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Indiana - New Law Requires Cost Approach

by Morgan Thomas, Chicago, June 2015

 

On May 6, 2015, Indiana Governor Pence signed new legislation into law requiring certain "special purpose" properties be assessed using only the cost approach. This includes big box retail, fast food restaurants, manufacturing plants, movie theaters, and industrial properties.

 

The new law restricts application of the dark store theory, which bases appeals on the Sales Comparison Approach of properties that have been vacated and sold.

 

SEA 436

 

Senate Enrolled Act 436 mandates that land be assessed separately from the improvements on the land.

 

For properties with an effective age of ten years or less and a building size of at least 50,000 square feet, the cost approach must be used. Depreciation and obsolescence must be factored into the assessment pursuant to local government finance department rules.

 

Appeals

 

To appeal a "special purpose" property assessment, owners must provide the assessor with official information concerning actual construction costs. The Property Tax Assessment Board of Appeals (PTABOA) may not review an appeal until this information is provided.

 

If the taxpayer's proof demonstrates that the actual costs are greater than the cost values established under department rules, then depreciation and obsolescence are to be deducted from the construction costs and not from the cost values.

 

SEA 436 is effective retroactive to March 1, 2014 and also applies to any assessment date with appeals pending before the PTABOA and the Indiana Board of Tax Review.