Colorado's Proposed Property Tax Changes for Short-Term Rentals:
Statewide, short-term rental units are properties used for primary or secondary residences and leased for overnight lodging for less than 30 consecutive days.
Colorado Legislators have proposed a significant change in how properties engaging in short-term rentals are taxed. What was initially identified as Bill 6 has undergone a nomenclature change and is now referred to as Bill C. Notably, the amendment not only includes a shift in name but also introduces substantive changes, expanding the bill from its original five pages (originally titled Bill 6, to a more comprehensive seven pages.) This blog post aims to unravel the critical aspects of Bill C, delving into its implications for short-term rentals and the broader property tax landscape in the state.
Bill C Overview:
The essence of Bill C revolves around creating a new property tax designation of real estate designated for short-term lodging. Effective for property tax years commencing on or after January 1, 2026, the bill introduces a nuanced classification system for short-term rental units.
- Residential or Lodging Classification:
- Short-term rental units and the associated land may be classified as residential real property or lodging property.
- A unit leased for short-term stays for more than 90 days in the previous property tax year would be classified as lodging property; otherwise, it falls under residential real property.
- Assessment Approach:
- Short-term rental units classified as lodging property will have their actual value determined solely through the market approach to appraisal. As proposed, this would mean around a four times increase in property taxes.
- Notice and Dispute Resolution:
- Assessors are required to annually notify short-term rental unit owners of the number of days the property was leased for short-term stays in the prior tax year.
- Owners can dispute the provided information, submitting evidence supporting a different number of days leased for short-term stays.
- Database and Reporting System:
- The property tax administrator is mandated to establish and administer a pilot program for a statewide database and uniform reporting system to track short-term rental units.
- Here are some potential reasons why this bill could be perceived as a challenge:
- Classification and Taxation Changes:
- If the bill classifies short-term rental units as lodging property, it would subject them to different tax rates and regulations than residential properties. The passage of this bill would lead to increased property taxes and additional compliance requirements.
- Assessment Based on Market Approach:
- The bill's provision stating that the actual value of a short-term rental unit classified as lodging property is determined solely by the market approach to appraisal might lead to higher property valuations. The passage of this bill would result in increased property taxes and higher tax rates for owners.
- Impact on Property Values:
- The change in classification and potential increase in property taxes may affect the overall value of short-term rental properties. Property values might be negatively impacted if the cost of ownership rises significantly.
- Dispute Resolution Challenges:
- The requirement for owners to dispute the number of days their property was leased for short-term stays could be administratively burdensome. Disputes may lead to delays in tax assessments and create additional challenges for property owners.
- Exclusion of Timeshare Units:
- If the bill does not address timeshare units or includes provisions that treat them differently, it creates inequities or challenges for short-term rental owners who feel unfairly targeted compared to other lodging arrangements.
- Economic Impact on Owners:
- Owners who rely on short-term rentals for supplemental income might face economic challenges if the bill results in higher taxes and operational costs. The passage of this bill could impact the viability of short-term rentals as a source of income.
Short-term rental property owners in Summit County need to monitor the bill's progress closely, stay informed about its specific provisions, and actively engage with local policymakers to voice their concerns. Additionally, it is crucial to seek legal and financial advice to understand the potential impact on their specific situation.
To receive Summit County STR alerts and to view recent discussions regarding the developments of this bill and ways to get involved, visit the Google Group "Summit County STR Alerts." (PMH does not own, moderate, or have any affiliation this group and takes no responsibility for its content or accuracy. It is linked here only as a courtesy and resource for concerned parties.)
Stakeholders, including property owners, realtors, assessors, and policymakers, should closely monitor the developments surrounding Bill C. Its potential impact on property values, taxation, and the broader real estate landscape makes it a crucial piece of legislation that merits careful consideration and analysis as it progresses through the legislative process.
**Please get in touch with your legislators and voice your opinions on this critical legislation.**