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A dispute over $3,000 in stormwater charges could have major implications for local governments across Indiana.

The Indiana Tax Court ruled last month that the stormwater fees charged by the Town of McCordsville in Hancock County were actually taxes.

The plaintiffs in the case had argued that  McCordsville did not have the authority to levy the $3,000 in stormwater charges and penalties because it was the improper imposition of a tax.  

Attorneys for the city argued the charges were fees and therefore the Tax Court did not have jurisdiction over the matter.

The Court held McCordsville’s stormwater fees were in fact taxes because they were not optional, and unlike fees, the taxpayer not entitled to receive anything in return.

This has statewide implications because if stormwater fees are actually taxes, they could impact the state’s property tax cap system, which limits how much local governments can collect.   Under Indiana law, a property owner’s taxes cannot be more than either one, two or three percent of its assessed value depending on the type of property it is. Should it be determined that stormwater taxes fall into that category, it could seriously reduce how much local governments could collect depending on how close it puts them to the limits of those caps.

“We are currently reviewing the decision,” said David Bottorff of the Association of Indiana Counties.

A spokesman for the Indiana Attorney General’s Office, which defended the Town, says they are also reviewing the decision before deciding whether to appeal.

A copy of the decision can be found here.

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