Opinion
Cause No. 49T10-9801-TA-00006.
November 10, 1998.
On appeal from final determinations of the State Board of Tax Commissioners.
Deborah Kay Ferguson, Greenwood, Indiana, Indianapolis, Indiana, Petitioner Appearing Pro Se.
Jeffrey A. Modisett, Attorney General of Indiana, Vincent S. Mirkov, Deputy Attorney General, Indianapolis, Indiana, Attorneys for Respondent.
Deborah Kay Ferguson appeals two final determinations of the State Board of Tax Commissioners (State Board) fixing the assessed value of property she owns as of March 1, 1994 and March 1, 1995. Ferguson challenges the legitimacy of the property tax system and seeks a refund of property taxes that she paid for the 1994 through 1996 tax years.
FACTS AND PROCEDURAL HISTORY
Ferguson owns real property in Trafalgar, Indiana. This property was assessed by local assessing officials at $18,930 for the 1994 tax year and at $19,400 for the 1995 and 1996 tax years. On February 24, 1997, Ferguson filed two Form 133 Petitions for Correction of an Error with the Johnson County Auditor. In these petitions, Ferguson alleged that the property tax system was unconstitutional and sought a refund for the property taxes she paid for the 1994 through 1996 tax years.
The change in the assessed value of Ferguson's property was due to the 1995 state-wide general reassessment. See Ind. Code § 6-1.1-4-4 (West Supp. 1998).
At that time, Ferguson was named Deborah Kay Reeder.
Ferguson did not file a Form 17T, which is a prerequisite to receiving a refund. See Ind. Code Ann. § 6-1.1-26-1(3) (West 1989); Ind. Admin. Code Tit. 50, r. 4.2-3-14(a) (1996). Neither the State Board's final determination, nor its pleadings in this Court make any reference to Ferguson's failure to file the proper form. Therefore, Ferguson's refund claim will not be rejected on this basis.
On February 25, 1997, the Johnson County Auditor, Assessor, and Treasurer unanimously rejected the Form 133 petitions. See Ind. Code Ann. § 6-1.1-15-12(d) (West Supp. 1995) (amended 1997). The petitions were then forwarded to the State Board. See id.; Barth, Inc. v. State Bd. of Tax Comm'rs, 699 N.E.2d 800, 801 (Ind.Tax Ct. 1998). The State Board held a hearing on the petitions, and on November 26, 1997, the State Board issued two final determinations rejecting Ferguson's claims. Ferguson then filed this original tax appeal on January 9, 1998. The parties tried this cause on August 10, 1998, and the Court now issues its decision.
ANALYSIS AND OPINION Standard of Review
The State Board is given great deference when it acts within the scope of its authority. Accordingly, this Court will only reverse a final determination of the State Board when that determination is unsupported by substantial evidence, is arbitrary or capricious, constitutes an abuse of discretion, or exceeds statutory authority. See Clark v. State Bd. of Tax Comm'rs, 694 N.E.2d 1230, 1234 (Ind.Tax Ct. 1998).
Discussion
Ferguson challenges the authority of the state to collect property tax under an allegedly invalid property tax system. In her view, the fact that Indiana's present property tax system has been declared unconstitutional, see Town of St. John v. State Bd. of Tax Comm'rs, 690 N.E.2d 370 (Ind.Tax Ct. 1997), review granted, 695 N.E.2d 123 (Ind. 1998), renders the state powerless to collect property taxes. Ferguson also considers the property tax itself contrary to the "Organic Laws of the Land," to article I, section 10 of the U.S. Constitution, and contrary to several federal statutory provisions. (Petr's Complaint at 2). These alleged infirmities, in Ferguson's view, independently render the state powerless to collect property tax. For all of these reasons, Ferguson believes that she is entitled to a refund because "[t]he taxes, as a matter of law, were illegal." Ind. Code Ann. § 6-1.1-26-1(4)(ii) (West 1989).
The Effect of the Town of St. John Decision
Ferguson's contention with respect to the Town of St. John decision is simple. Indiana's system of property taxation is unconstitutional; ergo, any taxes collected under that system must be illegal. Ferguson's argument fails.
In an order following this Court's decision in Town of St. John, this Court left the present property tax system in place in its entirety until May 11, 1999. Town of St. John v. State Bd. of Tax Comm'rs, 691 N.E.2d 1387 (Ind.Tax Ct. 1998) (order and judgment entry). A fortiori, this means that the state has the authority to collect property taxes, despite the fact that it does so under an unconstitutional system. Cf. Dana Corp. v. State Bd. of Tax Comm'rs, 694 N.E.2d 1244, 1247 (Ind.Tax Ct. 1998) (taxpayer may not make facial challenges to a property tax assessment). Consequently, Ferguson's argument is without merit.
The Court allowed the State Board to continue to collect property taxes under an unconstitutional system in order to avoid the chaos associated with requiring the State Board to "fix the system" overnight. See Town of St. John, 691 N.E.2d at 1389-90 (citing Hellerstein v. Assessor, 37 N.Y.2d 1, 371 N.Y.S.2d 388, 332 N.E.2d 279 (1975)).
This conclusion is not altered by Ferguson's citation of Marbury v. Madison, 5 U.S. [1 Cranch] 137 (1803) and Norton v. Shelby County, 118 U.S. 425 (1886). In those cases, the U.S. Supreme Court made broad statements regarding the force of an unconstitutional law, e.g., "An unconstitutional act is not a law; it confers no rights; it imposes no duties; it creates no office; it is, in legal contemplation, as inoperative as though it had never been passed." Norton, 118 U.S. at 442; "[A] law repugnant to the constitution is void. . . ." Marbury v. Madison, 5 U.S. at 180. The Court, of course, has no quarrel with these pronouncements of the U.S. Supreme Court. However, the cases are inapplicable here because they discuss the effect of a law that is repugnant to the U.S. Constitution. In Town of St. John, this Court held that Indiana's property tax system violated article I, section 12 and article X, section 1 of the Indiana Constitution. Indiana courts are free to determine what effect an Indiana law that violates the Indiana Constitution has. Cf. McGrew v. State, 682 N.E.2d 1289, 1290 (Ind. 1997) (in interpreting Indiana counterpart to federal rule, Indiana court not bound by federal interpretation). Consequently, Marbury v. Madison and Norton v. Shelby County fail to advance Ferguson's cause.
Miscellaneous Challenges to Indiana's Property Tax System
Ferguson contends that property taxation in general (and hence Indiana's property tax system) violates the "Organic Laws of the Land," the U.S. Constitution, and several statutory provisions governing United States currency and obligations of the United States. Each contention will be dealt with in turn.
In her complaint, Ferguson does not specify what she means by "Organic Laws of the Land." However, in a document entitled "Memorandum in Opposition to Respondent's Answer," Ferguson refers to the Articles of Confederation and the Northwest Ordinance of 1787. Ferguson also states that there is no reference to a property tax in the "Organic Constitution of Indiana."
Ferguson does not cite to any specific provision of the Articles of Confederation. This waives any argument with respect to that document. See Bulkmatic Transp. Co. v. Department of State Revenue, 691 N.E.2d 1371, 1375 (Ind.Tax Ct. 1998). Waiver notwithstanding, Ferguson's argument fails. The Articles of Confederation are not currently in force. See Martin v. Hunter's Lessee, 14 U.S. [1 Wheat.] 304, 332 (1816). Accordingly, no valid claim may be based on the Articles of Confederation.
This does not mean that the Articles of Confederation have no importance. They are often used in interpreting provisions of the U.S. Constitution. See, e.g., Oklahoma Tax Comm'n v. Jefferson Lines, Inc., 514 U.S. 175, 115 S.Ct. 1331, 1335-36 (1995).
Like the Articles of Confederation, the Northwest Ordinance of 1787 is not currently in force. In Sands v. Manistee River Improvement Co., 123 U.S. 288, 296 (1887), the Court held that "the [Northwest O]rdinance became inoperative except as adopted by [the states comprising the Northwest Territory]." Indiana has not adopted the Northwest Ordinance. Consequently, Ferguson's argument fails. Ferguson's argument that the Indiana Constitution makes no mention of a property tax is frivolous. Article X, section 1(a) of the Indiana Constitution provides in pertinent part: "The General Assembly shall provide, by law, for a uniform and equal rate of property assessment and taxation. . . ."
The Northwest Ordinance does have some residual effect. See State ex rel. Dep't of Conservation v. Kivett, 95 N.E.2d 145, 148 (Ind. 1950) (Indiana, by virtue of Northwest Ordinance, acquired title to riverbeds of navigable waterways). The residual effect of the Northwest Ordinance does not affect Indiana's power as a sovereign to tax property.
The Court turns next to Ferguson's argument concerning article I, section 10 of the U.S. Constitution, which, inter alia, prohibits states from "mak[ing] any Thing but gold and silver Coin a Tender in Payment of Debts." U.S. Const. art. I, § 10, cl. 1. The Court takes Ferguson's argument to mean that Indiana is without power to require the payment of property taxes in U.S. currency, instead of gold or silver coin. This argument is without merit. A state can require that payment of any debt, including property taxes, be made in lawful currency of the United States. See Walton v. Keim, 694 P.2d 1287, 1288-89 (Colo.Ct.App. 1984). The cases cited by Ferguson, Crews v. Ross, 44 Ind. 481 (1873) and Boyd v. Olvey, 82 Ind. 294 (1882), do not concern payment by lawful currency. They are therefore inapplicable to this case.
Lastly, the Court turns to Ferguson's argument that Indiana's property tax system violates 31 U.S.C. § 3124 (1994) and 12 U.S.C. § 411 (1994). Under 12 U.S.C. § 411, federal reserve notes, which are lawful U.S. currency, are "obligations of the United States." Under 31 U.S.C. § 3124, "obligations of the United States Government are exempt from taxation by a State or political subdivision of a State." Apparently, Ferguson believes that by being required to pay property taxes in lawful U.S. currency, she is being taxed on obligations of the United States Government. This is not the case. Ferguson is being taxed on her real property, not on the money she uses to pay those taxes.
The Court notes the difference in the language used in the two statutory provisions. 12 U.S.C. § 411 refers to obligations of the United States. 31 U.S.C. § 3124 refers to obligations of the United States Government. An obligation of the United States is not the same as an obligation of the United States Government. Cf. Provenza v. Comptroller, 497 A.2d 831, 833-34 (Md.Ct.App. 1985) (discussing effect of these statutory provisions).
CONCLUSION
For the foregoing reasons, the Court AFFIRMS the State Board in all respects.