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Assessor won’t round up taxes from ranchers

Allyn Harvey

Pitkin County Assessor Tom Isaac made it clear yesterday he has no plans to “go after” ranchers and tax them for grazing cattle on federal land.

But Isaac said there are plenty of other businesses that operate on government-owned property he’ll be scrutinizing as potential taxpayers in the wake of Monday’s ruling by the Colorado Supreme Court.

A split court ruled 4-3 that a 1996 law exempting ski areas and other businesses from paying property taxes on their leases with the federal government violates the state constitution. The ruling gives counties around the state the authority to tax companies like the Aspen Skiing Co. and Bentley’s at the Wheeler on the value they derive from controlling the property.

“We have identified some businesses that we’ll be adding to the tax roles as a result of the ruling,” Isaac said.

Along with the Skico and Bentley’s, the Pine Creek Cookhouse near Ashcroft and concessionaires at the airport are on the list of affected businesses. But Isaac said local ranchers who graze their cattle on federally owned property are not on that list. “They’ve been exempt in the past, and I don’t plan to start taxing them now,” he said.

The ruling may also mean big tax bills for professional sports teams in Denver that use publicly-owned facilities, such as Mile High Stadium and the Pepsi Center. Businesses located at Denver International Airport also face new property taxes, Isaac said.

Skico finance director Ken Hammerle said the ruling is likely to cost the company several hundred thousand dollars in back taxes. The company continued to pay the tax in 1996 and 1997, but received abatements for 1998 and 1999. It will owe taxes plus interest on those two years in addition to the tax for 2000, which is due in April.

“We realize we’re going to have to come up with a sizable amount of money out of pocket that we hadn’t budgeted for,” Hammerle said.

On an annual basis, the Skico pays “in excess of $600,000” each year in property taxes, Hammerle said. This week’s ruling tacks on at least another $85,000 to $100,000 per year. Isaac said that amount could go up once his office reassesses the value of the Skico’s federal holdings.

In its ruling, the court said the state legislature violated Article X, Section 3 of the state constitution, which bars lawmakers from granting special exemptions to the tax code.

What the legislature exempted were so-called “possessory interests” in tax-exempt, government-owned property. The Skico’s lease with the U.S. Forest Service, which allows it to use that agency’s property to run a ski area, is one example of the possessory interest. Bentley’s location on a prime piece of city-owned real estate is another.

“This legislation exempts certain forms of property from taxation without constitutional authorization, and also treats interests within the same class of property differently for taxation purposes. Neither is constitutionally permissible,” wrote Justice Gregory Hobbs for the majority.

The majority opinion says because both firms derive value from their control of the property and any improvements they make to it, they can and should be taxed using a formula that accounts for that derived value – even though they don’t own it.

In her dissent, Justice Rebecca Kourlis pointed out that the state constitution gives the legislature authority to levy taxes in the amount necessary to run the state government; it also calls for uniform taxation of all “real and personal property not exempt from taxation” by the constitution.

“I find the plain language of the constitution unambiguous,” Kourlis wrote. “It includes no reference to possessory interests, and I conclude that the framers intended to consign the issue to legislative discretion in defining real property as necessary to fund the state budget.”

The Skico’s Hammerle wouldn’t speak for the company about the ruling on a philosophical basis. But he did offer a personal observation: “We pay fees to the U.S. Forest Service for use of that land, so it could be seen as double taxation.”

But Isaac doesn’t agree. He sees it more in terms of making everyone pay their fair share. And he doubts the voters of Colorado would be in favor of a law that exempts ski areas and other commercial enterprises from paying the same taxes that other businesses have to pay.

He noted that several counties, including Pitkin County, refused to comply with the law because they thought it was unfair. They continued to collect taxes from private companies operating on government property and sued to have the law overturned. Their legal argument failed until it reached the Supreme Court.

“It was really a fight between the assessors and the legislature – that’s why it’s so amazing we won,” Isaac said. “We stood up for the little taxpayers.”

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Posted: Wednesday, February 28, 2001


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