A client recently raised concerns regarding a potential change in property tax assessment methodology that may be upcoming in the next Colorado state legislative session.  With revenues continuing to decline, local governments are seeking opportunities to capture property taxes from new sources.  The issue concerns residential property owners claiming an agricultural tax classification without having a bona fide agricultural operation on their land.

Colorado assessors classify real estate for property tax assessment purposes based on use, regardless of the underlying zoning designation.  Often, an agricultural classification results in a lower tax bill, because the actual value of agricultural land is based on its agricultural productive capacity.  A low productive capacity results in a low tax bill.    

HB10-1293, which became law last year, established the Land Assessment and Classification Task Force (the “Task Force”).  The Task Force’s nine members were charged with studying and evaluating assessment methodology for agricultural and residential properties and proposing statutory amendments to ensure that property is taxed in accordance with its actual use.  Under existing law, a residence on agricultural land is classified as residential, but the land is classified as agricultural.  

In October of this year, the Task Force released its Final Report.  In the Final Report, the Task Force agreed to focus its attention on a mixed residential/agricultural classification that would more accurately reflect the land’s use.  The Task Force proposed four recommendations as follows:

1. For any parcel that is more than 2 acres in size, assess a maximum of 2 acres as residential, when the residence is not an integral part of the agricultural operation.

2. For any parcel that is less than 2 acres in size, assess that portion of the land not used for agricultural operations as residential.

3. Require the division of taxation to establish guidance on the definition of “integral to agricultural operations” with certain guiding principles.

4. Require members of the Task Force to include recommendations 1 through 3 on any legislation carried
forward by Task Force Members. 

Because any changes to the historical tax classification methodology could have significant longrange consequences, it will be important to monitor the legislature’s interest and activity in this area.  I understand legislation on this matter supported by a number of Colorado counties has already been drafted.  Newspapers in Denver and Vail are already weighing in

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Jim Johnson assists real estate owners and developers in complex land use and development matters, including disputes regarding entitlement approvals and eminent domain. As part of Jim’s practice, he often represents clients in the acquisition of real property, in securing annexation, zoning, subdivision…

Jim Johnson assists real estate owners and developers in complex land use and development matters, including disputes regarding entitlement approvals and eminent domain. As part of Jim’s practice, he often represents clients in the acquisition of real property, in securing annexation, zoning, subdivision or other local governmental approvals and in the negotiation of construction and design contracts. Jim’s litigation practice includes representing land owners in Rule 106 actions challenging local government decisions surrounding annexation, zoning and subdivision issues. Jim also represents land owners facing the threat of eminent domain, in pre-condemnation planning, valuation issues and condemnation proceedings.