In Colorado, “residential land” has generally been taxed at a significantly lower rate then “vacant land”. In 2020, the Residential Assessment Rate was 7.15%. In contrast, the assessment rate for “vacant land” was 29%, more than three times higher. In the last few years, the Colorado Court of Appeals considered three different cases regarding the classification of “vacant land” and “residential land” for property tax purposes.
In 2020, the Colorado Supreme Court clarified the requirements for classifying undeveloped property as “residential land” in two cases: Mook v. Board of County Commissioners of Summit County, 457 P.3d 568 (Colo. 2020) and Lannie v. Board of County Commissioners of Eagle County, 471 P.3d 1207 (Colo. 2020). One of the implications of these rulings is that it may be more difficult to classify an undeveloped parcel as “residential land” and qualify for the substantially lower Residential Assessment Rate.
In Mook, the Colorado Supreme Courtconsidered three separate cases in which property owners challenged the reclassification of their land from “residential land” to “vacant land.” The Colorado Supreme Court concluded that:
- Parcels of land must physically touch each other in order to qualify as “contiguous parcels of land” and qualify as “residential land” for property tax purposes.
- One of the contiguous parcels must have a residential improvement, such as a house. A landowner can demonstrate that contiguous parcels qualify as “residential land” for tax classification purposes if the parcels are used as a “collective unit for residential purposes.”
- The parcels of land must also be under “common ownership,” which is determined from the county records and narrowly construed.
All three requirements must be met for a parcel to qualify as “residential land” for tax classification purposes.
Lannie held that “common ownership” requires parcels to “have identical record titleholders.” In Lannie, the Colorado Supreme Court held that the property owner, a married couple, could not demonstrate “common ownership” because the residential parcel was owned by the husband and wife as joint tenants and the undeveloped parcel was owned by the husband alone. The Court determined that the overlap in title was insufficient to meet the common ownership requirement.
Lannie and one of the cases considered by the Colorado Supreme Court in Mook have been remanded for further determinations regarding the use of the contiguous parcels. Subsequent rulings will likely address and clarify what it means to use contiguous parcels as a collective, residential unit.
In addition, the Gallagher Amendment was repealed in the 2020 election. The Gallagher Amendment, which was passed in 1982, split the state’s overall property tax between residential and non-residential properties. Residential properties paid 45% of the overall property tax, which operated to keep the Residential Assessment Rate lower. With the repeal of the Gallagher Amendment, residential property tax assessments are likely to increase.
If you have questions about or need assistance regarding the tax classification of your property or another property-related matter, please contact Garfield & Hecht, as follows:
- In Aspen and Snowmass Chris LaCroix, ext. 204, clacroix@garfieldhecht.com or Chris Bryan, ext. 802, (970) 925-1936, ext. 802, cbryan@garfieldhecht.com.
- In Basalt and Carbondale, Kelcey Nichols (970) 925-1936, ext. 221, knichols@garfieldhecht.com.
- In Glenwood Springs through Rifle, David McConaughy (970) 925-1936, ext. 810, dmcconaughy@garfieldhecht.com.
- In the Vail Valley and Denver, Kursten Canada (970) 925-1936, ext. 853, kcanada@garfieldhecht.com, and Tracy Kinsella, (970) 925-1936, ext. 854, tkinsella@garfieldhecht.com.
- In Crested Butte, John Belkin (970) 925-1936 ext. 215, jbelkin@garfieldhecht.com.
