ATTORNEY FOR PETITIONERS:                          ATTORNEYS FOR RESPONDENT:
DUSTIN D. HUDDLESTON                               MICHAEL H. MICHMERHUIZEN
HUDDLESTON & HUDDLESTON                            JOSHUA C. NEAL
Franklin, IN                                       BARRETT & McNAGNY, LLP
                                                   Fort Wayne, IN



                                IN THE
                          INDIANA TAX COURT

JOHNSON COUNTY PROPERTY TAX                    )
ASSESSMENT BOARD OF APPEALS and                )            Apr 01 2015, 12:16 pm
the JOHNSON COUNTY ASSESSOR,                   )
                                               )
      Petitioners,                             )
                                               )
           v.                                  )    Cause No. 49T10-1112-TA-92
                                               )
KC PROPCO LLC d/b/a                            )
KINDERCARE LEARNING CENTER,                    )
                                               )
      Respondent.                              )


                 ON APPEAL FROM A FINAL DETERMINATION OF
                     THE INDIANA BOARD OF TAX REVIEW

                                 FOR PUBLICATION
                                   April 1, 2015

WENTWORTH, J.

      In this case, the Court is asked to examine whether the Indiana Board of Tax

Review erred when it determined that the real property of KC Propco LLC d/b/a

KinderCare Learning Center (KC Propco) qualified for an educational purposes

exemption for the 2009 tax year. The Court finds that the Indiana Board did not err.
                           FACTS AND PROCEDURAL HISTORY

         KC Propco owns the Greenwood KinderCare facility located at 980 South State

Road 135, Greenwood, Indiana. The property consists of a 6,959 square foot building

and associated parking space situated on a 2.607 acre lot. (See Cert. Admin. R. at 12-

13.)

         In May of 2009, KC Propco filed an Application For Property Tax Exemption on

the subject property, claiming it was entitled to the educational purposes exemption set

forth in Indiana Code § 6-1.1-10-16 because it was owned, occupied, and used as an

early learning center for children. (See Cert. Admin. R. at 7-9.) The application also

sought to have the exemption extended to the personal property contained within the

building. (See Cert. Admin. R. at 7.)

         The Johnson County Property Tax Assessment Board of Appeals (PTABOA)

denied the exemption application on November 15, 2009. KC Propco appealed the

PTABOA’s ruling to the Indiana Board.

                 The Indiana Board Hearing: KC Propco’s Case In Chief

         During the Indiana Board’s July 7, 2011 hearing on the matter, KC Propco

presented, among other things, the testimony of David Benedict and Connie Mortensen,

employees of its parent company, the Knowledge Learning Corporation.1                       (See

generally Cert. Admin. R. at 136-40, 327-29.) They explained that:

            KinderCare Learning Centers, formed in 1969, is a Delaware
            corporation that operates early education facilities throughout the
            country;

            In 2003, KinderCare Learning Centers formed KC Propco as its real
            estate acquisition and development arm;

1
    Benedict’s testimony was presented via an affidavit. (See Cert. Admin. R. at 136-40, 433-34.)



                                                2
          In 2005, KC Propco acquired the subject property; KinderCare
          Learning Centers renovated the property in accordance with its
          specifications and has operated the facility as the Greenwood
          KinderCare since then;

          That same year (i.e., 2005), KinderCare Learning Centers was
          acquired by Knowledge Learning Corporation;

          Since 2005, KC Propco, KinderCare Learning Centers, and
          Knowledge Learning Corporation have all operated out of, and
          maintained the same corporate office in, Portland, Oregon.

(See, e.g., Cert. Admin. R. at 136, 330-31, 387-88, 396-401, 477-78, 489-91.) (See

also Cert. Admin. R. at 185-235.)    Mortensen testified that after 2005, KC Propco,

KinderCare Learning Centers, and Knowledge Learning Corporation considered

themselves to be “all the same.” (See Cert. Admin. R. at 329-30, 387, 439, 472, 491-

92.)

       KC Propco also provided evidence about how the subject property was used in

2009. For example, between 8:30 a.m. and 4:30 p.m. each Monday through Friday, the

Greenwood Kindercare administered both an accredited, age-appropriate curriculum for

children under the age of five, as well as a state-licensed full-day kindergarten. (See,

e.g., Cert. Admin. R. at 332-49, 358-67, 372, 395.) The teachers who administered

these programs had credentials ranging from high school diplomas with field experience

(i.e., previous employment at another early learning center or college-level early

childhood classwork) to post-college early education coursework. (See Cert. Admin. R.

at 141, 405-12.)

       Generally, the pre-kindergarten curriculum was designed to develop and refine

children’s cognitive, motor, language, and computer skills. (See, e.g., Cert. Admin. R.

at 101-02, 136-38, 360.) In addition, the curriculum was specifically tailored for each




                                           3
child in attendance to address his specialized needs and level of development. (See,

e.g., Cert. Admin. R. at 339, 342.) This basic pre-kindergarten curriculum was adjusted

for the kindergarten students to incorporate programs based in reading, math, science,

social studies, music, and physical fitness.    (See Cert. Admin. R. at 138.)      As a

supplement to its core curriculum, the Greenwood Kindercare also offered daily

enrichment courses in phonics, reading, math, music, and Spanish. (See Cert. Admin.

R. at 102, 138, 357-58, 368-70.) Mortensen explained that because most local public

school systems (for example, those located in Perry and Franklin Townships,

Indianapolis) offered educational programs for three, four, and five year olds, the

Greenwood Kindercare teaching staff would periodically meet with representatives from

those public schools to compare curricula and to ensure that its programs coincided

with theirs. (See Cert. Admin. R. at 139, 362-63, 380, 471.)

       The Greenwood Kindercare also offered a before and after school care program.

This program, offered from 6:00 a.m. to 8:30 a.m. and again from 4:30 p.m. to 6:00 p.m.

each weekday, existed primarily for the convenience of parents of school-aged children.

(See Cert. Admin. R. at 338, 395.) Nonetheless, educational goals and objectives were

still emphasized during these times.     For instance, the teaching staff assisted the

children in attendance with their homework and organized club-like activities for them in

the areas of math, science, and music. (See, e.g., Cert. Admin. R. at 102, 138, 466-67.)

During the summer months, the Greenwood Kindercare offered educational camps and

private tutoring sessions for school-aged children. (Cert. Admin. R. at 102, 138, 368-

70.)




                                           4
               The Indiana Board Hearing: The Assessor’s Rebuttal

      In response to KC Propco’s evidentiary presentation, the Assessor asserted that

because the subject property was owned by KC Propco, but occupied and used by

Kindercare Learning Centers, each of those entities had to demonstrate its own exempt

purpose before the subject property could be entitled to the exemption. (See, e.g., Cert.

Admin. R. at 326.) The Assessor argued that KC Propco’s limited liability agreement

demonstrated that it did not own the subject property for an educational purpose

because it merely stated that its purpose was “to acquire, own, develop, improve, and

hold” the subject property. (See Cert. Admin. R. at 189, 294, 476-479.) The Assessor

then argued that while there was an educational element to Kindercare Learning

Center’s use of the subject property, that element was incidental to the property’s

primary use as a childcare facility. (See, e.g., Cert. Admin. R. at 295-96, 325.) To

support this argument, the Assessor presented KinderCare Learning Centers’

Certificate of Incorporation which stated its purpose was “to be engaged in any lawful

act or activity.” (See Cert. Admin. R. at 285, 484-86.) The Assessor also pointed out

that the enrollment agreements used by KinderCare Learning Centers specifically used

the term “child care center.” (See Cert. Admin. R. at 89-94, 446-47.) The Assessor

reasoned that the subject property was primarily used “to provide a safe place for

parents to send their children when [they] are at work or the public schools are closed.”

(Cert. Admin. R. at 296.) Moreover, the Assessor theorized that if the subject property’s

primary use was educational, then KinderCare Learning Centers “would compete with

or offer similar educational opportunities as a public school during school hours.

[Instead, it has] concede[d] that children of school age can only attend the [p]roperty




                                           5
before and after public school hours.” (Cert. Admin. R. at 296.) (See also Cert. Admin.

R. at 443-45.)

                      The Indiana Board’s Final Determination

       On November 2, 2011, the Indiana Board issued a final determination granting

KC Propco’s exemption application. In its final determination, the Indiana Board stated

that while KC Propco owned the subject property and KinderCare Learning Centers

used it, each entity had its own exempt purpose. (See Cert. Admin. R. at 40-41 ¶¶ 38-

39.)   Indeed, the Indiana Board stated that both entities “are affiliated and share

common ownership by Knowledge Learning Corporation [and are therefore] integral

parts of one operation.” (Cert. Admin. R. at 40 ¶ 39.) Moreover, “KC Propco acquired

the subject property for the specific purpose of operating an early learning center and

the then existing improvements were specifically renovated, pursuant to plans approved

by KinderCare [Learning Centers], exclusively for the purpose of facilitating [its] early

learning programs.” (See Cert. Admin. R. at 41 ¶ 39.) The Indiana Board finally held

that the subject property’s use as an “early learning center” was educational because all

of the programs offered at the Greenwood KinderCare

         including programs for infants and children under the age of three,
         are a complement to and prepare children for enrollment in school by
         providing the foundational elements children need to thrive in more
         advanced programs.       In other words, [these] programs were
         designed to prepare pre-school children for school and other parts of
         the curriculum mirrored programs taught in several local, public
         schools.

(Cert. Admin. R. at 43 ¶ 45.) The Indiana Board declined to extend the exemption to

the personal property contained within the facility, however, because KC Propco

provided no information or evidence whatsoever regarding that personal property. (See

Cert. Admin. R. at 44 ¶ 49.)


                                           6
       On December 15, 2011, the Assessor and the PTABOA (collectively, the

Assessor) initiated this original tax appeal.        The Court heard oral argument on

November 16, 2012, in the Richardson Chapel at Franklin College in Franklin, Indiana.2

                                 STANDARD OF REVIEW

       As the party seeking to overturn the Indiana Board’s final determination, the

Assessor bears the burden of demonstrating its invalidity. See Osolo Twp. Assessor v.

Elkhart Maple Lane Assocs., 789 N.E.2d 109, 111 (Ind. Tax Ct. 2003). To do so, the

Assessor must demonstrate to the Court that the final determination is:

              (1) arbitrary, capricious, an abuse of discretion, or otherwise
                  not in accordance with law;

              (2) contrary to constitutional right, power, privilege, or
                  immunity;

              (3) in excess of statutory jurisdiction, authority, or limitations,
                  or short of statutory jurisdiction, authority, or limitations;

              (4) without observance of procedure required by law; or

              (5) unsupported by substantial or reliable evidence.

See IND. CODE § 33-26-6-6(e)(1)-(5) (2015).

                                             LAW

       In Indiana, all tangible property is subject to taxation. See IND. CODE § 6-1.1-2-1

(2015). Nevertheless, the Legislature has determined that all or part of a building is

exempt from property taxation if it is owned, occupied, and used for an educational

purpose. See IND. CODE § 6-1.1-10-16(a) (2009). This exemption also extends to the

land on which the building sits. I.C. § 6-1.1-10-16(c). When ownership, occupancy, and


2
  The Court wishes to thank the staff and students at Franklin College for their hospitality and
Professor Alli Fetter-Harrott for scheduling the argument.



                                               7
use of a property are not unified in one entity, each entity must demonstrate its own

exempt purpose. See Sangralea Boys Fund, Inc. v. State Bd. of Tax Comm’rs, 686

N.E.2d 954, 959 (Ind. Tax Ct. 1997) (stating that to qualify for an exemption, a property

must be owned for an exempt purpose, occupied for an exempt purpose, and used for

an exempt purpose; “[o]nce these three elements have been met, regardless of by

whom, the property can be exempt from taxation”), review denied.

      The purpose of the educational purposes exemption “is to encourage non-

governmental entities to provide educational services for ‘the public welfare.’” Dep’t of

Local Gov’t Fin. v. Roller Skating Rink Operators Ass’n, 853 N.E.2d 1262, 1265 (Ind.

2006) (citation omitted). See also State Bd. of Tax Comm’rs v. Ft. Wayne Sport Club,

Inc., 258 N.E.2d 874, 881 (Ind. Ct. App. 1970) (explaining that education in its broadest

sense “‘comprehends the acquisition of all knowledge tending to develop and train the

individual’” (citation omitted)). In order to qualify for the exemption, an applicant must

show that through the use of its property it provides a benefit to the public sufficient to

justify the loss in tax revenue. See Roller Skating Rink Operators Ass’n, 853 N.E.2d at

1265. An applicant can meet that burden by showing that it provides the public with

either the same educational training that would otherwise be furnished by our tax-

supported schools or that it provides educational courses that are related to those found

in tax-supported public schools but not necessarily provided by them. Id.

                                       ANALYSIS

                                            I.

      On appeal, the Assessor argues that the Indiana Board’s final determination is

not supported by the evidence for two reasons. First, it claims that there is no evidence




                                            8
in the administrative record that establishes who owns, occupies, and uses the subject

property.   (See Pet’rs’ Br. at 8-9.)    Second, it claims that the evidence in the

administrative record actually contradicts the Indiana Board’s finding that the subject

property was used for educational purposes. (See, e.g., Pet’rs’ Br. at 11-19.)

                                           A.

      The Assessor claims that there is no evidence in the administrative record that

establishes who owns, occupies, and uses the subject property. (See Pet’rs’ Br. at 8-9.)

Instead, it complains that KC Propco “only presented evidence of a confusing corporate

structure of multiple entities that did not clearly establish who owned, occupied and

used the property.” (Pet’rs’ Br. at 9.) In other words, the Assessor contends that the

Indiana Board erred in relying on the testimonial statements of Mortensen and Benedict

in making its finding that KC Propco owned the subject property and KinderCare

Learning Centers occupied and used it because those testimonial statements were “full




                                            9
of uncertainty and lacked substance.”3 (See, e.g., Pet’rs’ Reply Br. at 2-4 (footnote

added).) The Assessor’s argument fails for the following two interrelated reasons.

       First, it is well established that when this Court reviews a final determination of

the Indiana Board, it may neither reweigh the evidence presented nor judge the

credibility of the witnesses who testified at the Indiana Board’s hearing.                 See

Freudenberg-NOK Gen. P’ship v. State Bd. of Tax Comm’rs, 715 N.E.2d 1026, 1030

(Ind. Tax Ct. 1999), review denied. Thus, despite what the Assessor wants the Court to

think about the quality of both Mortensen’s and Benedict’s testimony, the Court is

limited as to what it can do when reviewing that evidence on appeal. See id. Indeed,

because the Indiana Board understood their testimony and determined it had probative

value, the Court will not overturn that determination absent an abuse of discretion. See

French Lick Twp. Tr. Assessor v. Kimball Int’l, Inc., 865 N.E.2d 732, 739 (Ind. Tax Ct.

2007). To demonstrate an abuse of discretion, the Assessor needed to show the Court


3
   For example, the Assessor asserts that Mortensen’s testimony was confusing because the
corporate relationships between KC Propco, KinderCare Learning Centers, and Knowledge
Learning Corporation were “complex.” (See, e.g., Pet’rs’ Br. at 9-10.) The Assessor also
asserts that Mortensen’s testimony was contradictory because: 1) while she testified that KC
Propco, KinderCare Learning Centers, and Knowledge Learning Corporation “were all the
same,” each entity actually had its own formation documents; and 2) while she stated that
KinderCare Learning Centers paid rent to KC Propco, one in theory would not pay itself rent.
(See Pet’rs’ Br. at 9; Cert. Admin. R. at 185-286, 329-30, 387-88, 465.) (But see Cert. Admin.
R. at 392-93 (providing that no money actually exchanged hands, rather the rent “payment” was
an internal accounting entry to assist in recognizing the profitability of the Greenwood
KinderCare).) Finally, the Assessor asserts that Mortensen’s testimony was unreliable because
she was an employee of Knowledge Learning Corporation “which is neither the owner or the
occupier . . . or the use[r]” of the subject property. (Oral Arg. Tr. at 8-9.) With respect to
Benedict’s affidavit, the Assessor argues that it is not entitled to any weight because while he
averred that he was familiar with the Greenwood KinderCare’s operations and facilities in
Marion County, Indiana, the property was actually located in Johnson County. (Compare Cert.
Admin. R. at 136 with Cert. Admin. R. at 2, 433-34 and Pet’rs’ Reply Br. at 4.) (But see Cert.
Admin. R. at 435 (where the Indiana Board rejected this argument because it was evident that
Benedict’s sworn testimony went to the universal corporate operation of KinderCare Learning
Centers and not just the Greenwood KinderCare).)



                                              10
that there was probative evidence in the administrative record that affirmatively

demonstrated that KC Propco did not own the subject property and that KinderCare

Learning Centers did not occupy and use it. The Assessor has made no such showing.

Rather, it has merely invited the Court to evaluate for itself the probative value of

Mortensen’s and Benedict’s testimony.

      Second, an Indiana Board final determination is supported by substantial

evidence “if a reasonable person could view the record in its entirety and find enough

relevant evidence to support [the decision].” Amax Inc. v. State Bd. of Tax Comm’rs,

552 N.E.2d 850, 852 (Ind. Tax Ct. 1990). Here, even looking beyond Mortensen’s

testimony and Benedict’s affidavit, the Court finds that there is enough other evidence in

the administrative record that would lead a reasonable mind to conclude that KC Propco

owned the subject property and that KinderCare Learning Centers occupied and used it.

(See, e.g., Cert. Admin. R. at 12 (indicating that the Assessor’s own property record

card listed KC Propco as the owner of the subject property), 304-524 (demonstrating

that during the Indiana Board hearing, it was never once disputed that the Greenwood

KinderCare was operated out of the subject property).) Thus, the Indiana Board’s final

determination will not be reversed on this basis.

                                            B.

      The Assessor also argues on appeal that the Indiana Board’s finding that the

subject property was used for educational purposes is not supported by evidence.

Indeed, it argues that the evidence in the administrative record actually supports an

“alternative conclusion.” (See, e.g., Pet’rs’ Reply Br. at 5.) For instance, the Assessor

again points to the fact that the corporate documents for both KC Propco and




                                            11
KinderCare Learning Centers do not explicitly state that their purposes are educational.

(See Pet’rs’ Br. at 11-12.) The Assessor also explains that KC Propco admitted during

the Indiana Board hearing that between 8:30 and 4:30, certain non-educational activities

occurred: children were fed (breakfast, lunch, and two snacks) and allowed to have

quiet time4, and with respect to the infants and toddlers, time was spent “changing

diapers, wiping noses, [and] tying shoes[.]” (See Pet’rs’ Br. at 13.) The Assessor also

points to the fact that in 2009, only 25% of Greenwood KinderCare’s teaching staff held

college degrees. (See Pet’rs’ Br. at 15.) Finally, the Assessor explains that KC Propco

failed to provide any evidence to corroborate Mortensen’s testimony that (1) the

Greenwood KinderCare’s teachers met with local public school officials to compare

curricula and (2) the Greenwood KinderCare’s programs mirrored those offered in local

public schools. (See, e.g., Pet’rs’ Br. at 15; Oral Arg. Tr. at 15, 19.)

       The Assessor’s argument fails because it essentially requests the Court to

reweigh the evidence that was presented to the Indiana Board during its administrative

hearing. In its final determination, the Indiana Board acknowledged that some non-

educational activities did in fact occur at the Greenwood KinderCare, but that those

activities did not diminish the property’s overall educational use. Indeed,

          it is clear that both educational programs and child care activities
          take place at the Greenwood KinderCare. From [KC Propco’s] point
          of view, the educational programs are the focus and the child care
          activities are merely incidental. The [Assessor], of course, views the
          child care activities as the focus and the educational programs as
          incidental. Ultimately, in this case [KC Propco’s] point of view is
          more persuasive. The weight of the evidence establishes that the
          use of the subject property is most accurately characterized as

4
   KC Propco indicated during the Indiana Board hearing that “quiet time” did not necessarily
mean nap time; rather, it meant that children were given time outside of the group dynamic to
“recharge.” (See Cert. Admin. R. at 372.)



                                             12
          educational. The exemption for the real property should not be
          denied based on the incidental child care activity that necessarily
          takes place due to the ages of the children.

(Cert. Admin. R. at 43-44 ¶ 47.)

       Here, it is clear that the Assessor simply disagrees with how the Indiana Board

distributed the weight of the evidence. Nonetheless, the Court will not now redistribute

the weight in order to tip the scales in the Assessor’s favor. See Freudenberg-NOK,

715 N.E.2d at 1030. Consequently, the Indiana Board’s final determination will not be

reversed on this basis either.

                                              II.

       Finally, the Assessor argues that the Indiana Board’s final determination is

arbitrary and capricious because it extended the educational purposes exemption to all

2.607 acres of KC Propco’s land. More specifically, the Assessor asserts that while the

one acre of land on which the subject property’s building and parking lot actually sit may

well be exempt, KC Propco failed to prove that the other 1.607 acres – which were

vacant – were entitled to the exemption. (See generally Cert. Admin. R. at 12; Pet’rs’

Br. at 19-21; Pet’rs’ Reply Br. at 8-10; Oral Arg. Tr. at 6, 21-26.)

       As previously noted, when a building is exempt from property taxation because it

is owned, occupied, and used for an educational purpose, the exemption also extends

to the land upon which it sits. I.C. § 6-1.1-10-16(c). KC Propco’s building sits on a

2.607 acre parcel of land. (See Cert. Admin. R. at 12.) That entire parcel is exempt,

not just the land attributable to the building’s footprint. See I.C. § 6-1.1-10-16(c). See

also DeKalb Cnty. E. Cmty. Sch. Dist. v. Dep’t of Local Gov’t Fin., 930 N.E.2d 1257,

1260 (Ind. Tax Ct. 2010) (explaining that the Court will read statutes logically and in




                                             13
such a way as to prevent an absurd result). The Court will therefore not reverse the

Indiana Board’s final determination on this basis.

                                      CONCLUSION

       For all the above-stated reasons, the Court hereby AFFIRMS the Indiana Board’s

final determination in this matter.




                                            14
