, which resulted in additional corporate income, which in turn flowed through to Taxpayer pursuant to 45 IAC 3.1-1-66.

Taxpayer asserted that the audit's "methodology is incorrect because it does not match the verifiable bank records, because it does not match the original spreadsheet records of [Corporation], and because it does not match the actual purchase invoices of [Corporation]." Taxpayer also asserted that the audit did not "include Stanz Cheese and Gordon's Food Services in its exemption percentage calculation," which could have reduced Taxpayer's tax liability. To support its protest, Taxpayer's representative compiled several Excel Spreadsheets, which contained Taxpayer's numbers as compared to the Department's audit workpapers. However, without the required source documentation to support Taxpayer's numbers, the representative's Excel Spreadsheets could not be verified. In addition to copies of its 2009, 2010, 2011, and 2012 monthly bank statements, Taxpayer submitted a copy of its "Sales Report[s]," which was information compiled by Taxpayer and manually recorded in an Excel worksheet created by Taxpayer. Relying on its "Sales Reports" as its source documents, Taxpayer claimed the Department's audit assessments were incorrect.

Taxpayer is mistaken. First, pursuant to IC § 6-8.1-5-4(a), Taxpayer and Corporation are required to keep books and records, which are "all source documents . . . including invoices, register tapes, receipts, and canceled checks" so the Department can determine Taxpayer's liability. Taxpayer and Corporation did not do so. Rather, Taxpayer claimed that Corporation's bank statements and "Sales Reports" are his source documents. Upon review, however, the Department is not able to agree. The bank statements simply summarized its monthly financial transactions, such as deposits, transfers, or withdrawals for the years at issue, concerning its two bank accounts. The bank statements failed to show any sales transactions occurred inside Corporation's convenience store during the tax years at issue and the amount of the sales collected for each transaction. Thus, the Department is not able to agree with Taxpayer that its bank statements are the source documentation under IC § 6-8.1-5-4(a).

Additionally, Taxpayer's "Sales Reports" were manually compiled by Taxpayer on a daily and/or monthly basis. Taxpayer's "Sales Reports" contained the total sales tax amount in each of eight categories: "FOUNTAIN," "DELI TAX," "POP," "CANDY," "GROTAX," "CAT15," "CIGARETTE," and "MERCHANDISE." Taxpayer then totaled the sales tax for that month for each of those categories. Taxpayer's "Sales Reports" did not contain any records of each retail transaction (i.e., items sold per sale) occurred inside the store; rather, the "Sales Reports" summarized Corporation's total sales of each category for specific day or month. Thus, the Department also is not able to agree with Taxpayer that the "Sales Reports" are the source documentation under IC § 6-8.1-5-4(a).

Taxpayer and Corporation not only failed to adequately maintain the statutorily required books and records, but also failed to provide source documentation to substantiate its above assertion. Thus, given the totality of the circumstances, in the absence of other supporting documentation, the Department is not able to agree that Taxpayer met his burden of proof to demonstrate that the proposed assessment is wrong.

Board Finds Property Entitled to Homestead Exemption Despite Dwelling Being Incomplete on Assessment Date

Excerpts of the Board's Determination follow:

18. The Board is a creation of the legislature and has only the powers conferred by statute. Whetzel v. Dep’t of Local Gov’t Fin., 761 N.E.2d 904, 908 (Ind. Tax Ct. 2001) (citing Matonovich v. State Bd. of Tax Comm’rs, 705 N.E.2d 1093, 1096 (Ind. Tax Ct. 1999)). By statute, the Board conducts an impartial review of all appeals concerning the assessed valuation of tangible property, property tax deductions, property tax exemptions, and property tax credits that are made from a determination by an assessing official or county property assessment board of appeals to the Board under any law. Ind. Code § 6-1.5-4-1.

19. The parties agree that the dwelling was not complete on March 1, 2010. They also agree that an amendment added in 2013 entitles an individual to the homestead deduction if construction of the dwelling that constitutes the homestead was not completed on the assessment date. The dispute is whether or not the amendment applies to the March 1, 2010 assessment date.

20. Pub. L. 288-2013 amended Ind. Code § 6-1.1-12-37 to include, among other things, a deduction for a homestead if on the assessment date the construction of the dwelling that constitutes the homestead was not completed. Ind. Code § 6-1.1-12-17 (2013). This provision became effective March 1, 2013. The Petitioners contend that there is nothing stating that the amendment is not retroactive to March 1, 2010. The Respondent contends that the amendment became effective in 2013 and there is nothing that indicates that it should be applied prior to 2013.

21. Despite the change in statute, there can be no question that the statutory framework in place in 2010 governs the 2010 assessment. See, e.g., Methodist Hospitals, Inc. v. Lake County Property Tax Assessment Board of Appeals, Cause No. 45T10-0411-TA-50 (Ind. Tax Ct. 2007) (for publication January 10, 2007) (Amendment provided that property owned by an Indiana nonprofit corporation that is used in the operation of a hospital is exempt from property taxation as of January 1, 2001 but the petitioner’s medical offices were found to be not exempt in 2000 because the statutory provision in place at the time of assessment only allowed exemption of property “substantially related to or supportive of the inpatient facility of the hospital.”)

22. Therefore, the Board looks to the statute as written in 2010. Ind. Code § 6-1.1-12-37(b) states:
Each year a homestead is eligible for a standard deduction from the assessed value of the homestead for an assessment date. The deduction provided by this section applies to property taxes first due and payable for an assessment date only if an individual has an interest in the homestead described in subsection (a)(2)(B) on:

(1) the assessment date; or
(2) any date in the same year after an assessment date that a statement is filed under subsection(e) or section 44 of this chapter, if the property consists of real property.
Subject to subsection (c), the auditor of the county shall record and make a deduction for the individual or entity qualifying for the deduction.

23. In this case, the Petitioners purchased the property and filed the sales disclosure form on April 29, 2010. Pursuant to Ind. Code § 6-1.1-12-44, the sales disclosure form serves as an application for deductions. The Petitioners applied for the homestead deduction on the sales disclosure form. Board Exhibit A - Sales Disclosure Form attached to Form 133 petition. Because the County Auditor originally allowed the homestead deduction, the Board assumes there is no dispute with the Petitioners’ interest in the homestead or the filing for the homestead deduction. The letter from the County Auditor states that the homestead deduction was removed because the home was not 100% complete as of March 1, 2010. Neither the letter nor Mr. Watkins cited to any statutory authority requiring that the dwelling be 100% complete on the assessment date.

24. A homestead is defined as an individual’s principal place of residence that (1) is located in Indiana, (2) the individual owns, and (3) consists of a dwelling and the real estate. Ind. Code § 6-1.1-12-37(a)(2) (2010). Nothing in Ind. Code § 6-1.1-12-37 requires the dwelling to be 100% complete on the assessment date.

25. Because the statute does not limit the homestead deduction to dwellings that are 100% complete on the assessment date, neither the County nor the Board have the authority to impose that limitation. Where a statute’s language is clear, the Board lacks the authority to construe it for purposes of limiting or extending its operation. See Joyce Sportswear Co. v. State Bd. Of Tax Comm’rs, 684 N.E.2d 1189, 1192 (Ind. Tax Ct. 1997).

26. To be eligible for the homestead deduction for the March 1, 2010 assessment date, the statute required the Petitioners to show that they had an interest in the homestead and filed for the deduction on any date in 2010. The record shows that the Petitioners purchased the property and filed for the homestead deduction on April 29, 2010.

27. Neither party addressed the other decisive issues in this case. First, did the Petitioners claim the homestead deduction anywhere else? And second, is the subject property the Petitioners’ principal place of residence? Again, because the County Auditor originally allowed homestead deduction, the Board assumes these issues are not in dispute.

DLGF Posts Frequently Asked Questions on Property Tax Deductions

Frequently Asked Questions


Revised May 28, 2014


1.      Question: A man and woman had a pre-nuptial done (this was the man’s second marriage) to protect the children of his first marriage. The pre-nuptial said the woman’s name would not appear on the deed, but when he would die, she would retain ownership of the home and garage for 1 year from the date of his death (but she would not be a life tenant). He died in December 2012. We removed the homestead at the end of 2013 for the pay-2014 billing. Did the wife own the home as of March 1, 2013, due to the pre-nuptial agreement and thus is eligible for the homestead deduction?

Answer: It is unclear whether the pre-nuptial agreement actually gave the wife ownership of the property. Your county attorney would be a good resource in helping you make that determination. Even if the wife was the owner as of March 1, 2013, she would have to have been named on the homestead deduction application or sales disclosure form when her husband filed for the deduction, or she would have had to file her own application after her husband died for the 2013 Pay 2014 cycle. If she was not listed on the husband’s deduction application or she did not complete and file a timely homestead deduction application in her own name, then she would not be eligible for the deduction for 2013 Pay 2014.

2.      Question: Do we have to do the process for ineligible homesteads for any other deduction falsely claimed (like mortgage, over 65, etc.)?

Answer: The ineligible homestead deduction process (IC 6-1.1-36-17) applies to the homestead deduction only and not to other deductions claimed falsely.

3.      Question: A company owned a property in 2013 and sold it to a couple on December 31, 2013. The couple tried to file a homestead on January 1, 2014, but the property was not yet transferred into their name.
(1)   Does the grace period for filing deductions also apply to the corresponding transfer of property?
(2)   Does the couple have to wait until pay-2015 to receive the homestead deduction because it was in the name of the company for pay-2014? Some taxpayers may fall through the crack during January 1 and January 6 grace period for deductions.

1) The homestead deduction application must be “completed and dated in the calendar year for which the person desires to obtain the deduction and filed with the county auditor on or before January 5 of the immediately succeeding calendar year.” IC 6-1.1-12-37(e). Eligibility for the deduction, however, depends on whether the applicant had an interest in the homestead on the assessment date or “any date in the same year after an assessment date” that an application or sales disclosure form is filed. Thus, while there is a grace period for filing an application, it does not extend to a transfer of property, which must occur before the end of the assessment year.

2) As indicated in the answer to 1), an applicant would be eligible for the deduction if he or she had an interest in the homestead on the assessment date or any date in the same year after the assessment date that an application or sales disclosure form is filed. In this case, if the couple did not own the property by December 31, 2013, then they would be ineligible for the deduction for Pay 2014. If the couple applied for the deduction today, it would apply to the 2014 Pay 2015 cycle.

Please also note that even if the couple had an ownership interest in the property on December 31, the property has to be their principle place of residence during the year for which they are claiming the deduction. If the couple didn’t move in until after December 31, this would be a problem.

4.      Question: Property sells by sheriff’s sale after March 1, 2014. Customer has supplied all information to the auditor (via the pink form). Is the auditor able to remove the homestead deduction for 2014-pay-2015 since the property is now deeded to a financial institution or must the homestead deduction remain on the property for a carryover?

Answer: If the homestead deduction was validly in place on March 1, 2014 (meaning the owner receiving the deduction was using the property as his or her principal place of residence), then the deduction stays on for 2014-pay-2015.

5.      Question: Is there a deadline in which all counties must have their pink forms entered into the Department website?

Answer: The Department is unaware of such a deadline, but encourages counties to update the database as soon as possible.

6.      Question: It appears that when entering a primary last name/primary SSN/ID that if they are not the primary owner in another county (they are secondary or vice versa) the website will not cross reference counties. Same with the spouse’s last name/spouse SSN/ID entered into the website not cross referencing if they are the primary owner in another county.

Answer: This understanding is correct. Search functionality is not currently designed to look at both the primary owner and spouse fields. That seems like a good suggestion, so if there is interest in the tool working this way, the Department can investigate making this type of update.

7.      Question: We have noticed that not all counties are updating their vacated homesteads in the Department website when a homeowner has moved from one home to another home, making it appear that homeowners have multiple homestead deductions.

Answer: The Department has noticed this as well. County auditors are hereby reminded to update the database as soon as possible and as often as necessary.

8.      Question: If someone owns two homes and wants to move from their city home to their lake home, does the city home get the benefit of the carryover for the year they move? If not, how is it different than someone who owns two homes, decides to sell one and move into the second home? I understand the home being sold gets the carryover the first year if the home doesn’t sell right away.

Answer: If a person moves from his homestead after March 1 to another homestead later that year, he can receive the homestead deduction on both properties for that assessment date. The deduction would come off the first property for the next assessment date. Here, if the person’s homestead is the city home and he is moving after March 1 to the lake home to use that as his homestead, then both homes could receive the homestead deduction for that assessment date. In the case of the person who owns two homes and decides to sell one and move into the other, again, if the person was using the first home as his homestead and moved after March 1 into the other home to use it as his homestead, both properties could receive the homestead deduction for that tax cycle, even though the first one has been placed up for sale. Keep in mind that if a person moves from his homestead after March 1 to a property that was not completed on the assessment date, the person can receive a homestead deduction on that new property for that assessment date, but the deduction on the first property would have to be cancelled for that assessment date.

9.      Question: We have a taxpayer that owns land by the river. They have an RV camper on the property and tell us this is their permanent residence. Can an RV camper be assessed as a residence if it is licensed and movable? Also, can they file a homestead deduction on this property?

Answer: In order for property to receive the homestead deduction, there must be a dwelling present. Dwelling is defined by statute thusly (from IC 6-1.1-12-37):
“Dwelling” means any of the following:
(A)   Residential real property improvements that an individual uses as the individual’s residence, including a house or garage.
(B)   A mobile home that is not assessed as real property that an individual uses as the individual’s residence.
(C)   A manufactured home that is not assessed as real property that an individual uses as the individual’s residence.

An RV would not fall within the category of residential real property improvement. In order for it to be considered a mobile home, it must meet certain criteria (from IC 6-1.1-7-1):

“Mobile home” means a dwelling which:
(1)    is factory assembled;
(2)    is transportable;
(3)    is intended for year around occupancy;
(4)    exceeds thirty-five (35) feet in length; and
(5)    is designed either for transportation on its own chassis or placement on a temporary foundation.

Permanent residence or not, if the vehicle is classified as an RV by the BMV and is titled as such, it is subject to excise tax and would not meet the definition of dwelling for purposes of the homestead deduction statute.

As for the land, since a homestead consists of “a dwelling and the real estate, not exceeding one (1) acre, that immediately surrounds that dwelling” (IC 6-1.1-12-37), if there is no dwelling, then there would be no acre “that immediately surrounds that dwelling” to qualify for the deduction.

10.  Question: This past year we had a taxpayer that checked No on the sales disclosure form to file for the homestead deduction. His mortgage company sent him a letter this year indicating that their mortgage payments would go up. The taxpayer said that we should, as a courtesy, put the deduction on this year since they didn’t know they had to file. The taxpayer said he called other counties and those counties agreed that the deduction should be put on the property. What is our auditor required to do?

Answer: In order to receive the homestead deduction, the taxpayer must apply for it. If the taxpayer did not apply for the deduction through the sales disclosure form by checking the appropriate boxes and supplying the required information or if the taxpayer did not timely complete and submit a homestead deduction application form, then the taxpayer was ineligible for the deduction for that corresponding assessment date due to the failure to apply. There is no mechanism for retroactively applying for a deduction.

11.  Question: We received payment for an ineligible homestead in May, 2014. Is there a limit on the time we have to refund this amount? What if the taxpayer comes in the next year with a verification of homestead – will we have to issue a refund?

Answer: If the auditor terminated a taxpayer’s homestead deduction because the taxpayer failed to file the verification form, there is no deadline by which the taxpayer must come in to present proof of eligibility for that assessment date. If the taxpayer presents proof of eligibility for the assessment date(s) in question, the taxpayer could request a refund for taxes paid (the refund window would be limited to the three-year period set by IC 6-1.1-26), but there would be no interest due on the refund.

In this particular question, however, it appears that the taxpayer’s deduction was terminated for prioryears under IC 6-1.1-36-17. In other words, the taxpayer’s deduction hasn’t merely been terminated going forward for failure to file the verification form. Rather, the property was found to be ineligible for the homestead deduction in prior years and the taxpayer is now being billed for back taxes and penalties. In this case, if the taxpayer has already paid those back taxes and penalties but now disputes the termination of the deduction for those years and is seeking a refund, perhaps the Form 133 Correction of Error process would be available to the taxpayer.

12.  Question: Can someone still get homestead deduction if the spouse does not have any ID’s and is not named in the title?

Answer: The applicant would have to list the spouse’s name on the application and the last five digits of the spouse’s Social Security number, or, if the spouse doesn’t have a Social Security number, the last five digits of the spouse’s driver’s license number or the last five digits of the spouse’s state identification card number. If the spouse does not have a driver’s license or a state identification card, the last five digits of a control number that is on a document issued to the spouse by the federal government. If the spouse has no such information available, then the homestead deduction application would be incomplete and thus invalid.

13.  Question: If a married couple owns 2 separate homes and each one lives in a separate house, would each one be allowed to receive a homestead deduction? What if the names of both people are on both deeds?

Answer: Normally a married couple is entitled to only one Indiana homestead deduction regardless of living arrangements. There is a narrow exception to this whereby one spouse lives in Indiana and the other spouse lives in another state and each spouse maintains a separate principal place of residence in his and her respective names. In this scenario, the Indiana spouse may be able to receive a homestead deduction even if the other spouse is receiving a homestead deduction in his or her state.

14.  Question: John Doe has a homestead deduction on Home A. He purchases and moves to Home B on July 1. Home B did not have a homestead deduction when he filed one for himself. The auditor removes the homestead deduction from Home A per Department guidance. John Doe sells Home A to Jim Smith on July 31. Jim Smith is not going to be happy that the carryover provision no longer applies, even through the homestead deduction was in place on March 1. Did I understand this correctly?

Answer: No, the deduction would stay on Home A. Again, if a person moves from one homestead after March 1 to another later that year, both properties could potentially receive the homestead deduction for that assessment date. The only exception to this occurs if the new property the taxpayer moves to was not complete on the assessment date. In that case, the taxpayer could still receive a homestead deduction on that new property for that assessment date, but the deduction on the first property would have to be cancelled for that assessment date.
15.  Question: Is there or was there once a statement in statute IC 6-1.1-12-37 which indicated that a home must be 100% complete by March 1 prior to being eligible for the homestead deduction?

Answer: The Department does not believe there was ever such an explicit statement, but the principle was implied in the definition of homestead as principal place of residence. The Department reiterates that due to legislative action and a recent IBTR decision, land vacant or structures partially completed on the assessment date can potentially receive the homestead deduction for that assessment date.


16.  Question: Does a reverse mortgage qualify for a mortgage deduction?

Answer: The mortgage deduction statute, IC 6-1.1-12-1, allows a taxpayer who has a home equity line of credit placed on property the taxpayer owns to receive the mortgage deduction.


17.  Question: Recently, a taxpayer brought in paperwork to sign up for the disabled persons deduction. The taxpayer said the auditor’s office was required to do a correction of error for the past 2 years because they were eligible but didn’t know they had to come in and file for the deduction.

Answer: A correction of error is appropriate when, through an error of omission by any state or county officer, the taxpayer was not given the proper circuit breaker credit, or any other credit, exemption, or deduction permitted by law. See IC 6-1.1-15-12(a)(8). Assuming the taxpayer was eligible to receive the deduction in those years, he nevertheless failed to file for the deduction when he needed to. It was not through error or omission by any county or state officer that he was not receiving the deduction, so a correction of error would be inappropriate.

18.  Question: For the over 65 deduction, if two people own real property whether they be husband & wife, mother & son, etc., and only one of them are over 65 years and qualify for the deduction, do they receive one-half of the deduction until the other person is over 65, or do they receive the full deduction amount, regardless?

Answer: IC 6-1.1-12-9(h) states that if two or more people own real property, a mobile home, or a manufactured home as joint tenants or tenants in common, but not all of the tenants are at least 65 years of age, then the deduction must be reduced by an amount equal to the deduction multiplied by a fraction. The numerator of the fraction is the number of tenants who are not at least 65 years of age, and the denominator is the total number of tenants. Hence, if two people own real property as joint tenants or tenants in common, but only one of them is at least 65 years old, then the amount of the deduction is to be reduced by one-half.

19.  Question: When the customer files for the disability/age deductions (with income limits) and states that they “do not file federal income tax,” how can we prove this? Do we take the customer’s word that they no longer file federal income tax?

Answer: In order to substantiate the deduction statement, the applicant must submit for inspection by the county auditor a copy of the applicant’s and a copy of the applicant’s spouse’s income tax returns for the preceding calendar year. If either was not required to file an income tax return, the applicant must subscribe to that fact in the deduction statement.

20.  Question: Can an illegal alien get the disability deduction with the doctor’s letter, even though they cannot qualify for the homestead because they have no U.S. issued ID?

Answer: The disability deduction statute does not require that an applicant include the last 5 digits of their SSN, their state ID number, or a federally issued control number.


21.  Question: Property owner/customer qualifies for an over 65 deduction. Customer is also a disabled veteran. Can we prepare an affidavit for the customer to receive the $70 credit toward his vehicle plates and not use the disabled veterans toward his real estate?

Answer: The excise-only option is available only to vets who do not own or are not buying property that qualifies for a disabled veteran property tax deduction. Here, the vet does qualify for the disabled veteran deduction but he can’t receive it only because he’s seeking an over 65 deduction instead. If the vet wants excise tax relief, he may need to take the disabled veteran deduction instead of the over 65 deduction and if there is an unused portion of the veteran deduction left after it’s applied to his property, he could apply that toward excise taxes.

22.  Question: Will you consider removing the requirement on the Veterans Excise affidavit that the auditor’s signature be notarized? This is a “Department prescribed affidavit” and not statutorily required? It seems redundant and unnecessary.

Answer: Indiana Code 6-6-5-5.2(f) requires the auditor to provide the vet an “affidavit” “stating that the claimant does not own property to which a [veterans deduction] may be applied . . . ”. It is a well established legal principle that an affidavit is a written statement of fact which is sworn as to the truth before an authorized officer. See Dawson v. Beesley, 242 Ind. 536, 543 (1962). Furthermore, notarizing an affidavit is presumptive evidence of the facts contained in the affidavit (see IC 33-42-2-6), which is signed under penalty of perjury. The Department therefore cautions against completing an affidavit without having it notarized.

23.  Question: A veteran requests a veterans deduction but, due to the total AV on his/her properties that exceeds the allowed total, is told he cannot be granted the deduction on his/her property. Is that person then eligible to receive any amounttoward excise tax?

Answer: Only the deduction for totally disabled vets/vets 62 and over has an assessed value limit. If a vet does not qualify for this deduction because his AV exceeds the limit, then there would be no unused portion of that deduction that can be applied to excise taxes. If the vet qualifies for the partially disabled vet deduction and there is an unused portion of that deduction left after the deduction has been applied to his property, then the vet could use that portion toward excise taxes. If the vet doesn’t qualify for the partially disabled vet deduction, either, then he may be able to pursue the excise-only option.

24.  Question: If a deed is in the wife’s name only and the husband is a disabled veteran, do they get the deduction on property or do they have to get excise because the husband is not in the title?

Answer: Only a disabled veteran who owns the property or is buying the property under recorded contract may receive a vet deduction. If the veteran is not named in the deed, then the excise-only credit may be available to the vet.

25.  Question: We have the husband and wife on the title, and the husband has the disabled veterans deduction while the wife has the over 65 deduction. The husband dies and the wife applies for the surviving spouse of veteran deduction. Can she keep the over 65 deduction?

Answer: A recipient of the over 65 deduction is ineligible to receive any other deduction except the homestead, supplemental homestead, fertilizer storage, and mortgage deductions. The wife would thus be ineligible for the surviving spouse of veteran deduction so long as she is receiving the over 65 deduction.

26.  Question: Does a vet that has the vet deduction, but lives in a mobile home, still only get the $70 towards excise tax?

Answer: Assuming the veteran owns or is buying the mobile home under recorded contract, the answer is no. If the vet here is receiving the property tax deduction, any portion of the deduction remaining after it is applied to the mobile home (and possibly the real property the mobile home sits on if it is also owned by the vet) can be applied toward excise taxes. The excise-only credit is available only to vets who do not own or are not buying property that qualifies for a disabled vet property tax deduction.

27.  Question: Please clarify the amount of deduction a mobile home owner with a VA disability deduction code 1, 2, or 3 would receive - $70.00 affidavit or excise slip?

Answer: A vet who owns or is buying a personal property mobile home may be able to receive a disabled vet property tax deduction (note that the AV of a personal property mobile home cannot be reduced by more than 50%, not including the supplemental homestead deduction). If there is an unused portion of this deduction remaining after the deduction is applied to the mobile home, the vet may use this amount toward the land the mobile home sits on (assuming the vet owns the land) or any personal property taxes (if the vet has any) or toward excise taxes. The vet would receive the Form 128-VET from the auditor and take this to the BMV.

If the vet does not own or is not buying property that qualifies for a disabled vet property tax deduction, the vet may qualify for the excise-only option. The vet would request an affidavit to this effect from the county auditor and provide this to the BMV. The BMV has its own form.

Please note that the IDVA has discontinued the Code classification, which was never a part of the deduction statutes anyway.


28.  Question: Concerning tax abatements, what do we need to do if a tax abatement was approved by the council, but they overlooked passing a resolution for this abatement? There is already a resolution for this company for a prior abatement. Should the council have had a separate resolution?

Answer: It depends on the specific facts. It’s possible, for example, for a town to create an industrial park in a 20-acre cornfield. The resolution declares the legal description as an Economic Revitalization Area. Later as companies want to move into this area, all they need to do is submit a Form SB-1 to set up the number of years and the deduction percentage. Thus, it is possible that an initial resolution is still valid. There is no one size fits all answer, as different attorneys write up the resolution in different fashions.

29.  Question: If the CNAV’s are uploaded from our systems, will we still be able to withhold AV for deduction filings, etc.?

Answer: CNAV upload will not be available this summer/fall. The CNAV application for this year’s budget cycle will closely resemble last year’s application.

30.  Question: Is the “home in inventory” deduction for real property parcels still in effect? If so, what is the code site? Where would I find filing information?

Answer: Yes, the Residence in Inventory deduction is still available. It is located at IC 6-1.1-12.8. State Form 54861 is used to apply for the deduction and information about the filing process is included in that form.

31.  Question: Can we require a new deed or survey if a property owner wants to combine parcels? The assessor sent hundreds of letters out to homeowners to combine parcels. Now we are getting those requests from the assessor on a form with just a short legal and parcel number. We are overwhelmed by requests and it will take more than a year to get them all done.

Answer: If an owner of existing contiguous parcels makes a written request that includes a legal description of the existing contiguous parcels sufficient for the assessing official to identify each parcel and the area of all contiguous parcels, the assessing official must consolidate more than one existing contiguous parcel into a single parcel to the extent that the existing contiguous parcels are in a single taxing district and the same section. For existing contiguous parcels in more than one taxing district or one section, the assessing official must, upon written request by the owner, consolidate the existing contiguous parcels in each taxing district and each section into a single parcel. An assessing official must consolidate more than one existing contiguous parcel into a single parcel if the assessing official has knowledge that an improvement to the real property is located on or otherwise significantly affects the parcels. The Department encourages county officials to confer with their county attorneys for guidance concerning their powers to demand new deeds or surveys. IC 6-1.1-5-16

32.  Question: When the assessment date changes to January 1, will the deductions still use the March 1 date for removing deductions?

Answer: No. January 1 will be the assessment date to which deductions correspond. Any deductions that are validly on a property as of that date should remain on that property for taxes due and payable in the following year.

33.  Question: Has any county prepared a flow chart showing the specific filing requirement for each deduction that they would be willing to share?

Answer: The Department is not aware of any county-made flow chart on deduction filings. The Department would point out that the Property Tax Benefits Form, available at, does include filing information.

34.  Question: Since deductions are based on date of instrument, how do we handle re-recordings that change the ownership? Example: Donald Duck is the deeded owner (DOI = Feb. 2007) and is getting credit for homestead. Donald Duck quit-claims property to his nephews (DOI = Feb. 2012), no new deductions filed. We remove homestead for 2012 pay 2013, but then they re-record the deed to add “Donald Duck retains a life estate” on 6-1-14. Are we required to go back and give them the homestead deduction for 2012 pay 2013 and 2013 pay 2014 plus refund?

Answer: Since Donald had no ownership interest in the property on March 1, 2012 (and he didn’t acquire an ownership interest later in 2012 and reapply for the deduction), the homestead deduction (and probably all other deductions) in his name would be removed for 2012 Pay 2013. If Donald wants the deduction for 2014 Pay 2015, he would need to re-apply for it.

Thursday, May 29, 2014

DLGF Publishes 2015 Gateway Budgets Upload Specfications

TO: Software Vendors

FROM: Matthew Parkinson, Director of Data Analysis

SUBJECT: 2015 Gateway Budgets Upload Specifications

DATE: May 23, 2014

The Department of Local Government Finance (“Department”) recently released the 2015 Budgets
application of Indiana Gateway for Government Units (“Gateway”). The upload specifications for the
2015 Budget cycle very closely mirror the 2014 upload specifications.

As was the case in 2014, the Gateway Budgets application will no longer accept custom revenue codes
number 9700-9799. Units will only be allowed to use revenues included on the standard revenue code list.
Updated fund, revenue, and expenditure code lists are available at

Times Reports Porter County Takes Steps to Strip Hospital of Tax Abatement

From the Northwest Indiana Times:

The Porter County Council took action Wednesday on two long-debated issues involving Porter Regional Hospital, including taking the first step in possibly pulling 10 years of tax breaks.
The council members unanimously agreed to host a meeting at 5 p.m. June 5 to decide whether the hospital is in compliance with the requirements for the approved tax abatement.
If the council finds the hospital not in compliance, a hearing will be scheduled within 30 days to allow hospital officials the opportunity to respond, Council Attorney Scott McClure said.
A finding by the council to pull the abatement would trigger an option for an appeal in the courts, McClure said.
Council President Dan Whitten, D-at large, said the concern over the abatement involves the large gap between the $39.3 million value the hospital places on the property for tax purposes and the requirement when the tax abatement was approved in 2009 that $130 million or more be invested in the site.
"They can't have it both ways," he said.
The hospital has — three years into the tax abatement period — submitted forms requesting the tax abatement be activated, McClure said. The hospital also is seeking to have those benefits applied retroactively to the earlier years.

Tax Court Posts Argument in Gillette v. Brown Co. Assessor

THU, MAY 29, 2014 at 10:00 AM

Board Finds Hearsay Appraisal, Without More, Insufficient to Support Reduction of Property's Value

Excerpts of the Board's Determination follow:

14. The Assessor made a hearsay objection to Petitioner’s Exhibit 1—Mr. Coulson’s appraisal report. The Assessor pointed out that Mr. Coulson was not at the hearing and therefore could not be cross-examined about whether his opinion had any limiting conditions or assumptions or why he used only the sales-comparison approach. Wallenfang objection.

15. The Assessor is correct that the appraisal report is hearsay. See Ind. Evidence Rule 801(c) (defining hearsay as a statement that “(1) is not made by the declarant while testifying at the trial or hearing; and (2) is offered in evidence to prove the truth of the matter asserted.”) Evid. R. 801(c). But the Board’s procedural rules allow it to admit hearsay, albeit with a significant caveat: if an opponent properly objects to the hearsay and it does not fall within a recognized exception to the hearsay rule, the Board cannot base its determination solely on that hearsay. 52 IAC 3-1-5(b).

16. The Board therefore overrules the Assessor’s objection. The Board has admitted hearsay appraisal reports in many appeals, and where those reports were not objected to, it has relied on them in reaching its determination. Because the Assessor objected to Mr. Coulson’s report and Mr. Wilkins did not lay a foundation to qualify the report under any generally recognized exception to the hearsay rule, however, the Board cannot base its determination solely on that report.

a. Indiana assesses property based on its true tax value, which is the market value-in-use of a property for its current use, as reflected by the utility received by the owner or similar user, from the property. Evidence in a tax appeal must be consistent with that standard. For example, a market value-in-use appraisal prepared according to the Uniform Standards of Professional Appraisal Practice will often be probative. See Kooshtard Property VI, LLC v. White River Township Assessor, 836 N.E.2d 501, 506 n. 6 (Ind. Tax Ct. 2005). The actual sale price or construction costs for a property under appeal, sales or assessment information for comparable properties, and any other evidence compiled according to generally accepted appraisal principles may also be probative.

b. Here, Mr. Wilkins relied almost exclusively on Mr. Coulson’s hearsay appraisal report, which estimated the property’s value at $22,000 as of January 17, 2011. As explained above, however, the Board cannot rely solely on that report in reaching its determination. The only other evidence that Mr. Wilkins offered was his testimony about other unidentified properties from the subject property’s neighborhood. That testimony is too vague to have any probative value. Mr. Wilkins therefore failed to make a prima facie case for reducing the subject property’s assessment.