Colorado Lawmakers Back Off Idea to Tax Second-Home Owners Differently Under Bipartisan Property Tax Proposal

Colorado Lawmakers Back Off Idea to Tax Second-Home Owners Differently Under Bipartisan Property Tax Proposal

Second-home owners in Colorado won’t be taxed differently compared to primary owners under a bipartisan proposal introduced on Monday in the final three days of the state legislative session.

At least, not yet. 

The idea of creating a property tax exemption for primary homeowners has floated around the state Capitol over the past year, as lawmakers have considered the best way to calculate and collect property taxes. 

When that proposal failed in November, Gov. Jared Polis convened a special session of the Legislature. While lawmakers agreed on a way to slow property tax spikes for one year during that special session, they also created a commission to study a longer-term approach to the issue. The commission, which has met regularly since then, also considered taxing second-home owners differently. 

But ultimately, Senate Bill 233, the proposal presented by bipartisan leaders of both chambers and Polis on Monday didn’t include that idea. 

Sen. Chris Hansen, a prime sponsor of Senate Bill 233 and the chair of the property tax commission, said the commission initially supported the concept.

“But we quickly started to understand some of the implementation issues, and it was going to take time for us to figure out how to implement that idea,” he said, a Denver Democrat.

He was referring to the need to develop a system for assessors to learn whether a property is a primary home or not. 

Even though the concept wasn’t included in the latest proposal doesn’t mean the idea is totally dead, however.

“We’re going to spend some more time studying it,” he said. “It will be back on the docket for the conversations with the commission as we meet during the interim.” 

The Colorado Association of Realtors has said in the past that it opposes the idea and that it would hurt real estate in the state. It could also penalize Coloradans who have worked to get a second home, said Brian Tanner, the vice president of public policy for the group.

When asked about the concept, Polis said he wanted the commission to consider a land value tax, which he said could help increase housing supply.

“There will be an ongoing discussion about ways we can further improve property tax to enhance competitiveness and keep rates low,” he said. 

The bipartisan proposal

Senate Bill 233, a complex proposal that could change over the coming days, suggests the state keep tax rates from last year for the 2024 tax year. 

That approach would set schools across the state back by about $380 million when compared to what they would have received under current law. The bill proposes backfilling all of that from the state’s education fund.

The 2024 rates would also cause a hit to local governments, such as counties and special districts. Most would not receive backfill, losing out on a combined millions of dollars.

Beginning in 2025, the bill proposes creating two separate property assessment rates for calculating residential property taxes, with school districts having a higher rate and other local districts having another.

The bill’s sponsors hope that through creating the higher rate for schools, they can avoid the budget deficiencies that have plagued school districts in Colorado. 

For the local district assessment rate, the bill would also eventually create a 10% tax exemption for up to $70,000 of a home’s value.

The bill would also set a 5.5% cap on the annual growth of property taxes collected by local governments, except schools, beginning in 2025.  

The average impact on local governments and individual homeowners is difficult to predict because of the various mill levy rates imposed by local governments. 

Local governments that saw significant increases in property assessments — like many in the mountains — stand to lose some of that additional revenue under the deal.  

Colorado Counties Incorporated, which represents dozens of counties across the state, is in support of the bill. 

“I think it strikes the right balance,” said Tamara Pogue, a Summit County commissioner. 

The compromise has been struck as a series of property-tax-related ballot measures offering greater tax relief have put pressure on lawmakers to come up with an alternative. One of them, Initiative 50, a proposal brought by the conservative group Advance Colorado, would impose a 4% annual statewide cap on property tax revenue growth. 

The bill is sponsored by Hansen, along with Sen. Barbara Kirkmeyer, a Brighton Republican; Rep. Chris deGruy Kennedy, a Lakewood Democrat; and Rep. Lisa Frizell, a Castle Rock Republican. 

The session is scheduled to end at midnight on Wednesday.


By: Elliott Wenzler I The Aspen Times I May 7, 2024

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