On December 31, 2020 at 5:19 p.m., the Indiana Tax Court issued its order affirming the decision of the Indiana Board of Tax Review in Meijer Stores Limited Partnership v. Boone County Assessor Ind. Bd of Tax Rev. (Aug. 28, 2019) in favor of the Boone County Assessor.  The litigation involved  a “Big Box” property tax appeal. Big Box stores like Lowe’s, Meijer, Walmart, etc. have regularly taken the position that the stores they built are worth approximately half the cost to build them as soon as construction is completed, and they have made a practice out of litigating property tax assessments against county assessors, who often do not have the funds to regularly litigate these cases against Big Box stores.  PSRB represented the Boone County Assessor.  The assessments at issue were for 2014, when the Meijer store was completed, along with 2015-2017.  The assessed values for the four years at issue were $9,521,318 for 2014 when the building was not yet complete and $11,878,900 for 2015-2017. The parties agreed to try only the 2016 assessment and stipulated to formulas for 2014, 2015 and 2017 based on the outcome for 2016.

In the IBTR, Meijer claimed that its “market value-in-use [was] adversely impacted by substantial depreciation due to obsolescence.“  Meijer’s appraiser and Boone County’s appraiser had nearly identical values for the land ($3, 000,000 for Meijer and $3,090,000 for Boone County).  Meijer’s appraiser concluded to a cost-approach value of $10,946,461 before obsolescence.  Boone County’s appraiser concluded to $11,046,600.  But Meijer’s appraiser calculated external and functional obsolescence at $5,710,268 based on his income approach.  After adding back in the land value, Meijer’s appraiser concluded that the store’s market value-in-use at $8,240,000.  Boone County’s appraiser concluded to a cost-approach value of $11,628,000, with no obsolescence. The Indiana Board of Tax Review entered judgment in favor of Boone County in the amount of $12,798,600 for 2016.  The Board rejected sales comparison and income approach estimates by both parties’ appraisers.

On appeal, the Tax Court affirmed the IBTR decision in all respects.  The Tax Court noted that the IBTR compared the actual costs of construction in Koon’s second cost approach (based on actual construction costs) with the Marshall Valuation Service cost estimate in his first cost approach analysis, finding that the difference “roughly reflects obsolescence of 18%.”

Relying on its own prior decisions, the Tax Court concluded that the “dark box controversy” (i.e. the tendency of Big Box Stores to use vacant, second and third tier properties as comparables) is illusory.  To date, the Indiana Supreme Court has not yet ruled on this issue.  Nor has Indiana’s Legislature recently weighed in on this issue in any meaningful way.  Perhaps 2021 will shed some light on this issue.

The IBTR decision is available here.  The Tax Court decision is available here.  If you have any questions about the above litigation or other property tax appeal questions, please contact Brett Nelson at bnelson@psrb.com.

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