Editor’s Note: Law Week Colorado edits court opinion summaries for style and, when necessary, length.
The Colorado Supreme Court made multiple rulings May 30 involving COVID-19 and property tax assessments.
MJB Motels LLC et al. v. County of Jefferson Board of Equalization et al.
The Colorado Supreme Court en banc unanimously affirmed an order in a case involving the valuation of many commercial real property parcels in Jefferson County.
According to the high court’s opinion, the Colorado Constitution has a directive to achieve just valuations for taxing property. The Colorado General Assembly enacted a statutory framework that established a backward-looking, two-year reassessment cycle for property taxes in Colorado under Colorado Revised Statute 39-1-104(10.2)(a).
In odd-numbered years, which would be the first year of the two-year cycle, the assessor determines the actual value of the property, which the assessor uses to determine a valuation for assessment. The actual value doesn’t reflect the current value of the property on the Jan. 1 assessment date under 39-1-105. According to the opinion, it’s based on data gathered during a one-and-a-half-year period immediately prior to July 1 preceding the assessment date.
Usually, property valuations are calculated only once every two years and the actual value for the first odd-numbered year carries over to the second even-numbered year of the biennial assessment cycle. Section 39-1-104(11)(b)(I) tells assessors to revalue a property before the next odd-year assessment date under certain circumstances including when unusual conditions would result in an increase or decrease in actual value.
The unusual conditions exception allows a revaluation where a change in the property or the property’s use rendered application of the base year value unjust. Those conditions that require an assessor to reassess the actual value of the property are limited to multiple factors including any new regulations restricting or increasing the use of the land.
The petitioners, in this case, are taxpayers who own commercial real property in Jefferson County. On Dec. 10, 2020, they sued the County of Jefferson Board of Equalization and the Jefferson County Assessor in Jefferson County District Court. The complaint alleged in the beginning of March 2020, due to the COVID-19 pandemic, Colorado state and local authorities began issuing many executive orders and regulations restricting the use of the plaintiffs’ properties.
According to the taxpayers, the pandemic and other related orders issued by the governor, Colorado Department of Public Health & Environment and Jefferson County Public Health were unusual conditions under 39-1-104(11)(b)(I) that required the Jefferson County Assessor to revalue their properties and required the Board of Equalization to lower the assessor’s valuations of the their properties for the 2020 tax year.
The taxpayers argued the COVID-19 pandemic was a detrimental act of nature and the public health orders issued were new regulations restricting the use of their land. The taxpayers estimated the value of their properties for the 2020 tax year were 50% less than the assessor’s valuations.
In June 2021, the county filed a motion to dismiss arguing the taxpayers failed to state a claim for relief; the pandemic and public health orders occurred after the statutory timeframe for consideration of an unusual condition for the 2020 tax year; and the COVID-19 pandemic and related public health orders weren’t unusual conditions.
On Sept. 23, 2021, the district court dismissed the taxpayers’ complaint on the grounds the pandemic and public health orders didn’t qualify as unusual conditions. The district court concluded the pandemic wasn’t a detrimental act of nature because, unlike direct forces (forest fires, landslides, etc.), the pandemic’s impacts on real property were indirect and intangible.
The district court also found the public health orders didn’t qualify as regulations restricting the use of the land because the orders didn’t regulate the land itself.
The taxpayers appealed and the Colorado Court of Appeals filed a motion of determination of jurisdiction requesting this case, along with its three companion cases, be referred to the Colorado Supreme Court because they raised significant issues of public importance. The high court granted the motion and accepted jurisdiction.
In this case, the high court held COVID-19 wasn’t a detrimental act of nature and the orders issued in response to the pandemic weren’t regulations restricting the use of land under 39-1-104(11)(b)(I).
The high court wrote an unusual condition needs to fall within an act of nature and in or related to any real property. The high court concluded COVID-19 met neither of those requirements.
The order was affirmed.
Hunter Douglas Inc. et al. v. City and County of Broomfield Board of Equalization et al.
The Colorado Supreme Court en banc unanimously affirmed another order involving commercial property owners’ taxes in the City and County of Broomfield.
The taxpayers contended the pandemic and state and local public health orders were unusual conditions that required the revaluation of the properties under 39-1-104(11)(b)(I). The lower court disagreed granting summary judgment to Broomfield.
The Colorado Supreme Court accepted jurisdiction under this case as well, after the taxpayers appealed. The high court concluded COVID-19 wasn’t a detrimental act of nature and the orders issued in response to COVID-19 weren’t regulations restricting the use of land.
The high court wrote 39-1-104(11)(b)(I) didn’t require the City and County of Broomfield Assessor to revalue the taxpayers’ 2020 property valuations and didn’t require the Board of Equalization to correct the assessor’s evaluations.
The order was affirmed.
Larimer County Board of Equalization et al v. 1303 Frontage Holdings LLC et al.
The Colorado Supreme Court en banc unanimously reversed an order involving the valuation of many parcels of commercial property in Larimer County.
According to the Colorado Supreme Court opinion, under 39-1-104(10.2), assessors don’t appraise real property every year as the Colorado General Assembly created a two-year reassessment cycle where the value is determined every other year. The actual value of a property assessed as of Jan. 1 in odd-numbered years is automatically carried forward without further evaluation as the actual value of the property for Jan. 1 in the next even-numbered year.
The reassessment cycle is backward-looking, meaning the assessor’s goal is not to find the value of the property for the first year of the reassessment cycle, but rather the actual value is based on data gathered during the 18-month base period immediately prior to July 1 preceding the first year of the reassessment cycle. It is known as the level of value. The level of value is the amount used to calculate the property tax assessment for the first odd year and the second even year in each reassessment cycle.
The level of value for the 2019 tax year and 2020 tax year for real property in Larimer County was determined based on data gathered between Jan. 1, 2017 and June 30, 2018. Since the system is biennial, the same level of value was used for the Jan. 1, 2019 assessment date and Jan. 1, 2020 assessment date. Once the level of value for a particular property is established for the two-year reassessment cycle, Colorado law doesn’t authorize an assessor to revalue the property until Jan. 1 of the next two-year reassessment cycle, subject to certain limited exceptions.
These exceptions include total destruction of property, unusual conditions and clerical error. Once the levels of the value for taxpayers’ properties were established for the Jan. 1, 2019 assessment date and those values were carried forward to the Jan. 1, 2020 assessment date, the Larimer County assessor couldn’t revalue and reassess those properties, unless under certain narrow exceptions under statute.
In addition to the Jan. 1 assessment date, the statutory scheme specifies annual deadlines for tax assessors that inform and allow taxpayers to make objections to assessments for that year.
The dispute, in this case, centers on the unusual conditions exception. The unusual conditions explicitly include remodeling of a structure or damage short of total destruction of the property due to a fire or explosion, under 39-1-104(11)(b)(I).
According to the Colorado Supreme Court, one of the benefits of the biennial property tax system is taxpayers receive a lower valuation when property values increase over time. Conversely, in the years when property values decrease after the 18-month base period, the county benefits from a higher valuation.
The Colorado Supreme Court asked, what if something occurs in the middle of the tax year that allegedly significantly changes the actual value of real property after it’s already been assessed?
The petitioners in this case are many individuals and entities that pay property taxes for numerous parcels of real property in Larimer County. The taxpayers alleged their businesses suffered economically as a result of public health orders related to COVID-19. Due to the economic losses, the taxpayers asserted their property values decreased such that the levels of value reflected in their Jan. 1, 2020 tax assessments weren’t correct. They appealed to the assessor demanding they immediately revalue their commercial property and decrease their property tax assessments for that year.
The taxpayers argued COVID-19 and the public health orders were unusual conditions under 39-1-104(11)(b)(I), obligating the assessor to revalue their properties. The assessor denied their requests on the grounds the unusual condition triggering revaluation needs to occur before the Jan. 1, 2020 assessment date applicable that year so revaluation wasn’t required for an unusual condition that occurred during the 2020 tax year.
The assessor found that because the alleged unusual conditions began in March 2020, it wouldn’t trigger a revaluation, but would be considered during the next base period.
In August 2020, the Larimer County Board of Equalization similarly denied the taxpayers’ appeal for a midyear revaluation, concluding the properties were fairly and equitably valued. The taxpayers then sought relief in district court.
Larimer County moved for a determination of a question of law under Colorado Rule of Civil Procedure 56(h). The taxpayers filed a motion for summary judgment, as did the county in a cross-motion.
The county sought summary judgment on the grounds the COVID-19 pandemic wasn’t an unusual condition under 39-1-104(11)(b)(I); the public health orders identified in the complaint aren’t regulations restricting the use of land; and the taxpayers seeking revaluation needed to prove a change in their property value.
Ruling first on the county’s motion for determination of law, the district court held title 39 allowed the assessor to consider an unusual condition that occurred after the Jan. 1, 2020 assessment date be taken into consideration for the 2020 tax year.
The district court then granted the taxpayers’ motion for summary judgment.
The court concluded the unusual conditions that occurred after Jan. 1, 2020, did require a revaluation and reassessment during the 2020 tax year. The court further concluded 39-1-104(11)(b)(I) doesn’t require each taxpayer to show a diminution in property value to trigger reassessment.
The lower court was persuaded that the taxpayers needed to prove an unusual condition. The district court also determined COVID-19 and the public health orders qualified as unusual conditions, finding COVID-19 constituted a detrimental act of nature and public health orders restricted the use of land.
Larimer County appealed and the case ended up in the Colorado Supreme Court.
The high court concluded article 1 of title 39 doesn’t require an assessor to revalue real property when an unusual condition occurs in the middle of the tax year. It further found an unusual condition after the Jan. 1 tax assessment date is considered the next property tax year. Since the taxpayers sought revaluation in 2020 based on alleged unusual conditions after Jan. 1, 2020, the district court erred granting the taxpayers’ motion for summary judgment, the high court wrote.
The high court further concluded that taxpayers have the burden of proving an unusual condition existed before the Jan. 1 assessment date, the unusual condition impacted their properties and the assessed value of their properties was incorrect. It also concluded, like in the other cases, COVID-19 wasn’t a detrimental act of nature and orders issued in response to COVID-19 weren’t regulations restricting the use of land and, as such, didn’t trigger property revaluations in Larimer County in 2020.
The high court reversed the district court’s order and held the taxpayers don’t have the statutory right to property tax revaluations for the 2020 tax year.
Educhildren LLC et al. v. County of Douglas Board of Equalization et al.
The Colorado Supreme Court en banc unanimously affirmed an order involving many commercial property owners in Douglas County.
According to the opinion, like the taxpayers in the other counties, they asserted the COVID-19 pandemic and orders related to it were unusual conditions under 39-1-104(11)(b)(I) that decreased their property values for the 2020 tax year. The Douglas County taxpayers also contended that because the unusual conditions caused their property values to decrease, they had a right by statute for reassessment in 2020.
A district court originally granted Douglas County’s motion to dismiss.
In 1303 Frontage, the Colorado Supreme Court held, after interpreting article 1 of title 39, the Jan. 1 annual statutory assessment date cut-off applied to the unusual conditions exception. Under that rule, for an unusual condition to compel a county tax assessor to revalue real property for an intervening year, the condition needs to have occurred before Jan. 1 at noon of the intervening year.
In 1303 Frontage, that meant because the pandemic and public health orders occurred in March 2020, after the Jan. 1, 2020 assessment deadline, the Larimer County Tax Assessor wasn’t required to revalue the taxpayers’ commercial properties in that county. In 1303 Frontage, the timing issue was dispositive, according to the high court, and they held that in this case as well.
After applying its holding in 1303 Frontage, the Colorado Supreme Court considered one identical and one related issue in this case: whether the Douglas County Tax Assessor had the discretion to revalue properties when a purported unusual condition occurred during the intervening year (after Jan. 1, 2020) and whether the assessor can consider unusual conditions that occur outside the 18-month base period from Jan. 1, 2017-June 30, 2018.
The Colorado Supreme Court concluded under 39-1-104(11)(b)(I) a county tax assessor cannot properly revalue and reassess property when an unusual condition occurs after the Jan. 1 assessment date for the intervening year in the reassessment cycle.
The high court found an assessor doesn’t have discretion to revalue and reassess property under these circumstances in the middle of a tax year. It further concluded that an unusual condition occurs after the Jan. 1 tax assessment date is properly considered in the next tax year.
The Colorado Supreme Court affirmed the district court’s order granting the motion to dismiss, albeit on different grounds.