Hamilton County Property Tax Assessment Board of Appeals v. Oaken Bucket Partners, LLC
2010 Ind. LEXIS 795
| Ind. | 2010Background
- Oaken Bucket owns a multi-unit office building in Fishers and leased about 35% (13,000 sq ft) to Heartland Church at $6.00/sq ft annually, with an additional 15,000 sq ft leased at $8.00/sq ft under a second triple-net lease.
- Heartland is a non-denominational church with 500 members, designated as a 501(c)(3) by the IRS, and provides religious activities and a non-profit daycare ministry.
- Oaken Bucket attempted to obtain a charitable and religious purposes exemption for Heartland space; the County Board denied the exemption after contesting the ownership/use for exempt purposes.
- Heartland’s rent was disputed as below market, with evidence suggesting the fair market value for comparable space ranged from $8.00 to $10.00 per sq ft.
- The State Board affirmed the County Board’s denial; the Tax Court reversed, then on rehearing affirmed the Tax Court’s reversal, and the Indiana Supreme Court granted review.
- The Court majority holds that below-market rent alone does not establish an exempt purpose separate from the lessee; ownership must be for a purpose independent of the lessee’s exempt purpose.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does below-market rent show independent exempt purpose? | Oaken Bucket asserts below-market rent demonstrates its own exempt purpose. | State Board argues rent level does not prove separate exempt purpose. | Not sufficient; must show separate exempt purpose beyond lessee's. |
| Must owner have an exempt purpose independent of lessee to obtain exemption? | Owner argues it can be exempt if owned/used for exempt purposes separate from Heartland. | No separate exempt purpose proven; ownership too entwined with lessee's use. | Yes; owner must demonstrate an exempt purpose independent of lessee. |
| Is unity of ownership, occupancy, and use required for exemption? | Argues even with no unity, owner may have own exempt purpose. | Agrees unity not required but requires independent exempt purpose by owner. | Even without unity, independent exempt purpose is required. |
| What is the proper standard of review for Tax Court determinations on exemptions? | appeals the Tax Court decision per deference rules to State Board? | Tax Court’s findings are reviewed for clear error with deference to Board. | Review adheres to clearly erroneous standard; deference to Tax Court’s findings. |
Key Cases Cited
- Travelers' Insurance Co. v. Kent, 151 Ind. 349, 50 N.E. 562 (Ind. 1898) (ownership rental use not exempt solely by public-benefit purposes)
- Spohn v. Stark, 197 Ind. 299, 150 N.E. 787 (Ind. 1926) (rental income not exempt merely due to lessee’s public-use purpose)
- College Corner, L.P. v. Department of Local Government Finance, 840 N.E.2d 905 (Ind. Tax Ct. 2006) (exemption may apply where for-profit partner's profit is inconsequential to exempt purpose)
- Sangralea Boys Fund, Inc. v. State Bd. of Tax Comm'rs, 686 N.E.2d 954 (Ind. Tax Ct. 1997) (unity of ownership/occupancy/use discussed in exemption analysis)