Lodging Property Tax Treatment
The bill will have significant implications for property owners engaging in short-term rental activities, especially as classification can directly affect the property tax assessment and thus the financial liabilities of these owners. For properties classified as lodging, the actual value will be determined exclusively through a market approach rather than by other methods that may consider different factors. Additionally, a pilot program will be established for a statewide database to track short-term rental activity, facilitating better oversight and assessment.
Senate Bill 24-033 proposes changes to the property tax classification of short-term rental units in Colorado. Effective from January 1, 2026, the bill stipulates that short-term rental units will be classified as either residential real property or lodging property based on their usage during the preceding year. Specifically, units leased for short-term stays for 90 days or fewer will be classified as residential, while those leased for more than 90 days will be classified as lodging property. This classification scheme is intended to standardize how such properties are assessed for property tax purposes, which may help local governments regulate short-term rentals more effectively.
The proposed classifications have generated discussions among legislators and stakeholders. Proponents argue that the legislation will create clearer definitions and more consistent property tax treatment for short-term rentals, which is growing in prevalence and complexity due to platforms like Airbnb and VRBO. However, opponents may see potential drawbacks in terms of enforcement challenges for local jurisdictions wishing to regulate short-term rentals at their discretion. The effective classification system could lead to disparities in tax responsibilities between property owners who engage in different levels of rental activity, inciting community debates about fairness and local agency.
The bill has undergone initial review within the Senate committee, where it has seen some contention reflected in voting patterns. As of the latest voting record on April 16, 2024, the bill received one vote in favor versus six against, indicating challenges ahead as it moves through the legislative process. The ongoing discussions suggest a need for negotiation to address concerns from various stakeholders while finding a balanced approach to the evolving landscape of short-term rental taxation.