Property Tax Appeal
Property tax appeals can result in substantial yearly tax savings, especially for commercial properties. We have experience providing appraisals for this use.
How Are Property Taxes Determined?
Real and personal property is taxable in Colorado unless specifically exempted by law.
Property taxes for commercial real property are based on the market value of the property as of the re-appraisal year. Property in Colorado is re-appraised every odd numbered year (2017, 2019, 2021, etc.).
The market value for commercial real estate, which is referred to as “Actual Value” by the Assessor, is established like any other appraisal situation- by using the sales comparison, cost and/or income approaches.
For some properties, all approaches to value are relevant. For others, only certain approaches to value are relevant.
For most typical commercial properties, the sales comparison and income approaches are most relevant to value provided that there is sufficient data to make reasonable and supported conclusions. For unique properties, the cost approach can be the most relevant.
There is no single equation or statutory requirement to use one approach to value over the other and it can be a matter of opinion as to what approach is most relevant. There is also no single equation or statutory requirement as to the weighting of each approach.
The cost approach is typically the least preferred stand-alone approach since it requires inputs such as depreciation, construction costs and developer profit to which there can be varying opinions as to the value of these items.
Typically, the most “supported” approach is the approach that requires the least amount of subjective inputs or is most “proven” by actual transactions in the market. This tends to result in the sales comparison and income approaches being most relevant to most commercial properties.
Taxes for business and/or personal property are typically based on asset information provided by the owner or an iteration of the cost approach.
Taxable Property
Real property includes land, buildings, and fixtures that are physically incorporated into a building or affixed to land (HVAC, lighting, plumbing, etc.). Real property also includes possessory interests, which are private property interests or the right to the occupancy and use of an otherwise tax-exempt property. Personal property includes machinery, equipment, furniture and other articles related to the business of a commercial or medical office operation.
2019 Assessment Period
Real and personal property in Colorado are re-valued every two years.
2019 is a reappraisal year.
For the 2019 assessment period, the Assessor is required by law to establish values for all real property by considering market information from the 24-month base period from July 1, 2016 through June 30, 2018.
The actual value of real property is based on its value on the appraisal date, which is June 30 of the year prior to the reappraisal year (2018 in this case); however, the property is valued in the condition it was in, and for the use of the property, on January 1 of the current year.
For example, for the 2019 re-appraisal, the valuation date, or the date on which the Assessor must estimate the value of real property, is June 30, 2018, reflecting the physical condition and use of the property as it exists on January 1, 2019 (for 2019 taxes) and January 1, 2020 (for 2020 taxes).
2017 Assessment Period
For the 2017 assessment period, the Assessor is required by law to establish values for all real property by considering market information from the 24-month base period from July 1, 2014 through June 30, 2016. The valuation date, or the date on which the Assessor must estimate the value of real property, is June 30, 2017, reflecting the physical condition of the property as it existed on January 1, 2017 (for 2017 taxes) and January 1, 2018 (for 2018 taxes).
Assessment Rates
The assessment rate for commercial real and personal property is 29%. For property that is classified as residential, the current assessment rate is 7.96% of Actual Value. Multiplying the Actual Value of the property by the appropriate assessment rate results in the property’s Assessed Value.
Each year, county commissioners, city councils, school boards, and special district boards (the governing boards of these political subdivisions) determine the revenue needed and allowed under the law to provide services the following year. All of the tax rates of the political subdivisions (County, City, Local, Metro Districts, etc.) that provide services in the tax area are added together to form the total tax rate. The summation of all rates is known as the “combined tax rate”, “assessment rate”, “mill levy” or sometimes, the “mill rate”. Mill levies are not available each year until December.
If stated as a mill levy or mill rate, the figure must be divided by 1,000 before multiplying to the Assessed Value. For example, 83.054 mills is 8.3054% (0.083054).
To determine real or personal property taxes due, the Assessor multiplies the mill levy (divided by 1,000) or combined tax rate by the Assessed Value. For example, a property with an Assessed Value of $100,000 (which would equate to an Actual Value of approximately $344,827) and a mill levy of 100.00 mills (10%) would have taxes of $10,000 ($100,000 x 0.10 = $10,000).
Real Property Notices of Valuation are mailed by May 1 of each year. Personal Property Notices of Valuation are mailed by June 15 each year. The Notices of Valuation list the location, classification, and value of the property for both the prior and current years.
Property taxes are payable in arrears. For example, 2016 property taxes are payable and due in 2017. Taxes can be paid in two equal installments or in one full installment. If paid in two installments, the first half is due February 28th, and the second half is due June 15th. If paid in full, they are due by April 30th.
Appealing Your Taxes
To appeal your taxes, most counties in Colorado allow for an online appeal. There are specific dates and timelines that must be followed depending on the year you are appealing. The best and easiest thing is to check with your County Assessor’s Office website.
The initial appeal process is generally easy (clicking the appeal button), but proving your value is different than what the Assessor states can be very time consuming.
Generally, if you are to be successful with a tax appeal, you need to:
1. Determine what the value of your property is.
2. Support the value that you believe the property is worth.
It is typically not enough to simply state that you don’t agree with the value and you think it’s lower. Typically, you need to say what you think the value is, and, prove it.
Typically, the best way to support your value is via an appraisal or similar valuation analysis.
Do I Need an Appraisal to Appeal my Taxes?
Short answer- No.
Long answer- It can be instrumental to your success.
Appraisers are experts at valuations and we do valuations all day, every day. Most other participants in the tax appeal process, including the Assessor’s Office, are not experts at valuations.
Also, it can be very helpful if not instrumental to your appeal and you may have a difficult time proving value without an appraisal.
On the flip side, as long as you can determine the value of the property, and provide support for the value, you do not legally need an appraisal to dispute your taxes.
Nor do you need to hold an appraisal license or be an appraiser to determine or opine property value for a tax appeal, legally speaking.
However, properly developed appraisals can carry extensive weight that a non-appraiser valuation does not possess. The appraisal process typically results in a more systematic method for determining and supporting value than a non-appraisal valuation method. Thus, the appraisal process itself is generally superior than what most owners or tax consultants will put together.
Appraisers are also unbiased and are held to a high level of public trust. A good appraiser and appraisal is typically held to a higher regard than a valuation from a non-appraiser.
Most MAI developed appraisals will be substantially better in proving value as compared to anything put together from the County or a tax consulting company.
For most value disputes, the party with better evidence and better justification, such as the party with a better appraisal, will win. That holds true for tax appeals.
Most MAI developed appraisals will also be more accurate than anything put together from the County or a tax consulting company.
Thus, appraisals are not legally required but a well put together appraisal is often times instrumental to a tax appeal.
