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INDIANAPOLIS – Tax protesters from around the state sued Thursday challenging various parts of the state assessment and property tax system including whether it meets the constitutional mandate to be uniform and equal.
The plaintiffs in the case include 11 residents from around the state – including Mark Sponhower of Auburn – and seven organizations, many of which support the elimination of property taxes.
John Price, the Indianapolis attorney who filed the complaint with the Indiana Tax Court, said the lawsuit can’t accomplish an abolishment of property taxes on its own but could be historic nonetheless.
“It is a case testing the constitutionality of various aspects of our broken property tax system,” he said while surrounded by an entourage of angry taxpayers.
Homeowners around the state have staged a revolt in recent months against larger-than-usual property tax increases.
Various factors – including new annual updates of property values based on sales of similar properties – have led to 24 percent average increases in bills for residential taxpayers.
Price also has sued alleging assessment errors in Marion and Allen counties. State officials have ordered a reassessment for Marion County but remained mum on Allen.
The Allen County case has been transferred to Adams Circuit Court Judge Frederick A. Schurger, who Wednesday extended to Sept. 19 the deadline for the plaintiffs to respond to various motions to dismiss.
In the meantime, the parties will have a Sept. 11 telephone conference to pick a hearing date on those motions as well as the cause of the suit – a request for class-action certification and an injunction against the possibly flawed property tax bills.
The new complaint filed Thursday involves 14 counts. Two of them relate directly to Marion County, challenging a recently passed income tax increase and seeking immediate tax refunds to homeowners who overpaid while a new assessment is ongoing.
The claims of more statewide importance include:
•Tax rate equality. Although the Indiana Constitution requires a “uniform and equal rate of property assessment and taxation,” the lawsuit points out that the numerous taxing districts in a county have resulted in widely varying tax rates.
“The differential tax rates are the result of intentional state discrimination,” the complaint said. “While absolute uniformity cannot be expected, differential effects of over 100 percent simply do not comport with the requirements of Article 10, Section 1.”
•Unfair assessment practices. Specifically, the suit points out that the Indiana Department of Local Government Finance instructed assessors to exclude foreclosures and tax sales when assessing a home’s new market value. This practice “skews and distorts the true market value of residences.”
Also, the complaint contends that tax abatements for businesses are unfair, as is a state rule that prohibits reassessing land purchased by a developer based on the sales price until the buyer obtains a building permit for the land.
•Extension of local option income tax deadlines. The lawsuit said the legislature passed a law allowing local governments to increase income taxes as long as they did so by Aug. 1. But Gov. Mitch Daniels has arbitrarily extended that deadline twice.
“We’re asking the court to enforce the statute as written regarding the income tax rate increases on the local level because the legislature said Aug. 1st is the deadline and neither the governor nor the Department of Local Government Finance can rewrite statutes,” Price said. “If they could we wouldn’t need a legislature.”
Daniels said Wednesday in an unrelated news conference that he may very well need to ask the legislature to retroactively ratify his action when lawmakers return in November for Organization Day.
A statement released Thursday from Daniels’ general counsel, Mark Massa, said, “Governor Daniels has acted boldly to protect property taxpayers and shouldn’t be included in this lawsuit.”
•The Common School Fund. The lawsuit claims the Constitution restricts the collection of property taxes for schools to corporations – not homes. But the lawsuit bases the argument solely on a section setting up the Common School Fund, a revolving account to give school districts with lower assessed values low-interest construction loans, technology grants and charter school startup assistance.
State Auditor Tim Berry noted that no property tax revenue goes into the Common School Fund.
Sponhower did not immediately return a message left at his home seeking comment.
nkelly@jg.net
