Thursday, May 29, 2014

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.