May 22, 2017

Colorado Supreme Court: Blunt Wraps are “Kind” or “Form” of Tobacco Product Subject to Taxation

The Colorado Supreme Court issued its opinion in Colorado Department of Revenue v. Creager Mercantile Co. on Monday, May 15, 2017.

Statutory Construction—Tobacco taxation.

The supreme court granted certiorari review to determine whether Blunt Wraps, a type of cigar wrapper made in part of tobacco and designed to be filled with smoking material and smoked, may be taxed as “tobacco products,” as that term is defined in C.R.S. § 39-28.5-101(5). The court held that because Blunt Wraps are a “kind” or “form” of tobacco and are “prepared in such manner as to be suitable . . . for smoking,” they fall within the plain language of the statutory definition of “tobacco products” and are taxable accordingly. The court therefore reversed the judgment of the court of appeals.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Donor and Transferee Are One Entity for Conservation Easement Tax Credit Purposes

The Colorado Court of Appeals issued its opinion in Medved v. Colorado Department of Revenue on Thursday, October 20, 2016.

Conservation Easement Tax Credit—Statute of Limitations—Notice of Disallowance.

The Medveds purchased a conservation easement (CE) tax credit from Whites Corporation (Whites). The appraised value of the tax credit was $130,000. Whites was the CE donor and the Medveds were the CE transferees. On October 23, 2006, the Medveds filed their 2005 Colorado tax returns and claimed a $130,000 credit based on the CE. On October 30, 2007, Whites filed a Colorado State C Corporation income tax return and claimed a $260,000 credit based on the same CE.

On March 4, 2011, the Colorado Department of Revenue (Department) issued a notice of disallowance to Whites and the Medveds, disallowing the credit in its entirety. The Medveds appealed to the district court and argued the notice of disallowance was barred by the four-year statute of limitation in C.R.S. § 39-21-107(2). The Department argued that the Medveds and Whites were subject to the same statute of limitations that was triggered when the donor filed its tax return under C.R.S. § 39-22-522(7)(i). The district court found that the donor and the transferee were a single entity and were bound as to all issues concerning the tax credit to the four-year statute of limitations, which was triggered by the donor’s tax claim. Because Whites filed its return on October 30, 2007, the Department’s notice of disallowance was within the statute of limitations.

On appeal, the Medveds claimed they were not bound by the same statute of limitations as Whites. The court of appeals agreed with the Department that a donor and transferee are considered a single entity under the statute and are bound by the same statute of limitations. The Medveds also argued that the first claim filed triggers the four-year statute of limitations. Finding the statutory language ambiguous, the court considered its legislative intent and purposes and concluded that the General Assembly intended that the first claim filed, either by the donor or transferee, begins the four-year statute of limitations period. Because the Department’s notice of disallowance was beyond the four-year limitations period, the Department’s disallowance was untimely and statutorily barred.

The judgment was reversed and the case was remanded for dismissal.

Summary provided courtesy of The Colorado Lawyer.

Frederick Skillern: Real Estate Case Law — Property Taxation and Assessments

Editor’s note: This is Part 15 of a series of posts in which Denver-area real estate attorney Frederick Skillern provides summaries of case law pertinent to real estate practitioners (click here for previous posts). These updates originally appeared as materials for the 32nd Annual Real Estate Symposium in July 2014.

frederick-b-skillernBy Frederick B. Skillern

Roaring Fork Club, LLC v. Pitkin County Board of Equalization
Colorado Court of Appeals, December 5, 2013
2013 COA 167

Valuation of a private golf club property.

The Pitkin County assessor determined the value of the Roaring Fork Club property for tax year 2011, and The Pitkin County Board of Equalization and the Board of Assessment Appeals agrees with the valuation. On appeal, the club asserts that the assessor should not have included the value of sold club memberships in the assessment of the club’s property. The Court of Appeals agrees and reverses.

The club’s property is open only to its members. Membership rights are retained for life unless sold or relinquished or revoked by the club. The club uses membership deposits to improve the property and maintain the improvements. The deposits are treated as a liability for accounting purposes because all or a part of them are refunded if members maintain their membership for at least thirty years or if they resign earlier and replacement members fill their spots.

The club’s amenities were completed in 1999 and the club had sold about 82% of the memberships by 2011. The club argues that the value of the sold memberships should not be considered in determining the actual value of the club’s property for property tax purposes because they are not interests in the real property. The BOE contends that the membership deposits are akin to prepaid rent on leasehold interests and they would escape taxation if not included in the property value.

On appeal, the club and the BOE agree that the income approach is the proper method to value the club’s property. However, the county argues that the memberships are an interest in land, like a leasehold, and should be included in the value under the “unit assessment rule.” The club contends that memberships are licenses, and are not an interest in land. The court agrees, and holds: (1) the membership agreement is not a lease; (2) memberships are not life estates; (3) the membership agreement does not give members any other taxable interest in the club’s property; (4) the membership agreement establishes that memberships are revocable licenses; (5) the unit assessment rule does not apply to these memberships; and (6) the sold memberships are not usufructuary interests. Accordingly, the Board’s order is reversed and the case is remanded to hold a hearing to determine the actual value of the club’s property without taking into account the value of the sold memberships.

 

Village at Treehouse, Inc. v. Property Tax Administrator
Colorado Court of Appeals, January 16, 2014
2014 COA 6.

Property tax; unit assessment rule.

Village paid more than $1 million to purchase certain development rights from the Treehouse Condominium Association (HOA). This supposedly gave Village the right to construct up to nineteen condominium units in the complex. The development rights were created by an amendment to the Treehouse declaration in 2006. The rights were assigned to Village in 2008 in a document entitled “Warranty and Assignment of Supplemental Development Rights”. The question is whether this property right is a taxable interest in real property. The Board of Assessment Appeals found that the right to build new condominium units constituted a taxable interest in real property for ad valorem tax purposes.

On appeal, the court of appeals affirms the BAA, and holds that the assignment, in effect, severed the development rights from the common elements owned by the HOA, creating a new taxable property interest. Because the Village acquired an interest in land, taxation of the development rights was required under C.R.S. § 39-1-102(16) and (14)(a).

Because the Assignment evinced the intent to sever title to the development rights from the common elements, taxing the development rights separately from the common elements did not contravene §§39-1-103(10) or 38-33.3-105. This taxation does not violate the unit assessment rule.

The Assignment created separate interests in real estate as between the interests of the individual unit owners in the common elements and those of the developer. The order was affirmed.

 

Premises Liability, Trespass and Nuisance

S.W. v. Towers Boat Club, Inc.
Colorado Supreme Court, December 23, 2013
2013 CO 72

Attractive nuisance; premises liability statute.

The Supreme Court considers whether, in the context of our premises liability statute, the attractive nuisance doctrine applies to both (a) trespassing children and (b) children who are licensees or invitees. The Court held that the doctrine permits all children, regardless of their classification, to bring a claim for attractive nuisance. C.R.S. § 13-21-115. The court therefore reverses the judgment of the court of appeals, which had found that the doctrine only protects trespassing children.

 

Frederick B. Skillern, Esq., is a director and shareholder with Montgomery Little & Soran, P.C., practicing in real estate and related litigation and appeals. He serves as an expert witness in cases dealing with real estate, professional responsibility and attorney fees, and acts as a mediator and arbitrator in real estate cases. Before joining Montgomery Little in 2003, Fred was in private practice in Denver for 6 years with Carpenter & Klatskin and for 10 years with Isaacson Rosenbaum. He served as a district judge for Colorado’s Eighteenth Judicial District from 2000 through 2002. Fred is a graduate of Dartmouth College, and received his law degree at the University of Colorado in 1976, in another day and time in which the legal job market was simply awful.

HB 14-1001: Establishing Income Tax Credit for Property Owners Owing Property Tax for Destroyed Property

On January 8, 2014, Rep. Jonathan Singer and Sen. Jeanne Nicholson introduced HB 14-1001, Concerning the Creation of an Income Tax Credit for a Taxpayer that Owes Property Tax on Property that Has Been Destroyed by a Natural Cause. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Beginning in the 2013 income tax year, the bill establishes an income tax credit for a taxpayer that owns real or business personal property that was destroyed by a natural cause as determined by the county assessor of the county in which the property is located. The amount of the credit is an amount equal to the taxpayer’s property tax liability for the destroyed property in the property tax year in which the natural cause occurred. A taxpayer is allowed to claim the credit only for the income tax year during which the property was destroyed.

The bill requires the executive director of the department of revenue (department) to create a certification form to be used by a county assessor to certify to the department, at the request of a taxpayer, that the taxpayer’s property was destroyed by a natural cause and that the taxpayer is entitled to an income tax credit. The bill specifies the information that shall be included on the certification form for real or business personal property that was destroyed by a natural cause. The department is required to make the certification form available to taxpayers and county assessors on the department’s web site and by any other means deemed necessary by the department.

Before claiming an income tax credit, the bill requires a taxpayer to request that the county assessor in the county in which the destroyed property is located complete and sign a certification form for the destroyed property that is the basis of the income tax credit. The county assessor is required to complete and sign the certification form upon such request and the taxpayer is required to submit the completed and signed certification form to the department with the taxpayer’s income tax return.

The amount of the credit allowed that exceeds the taxpayer’s income taxes due is refunded to the taxpayer. The bill is assigned to the Finance Committee.

HB 14-1012: Replacing Colorado Innovation Investment Tax Credit with Advanced Industry Investment Tax Credit

On January 8, 2014, Rep. Max Tyler and Sen. John Kefalas introduced HB 14-1012: Concerning Income Tax Credits that Promote Investment in Colorado Advanced Industries. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill repeals the Colorado innovation investment tax credit and replaces it with the advanced industry investment tax credit (tax credit). The tax credit is available for a qualified investor who, prior to January 1, 2018, makes an equity investment in a qualified small business from the advanced industries, which consists of advanced manufacturing, aerospace, bioscience, electronics, energy and natural resources, information technology, and infrastructure engineering. The tax credit is equal to 25 percent of the investment or, if the qualified business is located in a rural area or economically distressed area, it is equal to 30 percent. The maximum amount of credit for a single tax credit is $50,000, and the maximum of all tax credits allowed for a calendar year is $2 million; except that unused tax credits from 2014 may roll over into 2015. A tax credit may not be refunded, but it may be carried forward for five tax years.

The Colorado office of economic development (office) determines the eligibility for the tax credit and issues nontransferable tax credit certificates as evidence of eligibility and the amount of the tax credit. To claim the tax credit, a taxpayer must submit a copy of the tax credit certificate. The office and the department of revenue are required to share information related to the tax credit. In 2017, the office is required to submit to legislative committees a report that includes information about the tax credits issued and the economic benefits from the related qualified investments.

The state treasurer is required to transfer moneys from the repealed innovation investment tax credit cash fund to the newly created advanced industry investment tax credit cash fund. The general assembly shall appropriate any moneys in the fund to the office for the direct and indirect costs associated with the authorizing tax credits. The bill is assigned to the Finance and Appropriations Committees.

Colorado Court of Appeals: Return on Investment Not Deductible Cost for Severance Tax Purposes

The Colorado Court of Appeals issued its opinion in BP America Production Co. v. Colorado Department of Revenue on Thursday, November 7, 2013.

Return on Investment—Severance Tax—Deductable Cost.

The Colorado Department of Revenue (Department) appealed the judgment entered in favor of BP America Production Company (BP) on BP’s motion for summary judgment. The Court of Appeals reversed the judgment and remanded the case for entry of judgment in the Department’s favor.

The trial court found that return on investment (ROI) is a deductible cost for severance tax purposes under CRS § 39-29-102(3)(a), and allowed BP to deduct such expenses from its tax returns. BP’s ROIs were associated with facilities used for transporting, manufacturing, and processing natural gas.

The Department contended that the trial court erred in holding that ROI is a deductible transportation or processing cost under CRS § 39-29-102(3)(a). CRS § 39-29-105(1)(a) imposes a tax on “the gross income of crude oil, natural gas, carbon dioxide, and oil and gas severed from the earth” in Colorado. A taxpayer’s gross income is “the net amount realized by the taxpayer for sale of the oil or gas.” The net amount is calculated based on “the gross lease revenues, less deductions for any transportation, manufacturing, and processing costs borne by the taxpayer.” ROI is not a cost that has already been expended to transport or process oil or gas from its point of extraction at the wellhead. Because only costs incurred directly for the transportation or processing of oil or gas are allowable deductions under the statute, ROI is not a deductible cost. Therefore, the trial court erred when it allowed ROI as a deductible transportation or processing cost under CRS § 39-29-102(3)(a).

Summary and full case available here.

Tenth Circuit: In Tax Evasion Case, Conviction Affirmed, Sentence Reversed

The Tenth Circuit Court of Appeals published its opinion in United States v. Melot on Monday, October 21, 2013.

After a jury trial, appellant Bill Melot was convicted of one count of corruptly endeavoring to impede the administration of the Internal Revenue Code, one count of attempting to evade or defeat tax, six counts of willful failure to file, and seven counts of making false statements to the Department of Agriculture. Melot was sentenced to a term of sixty months’ imprisonment, a significant downward variance from the advisory guidelines range of 210-262 months. He was also ordered to pay $18,493,098.51 in  restitution to the Internal Revenue Service.

On appeal, Melot argued the Government presented insufficient evidence of willfulness to support his convictions and erred in the calculation of the tax loss and the amount of restitution. The Government cross-appealed, arguing the district court committed clear error by applying a two-level reduction to Melot’s offense level for acceptance of responsibility.

Regarding Melot’s conviction, the Tenth Circuit held that the Government’s evidence demonstrated overwhelmingly that Melot engaged in behavior consistent with an individual who had actual knowledge of his obligation to file returns and pay tax. The Government’s evidence showed Melot routinely concealed income and assets from the IRS; used cash extensively, informing others that this was a means to avoid the payment of income taxes; and acted in a manner inconsistent with his asserted belief he was not subject to federal income taxes because he was not a citizen of the United States. All of the Government’s evidence, together with the reasonable inferences that could be drawn from it, was amply sufficient to support the jury’s finding that Melot was aware of his obligation to file returns and pay federal taxes and negated any inference Melot acted in good faith.

On the issue of Melot’s sentence, Melot argued some evaded state fuel excise taxes did not qualify as relevant conduct because they were not groupable with his offenses of conviction. However, the court concluded the offenses of conviction and the evasion of fuel excise taxes were part of a common scheme or plan because both had a common purpose—the defeat of taxes owed.

In its cross-appeal, the Government argued the district court clearly erred in granting Melot a two-level decrease in his offense level for acceptance of responsibility. The Sentencing Guidelines provide that a defendant can meet his burden by showing, inter alia, he truthfully admitted the conduct comprising the offense of conviction or voluntarily paid restitution prior to adjudication of guilt. U.S.S.G. § 3E1.1. A review of the record confirmed Melot did neither of these things, nor did he engage in any other conduct demonstrating an acceptance of responsibility for his offenses. Because the record contained absolutely no evidence supporting the application of the acceptance-of-responsibility reduction but, instead, clearly demonstrated Melot did not accept responsibility for his criminal conduct, the district court’s determination that he was entitled to the § 3E1.1 decrease was clearly erroneous and Melot’s sentence had to be reversed.

The Tenth Circuit AFFIRMED Melot’s convictions and REVERSED his sentence.

HB 13-1318: Creating Excise and Sales Taxes to be Levied on Retail Marijuana

On April 18, 2013, Rep. Jonathan Singer introduced HB 13-1318 – Concerning the Recommendations Made in the Public Process for the Purpose of Implementing Certain State Taxes on Retail Marijuana Legalized by Section 16 of Article XVIII of the Colorado Constitution. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Subject to voter approval at the statewide election in November 2013, the bill imposes a sales tax and an excise tax on the sale of retail marijuana, which was legalized by section 16 of article XVIII of the state constitution.

Sales tax: Beginning Jan. 1, 2014, the bill imposes a tax of 15 percent on the sale of retail marijuana or retail marijuana products to a consumer by a retail marijuana store. The tax imposed is in addition to the 2.9 percent state sales tax and any local government sales tax that is imposed on the sale of all property and services pursuant to current law.

On or after Jan. 1, 2014, the general assembly is authorized to establish a rate that is lower than 15 percent by a bill enacted by the general assembly and signed into law by the governor. After establishing a tax rate that is lower that 15 percent the general assembly may increase the rate by bill enacted by the general assembly and signed into law by the governor, so long as the rate does not exceed 15 percent. An increase in the rate does not require additional voter approval.

A retail marijuana store is required to add the tax imposed as a separate and distinct item, and when added, the tax constitutes a part of the total price of the retail marijuana or retail marijuana products purchased. A retail marijuana store is required to collect and remit the tax to the department in the same manner as the state sales tax is collected and remitted to the department pursuant to current law.

Of the revenues collected pursuant to the 15 percent sales tax, 10 percent will be distributed to each local government in the state that has one or more retail marijuana stores within its boundaries. Each local government’s share of the revenues collected shall be apportioned according to the percentage of retail marijuana and retail marijuana products sales tax revenues collected by the department in the local government as compared to the total retail marijuana and retail marijuana products sales tax collections that may be allocated to all local governments in the state. The remaining revenues shall be deposited in the marijuana cash fund and appropriated as directed by the general assembly.

Excise tax: Beginning Jan. 1, 2014, the bill imposes a tax on the sale or transfer of unprocessed retail marijuana by a retail marijuana cultivation facility to a retail marijuana store, retail marijuana product manufacturing facility, or another retail marijuana cultivation facility. The amount of the tax is 15% of the average market rate of unprocessed retail marijuana statewide on the date that it is sold or transferred, as determined by the department, and the tax is imposed when a retail marijuana cultivation facility sells or transfers unprocessed retail marijuana to a retail marijuana store, a retail marijuana product manufacturing facility or another retail marijuana cultivation facility.

On or after Jan. 1, 2014, the general assembly is authorized to establish a rate that is lower than 15 percent of the average market rate by a bill enacted by the general assembly and signed into law by the governor. After establishing a tax rate that is lower that 15 percent the general assembly may increase the rate by bill enacted by the general assembly and signed into law by the governor, so long as the rate does not exceed 15 percent. An increase in the rate does not require additional voter approval.

The bill specifies that every retail marijuana cultivation facility is required to keep certain records regarding the sale or transfer of unprocessed retail marijuana and is required to collect and remit the tax to the department.

As required by section 16 of article XVIII of the state constitution, the bill specifies that the first $40 million received and collected in payment of the excise tax on unprocessed retail marijuana shall be transferred to the public school capital construction assistance fund currently created in law. Any amount remaining after the transfer shall be transferred to the marijuana cash fund.

Revenue and spending limitations: The bill allows the state to collect and spend any revenues generated by the retail marijuana sales tax and retail marijuana excise tax as voter approved revenue changes.

Submission of ballot questions by the secretary of state: The bill requires the secretary of state to submit a ballot question at the statewide election to be held in November 2013 asking the voters to:

  • Allow the general assembly to impose a retail marijuana sales tax at a rate not to exceed 15 percent of the sale of retail marijuana and retail marijuana products;
  • Allow the general assembly to impose a retail excise tax at a rate not to exceed 15 percent of the average market rate of unprocessed retail marijuana on unprocessed retail marijuana at the time when a retail marijuana cultivation facility sells or transfers retail marijuana to a retail marijuana product manufacturing facility, a retail marijuana store, or another retail marijuana cultivation facility;
  • Allow the general assembly to decrease or increase the rate of either tax without further voter approval so long as the rate does not exceed 15 percent for either tax; and
  • Allow any additional tax revenue to be collected and spent notwithstanding any limitations in TABOR or any other law.

Marijuana cash fund: The bill changes the name of the existing medical marijuana license cash fund to the marijuana cash fund.

The bill specifies that the sale of marijuana or marijuana products by a medical marijuana center to a consumer and the sale or transfer of unprocessed marijuana by a marijuana cultivation facility to a medical marijuana center are not subject to either tax. The department of revenue (department) is required to promulgate rules for the implementation of both taxes.

On April 25 the Finance Committee amended the bill and sent it to the Appropriations Committee. On April 26, the Appropriations Committee amended the bill and sent it to the floor of the House for consideration on 2nd Reading.

Since this summary, the bill was amended in the House on Second Reading but passed, and also passed Third Reading in the House. It has been introduced in the Senate and assigned to the Finance Committee.

SB 13-281: Expediting the Resolution of Disputes Related to Tax Credits for Donation of a Perpetual Conservation Easement

On Thursday, April 18, 2013, Sen. Larry Crowder introduced SB 13-281 – Concerning the Expeditious Resolution of Disputed Claims for State Income Tax Credits Allowed for the Donation of a Perpetual Conservation Easement. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Taxpayers may claim a state income tax credit for a portion of the value of a perpetual conservation easement that the taxpayer donates. If the executive director of the department of revenue disputes the claim of the credit, current law sets forth procedures for resolving the claim administratively or through an appeal process in the courts. In the past, a significant number of claims have been disputed and are in the process of being resolved.

The bill requires all disputes for tax credits claimed prior to July 1, 2008, to be resolved by July 1, 2014, and prohibits the state from using any funds, resources, or personnel to continue to litigate these disputed claims after that date.

The bill was introduced on April 18 and assigned to the State, Veterans, & Military Affairs Committee. The bill is scheduled for committee review on May 1 at 1:30 p.m.

SB 13-256: Authorizing Any County or City and County to Use an Alternate Property Tax Protest and Appeal Procedure First Implemented in Denver

On Tuesday, April 9, 2013, Sen. Owen Hill introduced SB 13-256 – Concerning Authorization for Any County or City and County to Elect to Use an Alternate Property Tax Valuation Protest and Appeal Procedure Previously Created for the City and County of Denver. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Currently, the county board of equalization receives and hears petitions for appeal regarding the valuation for assessment of taxable property. The county board of equalization process has multiple filing deadlines and addresses multiple valuation appeals in a single year. The board of county commissioners also receives and hears petitions for appeal and has jurisdiction over petitions for abatement or refund of taxes, including assessment of taxable property overvaluation. The board of county commissioners’ process has one filing deadline and can address valuation appeals, abatements, and refunds over multiple years.

House Bill 13-1113 created a pilot program that authorizes the governing body of the city and county of Denver, at the request of the assessor, to elect to use an alternate protest and appeal procedure that combines the multiple steps in the annual valuation dispute process through the county board of equalization into the single hearing and appeal process conducted by the board of county commissioners. House Bill 13-1113 specifies the filing deadlines for tax petitions and for resolving valuation disputes for the city and county of Denver to use the alternate protest and appeal procedure.

The bill expands the pilot program created by House Bill 13-1113 so that any county or city and county in the state may elect to use the alternate protest and appeal procedure.

Introduced on April 9, the bill has been is assigned to the Finance Committee; the bill is scheduled for committee review on April 18, “Upon Adjournment.”

Since this summary, the Finance Committee referred the bill, unamended, to the Senate Committee of the Whole for consideration on Second Reading.

The American Taxpayer Relief Act of 2012: Bidding Adieu to the Sunset (Part 3)

Editor’s Note: This is Part 3 of a 3-Part Series. For Part 1, click here, and for Part 2, click here.

By Merry H. Balson and Laurie A. Hunter

Return of the Charitable IRA Rollover Through 2013. The 2012 Tax Act extended the IRA charitable rollover rules through 2013. These rules were originally put in place in 2006, and had expired at the end of 2011. The charitable IRA rollover provisions allow individuals who are 70 ½ or older to transfer (or “rollover”) up to $100,000 per year from their IRAs to most charities on a “tax neutral” basis if the transfer is a “qualified charitable distribution” and satisfies certain rules. Qualified Charitable Distributions will not count as taxable income to the individual (as would usually be the case in any other distribution from an IRA) but no charitable income tax deduction is allowed for the contribution. Transfers must be directly from the IRA trustee to the charity to qualify. Additionally, transfers to private foundations, donor advised funds, supporting organizations or split-interest trusts (such as charitable remainder or charitable lead trusts) do not qualify for this special treatment. Because the charitable IRA rollover had expired in 2011 and has now been reinstated retroactively for 2012, taxpayers were also allowed to treat distributions from IRAs made after November 20, 2012 and before January 31, 2013 as a charitable IRA rollover for 2012, if that distribution is made in cash to charity before January 31, 2013. As a result, in 2013 taxpayers had an opportunity to give up to $200,000 to charity from their IRAs (with $100,000 treated as given in 2012) if they acted by the end of January.

Other Annual Extenders. The 2012 Tax Act also extended a number of credits and deductions that have been extended year by year for some time, and did not make them “permanent.” These include the American Opportunity Tax Credit,[1] more favorable conservation easement rules,[2] more favorable depreciation rules, the wind energy credit, and research and development credits.

Health Care Act Changes. Finally, changes taking place in 2013 include raising the medical expense deduction to 10% of adjusted gross income from 7.5%, and the new 3.8% surtax on net investment income for single taxpayers with $200,000 “modified” adjusted gross income and $250,000 for married filing jointly.

Conclusion

The 2012 Tax Act is replete with references to permanence. While that might provide comfort to some, keep in mind that the provisions of the 2012 Tax Act are only truly permanent until Congress and the President decide to change them. Until then, we can all breathe a sigh of relief that sunset never came to pass, and for the first time in decades advise our clients about the tax implications of their gifts during life and at death with some measure of certainty.

Merry H. Balson is Of Counsel at Wade Ash Woods Hill & Farley, P.C., where her practice emphasizes estate planning, estate and trust administration and forming and advising exempt organizations. She can be reached at mbalson@wadeash.com or 303-329-2215.

Laurie A. Hunter is a Shareholder at Wade Ash Woods Hill & Farley, P.C., where her practice emphasizes estate planning, probate and trust administration. She can be reached at lhunter@wadeash.com or 303-329-2227.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

 


[1] Pub.L. 112-240, Sec. 103, H.R. 8, 126 Stat. 2313 (2013).

[2] Pub.L. 112-240, Sec. 206, H.R. 8, 126 Stat. 2313 (2013).

HB 13-1246: Allowing Property Tax Exemptions for Property Used for Charitable Purposes

On March 4, 2013, Rep. Lois Court and Sen. Pat Steadman introduced HB 13-1246 – Concerning Modifications in Connection with Current Property Tax Exemptions for Nonprofit Organizations. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Tax exempt property acquired by nonprofit housing provider for low-income housing: Current law allows a property tax exemption for real property acquired by a nonprofit housing provider upon which the provider intends to construct or rehabilitate housing to be sold to a low-income applicant. The bill modifies the property tax exemption by also allowing it to apply to real property acquired by a nonprofit housing provider that the provider intends to sell to a low-income applicant for the purpose of constructing or rehabilitating housing for the low-income applicant’s residential use.

In addition, the bill changes the criteria to qualify as a low-income applicant from an individual or family whose total median income is no greater than 60 percent of the area median income to an individual or family whose total median income is no greater than 80 percent of the area median income.

Waiver of filing deadline for annual report from owners of tax-exempt property: An owner of property that is exempt from property tax as determined by the property tax administrator is required to file an annual report to the state board of equalization (state board) regarding the tax-exempt property. Currently, the state board may waive the filing deadline for the annual report under certain circumstances. The bill allows the state board to determine a deadline for the property owner to file the report when granting the waiver and specifies that the waiver is invalid after the date established by the state board.

Effective date of property tax exemptions when a public official has made an error: The property tax administrator is currently authorized to grant a property tax exemption for certain types of property. The property tax administrator may grant the exemption back to Jan. 1 of the year preceding the year in which the application was filed, but no earlier. The bill allows the state board to authorize the property tax administrator to make an exemption effective earlier than is currently allowed when the property has been added back to the tax roll as omitted property and would otherwise have met all criteria for exemption during the time that it was omitted.

On March 27, the House gave final approval to the bill on 3rd Reading; the bill has not been assigned to a committee in the Senate.

Since this summary, the bill has been assigned to the Finance Committee in the Senate.