## Facts

- Indiana law used “true tax value” as the basis for real property assessments for ad valorem taxation, with implementation delegated to the State Board of Tax Commissioners through regulations.
- A town and a class of taxpayers challenged the constitutionality of the statewide real property assessment system under Article X, § 1 of the Indiana Constitution (uniform and equal assessment and taxation; just valuation).
- The Indiana Tax Court held that a statute stating “true tax value does not mean fair market value” violated the state constitution and that the State Board’s regulatory cost schedules relied on arbitrary figures and formulas unrelated to actual value.
- The State Board appealed, disputing both the constitutional rulings and the scope of the Tax Court’s systemic remedy.

## Issues

1. Whether a statutory definition providing that “true tax value does not mean fair market value” is unconstitutional under Article X, § 1 of the Indiana Constitution.
2. Whether the State Board’s real property assessment cost schedules are unconstitutional because they are arbitrary and insufficiently related to actual property value.
3. What remedial limits apply when a court finds a statewide property tax assessment scheme unconstitutional.

## Decision

- The Indiana Supreme Court largely affirmed in part and modified in part the Tax Court’s judgment.
- The Court held that the statutory statement that “true tax value does not mean fair market value” is not unconstitutional on its face; the legislature may choose valuation methods other than market value if they can produce uniform and equal taxation based on just valuation.
- The Court affirmed that the State Board’s cost schedules, as implemented, violated Article X, § 1 because they employed arbitrary figures and formulas with little or no reference to actual value, causing non-uniform and unjust assessments.
- The Court approved a remedy requiring the State Board to develop and implement a constitutionally compliant assessment system, while avoiding judicial specification of the replacement valuation methodology.

## Legal Principles

- Article X, § 1 requires both (a) uniform and equal assessment and taxation and (b) just valuation; these requirements must be read together to demand a rational, consistently applied valuation approach.
- The constitution does not mandate fair market value as the exclusive assessment standard; legislative flexibility is permitted if the chosen method maintains a rational relationship to real-world property values and yields comparability among similarly situated taxpayers.
- Assessment regulations are unconstitutional when the operative schedules or formulas are arbitrary or lack a rational connection to property value, producing systematic non-uniformity.
- In structural tax cases, courts may declare unconstitutional statutes or regulations and require corrective action, but should leave policy design choices and administrative implementation primarily to the political branches, subject to judicial enforcement of constitutional compliance.

## Conclusion

The court sustained Indiana’s ability to define “true tax value” without equating it to fair market value, but invalidated the State Board’s cost schedules as arbitrary and constitutionally deficient, directing the agency to implement a new assessment system that produces uniform and equal taxation grounded in just valuation.


State Bd. of Tax Comm’rs v. Town of St. John, 702 N.E.2d 1034 (Ind. 1998)