What the Colorado Legislature passed during the special session and how it will affect your wallet

In a special legislative session that ended Monday afternoon, the Colorado General Assembly cut property taxes by $434 million and increased taxpayer refunds for most Coloradans by reallocating money that would otherwise go to people with higher incomes.

They also redirected $185 million in surplus taxes to expand tax credits for low-income workers, approved $30 million in rental assistance and authorized a summer meal program for low-income children that will bring in up to $42 million in federal financing.

It all happened in four tense days as lawmakers rushed to wrap up before Thanksgiving.

Gov. Jared Polis called the special session earlier this month after voters overwhelmingly rejected Proposition HH, his sweeping tax plan that offers a complex mix of property tax relief, school spending increases and revisions to the state revenue cap under the Taxpayer Bill of Rights.

In response, legislative Democrats went back to the drawing board on tax cuts, targeting more of them to low-income workers instead of staunch Republican opposition, but failed to find any long-term solutions to Colorado’s cost-of-living crisis. Six of the bills they sent to the governor’s desk make only temporary changes to the state’s tax code, while a seventh tasks a bipartisan committee with studying a more permanent solution.

All of the legislation is set to be signed by Polis, whose office has been closely involved in crafting the policy debated in the Capitol during the special legislative session.

Here’s what the legislature did and what it means.

How much will homeowners save

The average Colorado homeowner will save just over $200 on their property tax bill due in April. The amount of savings may be higher or lower depending on the value of your home and local mill tax.

Democrats used two levers to secure relief. They cut the home assessment rate for the 2023 tax year to 6.7% from 6.765%. And they increased the amount of the home’s tax-exempt value to $55,000 from $15,000.

Combined, that’s about an 8 percent tax cut for a home worth $550,000 — and more cuts are likely to come. Many local governments will be required by law to reduce mill levies due to local revenue caps as they grapple with a 40 percent increase in home values ​​in the state.

To be clear: Your property tax bill will not be lower than it was. The relief passed by lawmakers will limit the increase caused by higher property values.

Lawmakers did not pass any additional tax breaks for commercial properties.

You can use our calculator below to see how much you’ll owe in property taxes — and how much you would have if the Legislature hadn’t acted:

Expanding the tax credit for the working poor, as well as $30 million to help tenants facing eviction

Democrats tried to help tenants in several ways. But unlike the property tax abatements granted to every homeowner, not all renters will qualify.

The biggest relief measure comes in a $185 million expansion of the Earned Income Tax Credit, which mostly benefits low-income working families. Currently, Coloradans receive 25% of the federal tax credit of the same name. The General Assembly doubled it just for this tax year.

That means another $1,350 for a family of three, making $25,000.

The federal program is designed to encourage people to work, so it rises during the first $10,000 to $15,000 of income, but falls after a certain point. No one making more than $63,400 is eligible. You can use the calculator found here to determine your federal credit, then divide it by two to determine your state credit for that tax year.

Democrats also approved up to $30 million in emergency rent assistance for households making up to 80 percent of their district’s median income. To qualify, tenants must be able to demonstrate financial hardship that puts them at risk of eviction.

There is a deadline for getting help: any money not distributed to landlords before July 1 will be returned to the state coffers to be spent on other programs.

Higher TABOR refunds for most

Coloradans making less than $104,000 — the majority of Colorado taxpayers — will get a larger refund under the Taxpayer Bill of Rights next calendar year, while higher earners will receive less than they would have otherwise.

That’s because Democrats passed a bill that makes TABOR refund checks the same for everyone, a temporary change from the usual system that ties refunds to income, with higher earners getting more.

Refunds are due for excess revenue collected above the TABOR cap, which is determined by annual inflation and population increases. The state must refund money collected above the ceiling.

The checks will be $800 for single filers and $1,600 for joint filers.

The refunds would have been $47 higher per person, but lawmakers used $185 million of the state’s $3.6 billion surplus to fund the expansion of the earned income tax credit.

How the Legislature is—and isn’t—reimbursing schools and local districts

The schools would be refunded all the money they would have received if the Legislature did not exempt $55,000 of the home’s value from taxation and reduce the home assessment rate. That amounts to about $145 million.

Fire, ambulance and hospital districts, like schools, would be reimbursed for all the money they would have collected had lawmakers not passed property tax breaks. That adds up to a total of about $50 million.

Counties, cities and other local agencies such as water districts and libraries will receive state aid only if their local property values ​​increase by less than 15%. Even then, the recovery may be only partial.

What did legislators do to plan future property tax policy

The Legislature also formed a bipartisan, 19-member task force to come up with a long-term property tax solution.

The task force will include state legislators and local elected officials, as well as representatives from education, firefighters and business advocates. Property owners will also be on the panel.

Appointments to the task force will be made by December 4, and the commission will begin meeting the following day. The meetings will continue at least twice a month until at least mid-March, when it is required to present its findings to the governor and the Legislature.

The group was created with the goal of either passing a long-term property tax resolution at the Capitol next year or crafting a measure to be put on the 2024 ballot.

Single-family and townhouses line each other with mountains in the background
New homes built in Leadville’s Railyard neighborhood, August 7, 2023. (Hugh Carey, The Colorado Sun)

The bill to create the task force was originally drafted to be dominated by Democrats, but was changed in the Senate to be more politically and geographically diverse. For most Democrats, it’s a bid for bipartisanship after a special session that was otherwise deeply divided along party lines. If the plan that emerges from the task force manages to garner some Republican support in the Legislature, it could have enough votes in the Capitol to put a constitutional amendment on the ballot next year.

Putting a constitutional amendment on the ballot takes the support of two-thirds of lawmakers in each House and Senate. Democrats have a supermajority in the House of Representatives, but are one vote short of that threshold in the Senate.

How the special session affects the budget picture

Democrats had to scramble to find funding for their proposals after state budget analysts said last week that the state could face a shortfall this year.

They got some help from the revised property tax projections. Local property taxes are now expected to generate $262 million more for schools this year than expected, allowing lawmakers to delay state school reimbursement until the 2024-25 budget year, which begins July 1.

If Proposition HH had passed, lawmakers would have been required to spend that money this year.

They also used $15 million in leftover federal stimulus funding to cover half the cost of Supplemental Rental Assistance.

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