Spring is in the air, and while for most people, that means budding tulips and birds chirping, for us real property tax lawyers, that means assessment time. Property owners in Colorado will receive their 2021 real property valuations from the county assessor by May 1. So, April is the time to gear up for what is likely going to be a big year for commercial landowners to appeal their taxes. Because of the fluctuation in real estate values due to the pandemic-era economy, there are opportunities for commercial landowners to decrease their real property taxes in 2021. And, as always, it will help to have experienced property tax professionals in your corner.
In Colorado, properties are assessed on a two-year cycle. That means that the value assessed this year will, absent unique circumstances, apply for both your 2021 and 2022 taxes. May is the time to appeal if you believe your property has been overvalued, so now is the time to engage counsel to help. To help you evaluate whether an appeal makes sense, here are a few frequently asked questions about Colorado’s real property taxes and the tax appeal process.
How is my tax bill calculated?
Your property tax bill is based on the property’s “actual value,” which is defined by statute and described below. But you don’t pay taxes on the full value of your property. Instead, tax assessors apply an assessment rate to determine the “assessed value,” or the portion of the property’s value on which you pay taxes. In 2021, the assessment rate for commercial property in Colorado is 29%. Multiplying your property’s assigned actual value by the assessment rate gives you the “assessed value.” To calculate your real property taxes, you multiply your assessed value by its “mill levy” (or tax rate). The mill levy is made up of “mills,” which equal $1 of property tax for every $1,000 of assessed value. These mills are levied by all sorts of government entities and taxing districts.
How do tax assessors determine the actual value of my property?
In 2021, your property will be valued by the county assessor in the county where the property is located. Because county assessors have so many properties to value in each tax cycle, they generally use a “mass appraisal” process to value a group of properties together considering common data, standardized methods, and statistical testing. As a result, in their initial assessment of your property, county assessors rarely consider a property’s unique characteristics. Even in a normal year, this can mean that the assessor’s determination of a property’s “actual value” may not be accurate.
How will the COVID-19 pandemic affect my property taxes?
There is a significant likelihood that counties’ “mass appraisals” will overstate commercial properties’ “actual value” in 2021 as that phrase is defined by Colorado statute. We believe that for two reasons: (1) Colorado’s statutory “date of value;” and (2) Colorado’s statutory data gathering period.
Specifically, in 2021, all property in Colorado must be assessed based on a date of value of June 30, 2020, using sales data from the period 18 months prior to that. Of course, this year, commercial property values have varied widely. And valuing properties en masse likely won’t account for those important variations and the impact of COVID-19 on property values on June 30, 2020. Accordingly, your property’s assessed value may not be consistent with its actual value on June 30, 2020.
What can I do if I believe my property has been valued too high?
You can appeal the valuation. It is important to preserve your rights to challenge that value by appealing to the proper tax body at the proper time. These appeals take place in three stages. The appeal process and related deadlines are discussed in depth in a previous article on the subject. It is worth noting here, though, that real property tax appeal deadlines are quick. For example, you only have one month to pursue your appeal to the county after you receive your initial assessment. For that reason, it is important to hire a tax appeal professional before May 1 so that you are or your company is prepared to pursue your appeals in a timely manner.
How does the Gallagher Amendment repeal affect my 2021 property taxes?
The Gallagher Amendment repeal will not affect your 2021 property taxes, but your 2023 taxes might be different. In 2020, Colorado voters repealed the Gallagher Amendment from the Colorado Constitution. That amendment required a particular ratio of property tax collection on a state-wide basis to be 45% from residential and 55% from non-residential properties. Gallagher also pinned the non-residential assessment rate (which is described above) at 29% of property values. Now that the amendment has been repealed, both the ratio and the assessment rate may change. Stay tuned for the 2023 tax season.
What commercial properties are ripe for real property tax appeals?
Based on data we are currently gathering, if you own hotel (including extended stay hotel), retail or commercial office space property, it is likely you will have a viable real property tax appeal in 2021. If you think this may be an opportune time to appeal your real property tax, now is the time to consult with legal counsel and put together a plan of action. We have analysts who can evaluate any commercial property’s assessment and will let you know whether an appeal makes sense for you or your company.