Realtor | Corey Dwan

Property Valuation and Taxation for Business and Industry

Prepared by the Colorado Assessor’s Association of Tax Appraisers and Colorado Division of Property Taxation, Department of Local Affairs.
This information was prepared to give business owners a better understanding of how the property tax system works in Colorado.

Definitions
Assessment Date: Colorado law establishes January 1 as the assessment date. Property is assessed according to its status, use, and condition on the assessment date.
Actual Value: For commercial and industrial real property and personal property, actual value is generally synonymous with market value.
Assessed Value: The actual value multiplies by the assessment rate. For business property, the assessment rate is 29%.
Taxable Property: All property, real or personal, not exempted by the law.
Real Property: Permanently fixed in nature, such as land, interest in the land, and improvements to the land.
Improvements – All structures, buildings, fixtures, fences, and water rights attached to the land.
Fixtures – Items that were once movable but have become physically incorporated into an improvement or affixed to the land. “Fixtures” include systems for heating, air conditioning, ventilation, sanitation, lighting and plumbing. “Fixtures” do not include machinery, equipment or other articles related to commercial or industrial operations that are affixed to the real property for proper utilization.
Leasehold Improvements – Additions or remodeling made and owned by a lessee.
Personal Property: Everything that is NOT included under the term real property. Personal property is typically portable or movable items such as equipment, furniture and freestanding appliances.
Taxable Personal Property: All personal property that is not specifically exempted by law.
Exempt Personal Property: Inventories for resale; property rented for 30 days or less; materials and supplies held for business use or sale; livestock; agricultural products; equipment used on a farm or ranch to produce agricultural products or handle livestock; computer software; household furnishings not productive of income at any time during the year; consumable property; and all personal property schedules with a totalactual value of $2,500 or less are exempt from property taxation by law.
Consumable personal property is defined as any item having a life of one year or less regardless of cost; or any item with a life longer than one year that has a cost of $250 or less at the time of acquisition. The $250 limitation applies to each item of personal property fully assembled and ready for use including all installation costs, sales taxes and freight expenses.
Intangible personal property: A right rather than a physical object; consists of trademarks, patents, copyrights, stocks, bonds, and computer software not used as built-in machine language initiated during the computer startup. Except for public utility valuation, all intangible personal property is exempt from property taxation in Colorado.

How Businesses (Non-Residential) Property is Valued
Classification: Non-residential property is classified as Real Property or Personal Property. The county Assessor’s duty is to value property for property tax purposes. The primary responsibility is to determine an equitable value for your property so you pay only your fair share of the taxes.
Level of Value: Real Property is reappraised by the Assessor’s Office every odd numbered year. The value determined by the Assessor for the year of reappraisal is generally used for the intervening year also. The actual value of real property is base on its value as of the appraisal date, which is June 30th of the year prior to the reappraisal year.
The actual value of Personal Property is based on its current value adjusted to the level of value used for real property.
The actual value of producing mines, producing coal mines, other lands producing nonmetallic minerals, oil and gas, and agricultural lands is based on production or income information and is not adjusted to the level of value used for real property. Their actual value is an exception to the "Level of Value" procedure.

Approaches to Appraisal:
The Assessor determines the actual value of property by considering three methods of appraisal: the market approach, the cost approach, and the income approach.
Market Approach:
Consists of comparing fair market sales of comparable property.
Real property:
Arms length market sales of similar properties are analyzed, compared, and adjusted to arrive at a value for the subject property. These sales must have occurred during the 24-month period prior to and including the appraisal date of June 30. If a sufficient number of sales are not available during this 24-month period, the Assessor may go back a maximum of five years to collect the required number of sales needed to set values.
Personal property:
Estimate of the current selling price of the owner’s furniture and equipment. The selling price is then rolled back to the appropriate level of value used for real property.
Cost approach: Estimates the material and labor costs to replace the subject property with a similar property.
Real property:
Estimates the replacement cost of improvements and fixtures as of the appropriate level of value.
Personal property:
Estimates the current replacement cost and the total accrued depreciation of the item. The estimate of value is then rolled back to the appropriate level of value used for real property.
Income approach: Converts net income from rent to a potential worth.
Real property:
Determines the net income of the business property from rents by deducting operating expenses from the gross income. The net income is capitalized into an indication of value.
Personal property:
Applies to leased or rented equipment when net income can be converted into an estimate of value. The value is then factored back to the appropriate level of value used for real property.
Exceptions to the Three Approaches:
Residential real property:
The Assessor determines the actual value of residential property by using only the market approach to value.
Agricultural land:
The Assessor determines the actual value of agricultural land, exclusive of buildings or improvements, by considering the earning or productive capacity of the land over a reasonable time, capitalized at a rate of 13%.
Natural resource properties:
1. Oil and gas leasehold and lands – The valuation for assessment for producing oil and gas leaseholds and lands is 87 ½% of the selling price of oil and gas sold or transported from the premises from primary recovery during the preceding calendar year; or 75% of the selling price of oil or gas sold or transported during the preceding calendar year from secondary recovery, tertiary recovery, or recycling project facility.
2. Producing mines – all mines whose gross proceeds during the preceding calendar year have exceeded $5,000 are classified as producing mines. Producing mines are valued by the Assessor at 25% of the gross proceeds or 100% of the net proceeds whichever amount is greater.
Equipment and improvements or buildings of natural resource properties are valued separately by using the three approaches to value.
Assessment Date:
Colorado law states that January 1 is the assessment date. The Assessor determines the current use and condition of the property as of January 1 each year.
Assessed Value:
The Assessor multiplies the actual value by the assessment rate of 29% (except residential property, oil and gas lands, and producing mines) to arrive at an assessed value. The assessed value is multiplied by a tax rate to calculate the taxes for the property.

Example:
Retail Store:
The Assessor determines the following retail store property values at the appropriate level of value:
Real Property:
Land - $40,000
Building - $160,000
Total Actual Value - $200,000
Personal Property:
Equipment - $23,000
Furniture - $17,000
Total Actual Value - $40,000
The taxpayer would receive two Notices of Valuation: a Real Property notice and a Personal Property notice.
Actual Value x 29% = Assessed Value
Real Property: $200,000 x 29% = $58,000
Personal Property: $40,000 x 29% = $11,600
The taxing entities calculate the mill levy based on the allowable budgets in the tax area. For the purpose of the example, 50 mills are used. The decimal equivalent of 50 mills is 0.050.
Assessed Value x Mill Levy = Tax Bill
Retail Store’s Tax Bill:
Real Property: $58,000 x .050 mills = $2,900 Tax Bill
Personal Property: $11,600 x .050 mills = $580 Tax Bill

Valuation of Personal Property
Personal property is not taxable until the assessment date (January 1) following the year in which the property is acquired and first put into use. Personal property value is not prorated. The valuation and taxable status as of January 1 remains for the entire year even if the property is destroyed, conveyed, enters or leaves the state, or changes taxable status after the assessment date. When any of these changes occur, taxpayers need to modify their asset listing when filing their declaration schedule the following year.

$4,000 Exemption for Personal Property:
Effective 1/1/2009, the total actual value (market value) in the county is $4,000 or less to be exempt.
If an owner’s personal property filed in the county exceeds a total actual value of $4,000, all the property is taxable including the initial $4,000.
Also, in the event additional assets are put into use which increases the total actual value of the personal property to an amount greater than $4,000 the owner must again file a declaration schedule.
Business location is defined as the actual physical location of your property as of January 1. When more than one item of personal property is located in the county, consideration of the $4,000 exemption must be based on the total actual value of all the items. To avoid a possible misunderstanding regarding whether a declaration schedule must be filed, new businesses, first time filers, and taxpayers who are unsure as to the actual value of their personal property are urged to contact the Assessor and provide an itemized listing of their personal property. All real property is valued based upon its status as of January 1, the assessment date. However, real property can be prorated under the following conditions:
Change in taxable status: When real property changes taxable status during the year, the Assessor will prorate the value of the real property. The property’s value will be based upon the number of days it was taxable.
Property improvements demolished or destroyed after the assessment date: The owner must notify the Assessor of the date the property was demolished or destroyed during the calendar year in which it was demolished or destroyed. If the owner does not notify the Assessor, no proration of value will be applied. Property value is prorated according to the number of days in existence.
NOTE: If real property is moved, taxes are not prorated; taxes are due for the entire year based on the property’s location as of the assessment date.
Portable or Movable Equipment to be Located in More Than One Country
The owner must show the following information with his personal property schedule:
Kind, description, and serial number of equipment.
The counties in which the equipment will be located.
Estimated time in each county.
Portable or movable equipment includes drilling rigs.
The Assessor will determine a value that is apportioned to each county.
NOTE: Some equipment is classified as type "F" or special mobile equipment and is valued and taxed by the local county clerk. But, this property should be declared as such on the Personal Property Declaration Schedule filed by the owner.

Starting or Operating a Business in Colorado

If you are starting a business in Colorado, request:

COLORADO BUSINESS START-UP KIT from:

Colorado Business Assistance Center
2745 Welton Street
Denver, CO 80202
Telephone: (303) 592-5920
(800) 333-7798

If you are operating a business in Colorado, request:

BUSINESS DEVELOPMENT MATERIALS from:

Office of Economic Development and International Trade
1625 Broadway, Suite 1710
Denver, CO 80202
Telephone: (303) 892-3840

Declaration Schedules
DECLARATION SCHEDULES: What is required by law?
A declaration schedule must be filed by owners of taxable Personal Property if the total actual value (market value) of all the Personal Property is greater than $4,000. All Personal Property, such as a business or organization’s equipment not otherwise exempt by law, must be listed on the schedule.

How do you file?
The declaration schedule requests property information such as description, model number, year manufactured, date acquired, original installed cost, and estimated physical condition. It also asks for your social security number or federal identification number pursuant to 39-5-107, C.R.S. If you did not receive a declaration schedule, please contact the assessor's office at (970) 641-1085, or assessor@gunnisoncounty.org. First time filers may want to call or visit the assessor's office for assistance in completing the declaration schedule.
If you have previously filed a complete itemized listing of your personal property with the assessor, you may update the list by providing changes that occurred during the prior year. Changes may include items you acquired last year (including the cost of each) and any items traded, sold, destroyed, or deleted from your list of personal property. You should review the assessor's record of your account every year to verify ts accuracy.

Who must file?
Owners of taxable Personal Property.
Owners of producing natural resource properties:
1. Oil and gas
2. Producing mines
3. Coal mines and other lands producing nonmetallic minerals
What if I don't file?
If you have taxable personal property and fail to file your declaration schedule, the assessor will establish a taxable value based on the "best information available." The Colorado Supreme Court rules that values established using the "best information available" cannot be adjusted at a later time if thetaxpayer failed to file a declaration schedule and also failed to protest the assessor's value.
Deadline for Filing Declaration Schedules - April 15

When to file?
The Assessor mails declaration schedules after January 1, and taxpayers must return them to the Assessor by April 15, 2009. If the owner does not receive a declaration schedule in the mail, one may be picked up from the Assessor’s Office.
Extension for filing personal property declaration schedules: An extension may be obtained from the Assessor’s Office by submitting a letter of request and payment of $20 for 10 days or $40 for 20 days. The extension request must be received by the April 15 filing deadline. One extension covers all schedules.

Failure to file property declaration schedule
LATE FILING PENALTY ATTACHED – Any owner of personal property who fails to file a declaration schedule by April 15 or by the end of the extension time requested, will be fined $50 or 15% of the taxes due, whichever is the lesser amount.
The Assessor will determine the property value according to the best information available.
Confidential Documents: All Personal Property Declaration Schedules and enclosed forms returned to the Assessor are considered private, confidential documents by law.

Affidavit

What is required by Law?
Within ten days of the execution of a mineral lease, the lessor must file an affidavit with the Assessor. The affidavit contains the annual net rental and is considered a confidential document.

Notification of Value

Assessor’s Responsibility
Each year, you will receive a Notice of Valuation for each class of property you own. This notice will indicate the actual value of your property and advise you of your right to appeal the value listed.

Taxpayer’s Responsibility
When you receive a Notice of Valuation, study it carefully. The notice describes the property you own, gives the actual value for both the prior and current year, advises you of the amount of change, and provides an opportunity to present your appeals to the Assessor.
Keep in mind that the changed value on the notice affects the amount of taxes you pay the following January. If the Notice of Valuation reflects a value you disagree with or if you have any questions about the valuation, call your County Assessor.

Taxpayer Remedies

THESE ARE YOUR LEGAL RIGHTS UNDER THE LAW:
If you disagree with the change in value, you must file an appeal with the Assessor in the county where the property is located.
Real Property Owners: A mailed appeal must be postmarked by June 1, or if you appear in person, you must do so by June 1.
Personal Property Owners: A mailed appeal must be postmarked by June 30, or if you appear in person, you must do so before June 30.
The Assessor must give a decision, in writing to Real Property owners and Personal Property owners by the last regular working day in June.

For more information, see the Assessment Appeals Process page.

When to Pay Property Taxes
The county treasurer is responsible for mailing and collecting the property tax bill. Each year taxpayers receive their property tax bills after January 1. If the tax amount is $10 or less, the county treasurer may add an administrative fee of $5 to your bill. If the tax amount is greater than $25, you can pay the taxes in two equal payments.
The first half payment is due in the treasurer’s Office by February 28.
The second half payment is due by June 15.
If you pay your taxes in a lump sum, the payment is due by April 30.
If your payment is late, a penalty interest is added to the tax amount.