Colorado to tax STRs as commercial properties?

[James Carlson]

Do you own a vacation rental or STR in Colorado? Your property taxes might be going up if a new plan passes.

The legislative proposal -- which passed a key legislative hurdle yesterday -- would classify short-term rentals rented for more than 90 days per year as commercial property for property tax purposes. The current residential property tax rate is just above 6.7%. Commercial property tax rate is 27.9%. So, you know, that's a bit higher. 

I've been suspect of this proposal passing in the past. (See my reaction just a few weeks ago here.) But I may have underestimated the growing support it's garnered. The proposal just passed the Legislative Oversight Committee Concerning Tax Policy and will go to the full legislature in January. In the past, the proposal always died in this committee. 

I'm torn on this. Philosophically, it makes sense to me that a full-time Airbnb rental can be seen as a commercial lodging business. On the other hand, the vast majority of people doing STRs are little guys, and there are so many tax loopholes for big business. It seems like we could cut the small guy some slack here. Oh, finally, the investor with one or two properties found a way to get ahead a little bit and now they're going to tax them into oblivion? 

Again, this has a ways to go in the legislature, but if you're in Denver or Colorado Springs or, hell, anywhere in Colorado, now might be the time to make your voice heard. 

[Michael Baum]

Not going to invest in CO. Time to get out.

[Zach Edelman]

Great and very informative forum. Thank you for posting this!

[James Carlson]

A quick update here. Seems like the backlash to the Colorado STR taxation bill is already having some effect. This story on a local CBS station has a couple interesting notes:

-- The bill sponsor seems to say that he is trying to combat hotels that converted to "residential" for tax purposes. (If that's all he's after, that is a totally different thing that taxing all vacation rentals in Colorado at commercial rates. I suspect a journalistic edit might have given the wrong impression. I think the sponsor still wants to tax a lot of short-term rentals that way too.)

-- Everyone is already talking about amendments to the bill, including the sponsor. What those are? We don't know. Seems like a couple avenues are: 1. changing the threshold for triggering commercial taxation. The bill currently says any home rented on as an STR for 90 days ore more is subject to the commercial tax rate. Maybe they raise that to 180 or 240 or something2. Having some middle tier of tax rate between the 6.7% residential and 27.9%

-- I think the fear among STR owners in Colorado is that unlike similar bills in previous years, this one has the support of several county governments. The thinking goes, then, that legislators representing those counties would follow suit when voting. But at least the one state senator they interview, a Democrat representing Breckenridge, Steamboat Springs and other mountain areas, said he doesn't support the bill as written.

-- In this other recent story, there's another bill proposed that would allow for every Coloradoans to have one STR at the residential rate.

I'll be watching this closely. 

[Zachary Jensen]

Great post! thank you for sharing. Wonder if that means folks with REPS can invest here to get credit towards their qualification