Assessment of Tangible Personal Property in Indiana

Indiana Administrative Code
Title 50. DEPARTMENT OF LOCAL GOVERNMENT FINANCE
Article 4.2. ASSESSMENT OF TANGIBLE PERSONAL PROPERTY
Rule 1. Administration; Procedure
50 IAC 4.2-1-1. Primary definitions (Repealed)

50 IAC 4.2-1-1.1. Primary definitions
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-1-11

Sec. 1.1. (a) The definitions in this section apply throughout this article.
(b) "Assessed value" or "valuation" means an amount equal to the true tax value of property rounded to the nearest ten dollars ($10).
(c) "Assessing official" means a:
(1) township assessor, if any;
(2) county assessor; or
(3) member of a county property tax assessment board of appeals.
(d) "Assessment date" means March 1.
(e) "Construction in process" means tangible personal property not placed in service. The term includes tangible personal property that has not been depreciated and is not yet eligible for federal income tax depreciation under the Internal Revenue Code. The term does not include inventory, special tools, leased property, or returnable containers.
(f) "Critical spare parts" means parts that are maintained for possible future replacement of parts in use in operating equipment. Critical spare parts are maintained on-site, sometimes for a considerable period of time, to avoid a disruption of production if replacement of a failed part cannot otherwise be made immediately.
(g) "Depreciable personal property" means all personal property that is used in a trade or business, used for the production of income, or held as an investment that should be or is subject to depreciation for federal income tax purposes, except to the extent that property is treated otherwise in this article.
(h) "Filing date" means the May 15 date on which every person owning, holding, possessing, or controlling tangible personal property with a tax situs within the state of Indiana as of March 1 of any year is required to file a personal property tax return unless an extension of time to file is obtained. If the filing date falls on a Saturday, a Sunday, a national legal holiday recognized by the federal government, or a statewide holiday, the next succeeding business day that is not a Saturday, Sunday, or federal or state holiday becomes the filing date.
(i) "Inventory" means:
(1) materials held for processing or for use in production;
(2) finished or partially finished goods of a manufacturer or processor;
(3) property held for sale in the ordinary course of trade or business; and
(4) items that qualify as inventory under 50 IAC 4.2-5-1 .
The term excludes items that are or should be subject to federal tax depreciation and that are or should be reported for Indiana property tax purposes at cost per 50 IAC 4.2-2-2 in Pool 1 ( 50 IAC 4.2-4-5 ) including rent to own assets; DVD, CD, and video games held for rent; and equipment held for rent that is fully expensed in its first year.
(j) "Nonsubstantial compliance" means a tax return that:
(1) omits five percent (5%) or more of the cost per books of the tangible personal property at the location in the taxing district for which a return is filed;
(2) omits leased property and other nonowned personal property assessable under 50 IAC 4.2-2-4(b) where such omitted property exceeds five percent (5%) of the total assessed value of all reported personal property; or
(3) is filed with the intent to evade personal property taxes or assessment.
(k) "Original personal property return" means a personal property tax return filed with the proper assessing official by May 15 or, if an extension is granted, the extended filing date.
(l) "Personal property":
(1) has the meaning set forth in IC 6-1.1-1-11 ; and
(2) also includes nonautomotive equipment attached to excise vehicles.
(m) "Personal property and real property guide" means a listing of items of machinery, equipment, or structures as to their assessability as real or personal property for Indiana assessment purposes. Generally, if the item is directly used for manufacturing or a process of manufacturing, it is to be considered as personal property. If the item is land or a building improvement, it is to be considered as real property.
(n) "Placed in service" means the asset is ready and available for a specific use whether in a trade or business, the production of income, or a tax exempt activity. An asset is assessed until it is retired from service. An asset is retired property from service when it is permanently withdrawn from use by:
(1) sale or exchange of the property;
(2) conversion to personal use;
(3) abandonment;
(4) transfer to a supply or scrap account; or
(5) property is destroyed.
(o) "Special tools" includes, but is not limited to, tools, dies, jigs, fixtures, gauges, molds, and patterns acquired or made for the production of products or product models which are of such specialized nature that their utility generally ceases with the modification or discontinuance of such products or product models. Those items of "special tools" being manufactured or built for sale or lease to another person must be valued as inventory pursuant to 50 IAC 4.2-5.
(p) "State board of tax commissioners" means the department of local government finance.
(q) "Tax rate" means a tax rate that is levied at a rate of tax per one hundred dollars ($100) of assessed valuation by each taxing district.
(r) "Tax payment date" means property taxes that are based on the amount of the March 1 assessment for a given year and are due in two (2) equal installments on May 10 and November 10 of the following year. If any due date falls on a Saturday, a Sunday, a national legal holiday recognized by the federal government, or a statewide holiday, the next succeeding business day that is not a Saturday, Sunday, or federal or state holiday becomes the due date.
(s) "Taxing district" means an area within a township having tax levies and rates different from the tax levies and rates in other areas within the same township.
(t) "True tax value" as used in this article means the resultant value of property determined in accordance with the rules issued by the department, exclusive of those portions of the rules related to determining assessed value.

50 IAC 4.2-1-2. Powers and duties of the department of local government finance
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1

Sec. 2. The department of local government finance (hereafter department) is responsible under Indiana law for promulgating rules, appraisal manuals, bulletins, directives, returns, and forms to govern the assessment of personal property subject to the ad valorem (tax on value) property tax. Duly appointed personnel of the department have the responsibility for holding hearings and recommending changes in the assessment of the taxpayer's property. The department may reconsider the evidence submitted at the original hearing or consider additional information submitted subsequent to the original hearing. The department has the administrative authority to determine the final assessment of personal property.

50 IAC 4.2-1-3. All property taxable
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-1; Article 10, Section 1 of the Constitution of the State of Indiana

Sec. 3. Unless specifically exempted by law, generally, all property shall be taxed as personal property, real property, public utility, commercial vessel, mobile home, motor vehicle excise, aircraft excise, intangible, or subject to the bank tax act.

50 IAC 4.2-1-4. Amendments to rules
Authority: IC 6-1.1-31-1
Affected: IC 4-22-2

Sec. 4. This article may be amended in whole or in part at the discretion of the department. The procedure for the amendment is specified in IC 4-22-2 and IC 6-1.1-32-8[IC 6-1.1-32 was repealed by P.L. 41-1993, SECTION 53, effective July 1, 1993.], which provide as follows:
(1) A notice shall be published in a newspaper of general circulation printed and published in Marion County, Indiana, in the Indiana Register at least twenty-one (21) days prior to the date set for a hearing which states the time and place of said hearing and will indicate the subject matter of the rules or amendments. In addition to the notice as prescribed above, copies of such proposals shall be forwarded to the members of the advisory council, all duly elected members of the Indiana General Assembly, and to all county and township assessors not serving as members on the advisory council, together with any supporting data or statistical matter, at least twenty-one (21) calendar days prior to the public hearing required by law to be held on the same. Members of the advisory council shall, before or at the public hearing, make their views known in writing to the department, with respect to such proposals. All commentary, opinions, judgments, and similar statements made by members of the advisory council shall be public records and shall be maintained as such by the department.
(2) Five (5) copies of the proposed amendment shall be on file in the office of the department in Indianapolis and two (2) copies shall be delivered to the legislative council, after the notice pursuant to subdivision (1) is given, for any interested party to review.
(3) A hearing will be held on the date indicated in the notice to provide any interested party or attorney for any interested party an opportunity to present facts, arguments, views, or written data relevant to the proposed amendments.
(4) Six (6) copies of the rule or rules or amendment or amendments will be submitted to the attorney general for approval as to legality and, when so approved, to the governor for approval.
(5) The original and one (1) copy of the approved amendments must be filed with the secretary of state and one (1) duplicate approved copy must be filed with the legislative council. The rule or amendment shall be effective thirty (30) days from the date and time filed with the secretary of state.

50 IAC 4.2-1-5. Instructional bulletins
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-35-1

Sec. 5. (a) The department may issue instructional bulletins. The instructional bulletins, designated I-09-1, I-09-2, etc., are used to instruct taxing officials of their duties and provide administrative forms to be used by taxpayers, local and county officials as required by the various rules of the department. These instructional bulletins are effective for the year designated and will remain in effect for subsequent tax years unless specifically rescinded or revised by subsequent directives or instructional bulletins.
(b) Copies of instructional bulletins issued pursuant to this article may be obtained for a fee of twenty-five cents ($.25) per page plus mailing costs by contacting:
Department of Local Government Finance
Assessment Division
100 North Senate, Room N1058
Indianapolis, IN 46204

50 IAC 4.2-1-6. Administrative adjudications by the department; effect
Authority: IC 6-1.1-31-1
Affected: IC 4-21.5

Sec. 6. (a) The department may, at its discretion, issue an administrative adjudication determination on the ad valorem tax consequences of a taxpayer's proposed transaction or unusual circumstances prior to the filing date of May 15 for the assessment year in question. If the taxpayer has received an extension for filing from the assessor, the date shown in the assessor's letter of extension will be the date used in this section. This administrative adjudication determination will be effective only for the tax year designated in the determination.
(b) The taxpayer should make a written request not later than March 31 of the assessment year in question stating all the facts and circumstances that affect the transaction on which a determination is requested.
(c) The administrative adjudication determination as issued by the department will be in writing and executed by the department.
(d) Reliance. The taxpayer may rely upon the administrative adjudication determination for the tax year designated. The administrative adjudication determination as granted is conditioned upon the following:
(1) That the facts and circumstances as submitted by the taxpayer are representative of the facts and circumstances that actually exist.
(2) That all of the facts and circumstances related to the transaction have been disclosed to the department.

50 IAC 4.2-1-7. Practice before state board (Repealed)

Article 4.2. ASSESSMENT OF TANGIBLE PERSONAL PROPERTY
Rule 2. Filing Requirements
50 IAC 4.2-2-1. Place of filing; assessment
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1

Sec. 1. (a) A personal property tax return must be filed in each taxing district where property has a tax situs subject to the qualifications contained in this article. A return may cover all business locations in a single taxing district. However, if the property is located in two (2) or more taxing districts within the same township, a separate return must be filed reporting the property in each of the taxing districts.
(b) Personal property that is owned by a person who is a resident of this state shall be assessed at the place where the owner is a resident except where personal property has a tax situs on the assessment date at another location in the state and the property is regularly used or permanently located, in which instance the assessment shall be made in such location.
(c) Personal property that is owned by a person who is a nonresident of this state shall be assessed at the place where the owner's principal office within this state is located, except where personal property has a tax situs on the assessment date at another location within the state where it is regularly used or permanently located. In such an instance, the return or returns should be filed in the taxing district where the property is permanently located or regularly used. When the owner does not have a principal office in the state, the property will be assessed where located on the assessment date.
(d) To the extent that residence determines the place of assessment of personal property held by a fiduciary in their fiduciary capacity, the residence of the fiduciary shall govern, except that in the assessment of personal property of an estate of a deceased person, the actual residence in this state of the deceased person immediately before death shall be applicable until such property has been distributed.
(e) Questions regarding proper place of assessment. If a controversy arises concerning the appropriate taxing district for assessing personal property, the determination made as follows shall be summary and final:
(1) The county assessor shall determine the correct taxing district for assessment purposes if a question arises as to the appropriate taxing district within the county.
(2) The department shall determine the proper county for assessment if the question arises as to which county within the state is the proper tax situs.

50 IAC 4.2-2-2. Who must file
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-2-4 ; IC 6-1.1-3-7

Sec. 2. Every person, including any firm, company, partnership, association, corporation, fiduciary, or individual owning, holding, possessing, or controlling personal property with a tax situs within the state on March 1 of any year is required to file a personal property tax return on or before May 15 of that year unless an extension of time to file a return is obtained pursuant to section 3 of this rule(50 IAC 4.2-2-3). The obligation to file a return is not diminished or affected by the failure of an assessor to deliver or mail forms to a taxpayer. It is the responsibility of the taxpayer to obtain forms from the assessor and file a timely return in compliance with this article (50 IAC 4.2).

50 IAC 4.2-2-3. Extension of time to file returns
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3-7

Sec. 3. (a) The township assessor, if any, or the county assessor may grant an extension of not more than thirty (30) days (to June 14) provided an extension is requested in writing prior to May 15 of the current year. The application must clearly state the reason for the request.
(b) The request must be made to the assessor with whom the return should be filed. The assessor may, at their discretion, approve or disapprove the request in writing. The approved request or a copy must be attached to each taxpayer's return required to be filed.

50 IAC 4.2-2-3.1. Single return
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3-7 ; IC 6-1.1-37-7

Sec. 3.1. (a) If:
(1) a taxpayer has personal property subject to assessment in more than one (1) township in a county; and
(2) the total assessed value of the personal property in the county is less than one million five hundred thousand dollars ($1,500,000);

the taxpayer filing a return shall file a single return with the county assessor and attach a schedule listing, by township, all the taxpayer's personal property and the property's assessed value. The taxpayer shall provide the county assessor with the information necessary for the county assessor to allocate the assessed value of the taxpayer's personal property among the townships listed on the return, including the street address, the township, and the location of the property.
(b) The county assessor shall provide to each affected township assessor, if any, in the county all information filed by a taxpayer under subsection (a) that affects the township.
(c) The county assessor may refuse to accept a personal property tax return that does not comply with subsection (a). For purposes of IC 6-1.1-37-7 , a return to which subsection (a) applies is deemed filed on the date it is filed with the county assessor with the schedule required by subsection (a) attached.

50 IAC 4.2-2-4. Liability
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3-7

Sec. 4. (a) The owner of any personal property on the assessment date of a year is liable for the taxes imposed for that year on the property. The owner of any personal property is generally the holder of legal title except when:
(1) title passes on March 1 of any year, only the person last obtaining title on said date shall be deemed to have title on March 1; and
(2) personal property is security for a debt and the debtor is in possession of such property, such debtor shall be deemed to be the owner.
(b) Possessory interests. A person holding, possessing, or controlling any personal property on the assessment date of a year is liable for the taxes imposed for that year on the property unless they establish that the property is being assessed and taxed in the name of owner, or the owner is liable for the taxes under a contract with that person and that person files a correct Form 103-N (section 9 of this rule) supplemental information return on or before the due date (May 15 with extension). When a person other than the owner pays any property taxes as required by this section, that person may recover the amount paid from the owner unless the parties have agreed to other terms in a contract.
(c) The assessor shall assess the taxable property in the name of the owner of the property to the extent the owner has been identified. A person holding, possessing, controlling, or occupying any personal property on the assessment date of the year is liable for the taxes imposed for that year on the property unless they establish that the property is being assessed and taxed in the name of the owner or the owner is liable for the taxes under contract with that person and that person files a correct Form 103-N (section 9 of this rule) supplemental information return on or before the due date (May 15 with extension).

50 IAC 4.2-2-5. Full disclosure
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3-7

Sec. 5. (a) The taxpayer shall, in completing the return, make a full and complete disclosure of such information as may be required by the department, relating to the value, nature, and location of all the personal property of which the taxpayer was the owner or which the taxpayer held, possessed, or controlled, in any capacity whatsoever, on the assessment date of the current year.
(b) The owner of any personal property subject to assessment and taxation on the assessment date has the responsibility for reporting such property for assessment and taxation on their personal property tax return on Form 102 or Form 103 (section 9 of this rule), in the taxing district where the property had a tax situs as of the assessment date. In addition to the above reporting requirement, the owner of property, under circumstances in which possession is transferred to another person, but ownership is retained, shall be required to furnish in the taxing district where the property is located a complete listing on Form 103-O (section 9 of this rule), of such property showing the name and address of the person or persons in possession, model, description, location, quantities, date of installation, and value per this article reported for assessment and taxation in order to provide a means of verification and cross reference by the assessing official or officials that all property is being properly reported for assessment and taxation. (See special instructions in 50 IAC 4.2-8 for reporting leased personal property.)
(c) The person holding, possessing, or controlling any tangible property in any capacity, which personal property is subject to taxation under this rule, is required to file and attach with the return a complete listing on Form 103-N (section 9 of this rule), of all not owned property. The listing is to be filed in the taxing district where the property is located and must include the name and address of the owner, model, description, location, quantities on hand, date of installation, value (if known) per this article and any other information requested on the appropriate form. (See special instructions in 50 IAC 4.2-8 for reporting leased personal property.)
(d) A Form 103-N (section 9 of this rule), is required to be filed by the possessor even if the owner is liable for the taxes under a contract to assure that the assessing official has the necessary information to correctly assess the property in question.

50 IAC 4.2-2-5.1. Amended returns
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3-7 ; IC 6-1.1-3-7.5 ; IC 6-1.1-15-12

Sec. 5.1. (a) A taxpayer may file an amended personal property tax return after the later of the following:
(1) If no extension was granted under IC 6-1.1-3-7(b) , an amended return must be filed within six (6) months of the original due date of the return.
(2) If an extension was granted under IC 6-1.1-3-7(b) , an amended return must be filed within six (6) months of the extended filing date.
(b) A taxpayer who files a personal property tax return under IC 6-1.1-3 may file no more than one (1) amended return under IC 6-1.1-3-7.5 .
(c) A taxpayer may claim on an amended personal property tax return any adjustment or exemption that would have been allowable as if the adjustment or exemption had been claimed on the original personal property return.
(d) A taxpayer must file the amended return on the same form prescribed by the department for the filing of an original personal property return, indicating that it is amended in a conspicuous place on the front of the return. The amended personal property return must be completed and filed with the township assessor, if any, or county assessor in the same manner as is required for the original personal property return.
(e) Except as provided in this article, an amended return remains subject to the review and adjustment of assessing officials in the same manner as original personal property returns.
(f) The township assessor, if any, or the county assessor must report the assessed value resulting from an amended return to the county auditor on forms prescribed by the department.
(g) Within ten (10) days of receipt of an amended return submitted under subsection (e), the county auditor shall reflect the assessed value resulting from amended returns on the auditor's records of assessed valuation.
(h) A taxpayer that files a personal property tax return under IC 6-1.1-3 is not entitled to petition under this section for the correction of an error made by the taxpayer on the taxpayer's personal property tax return. If the taxpayer wishes to correct an error made by the taxpayer on the taxpayer's personal property tax return, the taxpayer must instead file an amended personal property tax return under IC 6-1.1-3-7.5 .

50 IAC 4.2-2-6. Additional filing requirements (Repealed)

50 IAC 4.2-2-7. Returns filed in duplicate
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3-7

Sec. 7. (a) When the assessed value of the personal property declared on all returns filed in a taxing district by a taxpayer is one hundred fifty thousand dollars ($150,000) or more, each return must be filed in duplicate. A legible, reproduced copy will satisfy this requirement.
(b) Whether or not a taxpayer has filed the return in duplicate, each township assessor, if one exists, must forward to the county assessor, on or before July 31 of each year, a copy of each personal property tax return filed by a taxpayer who has a total assessed valuation declared on all returns filed in a taxing district of one hundred fifty thousand dollars ($150,000) or more.
(c) Each year, on or before the time prescribed by the department, each township assessor of a county, if any, shall deliver to the county assessor a copy of each business personal property return that the taxpayer is required to file in duplicate and a copy of any supporting data supplied by the taxpayer with the return. Each year, the county assessor shall:
(1) review and may audit the business personal property returns that the taxpayer is required to file in duplicate; and
(2) determine the returns in which the assessment appears to be improper.

50 IAC 4.2-2-8. Short form returns
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3-7

Sec. 8. When the assessed value of personal property required to be reported in a township is less than one hundred fifty thousand dollars ($150,000), the taxpayer may elect to file Form 103-Short Form (section 9 of this rule) if:
(1) the business is not a manufacturer or processor;
(2) no exemptions or deductions are claimed that affect the business personal property assessment; and
(3) no special valuation adjustments, such as equipment not placed in service, special tooling, permanently retired equipment, interstate carrier mileage allocation, or abnormal obsolescence, are claimed in determining the value of the business personal property.

50 IAC 4.2-2-9. Authorized forms
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-31-1 ; IC 6-1.1-37-3

Sec. 9. (a) The department is required by statute to adopt tax return forms and schedules for personal property assessment purposes.
(b) The following are the authorized return forms provided for personal property assessment purposes pursuant to this article:
No.    Forms
102               Confidential Farmers Tangible Personal Property Return
103-SR         Single Confidential Business Tangible Personal Property Return
103-Short      Short Form Confidential Business Tangible Personal Property Return
103-Long    Long Form Confidential Business Tangible Personal Property Return
103-I    Confidential Return of Interstate Fleet of Commercial Carriers
103-N    Return of Not Owned Personal Property
103-O    Return of Owned Personal Property Not in Possession of Owner
103-P    Confidential Claim for Exemption of Air or Water Pollution Control Facilities
103-P5    Depreciable Assets in Pool 5
103-T    Confidential Return of Special Tools
104    Business Tangible Personal Property Return
104-SR    Single Business Tangible Personal Property Return
106    Confidential Schedule of Adjustments to Business Tangible Personal Property
(c) In lieu of using the actual return form prescribed in subsection (b), a taxpayer may use a computer or machine prepared substitute tax return form or schedule if that substitute:
(1) contains all of the information as set forth in the prescribed form;
(2) properly identifies the form or schedule being substituted; and
(3) is approved by the department pursuant to 50 IAC 4.2-1-6 prior to being used.
(d) The following are certain authorized administrative forms provided for personal property assessment purposes pursuant to this article:
No.    Forms
111/PP    Notice of Review of Current Year's Assessment for Personal Property by Assessing Official or County Property Tax Assessment Board of Appeals
113/PP    Notice of Assessment or Change in Assessment by Assessing Official
114/PP    Notice of Hearing on Petition - Personal Property (by County Property Tax Assessment Board of Appeals)
115/PP    Notice of Assessment of Personal Property by County Property Tax Assessment Board of Appeals
116    Notice of Hearing and Review of Assessment
117    Notice of Hearing on Petition
118    Notice of Final Assessment Determination
130    Petition to the County Property Tax Assessment Board of Appeals for Review of Assessment
134    Joint Report of Preliminary Informal Meeting on a Personal Property Appeal
MOD-1    Maritime Opportunity District Personal Property Tax Credit
EZ2    Enterprise Zone Investment Deduction Application
17-T    Petition for Refund of Taxes
103-ERA    Schedule of Deduction from Assessed Valuation for Personal Property in an ERA Area
CF-1/PP    Compliance with Statement of Benefits
SB-1/PP    Statement of Benefits for Personal Property
103-P5/ERA    Schedule of Deduction from Assessed Valuation for Pool 5 Property in an ERA Area
(e) Every person required to file a personal property tax return pursuant to section 2 of this rule must report all personal property on the form currently authorized as provided herein. The return form as provided in subsections (a) through (b) does not constitute a return unless it is signed under the penalties of perjury by a person authorized to file such return.

50 IAC 4.2-2-10. Penalties
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1

Sec. 10. (a) Any person who willfully makes and subscribes any return, statement, or other document which is verified under oath, which is certified as to the truth of the information contained therein, or which contains a written declaration that is made under the penalties of perjury and which he or she does not believe to be true and correct in every material respect shall be guilty of a crime and shall be subject to the same penalties as provided by law for perjury.
(b) If a person subject to IC 6-1.1-3-7(c) fails to include on a personal property return the information, if any, that the department requires under IC 6-1.1-3-9 or IC 6-1.1-5-13 , the county auditor shall add a penalty to the property tax installment next due for the return. The amount of the penalty is twenty-five dollars ($25). The purpose of this penalty is to require a full disclosure of the information related to the value, nature, or location of personal property on the personal property tax return for that year which is necessary for an assessing official to review the return. If this information is not provided, a thorough review of the return as required by law cannot take place.
(c) Failure to file a return or be granted an extension of time to file a return by May 15 as required by law will result in the imposition of a twenty-five dollar ($25) penalty. In addition, if the return is not filed within thirty (30) days after such return is due, a penalty equal to twenty percent (20%) of the tax determined to be due will be imposed with respect to the personal property which should have been reported on the return. No return shall be considered due within the meaning of this article until the expiration of a period of any extension of time which may have been granted pursuant to section 3 of this rule.
(d) If the total assessed value that a person reports on a personal property return is less than the total assessed value that the person is required by law to report and if the amount of the undervaluation exceeds five percent (5%) of the value that should have been reported on the return, then the county auditor shall add a penalty of twenty percent (20%) of the additional taxes finally determined to be due as a result of the undervaluation.
(e) Claims for deductions, exemptions, abnormal obsolescence, permanently retired equipment, and mathematical errors on the face of the return are excluded from the five percent (5%) undervaluation threshold of subsection (d).

50 IAC 4.2-2-11. Interest (Repealed)

Article 4.2. ASSESSMENT OF TANGIBLE PERSONAL PROPERTY
Rule 3.1. Review Process and Appeal Procedures
50 IAC 4.2-3.1-1. Assessor review
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-15; IC 6-1.1-36-12

Sec. 1. The township assessor, if any, or county assessor shall:
(1) examine and verify; or
(2) allow a contractor under IC 6-1.1-36-12 to examine and verify;
the accuracy of each personal property return filed with the township assessor, if any, or county assessor by a taxpayer. If appropriate, the assessor or contractor under IC 6-1.1-36-12 shall compare a return with the books of the taxpayer and with personal property owned, held, possessed, controlled, or occupied by the taxpayer.

50 IAC 4.2-3.1-2. Examination of property
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3-15 ; IC 6-1.1-15; IC 6-1.1-37-7

Sec. 2. (a) In connection with the activities required by section 1 of this rule, or if a person owning, holding, possessing, or controlling any personal property fails to file a personal property return with the township or county assessor as required by this chapter, the township or county assessor may examine:
(1) the personal property of the person;
(2) the books and records of the person; and
(3) under oath, the person or any other person whom the assessor believes has knowledge of the amount, identity, or value of the personal property reported or not reported by the person on a return.
(b) After such an examination, the assessor shall assess the personal property to the person owning, holding, possessing, or controlling that property.
(c) As an alternative to such an examination, the township or county assessor may estimate the value of the personal property of the taxpayer and shall assess the person owning, holding, possessing, or controlling the property in an amount based upon the estimate. Upon receiving a notification of estimated value from the township or county assessor, the taxpayer may elect to file a personal property return within thirty (30) days from first notice of assessment, subject to the penalties imposed by IC 6-1.1-37-7 .

50 IAC 4.2-3.1-3. Conversion of property
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3; IC 6-1.1-15

Sec. 3. If, from the evidence available, a township or county assessor determines that a person has temporarily converted any part of the person's personal property into property which is not taxable under this article to avoid the payment of taxes on the converted property, the township or county assessor shall assess the converted property to the taxpayer.

50 IAC 4.2-3.1-4. Delivery of personal property lists
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3; IC 6-1.1-15; IC 36-6-5-1

Sec. 4. (a) On or before June 1 of each year, each township assessor, if any, of a county shall deliver to the county assessor a list which states by taxing district the total of the personal property assessments as shown on the personal property returns filed with the township assessor on or before the filing date of that year, and in a county with a township assessor under IC 36-6-5-1 in every township the township assessor shall deliver the lists to the county auditor as prescribed in subsection (b).
(b) On or before July 1 of each year, each county assessor shall certify to the county auditor the assessment value of the personal property in every taxing district.
(c) The department of local government finance shall prescribe the forms required by this section.

50 IAC 4.2-3.1-5. Change of assessed value; notice
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3; IC 6-1.1-15

Sec. 5. A township assessor, if any, or county assessor must make a change in the assessed value and give notice of the change on or before the latter of:
(1) September 15 of the year for which the assessment is made; or
(2) four (4) months from the date the personal property return is filed;
if the return is filed after May 15 of the year for which the assessment is made provided the return has been filed in substantial compliance with this article. If the taxpayer has failed to file a return, a notice of assessment must be given within the ten (10) year period after the date on which the return should have been filed. If a fraudulent return has been filed, the assessor has no limitation of time within which to act. If the taxpayer fails to file a personal property return that substantially complies with the provisions of IC 6-1.1 and the rules of the department, the assessment may be changed if notice is given within three (3) years after the date the return is filed.

50 IAC 4.2-3.1-6. Examination of property
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3-7.5 ; IC 6-1.1-15

Sec. 6. Upon receiving a notification of estimated value from the township assessor, if any, or the county assessor, the taxpayer may elect to file a personal property return within thirty (30) days from the date of the written notice of assessment by the assessor subject to the penalties imposed under 50 IAC 4.2-2-8. This return cannot be amended by the taxpayer under IC 6-1.1-3-7.5 . The notice shall instruct the taxpayer on the procedures necessary to obtain a review before the county property tax assessment board of appeals.

50 IAC 4.2-3.1-7. Direct review of assessment by county property tax assessment board of appeals
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-13-1 ; IC 6-1.1-13-3 ; IC 6-1.1-15

Sec. 7. (a) The county property tax assessment board of appeals may review, at its own discretion, any assessment of any taxpayer within the county as described in IC 6-1.1-13-3 .
(b) The county property tax assessment board of appeals may contract with a private vendor to assist in the review.
(c) The county property tax assessment board of appeals shall give the proper notice as described in IC 6-1.1-13-1 .
(d) After the property tax assessment board of appeals has completed the review of the taxpayer's assessment, it shall notify the taxpayer by mail of the assessment on Form 115.
(e) When conducting a review of a taxpayer's personal property tax return, a county property tax assessment board of appeals must make a change in the assessed value, including the final determination by the board of an assessment changed by a township assessor, if any, or the county assessor, and give the notice of the change on or before the latter of:
(1) October 30 of the year for which the assessment is made; or
(2) five (5) months from the date the personal property return is filed;
if the return is filed after May 15 of the year for which the assessment is made provided the return has been filed in substantial compliance with this article. If the taxpayer fails to file a return, a notice of assessment must be given within the ten (10) year period after the date on which the return should have been filed. If a fraudulent return has been filed, there is no limitation of time within which it may act. If the taxpayer fails to file a personal property return that substantially complies with the provisions of this article, the assessment may be increased if notice is given within three (3) years after the date the return is filed. These time limitations apply to the review function of the property tax assessment board of appeals, but not the appeal function under IC 6-1.1-15.

50 IAC 4.2-3.1-8. Direct review by the department of local government finance
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-14-10

Sec. 8. (a) The department, on its own initiative, may conduct an audit to review a taxpayer's personal property assessment under IC 6-1.1-14-10 .
(b) A notice of audit of assessment on Form 116 will be mailed to the taxpayer advising the taxpayer at least ten (10) days in advance of the date, time, and place of the scheduled audit.
(c) The taxpayer is required to make available to the auditor of the department sufficient books, records, federal and state income tax returns, and related data to determine the assessment of the property in question. If the books, records, tax returns, and related data are not made available, a subpoena or a subpoena duces tecum will be issued to obtain this information unless in the judgment of the department other action would be more appropriate.
(d) Upon the completion of the audit, the auditor from the department shall make his findings and proposed assessed valuation known to the taxpayer.
(e) Upon the completion of the audit, the auditor from the department shall make a report to the department that includes recommendations and proposed assessed valuation.

50 IAC 4.2-3.1-9. Final determination of the department of local government finance
Authority: IC 6-1.1-31-1
Affected: IC 4-21.5; IC 6-1.1

Sec. 9. (a) The report required by section 8(e) of this rule, proposed assessment, and related information shall be considered by the department in determining the assessment of the taxpayer.
(b) If the taxpayer does not agree with the assessment recommended by the auditor, the taxpayer may petition the department to consider additional information, provided that the petition is made before the determination of the final assessment.
(c) If the taxpayer wants a hearing, the taxpayer must submit a letter requesting an administrative hearing to the department. Accompanying the letter should be a written brief or statement, along with any evidence, supporting the taxpayer's request for a hearing. The brief or statement should include a concise statement of the question in dispute and a summary of laws, regulations, and facts in support of such question.
(d) The department may hold an administrative hearing or appoint personnel to hold an administrative hearing at its discretion provided that the taxpayer has properly requested a hearing and the department determines that the taxpayer's facts and circumstances warrant an administrative hearing. The discussion at the hearing will be limited to the issues presented in the request for hearing unless, at the discretion of the department, it determines other issues should be discussed.
(e) If a hearing is held by the department, the department shall issue written findings of fact and conclusions of law related the administrative hearing.
(f) A written notice, Form 118, of the final assessment will be given to the taxpayer, township assessor (if one exists), county assessor, and county auditor when an audit was conducted by department on its own initiative.
(g) Any change in assessment by the department must be made and the notice of the assessment sent not later than October 1 of the year following the year of the assessment. If an extension of time to file was granted, the department has sixteen (16) months from the date the personal property tax return was filed to change the assessment. This general statute of limitations does not apply in the following circumstances:
(1) There is a three (3) year limitation on the ability to change an assessment when a taxpayer has not filed a property tax return in substantial compliance with the provisions of this article.
(2) A ten (10) year limitation on the ability to change an assessment when a taxpayer is required to file a tax return as provided by law under this article and fails to file a return.
(3) An unlimited statute of limitations applies to the ability to change an assessment when the taxpayer files a fraudulent personal property return or files a return with the intent to evade the payment of property taxes.

50 IAC 4.2-3.1-10. Appeal of assessments
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-15-1 ; IC 6-1.1-15-5

Sec. 10. If the taxpayer does not agree with the assessment made by an assessing official, an appeal may be made as follows:
(1) The taxpayer may appeal an assessment made by a township assessor, if any, or a county assessor to the county property tax assessment board of appeals by filing an appeal with the county assessor in the county where the property was assessed pursuant to IC 6-1.1-15-1(b) .
(2) A taxpayer or county assessor who disagrees with the assessment determined by the county property tax assessment board of appeals may petition for review of that determination.
(3) Appeal to the Indiana tax court under IC 6-1.1-15-5 .

Article 4.2. ASSESSMENT OF TANGIBLE PERSONAL PROPERTY
Rule 4. Valuation of Depreciable Tangible Personal Property
50 IAC 4.2-4-1. "Depreciable personal property" defined
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-1-11

Sec. 1. In general, "depreciable personal property", as used in this article, is all tangible personal property that is used in a trade or business, used for the production of income, or held as an investment that should be or is subject to depreciation for federal income tax purposes, except to the extent that property is treated otherwise in this article. In general, except as otherwise provided in this article, personal property will be deemed to become depreciable property when a depreciation deduction is allowable for federal income tax purposes.

50 IAC 4.2-4-2. Book cost determinative
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3

Sec. 2. (a) The cost of depreciable property, both real and personal, as recorded on the taxpayer's books and records, must be utilized in determining the value of the depreciable personal property subject to assessment.
(b) The cost of all depreciable property of a taxpayer shall be the total amount reflected on the books and records of the taxpayer as of the assessment date except as provided in section 3 of this rule. Per the provisions of this article and the Internal Revenue Code, the cost of depreciable personal property must include, but not be limited to, direct costs and an appropriate portion of indirect costs attributable to its production or acquisition and preparation for use. The cost of machinery, furniture, tools, computers (excluding application software), and other plant assets includes all costs necessary to place the asset in condition and in place, ready for use. These costs include, but are not limited to, the purchase price, transportation costs to the place of use, and installation costs, foundations and electrical wiring, interest incurred during construction and installation, and sales tax. If the asset is constructed by the company, the original cost must be made up of, but not limited to, the following costs:
(1) Direct and indirect labor costs and fringe benefits.
(2) Direct material costs.
(3) Designing.
(4) Supervision.
(5) Insurance.
(6) Depreciation of equipment used in construction.
(7) Claims for damage during construction not compensated for by insurance.
(8) Taxes and insurance during construction.
(9) Interest incurred during construction.
(10) Sales taxes.
(11) Other costs directly chargeable to construction.
No profit should be added to the actual costs since the company cannot make a profit on itself. Any credits in the form of sales of scrap materials, discounts received on purchases of materials, and return premiums on surrender of insurance policies should be subtracted from the gross costs of construction to determine the actual cost of the asset.
(c) The cost of additions and betterments must be added to the original cost of the asset. If an additional part is added or some other change is made in the fixed asset which increases its estimated useful life, its production, or efficiency, or changes it to a different use, such an expenditure is a betterment and should be capitalized by adding it to the original cost of the asset. If a part is replaced with a similar part, the new part would be shown as a new acquisition while the part replaced would be removed from the original cost of the asset when acquired. The cost of additions, betterments, or replacements would be reported as an addition, betterment, or replacement in the year the actual expenditure occurred.
(d) In the event a taxpayer cannot determine from its books and records the cost of the depreciable property on the assessment date, they must use:
(1) the cost per books as of the close of its annual financial period immediately prior to the assessment date and so indicate on their return;
(2) the book cost as of the close of its last financial period will then be adjusted to reflect all acquisitions and disposals of depreciable property which have occurred between such date and the assessment date;
(3) this adjustment should be taken as provided in section 4 of this rule; and
(4) installation costs and foundations applicable to machinery and equipment shall be reported and assessed on the same basis as the asset to which they apply.
(e) A taxpayer must be able to reconcile the cost of the depreciable personal property reported on the tax returns required to be filed with the cost of all depreciable property as recorded on the taxpayer's books and records on the assessment date. A personal property and real property guide is included in section 10 of this rule to assist in the reconciliation.
(f) Taxpayers with locations in more than one (1) taxing district in this state may fulfill the requirements of this section by making one (1) computation as required in subsection (e) for the entire state, provided that the cost of the depreciable personal property for each taxing district where the taxpayer has property on the assessment date is identified in such computation.

50 IAC 4.2-4-3. Fully depreciated, retired, or nominally valued property; computer equipment; report and valuation
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-1-11

Sec. 3. (a) Depreciable personal property that has not been retired from use must be reported for personal property assessment purposes whether or not the cost of the property has been:
(1) removed from;
(2) recorded on; or
(3) recorded at a nominal value on; the taxpayer's books and records.
(b) Any fully depreciated personal property that:
(1) has been written off the taxpayer's books and records; and
(2) is:
(A) on hand at the tax situs; and
(B) not permanently retired; on the assessment date;
must be reported in the return. The cost of the property must be clearly shown as an adjustment in the space provided on the tax return as provided in section 4 of this rule.
(c) "Permanently retired depreciable personal property" means depreciable personal property that has been removed from the manufacturing process on the assessment date, or has been removed from services other than manufacturing on the assessment date, and is awaiting disposition and must be scheduled to be scrapped, removed, or disposed of and will be considered to be permanently retired providing the taxpayer actually scraps or sells such property.
(1) Depreciable personal property that is:
(A) on hand at the tax situs on the assessment date, included in the cost per books as reported by the taxpayer in its return; and
(B) permanently retired on the assessment date as herein defined; is subject to an adjustment as herein provided if the taxpayer so elects.
(2) The cost per books of permanently retired depreciable property can be taken as an adjustment from book cost of depreciable property on the return provided the cost of the property is included in the cost per books actually reported on the return.
(3) In order to qualify for this adjustment, a taxpayer will need to substantiate that the property was:
(A) permanently retired; and
(B) not in use.
(d) Permanently retired depreciable personal property should be valued at its net scrap or net sale value. The valuation of this property:
(1) should be shown separately on the tax return; and
(2) will not be subject to the thirty percent (30%) limitation of original cost.
(e) Depreciable personal property recorded on the books and records at a nominal or no value must be recorded at its actual acquisition cost determined by reference to the insurable value in the year of acquisition for Indiana property tax assessment purposes. This category of property includes, but is not limited to, bulk purchase or the acquisition of a going business concern.
(f) Valuation of computer equipment. Computers are made up of the following three (3) elements:
(1) Hardware.
(2) Operational software.
(3) Application software.
Computers (including hardware and operational software) must be reported at the actual acquisition cost regardless of how this property may be valued on the taxpayers books and records.
(g) Computers are made up of the following elements:
(1) Hardware, composed of:
(A) mechanical;
(B) magnetic;
(C) electrical; and
(D) electronic;
devices and other components that constitute the physical computer assembly.
(2) Operational software. The operational program:
(A) controls the hardware;
(B) actually makes the machine operational;
(C) is fundamental and necessary to the functioning of the computer hardware itself;
(D) performs such functions as loading, scheduling, supervision, and data management;
(E) represents the internalized instruction codes that translate information into a form usable by the equipment;
(F) controls the basic operations of the central processing unit to perform arithmetic or logical operations, or both, automatically by means of programmed instructions; and
(G) is not normally accessible or modifiable by the user.
(3) Application software. The application program is a written sequence of instructions that details the operations the equipment is to perform in order to achieve a specific objective of the user.
(h) If the value recorded on the books and records reflects charges for customer support services such as educational services, maintenance, or application software that relate to future periods and not to the value of the tangible personal property, the charges may be deducted as nonassessable intangible personal property (to the extent that a separate charge or value can be identified).
(i) The true tax value at the time of acquisition of computer application software may be identified using the following:
(1) An independent, professional appraisal:
(A) must be made in conformance with generally accepted standards for appraisal practice;
(B) shall not be based on a contingent fee arrangement;
(C) shall include consideration of the cost, market, and income approaches; and
(D) shall distinguish the boundary in the equipment between exempt intangible application software and nonexempt tangible operational software.
The appraiser must have demonstrated competence in the valuation of software.
(2) In lieu of an independent professional appraisal, the taxpayer can evaluate existing assets already listed on its books and records and adjust them accordingly to reflect the software content using the valuation methods described in subdivision (1)(C).
(j) The allocation of interest incurred during construction and installation must be made (capitalized) for personal property tax purposes regardless of the fact that Section 263 of the Internal Revenue Code is not applicable in certain cases.

50 IAC 4.2-4-4. Adjustments to cost
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3

Sec. 4. (a) The adjusted costs of the assessable depreciable personal property as computed in subsection (d) must be reported at the tax basis of such property as defined in the Internal Revenue Code unadjusted by Sections 167 (depreciation) and 179 (expense deduction) of that Code or any credits (such as investment tax credit) that diminished the cost basis of the property. Therefore, if the tax basis of the taxpayer's assessable depreciable personal property is different than the cost per books of such property, except for the depreciable personal property defined and required to be reported by section 3 of this rule, an adjustment must be made to the cost per books of the assessable depreciable personal property reported on the Indiana property tax return.
(b) The adjustment from book to tax basis must be computed on Form 106 ( 50 IAC 4.2-2-9 ) and shown in the taxpayer's return on line 2 of Form 103 - Long Form ( 50 IAC 4.2-2-9 ), Schedule A.
(c) The adjustment is required to be made regardless of whether it is an increase or decrease of the cost per books.
(d) The adjusted cost of depreciable personal property is the resultant amount obtained by adjusting the cost per books, as defined in section 2 of this rule (cost per books), 50 IAC 4.2-11.1-3 (air pollution control system), and 50 IAC 4.2-11.1-4 (industrial waste control facility).

50 IAC 4.2-4-5. Pools of property; determination of costs by acquisition year
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3

Sec. 5. (a) The adjusted cost of depreciable personal property as computed in section 4 of this rule is required to be segregated for Indiana property tax purposes into four (4) separate pools. The depreciable life utilized for federal income tax purposes determines the pool to be utilized for Indiana property tax purposes. The pools to be utilized for Indiana property tax purposes are as follows:
(1) Pool No. 1: All assets that have a life of one (1) through four (4) years for federal income tax purposes.
(2) Pool No. 2: All assets that have a life of five (5) through eight (8) years for federal income tax purposes.
(3) Pool No. 3: All assets that have a life of nine (9) through twelve (12) years for federal income tax purposes.
(4) Pool No. 4: All assets that have a thirteen (13) years or longer life for federal income tax purposes.
(b) The useful life used to determine the proper classification of the pool in which an asset must be included is to be based upon the actual life utilized to compute depreciation on the federal income tax return of the taxpayer unless as follows:
(1) The department determines that such life is either unrealistic in relation to all of the taxpayer's facts and circumstances or when the life used on the federal tax return has been changed by the Internal Revenue Service on audit.
(2) The useful lives utilized by taxpayers for a particular category of assets are varied and the department, in order to obtain equalization in assessments, determines that a uniform life should be used by all such taxpayers in the state, the department may prescribe the useful life of such assets for all of these taxpayers in the state pursuant to 50 IAC 4.2-7-2 .

50 IAC 4.2-4-6. Determination of the year of acquisition
Authority: IC 6-1.1-31-1
Affected: IC 6-1.1-3

Sec. 6. (a) After the allocation of adjusted cost of depreciable tangible personal property, as provided in section 5 of this rule, it will be necessary to determine the cost by year of acquisition for each pool. The number of years that are required to be segregated by year of acquisition will depend upon the particular pool.
(b) Each pool is required to be segregated as follows:
(1) Pool No. 1 requires the cost to be determined by year of acquisition for the three (3) years immediately preceding the assessment date. The balance of the cost of the assets in this pool will be includable in the fourth category.
(2) Pool No. 2 requires the cost by year of acquisition be determined for the six (6) years preceding the assessment date. The balance of the cost would be includable in the seventh category.
(3) Pool No. 3 requires that cost by year of acquisition be determined for the ten (10) years preceding the assessment date. The balance of such account would be includable in the eleventh category.
(4) Pool No. 4 requires that the cost by year of acquisition be determined for the twelve (12) years preceding the assessment date with the balance of the cost of such pool includable in the thirteenth category.
(c) The year of acquisition for Indiana property tax purposes is a fiscal year March 2 to March 1 unless the taxpayer elects to use the same year as that utilized for federal tax purposes.
(1) If a taxpayer has a financial year that ends on December 31 or January 31, the taxpayer may elect to use the same year as that used for federal income tax purposes to determine the year of acquisition of assets for Indiana property tax reporting purposes. Otherwise, a taxpayer is not eligible to elect to use a federal year to compute year of acquisition for Indiana personal property tax purposes and must use a fiscal year of March 2 to March 1.
(2) If a federal tax year election is made, the acquisition made after the close of the taxpayer's federal taxable year to the assessment date must be included in a separate category on the return and clearly designated.
(d) For Indiana property tax purposes it will be presumed that the disposal of depreciable personal property occurs on a first-in, first-out basis unless the taxpayer establishes that such was not the case. Therefore, absent evidence to the contrary, all disposals will be deemed to occur from the remaining category in each pool.

50 IAC 4.2-4-7. True tax value determination; exception
CurrentnessAuthority: IC 6-1.1-31-1Affected: IC 6-1.1-31Note: P.L. 245-2003, Section 2 reinstated 50 IAC 4.2, as in effect January 1, 2001. Effective July 1, 2003.Sec. 7. (a) The true tax value for Indiana property tax purposes