Spencer County Assessor and Grass Township Assessor v. AK Steel Corporation
2016 Ind. Tax LEXIS 42
| Ind. T.C. | 2016Background
- Indiana enacted I.C. § 6-1.1-3-23 (Pool 5) allowing "integrated steel mills" to value certain personal property under a special depreciation pool; the statute defined an integrated steel mill as a person that "produces steel by processing iron ore and other raw materials in a blast furnace in Indiana."
- AK Steel operates a finishing facility (Rockport Works) in Rockport, Indiana, but its blast furnaces are located out-of-state; it used Pool 5 for 2004 and 2008 assessments and claimed entitlement for 2008.
- The Spencer County Assessor denied Pool 5 treatment for 2008 on the ground Rockport does not have an Indiana blast furnace; PTABOA and the Indiana Board of Tax Review sustained the denial (the Board noted it lacked authority to decide constitutional challenge).
- AK Steel challenged the "in Indiana" limitation as unconstitutional (equal protection, dormant Commerce Clause, substantive due process, special-law prohibition, and state uniformity clause); Assessors argued AK Steel also failed to qualify because the statute’s term "person" refers to a facility.
- The Tax Court rejected the Assessors’ argument that "person" means "facility," held AK Steel was not similarly situated to some entities that used Pool 5 (e.g., subsidiaries whose parent has an Indiana blast furnace), and rejected AK Steel’s constitutional challenges, affirming the Board’s result.
Issues
| Issue | Plaintiff's Argument (AK Steel) | Defendant's Argument (Assessors/State) | Held |
|---|---|---|---|
| Whether "person" in the Pool 5 definition means "facility" so Rockport (a finishing facility) cannot qualify | "Person" should be read as "facility," excluding Rockport because it does not produce steel in a blast furnace | "Person" has the statutory meaning (entity types), and "including a subsidiary" makes sense only if "person" means entity | Court: "person" means legal/person entity per I.C. §6-1.1-1-10; Assessors’ facility argument rejected |
| Whether the "in Indiana" phrase violates federal Equal Protection | No rational basis: location of blast furnace is irrelevant to valuation of Indiana personal property; similarly situated out-of-state blast-furnace owners are treated worse | Classification is rationally related to legitimate state interest (stabilizing local tax base where abnormal obsolescence claims occurred in Indiana) and subsidiaries of in-state blast-furnace owners are distinguishable | Court: classification is rationally related to legislative purpose; no equal protection violation |
| Whether the "in Indiana" phrase violates the dormant Commerce Clause (discrimination against interstate commerce) | The restriction facially discriminates by using state lines as the sole eligibility criterion and burdens interstate commerce | The statute does not favor in-state commerce over out-of-state actors generally; both domestic and foreign firms with Indiana blast furnaces qualify; out-of-state firms can seek abnormal-obsolescence relief via appeals | Court: no facial discrimination; Commerce Clause challenge fails |
| Whether the restriction violates substantive due process, Indiana special-law prohibition, or uniformity clause | Limitation is arbitrary, measures tax on irrelevant interstate characteristic, was tailored to exclude AK Steel, and causes non-uniform taxation | Statute is general (applies to a defined class throughout the state), reasonably related to legitimate legislative purpose, and not arbitrary | Court: rejects all these constitutional claims; "in Indiana" provision upheld |
Key Cases Cited
- Nordlinger v. Hahn, 505 U.S. 1 (1992) (rational-basis standard for state classifications under Equal Protection)
- City of Cleburne v. Cleburne Living Ctr., 473 U.S. 432 (1985) (analysis of equal protection classifications not involving suspect classes)
- Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977) (four-factor test for validity of state taxes under Commerce Clause)
- Jefferson Lines, Inc. v. Oklahoma Tax Comm’n, 514 U.S. 175 (1995) (dormant Commerce Clause forbids state taxation that discriminates against interstate commerce)
- Oregon Waste Sys., Inc. v. Dep’t of Envtl. Quality of Or., 511 U.S. 93 (1994) (discrimination inquiry under dormant Commerce Clause)
- City of Philadelphia v. New Jersey, 437 U.S. 617 (1978) (state laws that protect local economic interests by burdening interstate commerce face strict scrutiny)
- Northside Sanitary Landfill, Inc. v. City of Indianapolis, 902 F.2d 521 (7th Cir. 1990) (government action passes rational-basis if a sound hypothesized reason exists)
- Sims v. U.S. Fid. & Guar. Co., 782 N.E.2d 345 (Ind. 2003) (statutes presumed constitutional)
- Stinson v. Trimas Fasteners, Inc., 923 N.E.2d 496 (Ind. Tax Ct. 2010) (standard of review: deference to Board’s factual findings; legal questions reviewed de novo)
- Gen. Motors Corp. v. Tracy, 519 U.S. 278 (1997) (Commerce Clause analysis requires comparison of substantially similar entities)