News & Insights

Colorado Potential Property Tax Cut

Tax Development May 26, 2020

Colorado Potential Property Tax CutOn Tuesday, May 12, 2020, the Colorado Legislature’s Joint Budget Committee (JBC) met to talk about the coronavirus impacts to the state of Colorado’s budget for the current year and future years. The JBC heard from various economic forecasters and from Ms. JoAnn Groff, Property Tax Administrator for the state of Colorado.

Ms. Groff spoke about the property tax calendar, including when values are set, when notices are mailed, when tax bills would be mailed, and when taxes are due and delinquent. She told the legislators that Colorado taxes are paid in arrears and that any impact from COVID-19 would not impact the state from a cash basis until 2022.

Ms. Groff then spoke about a 1982 amendment in the Colorado Constitution known as the Gallagher Amendment. It requires approximately 45% of all collected property taxes to come from residential property owners and 55% of all collected property taxes to come from nonresidential property, including commercial property, minerals, oil and gas, state assessed properties, etc. Based on this, the amendment assessment ratio for nonresidential properties is set at 29%. The residential assessment ratio has decreased from 21%, initially set back in the 1990s, down to our current rate of 7.15%. This residential ratio is required to be reviewed every two years during a reassessment year based on the Gallagher Amendment.

The issue created by the COVID-19 pandemic (as well as the oil and gas market crash) is that nonresidential values are expected to decrease around 30% for oil and gas properties and 20% for commercial properties, while residential properties are expected to increase by as much as 10%. This would create a resetting of the residential ratio to approximately 5.88%, thus creating a significant tax cut in residential properties in Colorado.

It should be noted that we are expecting legislation to be introduced when the Colorado Legislature reconvenes to send a measure to the voters of Colorado to repeal the Gallagher Amendment and potentially freeze the residential assessment ratio at 7.15%. There currently hasn’t been any discussion on what, if anything, might replace the Gallagher Amendment; however, we are expecting this to be announced soon.

TECHNICAL INFORMATION CONTACT:

Matt Poling
Principal
Ryan
303.222.1845
matt.poling@ryan.com

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