The Indiana Supreme Court has overturned a 2024 Tax Court ruling that could have further upended residential property tax collections across the state — beyond even the largely yet-to-be-felt impact of Senate Enrolled Act 1.
In a case originating in Lake County, the state's high court reinstated the statutory one-acre limit on homesteaded residential property eligible for a maximum annual property tax charge equal to or less than 1% of its assessed value.
Indiana Tax Court Judge Justin McAdam said last year nothing in the Indiana Constitution authorizes the Legislature to restrict the application of the state's 1% property tax cap to a single acre of residential property, and homeowners with lots larger than one acre may be entitled to have the 1% cap applied to their entire property depending on how the rest of their land is used.
However, Justice Christopher Goff, writing for a unanimous Supreme Court, opted to set aside the constitutional question because Goff determined the litigants, Dr. Tulsi and Kamini Sawlani, failed to show more than one acre of their nearly four-acre Crown Point property is used for residential purposes.
"There is no need to determine if Article 10, Section 1 permits a one-acre limit given that taxpayers presented insufficient evidence that they use their excess property as 'curtilage,'" Goff said.
Records show the Sawlanis' seven-bedroom home, located in a gated community, had a 2024 assessed homestead value of $1,512,200, capped at 1%, and an assessed value of $59,600, capped at 2%, for their three other acres comprised mostly of trees intended to hide the house from a nearby subdivision.
The Sawlanis claimed the additional land should be counted as part of their homestead because it ensures their privacy. But Goff observed their individual property is not fenced, the trees do not form a distinguishable boundary around their lot and the Sawlanis did not show they use their entire plot in a way that it should be treated the same for tax purposes as the house itself.
"Because taxpayers presented insufficient evidence that they use more than one acre as curtilage, even under (a prior legal precedent), taxpayers failed to meet their burden of proving the Homestead Statute's one-acre limit is unconstitutional as applied to them," Goff said.
Had the Supreme Court ruled the other way, the property taxes paid by owners of large residential properties would have gone down and that burden shifted onto Indiana homeowners with less than one acre of land whose property tax bills aren't already at the 1% cap.
It also could have reduced the financial resources available to local units of government, including public and charter schools, similar to the property tax law enacted in April by the Republican-controlled General Assembly and Republican Gov. Mike Braun that will in the years ahead slightly shrink homestead property tax bills and significantly cut business property taxes, with limited options for local governments to recoup their lost revenue.
Following the high court ruling, Democratic Lake County Assessor LaTonya Spearman praised her legal team for the "countless hours" they devoted to preserving the one-acre limit and urged state lawmakers to swiftly clarify the statute.
"This is not only a positive outcome for Lake County, but for the state of Indiana as a whole," Spearman said. "We remain committed to working with the Indiana County Assessors Association, Association of Indiana Counties and the Department of Local Government Finance to support legislation that reaffirms and supports the one-acre homestead provision."
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