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Evansville Courier Co. Inc. v. Vanderburgh County Assessor

Tax Court of Indiana

June 5, 2017

Evansville Courier Company Inc., Petitioner,
v.
Vanderburgh County Assessor, Respondent

         On Appeal from a Final Determination of The Indiana Board of Tax Review

          Attorneys for Petitioner Joshua C. Neal William A. Ramsey Barrett McNagny LLP Fort Wayne, Indiana

          Attorneys for Respondent Curtis T. Hill, Jr. Attorney General of Indiana Winston Lin Jessica R. Gastineau Deputy Attorneys General Indianapolis, Indiana

          JOHN G. BAKER, SPECIAL JUDGE

         [¶1] Evansville Courier Company, Inc. (Evansville Courier), seeks judicial review of the decision of the Indiana Board of Tax Review (the Board) denying Evansville Courier's claimed tax deductions for the abnormal obsolescence of a printing press and related equipment. The Court finds that the Board improperly admitted an untimely-disclosed exhibit offered by the Vanderburgh County Assessor (the County) and that the Board did not err by finding that Evansville Courier did not make a prima facie case of abnormal obsolescence. We find that the Board erred by admitting the untimely exhibit. We also find, however, that the Board did not err by denying Evansville Courier's petition, and affirm the Board's judgment.

         Facts[1]

         [¶2] Evansville Courier is a daily newspaper publisher located in Evansville. Its primary paper, the Evansville Courier & Press, is published seven days per week. Over the last decade or so, Evansville Courier has experienced the downturn of the newspaper industry. In 2004, it employed approximately 500 people; currently, it employs approximately 215 people. In 2011, on average, it sold 49, 126 newspapers from Monday through Saturday, with an average Sunday circulation of 70, 864 newspapers. By 2014, the average circulation decreased to 39, 999 newspapers during the week and to 57, 111 on Sundays. It has experienced an overall decline of nearly 60% in circulation since the 1990s. Evansville Courier anticipates that it will soon reduce the number of publication days for the Evansville Courier & Press and that at some point in the next ten years, it will stop printing newspapers altogether.

         [¶3] In 1989, Evansville Courier purchased a new 12-position flexographic printer (the Printing Press). At that time, the flexographic method of printing was expected to become the predominant method of printing newspapers, but within a few years, it became apparent that the industry preferred using an offset press rather than a flexographic press. At one time, there were as many as thirty newspaper companies nationwide using flexographic press printers, but now only twelve remain in use. The flexographic method of printing is more expensive than the alternative offset method. Additionally, Evansville Courier can no longer buy parts for the Printing Press from the manufacturer, meaning that it must have parts specially manufactured or purchase used parts from newspaper companies that once operated similar presses.

         [¶4] In July 2011, Evansville Courier filed its 2011 tax return. The 2011 Return included a separate schedule applying an abnormal obsolescence deduction to the Printing Press and related equipment. Evansville Courier filed similar returns for each of the 2013 and 2014 tax years. In sum, Evansville Courier requested the following approximate abnormal obsolescence adjustments: $649, 398 for 2011; $3.5 million for 2013; and $5.1 million for 2014. The abnormal obsolescence adjustments were disallowed by Vanderburgh County for each of the three years.

         [¶5] The parties went through the required administrative process for each of the three tax returns.

• In March 2011, the Vanderburgh County Assessor had assessed the value of Evansville Courier's personal property, including the Printing Press and related equipment, to be approximately $8.6 million. Appellant's App. p. 4. Evansville Courier appealed that determination to the Vanderburgh County Property Tax Assessment Board of Appeals (the Vanderburgh County Board). Following an October 7, 2011, hearing, the Vanderburgh County Board affirmed the assessment of Evansville Courier's personal property value to be approximately $8.6 million. Id. at 7-8. On December 5, 2011, Evansville Courier filed a petition with the Board seeking a review of the Vanderburgh County Board's decision, asking that its property be valued at approximately $7.4 million. Id. at 1-3.
• In March 2013, the Vanderburgh County Assessor assessed the value of Evansville Courier's personal property to be approximately $8.57 million. Id. at 31. Evansville Courier appealed that determination to the Vanderburgh County Board, which, following a September 23, 2013, hearing, affirmed the assessment of the personal property value to be approximately $8.57 million. Id. at 35. On November 8, 2013, Evansville Courier filed a petition with the Board seeking a review of the Vanderburgh County Board's decision, asking that its property be valued at approximately $5 million. Id. at 22-24.
• In March 2014, the Vanderburgh County Assessor assessed the value of Evansville Courier's personal property to be approximately $7.6 million. Id. at 49. Evansville Courier appealed that determination to the Vanderburgh County Board, which, following a January 9, 2015, hearing, affirmed the assessor's valuation. Id. at 48. On March 30, 2015, Evansville Courier filed a petition with the Board seeking a review of the Vanderburgh County Board's decision, asking that its property be valued at approximately $2.5 million. Id. at 42-44.

         On January 26, 2016, the Board held a combined evidentiary hearing on each of Evansville Courier's three pending petitions.

         [¶6] At the hearing, Evansville Courier submitted appraisals prepared by Brad Venisnik, an Accredited Senior Appraiser, in support of its claim for an abnormal obsolescence deduction for the Printing Press and related equipment for the years of 2011, 2013, and 2014. The appraisals were prepared in accordance with the Uniform Standards of Professional Appraisal Practice. Venisnik considered the cost, income, and market approaches to value. He relied most heavily on the market approach because that approach "most accurately quantifies all forms of depreciation and obsolescence." Id. at 505. Venisnik researched the market by talking with the original equipment manufacturer, used equipment dealers, and other operators of two presses that are similar to the Printing Press.

         [¶7] Venisnik's research indicated that (a) the original equipment manufacturer would attach a value of $865, 000 to the Printing Press for the 2011 tax year; (b) no used equipment dealer had any interest in purchasing the Printing Press or any indications of recent comparable sales; and (c) other newspaper companies have discontinued operations of their flexographic presses and have sold the component parts for their scrap value. Venisnik concluded that it would be impractical to use the Printing Press for anything other than printing newspapers and that it lacks functionality for its best use because of an inherent inability to print color copy on both sides of the page. He therefore determined that it is not possible to cure the causes of the Printing Press's obsolescence.

         [¶8] Based on his research, Venisnik placed a value on the Printing Press and related equipment for 2011 of $1.2 million. He calculated abnormal obsolescence by using a mathematical computation equal to the difference between the reportable value of the Printing Press and its equipment and the appraised value. For 2011, the amount of abnormal obsolescence was approximately $4.3 million. For 2013 and 2014, the appraised value of the Printing Press and related equipment was $820, 000 and $632, 000, respectively. Thus, the amount of abnormal obsolescence for each of these years was approximately $4.44 million for 2013 and $4.47 million for 2014.

         [¶9] As part of its case-in-chief, Vanderburgh County called Bill Fluty, the County assessor, to testify. During Fluty's testimony, the County offered into evidence an evaluation of Venisnik's market value appraisal of the property in 2014. Evansville Courier objected to this exhibit because it had not been provided to Evansville Courier five days before the hearing as required by the Indiana Administrative Code and because it was hearsay evidence. The County responded that the exhibit was rebuttal testimony and therefore did not have to comply with the five-day timeline. The Board took the issue under advisement and completed the hearing.

         [¶10] On September 19, 2016, the Board issued its final determination, which denied Evansville Courier's petitions. In relevant part, the Board found and held as follows:

16. [With respect to the exhibit that was not timely disclosed by the County, ] [w]hile the Board's procedural rules do not specifically exempt rebuttal evidence from the exchange requirements, the Board does recognize a general exception for rebuttal evidence. . . . The Board may exclude evidence offered as rebuttal that should have been presented in the party's case-in-chief, but is not required to do so. Here, the Board is willing to make an exception because the exhibit was specifically offered to challenge the validity of the ...

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