Indiana Tax Court Reverses Site’s Charitable Exemption Determination

An Indiana Tax Court recently reversed an Indiana Board of Tax Review’s final determination that concluded a low-income apartment complex owner failed to prove it qualified for a charitable purposes exemption. In 2007, the owner purchased a HUD site for low-income renters in the county. The owner didn’t receive tax credits when it bought the property but operated it as an LIHTC apartment complex.

The owner applied for and later received a charitable purposes exemption for the site for 2008, but the property was determined by the county’s Property Tax Assessment Board of Appeals as ineligible for the exemption during the 2012, 2014, and 2015 tax years. In the appeal, the owner argued that the site was used solely for charitable purposes during the years at issue. The county assessor contended that the evidence was inadmissible because the owner didn’t comply with the state’s disclosure requirements.

The state board ruled against the owner, concluding that it had failed to prove that its property was predominantly owned, occupied, and used for charitable purposes during the years at issue. Specifically, it determined that evidence regarding the management fees, rental rates, residents’ income levels, screening process, and provision of additional services to residents didn’t show that the property qualified for a charitable purposes exemption.

The Indiana Tax Court reversed the state board’s final decision. The judge noted that the state board’s determination regarding the management fees, rental rates, resident’s income levels, screening process, and provision of additional services was unsupported by substantial evidence. Among its findings, the tax court concluded that the rent tenants paid was below market and that its residents were indeed proper subjects of charity. Additionally, the Tax Court found that the evidence indisputably showed that the owner didn’t receive any federal tax credits, and that the owner voluntarily charged its tenants below market rates and kept evictions to a minimum.