Indiana Code § 6-1.1-3-23(b), the
operative portion of the statute granting the benefits of Pool No. 5, provides
in relevant part:
[A] taxpayer may elect to
calculate the true tax value of the taxpayer's special integrated steel mill…equipment
by multiplying the adjusted cost of that equipment by the percentage set forth
in the following table…”
Indiana Code § 6-1.1-3-23(a)(7)
specifically defines “special integrated steel mill equipment” as “depreciable
personal property … that is owned, leased, or used by an integrated steel mill
or an entity that is at least fifty percent (50%) owned by an affiliate of an
integrated steel mill; and falls within Asset Class 33.4 as set forth in IRS
Rev. Proc. 87-56, 1987-2, C.B. 647.”
The Respondents argue that AK
Steel’s equipment is not special integrated steel mill equipment and,
therefore, that it should not be valued under Pool No. 5 because AK Steel’s Rockport
Works facility is not an “integrated steel mill.” Even though the 2005 amendment
to the Pool No. 5 statute requires only that an integrated steel mill have its blast
furnace in Indiana, the Respondents argue that only facilities with on-site
blast furnaces are “integrated steel mills” for purposes of Pool No. 5. At the
same time, however, they stipulated that the equipment in the I/N Tek and I/N
Kote facilities in St. Joseph County may be valued using Pool No. 5. I/N Kote
and I/N Tek both conduct the same finishing operations that are conducted at AK
Steel’s Rockport Works and neither has a blast furnace located in Indiana.
Indeed, neither of these facilities has a blast furnace at all. Each is
partially owned by a separate legal entity that has its own blast furnace
located in Indiana, but that blast furnace is at a facility located two
counties away.
The Respondent’s argument on this
point lacks merit. The statute clearly defines the term “integrated steel mill”
in reference to the owner of property that qualifies for the benefits of
Pool No. 5, not the facility where the equipment is located:
“integrated steel mill” means a person,
including a subsidiary of a corporation, that produces steel by processing
iron ore and other raw materials in a blast furnace in Indiana.
Ind. Code §6-1.1-3-23(a)(3)
(emphasis added). Because this term is specifically defined by statute, the
Respondent’s attempt to prove the meaning as a “term of art” used in the steel
industry has very little, if any significance.
Further, only the Petitioner’s
argument is consistent with the definition of “special integrated steel mill
equipment” (the personal property whose assessment depends on the operation of
the Pool No. 5 Statute) found elsewhere in the Pool No. 5 statute.
Reconciling the Respondent's
definition of "integrated steel mill" with the definition of "integrated
steelmaking equipment" is impossible because a facility cannot own, lease,
or use equipment and it cannot have an affiliate who can own at least half of
such equipment.
Under the unambiguous language of
the statute an “integrated steel mill” is a person or entity, such as AK Steel,
and not a specific geographical place such as Rockport Works.
Evidence in the record supports
this four-corners interpretation of the statute. For example, the Fiscal Impact
Statement prepared by the Indiana Legislative Services Agency Office of Fiscal
and Management Analysis for S.B. 327 (Sess. 2005), the ultimate bill that
became P.L. 228-2005, discusses the then-pending bill as follows:
Under current law, an integrated
steel mill is defined as a producer of steel by processing raw materials in a
blast furnace. Beginning with taxes paid in CY 2005, this bill would require
that the blast furnace be located in Indiana to meet the definition and in
order for a taxpayer to use Pool 5 depreciation. There is currently at least
one taxpayer, in Spencer County, that has its blast furnace in another state
but used Pool 5 depreciation for its Indiana property.
The flaws in the Respondents’
reasoning are further evidenced by the fact that at least two steel finishing
facilities located in Indiana—I/N Kote and I/N Tek—qualify for the benefits of
Pool No. 5 even though both conduct the same finishing operations that are conducted
at AK Steel’s Rockport Works and neither has a blast furnace located in Indiana.
Indeed, neither of those facilities has a blast furnace at all. Each is partially
owned by a separate legal entity with its own blast furnace located in Indiana,
although that blast furnace is connected to and affiliated with another
facility altogether.
AK Steel is “a person… that
produces steel by processing iron ore and other raw materials in a blast
furnace.” And it is uncontested that AK Steel’s personal property at Rockport
Works meets the requirements of Ind. Code § 6-1.1-3-23(a)(7)(A)(ii).
Therefore, the personal property
at issue is “special integrated steel mill equipment” that qualifies for the
benefits of Pool No. 5, except for the “in Indiana” language added to the statute
by the 2005 Amendment that AK Steel has challenged as unconstitutional.
AK Steel’s present appeal is a
challenge to the constitutionality of P.L. 228-2005, § 2, which amended Ind.
Code § 6-1.1-3-23 (“the Pool No. 5 Statute”) in 2005, retroactive to January 1,
2004.
In Indiana, to contest the
constitutionality of a personal property tax statute, a taxpayer must first
bring an action at the administrative level. State v. Sproles, 672
N.E.2d 1353, 1360-62 (Ind. 1996); see also Felix v. Indiana Dept. of State
Revenue, 502 N.E.2d 119 (Ind. Ct. App. 1986); Goldstein v. Indiana Dept.
of Local Government Finance 876 N.E.2d 391, 393-95 (Ind. Tax 2007).
Had AK Steel not appealed, it
would have had no method to contest the constitutionality of the 2005 amendment.
See State Bd. of Tax Com'rs v. Montgomery, 730 N.E.2d 680 (Ind. 2000) (“Even
if the ground of complaint is the unconstitutionality of the statute, which may
be beyond the agency's power to resolve, exhaustion may still be required because
‘administrative action may resolve the case on other grounds without
confronting broader legal issues.’ Sproles, 672 N.E.2d at 1358.”).
Both AK Steel and the Respondent
acknowledged that this Board’s limited grant of statutory authority to
adjudicate property tax appeals prevents the Board from declaring a statute
unconstitutional. More specifically, Ind. Code §6-1.5-4-1(a) confers limited authority
on this Board to conduct an impartial review of all appeals concerning the assessed
valuation of tangible property, property tax deductions, property tax
exemptions and property tax credits.
The Board’s jurisdiction is
limited to those areas specifically enumerated by statute, and “unless a grant
of power and authority can be found in the statute it must be concluded that
there is none.” Ind. Bell Tel. Co., Inc. v. Ind. Utility Reg. Comm’n,
715 N.E.2d 351, 354 n.3 (Ind. 1999). In State Board of Tax Comm’s v.
Montgomery, 730 N.E.2d 680, 686 (Ind. 2000), the Indiana Supreme Court held
that administrative agencies do not have the authority to decide constitutional
challenges to statutes. See also State v. Sproles, 672 N.E.2d 1353 (Ind.
1996).
Therefore, the Indiana Board may
not consider the merits of AK Steel’s constitutional challenges. The Indiana
Board is powerless to declare any statute unconstitutional. Rather, our
statutory mandate (or lack thereof) compels us to affirm the decision of Spencer
County PTABOA as to AK Steel’s eligibility to claim the benefits of Pool No. 5,
without further discussion of the merits of AK Steel’s constitutional
challenges.
Because the Assessor agreed that
AK Steel is entitled to its abatement deductions as claimed in the event that
AK Steel is not entitled to the use of Pool No. 5 to depreciate its personal
property located in Spencer County, and because this Board cannot reverse the PTABOA’s
determination that AK Steel is not entitled to the use of Pool No. 5, we therefore
conclude that AK Steel is entitled to its abatement deductions in full as originally
claimed for the March 1, 2008 assessment date.
http://www.in.gov/ibtr/files/AK_Steel_74-006-04-1-7-00001.pdf
