Colorado's Controversial Short-Term Rental Tax Bill Sparks Heated Debate

Stephanie Kroll

In a move that could have far-reaching implications for short-term rental property owners, a bill proposing a significant increase in property taxes for such properties is set to be debated in the upcoming legislative session in Colorado. The bill, developed by the Legislative Oversight Committee Concerning Tax Policy & Task Force interim committee, has already garnered attention and sparked a heated debate among lawmakers, property owners, and residents.

If approved during the 2024 lawmaking session, the bill would reclassify properties used as short-term rentals for more than 90 days per year as lodging properties starting in 2026. This reclassification would result in a nearly quadruple increase in property taxes for an estimated 24,000 short-term rental properties across the state.

Property owners would be required to submit a signed affidavit to their county assessor detailing the number of days the property was used for short-term rentals in the previous year. Lying on the affidavit could lead to second-degree perjury charges, punishable by up to 120 days in jail and/or a fine of up to $750.

The bill has generated strong opinions on both sides of the aisle. House Speaker Julie McCluskie expressed commitment to working with constituents and ensuring continued discussions. However, Rep. Julie Amabile voiced concerns about potential unintended consequences, emphasizing the unique role short-term rentals play in different communities.

The bill passed through the interim committee with a party-line vote, with Democrats in favor and Republicans against. This division underscores the polarizing nature of the proposed changes.

The bill aims to significantly increase property tax revenue for local jurisdictions, estimating a boost of $371 million starting in property tax year 2026. Additionally, it is projected to allocate an extra $78.2 million to school districts during the same period.

Governor Jared Polis has expressed support for the 90-day limit on short-term rentals being classified as residential. Similar bills in the past faced opposition from short-term rental owners, but the current political landscape suggests a potential shift in favor of the proposed changes.

The bill faced vocal opposition during the committee's meeting in October, with over 80 speakers expressing concerns. Many short-term rental owners highlighted the potential negative impact on their livelihoods, emphasizing the importance of rental income for affording property in Colorado.

Owners also raised issues regarding the overlapping local restrictions, fees, and taxes, warning that the proposed property tax increase could force them to sell their properties. Critics argue that the bill may cripple the short-term rental economy in Colorado.

Several amendments were proposed during the committee meeting to address concerns raised by property owners and assessors. State Sen. Chris Hansen's amendment suggested creating a statewide database of short-term rental owners to facilitate the assessment process. However, concerns about enforcement and the burden on assessors remain.

A proposed amendment by Rep. Lisa Frizell aimed to shift homes to commercial property tax rates if rented for 365 days a year, providing an alternative to the 90-day limit. Despite these proposals, the bill, in its current form, advanced to the full legislature for further consideration.

As Colorado prepares for the 2024 legislative session, the fate of this controversial short-term rental tax bill hangs in the balance. With potential implications for thousands of property owners and local economies, the debate over how short-term rentals should be taxed and regulated continues to draw attention and spark impassioned discussions in the Centennial State.

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