June 24, 2019

James Johnson: Colorado Amends “Agricultural Land” Classification

Post by James T. Johnson and Kimberly A. Martin

In May of this year, Governor Hickenlooper signed into law House Bill 11-1146, which amends the statutory definition of “agricultural land” for property tax purposes.  Historically, land underlying a residence located on a parcel of property that otherwise was classified as “agricultural land” was also classified as agricultural land for property tax purposes.  This classification resulted in the residence being qualified for more favorable “agricultural” property tax treatment as compared to the residential classification.

Under House Bill 11-1146, now excluded from the classification of “agricultural land” is up to two acres of land upon which a “residential improvement” is located if the residential improvement is not “integral to an agricultural operation” conducted on the land.  Any such excluded land will be classified as “residential land” for property tax purposes, but the remainder of the property would retain its agricultural classification.  If the residence is integral to the operation of a farm or ranch, the classification does not change.  Further, vacant land or any other land upon which a residence is not located, whether or not subdivided, is not affected by this legislation.

House Bill 11-1146 does not expressly define “integral” but provides that a residence is deemed integral to an agricultural operation if the person occupying such residence “either regularly conducts, supervises, or administers material aspects of the agricultural operation or is the spouse or a parent, grandparent, sibling, or child” of such person. As with all classifications of property for taxation purposes, the applicable county assessor is responsible for making the determination of whether property underlying a residence should be classified as “agricultural land” or “residential land,” in other words, whether the residence is “integral” to a farm or ranch operation. The determination may be appealed to the applicable county board of equalization.

Implementation of House Bill 11-1146 may implicate the Taxpayer Bill of Rights (TABOR), in that it may result in an increase in tax revenues to local governments and/or special districts in excess of the revenue limits prescribed by TABOR. If the local government or special district previously has not obtained voter approval to retain and spend excess revenues (known as “de-Brucing”) and determines that the implementation of House Bill 11-1146 will cause a net property tax gain that exceeds TABOR’s limits, House Bill 11-1146 provides that the government or district may place the issue before the voters for approval. If the voters do not approve the retention of the excess revenues, or if the government or district does not submit the issue to the voters, it must adjust its mill levy to eliminate any such net property tax revenue gain.

House Bill 11-1146 will apply to the 2012 property tax year and all subsequent tax years.

James Johnson is a Shareholder in Otten Johnson’s land use, real estate, and litigation groups. He represents clients in all aspects of real estate development and related issues, including disputes regarding entitlement approvals and eminent domain.

Kimberly Martin is s an associate in the firm’s land use and real estate practice groups. Her practice focuses on all aspects of entitlement matters.

They contribute to the firm’s Rocky Mountain Real Estate Law blog, where this post (and a client alert) originally appeared on August 23, 2011.

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