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The Journal Gazette

Sunday, April 23, 2017 1:00 am

Tax-case ruling to have far-reaching consequences

You can be forgiven if the tax bill for the Kokomo Kohl's store isn't foremost in your mind these days. But arguments before the Indiana Supreme Court Thursday could have a major effect on your pocketbook, your neighborhood schools, your library and local government services.

If the state's highest court declines to review and leaves in place an Indiana Tax Court ruling, the state could see a loss of $3.5 billion in assessed property value.

About $50 million in property tax liabilities could be shifted from commercial property owners, and nearly $70 million in local revenues will go uncollected.

You'll pay more if you haven't hit the property tax cap; you'll lose services even if you have. And some commercial property owners stand to reap nearly $121 million in tax savings.

Howard County Assessor v. Kohl's is much more than a disagreement between a county assessor and a single retailer. It represents an industry-wide push by major retailers to cut their tax bills by arguing their stores should be assessed as if they were vacant.

The implications go beyond the so-called “big box” stores like Kohl's, Meijer and CVS. Allowing major retailers to use an assessment methodology – with vacant “dark stores” for a sales comparison – could extend to thousands of other properties – factories, supermarkets, shopping malls and more.

“It's the No. 1 issue assessors are watching,” said Stacey O'Day, Allen County assessor and vice president of the Indiana County Assessors Association. “All of the sudden we have a particular property class that's been allowed to compare itself to vacant, abandoned properties. If one property class is allowed to do this, this could change the way we're looking at all properties.”

Also at stake are infrastructure projects supported by revenue from tax-increment financing districts – projectsundertaken with the expectation of all taxpayers paying their fair share, not paying tax bills based on assessments reduced by as much as 45 percent.

“It carries with it the potential of unraveling the whole system,” said Fort Wayne attorney Mark GiaQuinta, who will argue for a review on behalf of Howard County, the Association of Indiana Counties, county assessors and other interested parties.

The “system” is one the Indiana Supreme Court itself put in place with the St. John case in 1998, which declared the state's assessment procedures unconstitutional.

It called for assessments based on market value, so property owners know that the value of their homes and other property is based on sales of similar properties.

But recent tax court decisions involving big-box stores contradict that ruling in allowing sales comparisons for vacant buildings.

“The (Howard County) decision is one of several from the Tax Court which has redefined the market value-in-use standard to the detriment of each county in the State of Indiana,” argues a friend-of-the-court brief filed by GiaQuinta and attorney Sarah L. Schreiber.

The ruling “violates the spirit of the landmark valuation standard set forth by this Court in Tax Commissioners v. Town of St. John,” they write. 

Since the Supreme Court's 1998 decision, Hoosiers have benefited from tax-assessment procedures meeting the court's call for a system that is “substantially uniform and equal based on property wealth.”

It is more fair; it is more transparent. It now hangs in the balance.