June 23, 2018

Colorado Court of Appeals: Determining Ownership Requires Examining Right to Possess, Use, and Control Property

The Colorado Court of Appeals issued its opinion in Kelly v. Board of County Commissioners on Thursday, May 31, 2018.

Property Tax—Residential Land—Common Ownership—Vacant Land—C.R.S. § 39-1-102(14.4)(a).

Kelly purchased two adjacent parcels of land in Summit County. She built a home on one parcel and left the subject parcel vacant. Sometime later, Kelly placed the residential parcel in an irrevocable trust and the subject parcel in a revocable family trust. Kelly was the settlor, trustee, and beneficiary of both trusts.

For tax purposes, the Summit County Assessor classified the residential parcel as residential land but the subject parcel as vacant land, which is taxed at a higher rate. In 2016, Kelly appealed the subject parcel’s classification to the Summit County Board of County Commissioners, requesting that it be reclassified as residential under C.R.S. § 39-1-102(14.4)(a), and sought a tax abatement for the tax years 2014 and 2015. The County denied the petition. The Board of Assessment Appeals (BAA) affirmed, finding that because the two parcels were owned by two separate trusts, they were not commonly owned and therefore the subject parcel did not qualify under the statutory section.

On appeal, Kelly contended that the BAA erred in concluding that the subject parcel was not residential land. She argued that the BAA misconstrued the “common ownership” element of C.R.S. § 39-1-102(14.4)(a). The statute does not define common ownership, and the Property Tax Administrator has neither defined nor offered guidance to assessors on determining whether parcels are under common ownership. The BAA and the County interpreted “common ownership” to mean the same record titleholder. The court of appeals focused its analysis on the meaning of “ownership,” noting that ownership goes beyond mere record title and focuses on who has the power to possess, use, enjoy, and profit from the property. It concluded that ownership of contiguous parcels for purposes of C.R.S. § 39-1-102(14.4)(a) depends on a person’s or entity’s right to possess, use, and control the contiguous parcels. Here, the unchallenged testimony that Kelly was the beneficiary, trustee, and settler of both trusts established that Kelly held legal title to and was the equitable owner of both parcels. Further, Kelly testified that she only placed the parcels in the trusts on the advice of counsel for tax and estate planning purposes and that she possessed, controlled, and used the parcels before and after they were placed in trust. The Assessor testified that she considered the parcels separate simply because the names on the trusts were different. The court of appeals concluded that the parcels were under common ownership for tax years 2014 and 2015 and the BAA erred in denying the request to reclassify the subject property.

Kelly also argued that the BAA abused its discretion when it rejected the parties’ stipulation that the contiguous parcels element was not at issue. The BAA’s decision to reject the signed stipulation two months after the close of evidence and without notice to the parties was manifestly unfair.

The BAA’s order was reversed and the case was remanded with directions for the BAA to reclassify the subject parcel as residential land.

Summary provided courtesy of Colorado Lawyer.

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