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: Jan 21, 2022
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: (Revised) 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 estimates that it will need to hire an additional statistician to
complete this task. The total starting salary plus fringe benefits and indirect costs for a statistician is
estimated at $30,910 for one-half of FY 2023 and $62,116 for FY 2024. The DLGF is funded from the state
General Fund.
(Revised) 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. 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. 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.
However, the DLGF reports that they would have to do this work in-house, and it could require an additional
three field representatives if local assessors request that the DLGF assess all 610 large commercial
properties. The bill does not allow for non-contract assessing costs to be billed back to the counties. The total
starting salary plus fringe benefits and indirect costs for one field representative is estimated at $40,075 for
one-half of FY 2023 and $81,178 for FY 2024. If all three new field representatives are hired, the total
personnel cost could reach $120,224 for one-half of FY 2023 and $243,533 for FY 2024. The DLGF also
estimates travel expenses of up to $415 for each three day trip for a representative. If each field
representative traveled for three days most weeks, travel costs could be up to $20,000 each, per year.
Additionally, 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. If the DLGF were required to
defend all 610 assessments, the DLGF estimates that it would need to hire three additional attorneys. The
total salary plus fringe benefits and indirect costs for one attorney is estimated at $42,494 for one-half of FY
2023 and $86,210 for FY 2024. If all three new attorneys are hired, the total personnel cost could reach
$127,482 for one-half of FY 2023 and $258,630 for FY 2024.
The number of additional employees needed and the actual total additional cost for the DLGF is dependent
on the number of assessment requests received from local assessors.
Explanation of State Revenues:
Explanation of Local Expenditures: (Revised) State Assessment: If local assessors request that the DLGF
conduct assessments of any large retail properties under this bill and if the DLGF conducts these assessments
with DLGF staff instead of contracting the work out, then counties will save the expense of conducting these
assessments.
If the DLGF were to contract the work out, then the counties will reimburse the DLGF for the cost of the
assessments from the county reassessment fund. In this instance ,since the county would have otherwise
borne the cost of the assessment directly, any change in expenditures will depend on the difference in the
SB 145 2 cost if assessed locally versus the DLGF’s cost.
The actual change in county costs depends on the number of assessment requests made to the DLGF and on
how the DLGF conducts those assessments. Additionally, counties could save the expense of defending
assessments if the DLGF ultimately is tasked with that defense.
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
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