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Overview of Colorado House Bill 24B-1001 and Commercial Property Taxation
Colorado House Bill 24B-1001, enacted during the 2024 special legislative session, delivered significant property tax relief to commercial real estate businesses by reducing the assessment rate applied to nonresidential real property and personal property. While HB24B-1001 became law several years ago, the practical implications of the bill on commercial property owners are just beginning to take meaningful effect. The bill generally amends Colo. Rev. Stat. § 39-1-104 to phase down the commercial assessment rate from the prior standard of 29% to a rate of 25% of actual value by 2027, providing potential reductions in property tax liability for owners and operators of commercial real estate in Colorado. (CO ST § 39-1-104). While HB24B-1001 also provides for other important modifications with respect to school districts, residential property and other matters, this alert focuses only on HB24B-1001’s general impact on commercial property.
Assessment Rate Reductions for Commercial Property
Among other matters, HB24B-1001 provides for certain phased, multi-year reductions in the assessment rate applied to nonresidential real property. The assessment rate is the fundamental multiplier used to calculate a commercial property’s taxable assessed value. Prior to January 1, 2025, the standard assessment rate for all taxable property (including commercial) was 29% of actual value, though temporary reductions brought nonresidential property down to 27.9% for tax years 2023 and 2024. HB24B-1001 makes the reductions permanent and generally more impactful, as follows:
For Property Tax Years Commencing on January 1, 2025: The assessment rate for most personal property and nonresidential real property was 27% of actual value.
For Property Tax Years Commencing on Tax Year 2026: The rate drops to 26% for nonresidential real property and personal property; except that, property listed by the assessor under certain subclass codes or as agricultural property may receive a preferential rate of 25% of actual value. Here, HB24B-1001 creates two distinct categories of property that may qualify for the reduced rate:
- All property listed by the assessor under any “improved commercial subclass codes”; and
- All real or personal property classified as agricultural property.
“Improved commercial subclass codes” refers to classification codes that distinguish improved commercial parcels from other categories of nonresidential property. The practical effect of this is that a commercial property owner may benefit from the 25% rate automatically when the assessor has listed the property under an improved commercial code in the county’s records, with no separate application or election being required by the property owner. While the statute does not define the specific improved commercial subclass codes, the broader statutory framework in Colorado related to property taxation helps provide context. Consistent with Colo. Res. Stat. § 39-1-102(6.3), “improved commercial” subclass codes generally encompass commercial parcels on which certain types of improvements exist—the land is developed for commercial use—as distinguished from undeveloped or vacant commercial land parcels, which would fall under different subclass codes.
For example, on a commercial property with an actual value of $1,000,000, the assessment rate under the improved commercial subclass codes would be $250,000, versus $260,000 under the general nonresidential rate—a $10,000 reduction in assessed value. Each mill levy unit applied to that reduced assessed value results in proportionate tax savings.
For Property Tax Years Commencing on Tax Year 2027 and Beyond: The assessment rate for most personal property and nonresidential real property permanently becomes 25% of actual value. Accordingly, the distinction based on improved commercial subclass or agricultural coding becomes irrelevant after the 2026 assessment cycle.
What Qualifies as Nonresidential/Commercial Property
The statute defines “nonresidential property” as all taxable real and personal property in the state other than residential real property, producing mines, or lands or leaseholds producing oil or gas. This broad definition includes subclasses such as agricultural property, lodging property, and renewable energy production property. Commercial real estate businesses owning office buildings, retail centers, industrial facilities, warehouses, and similar properties all fall within this nonresidential classification and benefit from the reduced rates.
Uniform Application Requirement
HB24B-1001 mandates that the new assessment rate percentages are uniformly applied, without exception, to the actual value of real and personal property within the various classes and subclasses across all taxing jurisdictions in Colorado. This ensures that all similarly situated commercial property owners receive the benefit of the rate reductions regardless of which county their property is located in, in accordance with the Colorado Constitution.
Bottom Line: How the Assessment Rate Affects Commercial Tax Liability
Under Colorado’s property tax system, a commercial property owner’s tax bill is calculated as the product of the county mill levy, the applicable assessment rate, and the property’s actual value as determined by the county assessor. Because the assessment rate directly scales the taxable value, reducing the assessment rate for commercial properties from 29% to 25% generally represents an approximate 13.8% reduction in assessed value (and a corresponding reduction in the property tax owed) before any changes in mill levies or actual property values are considered.
Conclusion
This alert is intended to provide a general overview of HB24-1001 and its impact on the assessment rates applicable to commercial property. However, it is noteworthy that the application of these provisions may vary significantly depending on the specific facts and circumstances of a particular property or portfolio. If you have any questions regarding HB24-1001 or its potential impact on your business or real estate holdings, please contact an attorney at Otten Johnson for further guidance.
