LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
200 W. Washington St., Suite 301
Indianapolis, IN 46204
(317) 233-0696
iga.in.gov
FISCAL IMPACT STATEMENT
LS 6755 NOTE PREPARED: Dec 27, 2021
BILL NUMBER: SB 145 BILL AMENDED:
SUBJECT: Property Tax Matters.
FIRST AUTHOR: Sen. Buchanan BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
DEDICATED
FEDERAL
Summary of Legislation: Commercial Property Value: This bill provides that the true tax value of
commercial real property used for retail purposes that is at least 100,000 square feet and that is occupied by
the original owner or by a tenant for which the improvement was built shall be determined by the cost
approach for the first 10 years of occupancy of the property, less normal depreciation and normal
obsolescence under the rules and guidelines of the Department of Local Government Finance (DLGF).
Construction Cost: The bill requires the DLGF to annually establish a standard construction cost per square
foot for these properties for each county based on the average market cost in the county (or region) to be used
for purposes of the assessment, unless the taxpayer has provided the taxpayer's determination of actual
construction costs to the appropriate assessing official not later than 45 days after the date of the assessment
notice that is the subject of the review.
The bill requires the taxpayer, if a taxpayer has provided the taxpayer's determination of actual construction
cost within 45 days after the assessment notice, to provide to the county property tax assessment board of
appeals (PTBOA) information necessary to determine the actual construction costs for the real property. It
also requires that the taxpayer's actual construction costs must be used for purposes of the assessment if the
PTBOA determines that actual construction costs for the real property are less than the standard construction
cost established by the DLGF for the county.
Separate Account: This bill requires the fiscal officer of the county to establish a separate account for the
tax receipts that are attributable to the property tax assessment that is the subject of review.
State Assessment: The bill provides that a county assessor or township assessor (if any) may request the
SB 145 1 DLGF to perform a state conducted assessment of these properties for a specific assessment date and it sets
out the procedures for a state conducted assessment.
Effective Date: January 1, 2023.
Explanation of State Expenditures: Construction Cost: Beginning in CY 2023, the DLGF will be required
to annually establish a standard construction cost in each county of commercial retail properties with at least
100,000 square feet. The DLGF will incur additional costs each year to do so. The amount of the additional
expense is not currently known. This fiscal impact statement will be updated when additional information
becomes available. The DLGF is funded from the state General Fund.
State Assessment: Beginning in CY 2023 under this provision, the DLGF will conduct an assessment of a
particular large commercial retail property upon request by the local assessor. The DLGF may contract with
a professional appraisal firm to conduct the assessment. Any expenditure made by the DLGF under contract
to assess the property will be reimbursed by the county. There will be no net cost to the DLGF to conduct
the assessment.
The party who would be responsible for defending a DLGF assessment in an appeal is unclear. If the DLGF
is the responsible party then state expenditures could increase. The DLGF is funded from the state General
Fund.
Additional Information: For property taxes payable in 2022, there are 610 parcels that were coded as
commercial retail and have at least 100,000 square feet. These parcels have a total gross assessed value of
$5.1 B.
Explanation of State Revenues:
Explanation of Local Expenditures: State Assessment: If local assessors request that the DLGF conduct
assessments of any large retail properties under this bill, then the counties will reimburse the DLGF for the
cost of the assessments from the county reassessment fund. Since the county would have otherwise borne
the cost of the assessment directly, any change in expenditures will depend on the difference in the cost if
assessed locally versus the DLGF’s cost.
Explanation of Local Revenues: Commercial Property Value: This provision could result in increased
assessments of some commercial retail properties. Increased assessments will reduce the tax rate, shift taxes
to these properties from others, and potentially reduce tax cap losses in some places.
Beginning with January 1, 2023, assessments, a commercial retail property with at least 100,000 square feet
that is occupied by the original owner or the tenant for whom it was built will be assessed under the cost
approach for the first 10 years of occupancy if the owner appeals the property’s assessment. Normal
depreciation and normal obsolescence under DLGF rules and guidelines will be applied.
Economic and functional obsolescence may be determined by application of aggregate market data and not
by comparison to any other individual parcels. Land will be assessed separately and may be assessed or
challenged based on market comparables.
On appeal, the cost approach will be based on the standard construction cost for the county unless the
taxpayer provides their determination of actual construction cost within 45 days after the date of the
SB 145 2 assessment notice. If the taxpayer’s determination is timely provided, then the taxpayer must also provide
all information necessary to determine the actual construction cost at least 10 days before the PTABOA
hearing. If the actual costs are less than the standard cost then the actual cost will be the basis for the
assessment.
Separate Account: This provision will reduce current year revenues for local civil taxing units and school
corporations serving a large commercial retail properties with an assessment under appeal. Tax payments
attributable to the assessments under review will be deposited into a separate fund and held until there is a
final determination or final judgment. Money in the fund will be released to the units consistent with the final
determination or judgment. Future years’ revenue will increase as the money in the fund is released.
Under current law, if there is a refund due the taxpayer, then the refund reduces current year tax distributions
to the units. Under the bill, taxpayer refunds will come from the separate account before the remainder is
distributed to units.
State Agencies Affected: Department of Local Government Finance.
Local Agencies Affected: Local assessors; Civil taxing units and school corporations.
Information Sources: LSA’s property tax database.
Fiscal Analyst: Bob Sigalow, 317-232-9859.
SB 145 3