Bill Hiking Taxes for Short-Term Rentals to Be Gutted After Resistance from Airbnb, VRBO

A bill that would have quadrupled property taxes for thousands of short-term rentals in Colorado is set to be significantly watered down next week, according to the bill’s sponsor.

Since Sen. Chris Hansen, D-Denver, proposed the bill last fall, AirBnB, VRBO, and other short-term rental owners have rallied against the idea, saying it would devastate the tourism economy that ski towns rely on.

Senate Bill 33 proposed classifying any property used as a short-term rental for more than 90 days per year as a lodging property beginning in 2026. Colorado’s property tax assessment rate for lodging properties in 2023 was 27.9%. For residential properties, it was set at 6.765%. 

When the introduced bill received significant pushback — with some lawmakers saying it was the most frequently-referenced measure in their email inboxes — he suggested he would amend the measure to impact fewer properties by extending the number of days from 90 to 100 or 150 days. But then, the bill, which was introduced on the first day of session, continued to be delayed for its first committee hearing, a nod to its political difficulties. 

If his amendments are approved in Tuesday’s Senate Finance Committee hearing, Senate Bill 33 will instead require only a study of short-term rentals in the state. It would also prevent hotels from converting their rooms into short-term rentals to avoid paying the state’s lodging tax, he said. 

“It’s a tricky subject because people, I think, were conflating commercial activity with part-time rental activity,” he said. 

The study element of the measure will require the state to look at the impact of short-term rentals’ low tax rates on local services, including schools. 

Chris Romer, president of the Vail Valley Partnership, has been one of the most vocal opponents of Senate Bill 33. 

“The bill as drafted would destroy tourism in Eagle County and the mountain communities because it would destroy our bed base,” he said. 

While he said he’s waiting until he sees the amendments, if they are as they’ve been described, he said: “We no longer are concerned about this bill.” 

It’s not yet clear how the amendments would impact another bill in the legislature that was brought in response to Senate Bill 33. 

House Bill 1299, sponsored by Democrat Rep. Shannon Bird, proposes an alternative approach to regulating short-term rentals. Instead of deciding which tax rate a property must pay based on how many days a short-term rental is used, it would make the determination depending on how many properties each owner operates. 

It would allow homeowners to use their primary and secondary homes as short-term rentals as much as they want and still be taxed under the residential rate. But any additional properties used for those rentals — like third, fourth or fifth homes — would be automatically taxed under the much higher lodging rate.

The measures contradict one another, meaning only one of them could have become law.

Democratic Sen. Kyle Mullica, who is the chair of the Finance Committee, which is considering Senate Bill 33, is the other prime sponsor of House Bill 1299. 

Though the bill being pared back would mark the end of one battle over short-term rentals, it’s unlikely to be the end of the discussion, both at the local and state level. Local governments like Summit County and Steamboat Springs have enacted their own restrictions in recent years, with varying results. 

Hansen said he remains focused on making the state’s tax code more equitable. 

“We will continue to do that work across this area and many others,” he said. “This is just one example of it and certainly looking at additional options for next year.”

By: Elliott Wenzler | The Aspen Times I April 13, 2024