Lawsuit Takes Aim At Property Tax

A lawsuit filed by attorney John Price on behalf of several taxpayers and tax groups attacks the constitutionality of Indiana's property tax system on a number of fronts, pointing up the unfairness many taxpayers complain about. Whether the suit is successful, it should provide further fodder for a movement to repeal Indiana's property tax. Article 10, Section of the Indiana Constitution mandates a "uniform and equal rate of property assessment and taxation." Price's suit notes that Indiana courts just in the last decade through out the old "true tax value" method of assessing property taxes as violating the state constitutional mandate, which resulted in Indiana joining the rest of the nation in applying a "fair market value" method of valuing property. Nonetheless, Price's lawsuit notes assessments under this method often ignore the property's actual fair market value.

On the issue of uniformity and equal taxation, Price's lawsuit points up the vastly differing tax rates applied to property depending on where you live. "[I]n Marion County there are 97 taxing districts, which has resulted in vastly differing rates," the suit reads. It continues, "Petitioners make two alternative arguments: (1) that the multiple district plan is facially invalid because it has the effect of generating wide disparities in tax rates within different sub-localities and, alternatively, (2), the current system is invalid as applied. Rates within said taxing districts are as disparate as 2.2 to 4.8, thus, the differential in tax rate within the same community from lowest to highest rate is over 110 percent." "These differential effects in tax rates can not be justified under Article 10, Section 1’s requirements of a 'uniform and equal rate of property assessment and taxation.'" The suit maintains that the varying rates across the state are the "result of intentional state discrimination."

Drawing from a widely ignored provision of our state constitution, Price's lawsuit contends that the imposition of property taxes on individuals for funding schools is specifically barred by the state constitution. “Taxes on the property of corporations, that may be assessed by the General Assembly for common school purposes” under Article 8, Section 2 of the Indiana Constitution. "In spite of what is certainly a restrictive Constitutional provision as set forth above, the State of Indiana has levied and collected, and continues to levy and collect, taxes on residences in the State of Indiana, a practice not authorized in Article 8, Section 2 to provide funds for the Common School Fund," the lawsuit contends.

Price further contends that many assessment practices applied by assessors in Indiana render the current property tax system invalid, including:

• Excluding from foreclosures and tax sales data in arriving at a property's fair market value.
• Excluding high and low sales in a neighborhood to arrive at average comps.
• The practice of assessing office towers at a grade lower to reduce the assessments.
• Assessors have not been provided the necessary tools, methods and systems to properly assess property.
• Improper application and interpretation of the Indiana Constitution, state statutes and case law in carrying out assessments.
• A state law prohibiting assessors from assessing a developer's land at the fair market value until the developer begins constructions on the property or sells it to another developer.
• Property taxes are imposed on residences without taking into account the public services attributable to the residences.
• The tax burden shifting from commercial to residential property because of tax abatements.
• Allowing riverboat casinos to be taxed on an income method as opposed to a fair market value, which results in a much lower assessment.

The lawsuit also takes aim at the recently adopted $90 million, 65% increase in Marion County's local income tax based upon former Councilor Patrice Abduallah's abandoning his residency in his district last January prior to the vote, and the subsequent failure of the Democratic Party to name a replacement for him prior to the CCC taking a vote on the tax increase proposal, which otherwise would have failed without Abduallah's vote. Here's Price's legal argument on that point as it is made in his lawsuit:

• On July 23, 2007 the Respondent City-County Council of the Consolidated City of Indianapolis-Marion County adopted an ordinance increasing the local income tax in said taxing district from one percent (1%) to one and sixty-five hundredths per cent (1.65%), commencing in October, 2007.
• The vote cast on said ordinance was fifteen (15) to thirteen (13).
• One of the votes purportedly cast in favor of the income tax increase was cast by Councilor Patrice Abduallah, purportedly acting as a Councilor originally elected to represent Council District Fifteen (15), in the elections conducted in 2003.
• Abduallah listed in Council records and in his Declaration of Candidacy filed in January, 2007, an address that is not physically located within District 15. Upon Councilor Abdullah formally showing his residence outside of District 15 when he filed said official document in January, 2007 his office became vacant, pursuant to IC 36-3-4-2(c) (2) which provides that “a vacancy in the legislative body occurs whenever a member…ceases to be a resident of the …district from which the member was elected”.
• City-Council Councilors are required by statute to reside within the Council Districts that they represent on the City-County Council [IC 36-3-4-2(c)(2)].
• By statute [IC 36-3-4-2(c)(2)] Abdullah ceased to be a legal resident of District 15, and ceased to be a legal Councilor representing said District 15, beginning from the time of Abdullah’s sworn statement on his Declaration of Candidacy that he lived outside of District 15. By virtue of said statute, Abdullah’s District 15 seat on the City-County Council was “vacant” when he filed his Declaration of Candidacy, and by sub-section (e) of said statute “the vacancy shall be filled under IC 3-13-8”. The vacancy in the District 15 seat on the City-County Council was not filled pursuant to IC 3-13-8 in that a vote of the “remaining members of the council” did not meet and vote to fill the vacancy during thirty (30) days after the vacancy in District 15.
• Consequently, from thirty (30) days after the filing of Abdullah’s Declaration of Candidacy in January, 2007 his seat was “vacant” by operation of law, and any effort by Abdullah to act as a Councilor on the Indianapolis-Marion County City-County Council was of no force or effect, as his seat was “vacant”. At the time of the July 23, 2007 vote to increase local income taxes in the Consolidated City of Indianapolis-Marion County by 65%, therefore, District 15 was without representation on the Council for said vote on said income tax increase.
• The leaders and members of the Respondent Indianapolis-Marion County City-County Council are presumed to know the law, and had possession of the stated change of address in January, 2007. As such, they had an affirmative duty to fill the vacancy in District 15 within thirty (30) days of Abdullah’s stated move from his District. They can not now plead their own misfeasance in failing to fill the vacancy, to justify counting a vote that was not a valid vote.
• The legal effect of Abdullah’s vacating of his seat by his moving outside of his District [IC 36-3-4-2(d)(2)] is distinguished from cases holding that if an official may not have been properly or legally elected, but continues to serve, the official’s acts are de facto acts as he discharges his duties. Abdullah’s original election in 2003 appears to have been proper and legal, but he chose in the midst of his term to vacate his office by moving from his District. Once his office was vacated, he could no longer function in either a de jure or a de facto capacity.
• When a caucus of the members of the City-County Council was not called within thirty (30) days of the Abdullah vacancy to fill the vacancy created by Abdullah’s move from District 15, contrary to the requirements under IC 3-13-8-4, Indiana law holds that the vacant seat was not filled, pursuant to said statute. In fact, the vacancy was not filled until August 28, 2007, with the selection of Andre Carson, who was elected to fill the vacancy in District 15, which had been vacant since January, 2007.
• The leaders and members of the Respondent Indianapolis-Marion County City-County Council are presumed to know the law, and had possession of the stated change of address in January, 2007. As such, they had an affirmative duty to fill the vacancy in District 15 within thirty (30) days of Abdullah’s stated move from his District. They can not now plead their own misfeasance in failing to fill the vacancy, to justify counting a vote that was not a valid vote.
• District 15 could not have not have a legal representative present and voting in the period from thirty (30) days after Abdullah’s Declaration of Candidacy stating that he was no longer a resident of District 15, until his successor was selected to fill the vacancy in his seat on August 28, 2007. Therefore, on July 23, 2007 when the City-County Council voted to raise local income taxes by 65%, the proposed ordinance received only fourteen (14) legal votes from Members of the Council, and is thus void ab initio, and of no legal force or effect, as the vote for said ordinance, properly counted was 14. Since 15 votes of the Council of twenty-nine (29) members are required to adopt ordinances. (Ordinance 151-52) the ordinance failed as a matter of law.

If you follow Price's argument on the Abduallah residency issue to its logical conclusion, you also understand why election law experts can argue the time has run out for Democrats to place Abduallah's successor, Andre Carson, on the election ballot. Price's lawsuit also claims Gov. Mitch Daniels violated state law by extending the deadline by which counties could adopt the county option income tax. He is also seeking expedited tax refunds for persons who paid their property taxes based on the higher new assessments in Marion County.