Property Tax Assessment System To Change
July 28, 2016 at 4:25 p.m.
Kosciusko County homeowners dodged a bullet Friday when the Indiana Supreme Court upheld a portion of the state's property tax assessment procedure - but some may get pinged with a BB.
The state's high court ruled the state law on property assessment is constitutional, but that the method the state uses to determine property values is not.
The decision means the State Tax Board must rewrite regulations many call non-uniform and largely subjective. The court said those rules should be replaced with a system that is 'uniform and equal."
"I'm pleased we won't have to go to a straight fair market value assessment system," said Sen. Kent Adams (R-Bremen). "If we would have had to do that, it would have shifted 35 percent of the property tax burden to homeowners."
Indiana now bases property assessments on replacement costs minus depreciation, taking into account several factors, including materials, design and location, to get what is called true tax value. Those who challenged the system favored one based on fair market value of property.
The high court ruled the constitution does not require fair market value or any other specific system as long as the system used meets the constitutional test of being uniform and equal.
"I see this decision to be a net positive for the state, especially since we won't have to shift that tax burden to the homeowners," Adams said.
Kosciusko County Assessor Sue Ann Mitchell said while the total impact of the court's decision won't be fully known until later next year, whatever changes are made will be felt more in this county than most others in the state.
"It (the decision) will have a larger impact on our county because of our resort status - with all the lakes we have," she said. "The shift will more than likely be made to those property owners of lake properties."
Mitchell cautioned those homeowners not to become distressed on any possible changes in assessment methods.
"If the assessment goes up, the tax levies would have to come down because of the state's mandated spending caps," she said. "The decision is really a win-win situation for everyone because only the assessment guidelines were ruled unconstitutional, and not the tax system as a whole.
"If that had been the case, our office would have been inundated with appeals," she said.
The changes in the assessment procedures won't be felt by property owners until 2001, according to Mitchell. The reassessment period won't start until July, and those new assessments would not be applied until 2000, with those taxes due in 2001.
Adams said legislators were concerned the Supreme Court would require the use of nothing but fair market value in assessing property values. The decision will allow the rules to be changed, while maintaining the state's ability to consider the differences of property values around the state.
"Identical homes in Warsaw and Bremen would be assessed at totally different values under a fair market value system," he said. "The court's ruling will allow us to maintain some degree of consistency in our assessment procedures."
An added benefit of the decision will be a greater focus on the need for the legislature to find an alternative way of funding schools, the major recipients of local property taxes.
"Property taxes are already too high, so we're going to need to look at a different way of funding the schools," he said. "But the pressure is off somewhat with this decision, so I don't see property taxes as being a focal point in the upcoming session."
The property tax case started in 1993, when a group of Lake County homeowners filed a lawsuit saying that the system is subjective and results in unequal assessments and out-of-whack tax bills. The Indiana Civil Liberties Union agreed to take up the case.
Tax Court Judge Thomas Fisher twice ruled the system and the laws under which it was developed are unconstitutional for ignoring objective, hard data about values. The state appealed to the Supreme Court.
The high court agreed with Fisher about the regulations, saying the system lacks 'meaningful reference to property wealth and (results) in significant deviations from substantial uniformity and equality.'
The court disagreed with Fisher about the law itself.
It said the constitution 'does not mandate the use of strict market value or the use of its three measurement standards. [[In-content Ad]]
Latest News
E-Editions
Kosciusko County homeowners dodged a bullet Friday when the Indiana Supreme Court upheld a portion of the state's property tax assessment procedure - but some may get pinged with a BB.
The state's high court ruled the state law on property assessment is constitutional, but that the method the state uses to determine property values is not.
The decision means the State Tax Board must rewrite regulations many call non-uniform and largely subjective. The court said those rules should be replaced with a system that is 'uniform and equal."
"I'm pleased we won't have to go to a straight fair market value assessment system," said Sen. Kent Adams (R-Bremen). "If we would have had to do that, it would have shifted 35 percent of the property tax burden to homeowners."
Indiana now bases property assessments on replacement costs minus depreciation, taking into account several factors, including materials, design and location, to get what is called true tax value. Those who challenged the system favored one based on fair market value of property.
The high court ruled the constitution does not require fair market value or any other specific system as long as the system used meets the constitutional test of being uniform and equal.
"I see this decision to be a net positive for the state, especially since we won't have to shift that tax burden to the homeowners," Adams said.
Kosciusko County Assessor Sue Ann Mitchell said while the total impact of the court's decision won't be fully known until later next year, whatever changes are made will be felt more in this county than most others in the state.
"It (the decision) will have a larger impact on our county because of our resort status - with all the lakes we have," she said. "The shift will more than likely be made to those property owners of lake properties."
Mitchell cautioned those homeowners not to become distressed on any possible changes in assessment methods.
"If the assessment goes up, the tax levies would have to come down because of the state's mandated spending caps," she said. "The decision is really a win-win situation for everyone because only the assessment guidelines were ruled unconstitutional, and not the tax system as a whole.
"If that had been the case, our office would have been inundated with appeals," she said.
The changes in the assessment procedures won't be felt by property owners until 2001, according to Mitchell. The reassessment period won't start until July, and those new assessments would not be applied until 2000, with those taxes due in 2001.
Adams said legislators were concerned the Supreme Court would require the use of nothing but fair market value in assessing property values. The decision will allow the rules to be changed, while maintaining the state's ability to consider the differences of property values around the state.
"Identical homes in Warsaw and Bremen would be assessed at totally different values under a fair market value system," he said. "The court's ruling will allow us to maintain some degree of consistency in our assessment procedures."
An added benefit of the decision will be a greater focus on the need for the legislature to find an alternative way of funding schools, the major recipients of local property taxes.
"Property taxes are already too high, so we're going to need to look at a different way of funding the schools," he said. "But the pressure is off somewhat with this decision, so I don't see property taxes as being a focal point in the upcoming session."
The property tax case started in 1993, when a group of Lake County homeowners filed a lawsuit saying that the system is subjective and results in unequal assessments and out-of-whack tax bills. The Indiana Civil Liberties Union agreed to take up the case.
Tax Court Judge Thomas Fisher twice ruled the system and the laws under which it was developed are unconstitutional for ignoring objective, hard data about values. The state appealed to the Supreme Court.
The high court agreed with Fisher about the regulations, saying the system lacks 'meaningful reference to property wealth and (results) in significant deviations from substantial uniformity and equality.'
The court disagreed with Fisher about the law itself.
It said the constitution 'does not mandate the use of strict market value or the use of its three measurement standards. [[In-content Ad]]