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Under the Indiana Constitution, the State of Indiana must provide a "uniform and equal" system for the assessment and taxation of real property. The primary issue before the Court involved whether Indiana's current property tax assessment apparatus meets this constitutional requirement.

The State of Indiana currently taxes real property based upon its "true tax value." The "true tax value" of real property is based upon a complex set of formulas developed and applied by the State. The State's application of these formulas frequently produces property assessments that differ from the property's fair market value, sometimes by significant margins. Concerns about the fairness of the current property tax system has been the source of this recent litigation.

Critics argue that the current system is unconstitutional because Indiana's assessment formulas fail to incorporate sufficient real world information about property values. This fact, critics contend, precludes Indiana taxpayers from being able to evaluate the State's assessment of their property. Many critics further believe that the complex formulas used by the State in assessing property should be abandoned and the State should instead assess and tax property based simply upon its fair market value.

The Indiana Supreme Court agreed, but only in part. The Court concluded the State's assessment formulas "lack sufficient relation to objectively verifiable data to ensure uniformity and equality based on property wealth." However, the Court refused to require that Indiana assess its property taxes based upon a property's fair market value. Instead, the Court elected to give the State an opportunity to revise its formulas so that verifiable real world values are more fully incorporated into assessment and taxation.

Indiana farmers should be relieved by one remark in the Court's opinion. Under Indiana's current system, real property used for farming is taxed based upon the land's "actual use" for farming, not more profitable alternative uses that may exist. For example, a farm located in the midst of commercial development is taxed according to its use as a farm, not at a higher value to reflect the land's potentially lucrative development into a shopping mall. The Court's decision expressly stated that the State's "actual use" method of assessing and taxing farm land is perfectly appropriate.

Nonetheless, it is unlikely that the Court's much anticipated ruling will have an immediate effect on Indiana taxpayers. At the time of the Court's decision, the State already had plans to draft and implement a new property tax assessment system by the year 2001. The Court decided to allow the State's existing method of assessment to continue pending the implementation of the new assessment system.

In several years, when the State unveils its new assessment system, it will certainly be subject to renewed scrutiny by the courts to ensure that the new system adequately incorporates verifiable, real world factors in assessing and taxing Indiana property. Until then, no significant changes to Indiana's property tax system are expected. §