Opinion ID: 6316310
Heading Depth: 2
Heading Rank: 2

Heading: Real Property Taxation and Valuation

Text: ¶27 Article X of the Colorado Constitution sets forth the basic framework for taxation in Colorado. Article X, section 3(1)(a) provides, in pertinent part: The actual value of all real and personal property not exempt from taxation under this article shall be determined under general laws, which shall prescribe such methods and regulations as shall secure just and equalized valuations for assessments of all real and personal property not exempt from taxation under this article. Valuations for assessment shall be based on appraisals by assessing officers to determine the actual value of property in accordance with provisions of law, which laws shall provide that actual value be determined by appropriate consideration of cost approach, market approach, and income approach to appraisal. ¶28 The General Assembly has codified this taxation framework in a number of statutes that bear on the issues now before us. ¶29 For example, section 39-1-103(5)(a), C.R.S. (2021), provides, in part: All real and personal property shall be appraised and the actual value thereof for property tax purposes determined by the assessor of the county wherein such property is located. The actual value of such 12 property, other than [certain exceptions not applicable here], shall be that value determined by appropriate consideration of the cost approach, the market approach, and the income approach to appraisal. ¶30 Section 39-5-104, C.R.S. (2021), in turn, provides, “Each tract or parcel of land . . . shall be separately appraised and valued, except when two or more adjoining tracts, parcels, or lots are owned by the same person, in which case the same may be appraised and valued either separately or collectively.” ¶31 As the foregoing authorities make clear, assessors must separately appraise and value each legally distinct parcel of real property, and the title holders of each separate parcel are responsible for the taxes on those parcels. See Hinsdale Cnty. Bd. of Equalization, ¶ 22, 438 P.3d at 747 (“Colorado’s tax statutes reflect the legislature’s intent to levy property tax on the record fee owner of real property.”). Real property includes “[a]ll lands or interests in lands to which title or the right of title” has been acquired from the United States government or the state, as well as “improvements.” § 39-1-102(14)(a), (c), C.R.S. (2021). Intangible personal property, in contrast to real property, is exempt from the levy and collection of property tax. § 39-3-118. ¶32 The dispute before us centers on how the Eagle County assessor calculated the value of the Lodge under the income approach to valuation. As we have previously observed, the income approach is a common method for calculating the value of commercial properties. Bd. of Assessment Appeals v. E.E. Sonnenberg & 13 Sons, Inc., 797 P.2d 27, 30 n.8 (Colo. 1990). This approach “generally involves calculating the income stream (rent) the property is capable of generating, capitalized to value at a rate typical within the relevant market.” Id.; see also Denver Urb. Renewal Auth. v. Berglund-Cherne Co., 568 P.2d 478, 480 (Colo. 1977) (“The capitalization of income approach is utilized by appraisers to formulate an opinion as to value which reflects the net income generated by the property during the remainder of its productive life.”); 16 Eugene McQuillin, The Law of Municipal Corporations § 44:143, at 632 (3d ed. 2013) (explaining that the income approach involves “determining the rental value of the property, deducting from it the operating expenses, and, if there is a profit, capitalizing the net profit at a percentage commensurate with the amount of risk involved”).