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A combination of under-the-radar court decisions and unintended consequences of this year’s budget bill is turning into a multibillion-dollar headache for a number of Indiana counties.
As Amanda Iacone’s story on Wednesday explained, a number of for-profit nursing homes and hospitals are seeking exemption from property taxes, and an obscure section of this year’s budget bill allows owners of land used for charitable purposes to seek refunds going back a decade. In a worst-case scenario, if applications from all the owners for 700 Allen County parcels of land seeking the 10-year refund are granted, the county would lose $1.5 billion in assessed value for land and equipment and owe an estimated $30 million in refunds for current and back taxes.
Here’s why:
In Indiana, non-profit entities such as churches and social service organizations do not have to pay property taxes. Their property values are assessed, but the owners can seek exemptions.
Over the past few years, the Indiana Tax Court has issued opinions that have ruled nursing homes – even those that are owned by for-profit companies – provide a charitable service and are therefore eligible for property tax exemption.
“I don’t think anybody paid attention” to those cases, said Pete Mallers, a Fort Wayne attorney who represents a number of clients around the state seeking the refunds.
Some lawmaker – it isn’t clear who – slipped language in this year’s budget bill apparently intended to give a break to a single non-profit, not necessarily a nursing home, that had failed to file for its exemption over the years. The law extended the deadline for filing the exemption and also allowed eligible property owners who hadn’t filed in the past to receive refunds going back to 2000. But the way the bill is written, it could arguably apply to any property owner who provides a charitable service and has paid property taxes over the years.
“This was just something that came out of the blue,” Mallers said of this year’s language.
So the Property Tax Assessment Boards of Appeals in a number of Indiana counties are faced with weighing the requests to be exempted from property taxes and receive retroactive refunds.
Allen County Assessor Stacey O’Day believes the worst-case scenario will be avoided. “I think the law will need to be clarified,” she said. Still, she noted, “we will be spending many, many hours” defending the previous assessments, and the county will have to pay lawyers to research and challenge the appeals. This comes at a time when assessors must essentially conduct annual assessments of all properties and struggle to meet state-imposed deadlines.
Hoosiers should remember that the Indiana General Assembly failed to pass a budget on time – its only responsibility required by law. Indiana lawmakers routinely pass budgets on short notice. Ten years ago, powerful Democratic state Rep. Pat Bauer, now speaker of the House, quietly inserted language into a measure aimed at cutting the inventory tax. Most lawmakers didn’t learn until weeks later they had also passed a big tax cut for owners of mobile homes and RVs.
The issue involving the charitable property tax exemptions should serve as a haunting reminder that the legislature must vet the language and study the ramifications of the laws they adopt.
Clearly, soon after they convene in January, lawmakers will need to clarify exactly which properties are entitled to property tax exemptions.
