There have been a large number of proposed tax changes in the legislature this session, and one bill being heard today is raising concerns about potential impacts on businesses and property owners.
House Bill 1119 would allow local governments and certain special districts to tax land and buildings at different rates, applying a lower tax rate to improvements and a higher rate to land. This is a significant shift from the current system, where both are taxed at the same rate.
The Colorado Chamber’s Tax Council took an oppose position on the bill last month due to concerns about significant and unexpected tax increases for property owners, with small businesses likely to feel the impact the most. Many small business, retailers and office tenants operate under triple-net leases, meaning they pay property taxes as part of their rent. If taxes on land increase, those higher costs would be passed directly on to tenants, many of whom occupy older, more affordable spaces where land makes up a larger share of the property’s value. This is especially concerning in Colorado, where commercial property is already taxed at roughly four times the rate of residential property.
The bill could also create barriers for new businesses and development. Higher taxes on land would increase pre-development costs for housing and commercial projects, making it more difficult for developers to move projects forward and potentially driving investment to other states. At the same time, reducing affordable commercial space could limit opportunities for entrepreneurs trying to start or grow a business.
In addition, HB 1119 could introduce significant complexity into the property tax system. By requiring separate valuations for land and improvements, the bill may lead to more disputes between taxpayers and assessors, increasing administrative burdens and uncertainty for both property owners and local governments.
HB 1119 is scheduled to be heard in the House Finance Committee today.