Chapter 7 - Special Issues

Special Administrative Issues

The purpose of this section is to discuss special issues related to personal property administration. This section will be periodically updated to include new special personal property issues as they arise.

Apportionment of Value

Apportionment of value is the distribution of taxable value between two or more counties within the state. Apportionment does not affect the total taxable value of the property.

Personal property valuations are apportioned only in the following instances:

• Movable equipment that is apt to be located in more than one county during the current assessment year in the ordinary course of business
• Oil and gas skid-mounted drilling rigs that were located in more than one county during the preceding calendar year

Movable or Portable Equipment

The statutory requirements and definitions for movable or portable equipment apportionments are found in § 39-5-113, C.R.S.

County of Original Assessment

All persons owning movable or portable equipment, which in the ordinary course of business is likely to be located in more than one county during the current assessment year, must file the following information with the assessor no later than April 15:

1. Kind, description and serial number of the property
2. Counties where the property will be located or maintained during the year
3. The estimated period of time that the property will be in each county

Note: Owners of oil and gas skid-mounted drilling rigs, pursuant to § 39-5-113.3, C.R.S., and owners of special mobile machinery subject to specific ownership tax, pursuant to §§ 42-3-103(1) and 106(1)(e), C.R.S., have different filing requirements. Refer to Oil and Gas Skid-mounted Drilling Rigs, and SMM and Ad Valorem Tax – Form 301, found later in this chapter, for more information.

The taxpayer files this information with the county assessor of the county in which the property was located on January 1 of the current assessment year, or the county in which the property is first located. This county is called the County of Original Assessment (COA).

It is the responsibility of the assessor of the COA to determine the actual and assessed value of the movable property for the entire assessment year. The assessor of the COA is also responsible for making apportionments of value for the other counties listed by the taxpayer. The taxpayer and the other counties must be notified of the actual valuation and the apportioned actual values of the movable equipment. The apportionment is based upon the number of days that the property is estimated to be located in each county.

Auxiliary (Movable) Equipment

Auxiliary equipment can present a special apportionment problem. Examples of such equipment may include upholstery cleaning equipment installed in vans, auxiliary drilling equipment, or seasonal or temporary equipment, such as carnival equipment, hauled by semi-tractor trailers. If this property is likely to move between counties, an apportionment should be requested of the owner as required by § 39-5-113, C.R.S. If no apportionment is received from the owner, the apportionment should be based on the last year's county locations, if available. If the owner does not supply this apportionment, the entire value of the equipment should be listed in the County of Original Assessment (COA) until such time as the owner supplies an apportionment. Apportionments based upon current assessment year planned locations are preferred; however, historical locations should be used to apportion value rather than listing the entire value in the COA.

Example:

Subject Property: Auxiliary Drilling Equipment.
COA: Larimer County
Actual value estimate: $25,000
Times the Factor to Adjust to Specified Level of Value: x 0.95
Adjusted to Specified Level of Value: $23,750

Counties and Time Estimates for Each County:

Actual Value per Day: $23,750 ÷ 365 = $65.068

Apportionment of Value to Each County:

Larimer: 45 days
Apportioned Actual Value: (45 x $65.068) = $2,928.06
Boulder: 65 days
Apportioned Actual Value: (65 x $65.068) = $4,229.42
El Paso: 120 days
Apportioned Actual Value: (120 x $65.068) = $7,808.16
Adams: 135 days
Apportioned Actual Value: (135 x $65.068) = $8,784.18

Total Actual Value: 365 days $23,750 (rounded)

Note that this example reflects a typical 365-day year. During leap years, an extra day must be added. The taxpayer and each of the other three counties are notified of the total actual value and the actual value apportioned to each county, as in the example above, by the Larimer County Assessor. The apportioned assessed value of the movable equipment is included on the abstracts of assessment prepared by each of the four counties. The other counties are required to use the total actual value and the apportioned actual value provided by the assessor of the COA. Any protests of the actual value by the taxpayer are made to the COA.

The total of the county apportionments should be compared to the actual value determined by the COA to ensure that they are identical.

Amended Apportionments

If movable property is moved into a county not listed in the original declaration, or if movable property is located in a county for a different length of time than that originally declared, the assessor of any county so affected may request an amended apportionment from the county of original assessment (COA). This must be done whether the time the equipment is located in the county is shorter than or longer than the period of time used in the original apportionment.

The assessor of the COA, upon receipt of such a request for amended apportionment, shall reapportion the value to all affected counties and send an amended NOV to the taxpayer and the counties. The taxpayer and the affected counties must be notified of any amended apportionments. If there is no request for an amended apportionment by a county assessor, the original apportionment shall stand for that assessment year.

It is Division policy that when a change in apportionment occurs prior to December 10, the assessors must re-certify the valuation to the affected taxing jurisdictions pursuant to § 39-1-111(5), C.R.S. If a change in apportionment occurs after December 10, no amended apportionment is made.

Oil and Gas Skid-Mounted Drilling Rigs

The term "oil and gas skid-mounted drilling rig" means any drilling unit capable of drilling oil and gas wells, except self-propelled rigs subject to the specific ownership tax as required by §§ 42-3-102(1) and 105(1)(f), C.R.S. In addition, the term includes typical auxiliary equipment that is not permanently attached to, but is transported with the rig.

The statutory requirements regarding the apportionment of the valuations of oil and gas skid-mounted drilling rigs are found in § 39-5-113.3, C.R.S. The following procedures are to be used in the valuation of these rigs:

1. County assessors determine those rigs that were operating in their counties during the previous calendar year and mail a DS 656, Oil and Gas Drilling Rig declaration schedule to the owner or agent.
2. The owner or agent submits a declaration schedule, to the county assessor, which lists all of the owner's rigs that were located in the county during the previous year and attaches a copy of the drilling log for each rig.
3. The owner or agent also sends an inventory of each rig's equipment sufficient to determine the valuation for assessment to the assessor of the first county in Colorado listed on each rig's log. This county is the county of original assessment or COA. It is Division policy that this inventory must include the rig's depth capacity and actual working depth; its overall physical condition rating, such as excellent, very good, good, fair, or stacked; auxiliary equipment that may include automated top drives, iron roughnecks, or automated catwalks; and any additional drilling collars and linear feet of drill pipe that are stored at the site. The declaration schedule and associated data must be filed with the assessor no later than April 15.
4. Pursuant to §§ 39-1-103(5)(a) and 39-5-113.3(2), the assessor in the COA determines the value of the rig, including any auxiliary equipment, through consideration of the cost, market, and income approaches to value. The COA assessor then apportions the value among the counties listed on the drilling log according to the number of days the rig was located or stacked in each county as compared to the full calendar year.
   
   Should the rig have been destroyed during the previous calendar year, the same procedures are followed for an adjusted actual value and a shortened calendar year. In this case, the rig value is apportioned to Colorado counties based on the number of calendar days it was located or stacked in each county, prior to the day of its destruction. Refer to the topic Drilling Rigs Removed from State Prior to Next Assessment Date following this list.
    
5. On or before June 15, the assessor of the COA furnishes a copy of the apportionment working papers and an NOV for the apportioned actual value to the owner or operator. Also, on or before June 15, the assessor of the COA sends the total actual value, apportionment working papers, and a copy of the drilling log to every county assessor involved. These assessors must use the actual values as apportioned to their counties by the assessor of the COA and must send their NOVs to the taxpayers on or before June 15.
6. The apportioned rig is assessed at the appropriate assessment rate for all personal property and included in each county's abstract of assessment.

Drilling Rigs Removed or Destroyed Prior to Assessment Date

As stated above, Division policy requires the assessor to base the value of skid-mounted drilling rigs for the current assessment year on rigs operating in the county during the previous calendar year. If a rig was destroyed prior to the current assessment date, but was operating during the prior calendar year, a personal property declaration schedule is mailed to the owner or agent of the rig as soon after the assessment date as possible, as required by § 39-5-113.3(1), C.R.S.

The actual value of the rig is determined by dividing the intact rig value by the number of calendar days in the previous calendar year and multiplying the resulting actual value per day times the number of days the rig existed intact during the prior calendar year, excluding the day of destruction, as shown in the example.

As a check for balancing purposes, it is recommended that the nontaxable value due to demolition also be calculated and added to the apportioned taxable value. The resulting sum should be equal to the total intact rig value.

The assessor in the county of original assessment (COA) values the rig and apportions the value among the counties listed on the drilling log. This apportionment is accomplished by multiplying the calculated total actual value per day by the number of days the rig was located in each county during the previous calendar year. On or before June 15, the assessor of the COA furnishes a copy of the actual valuation of the rig, the apportionment working papers, and the NOV for the COA apportioned actual value to the owner or operator. The assessor of the COA also sends the actual valuation, apportionment working papers, and copies of the drilling log to every county assessor involved. These assessors send their NOV's for their apportioned actual values to the taxpayer on or before June 15. Below is an example of a skid-mounted drilling rig removed from the state on October 1, which is valued for assessment on January 1:

Total Actual Value: $357,140 ÷ 365 = $978.47

Apportioned Actual Value: $978.47 X 274 = $268,101
Nontaxable Value: $978.47 X 91 (Due to destruction or removal of property) = $ 89,041
$268,101 + $89,041 = $357,142

Days in Bent County, CO 54 X $978.47 = $ 52,837.38
Days in Baca County, CO 54 X $978.47 = $ 52,837.38
Days in Prowers County, CO 166 X $978.47 = $ 162,426.02

Total = $268,101

NOTE: This example shows calculations for a typical year. For leap years, the Total Actual Value would be divided by 366 days to arrive at a “per day” figure for apportionment. Final assessed-value rounding errors, either plus or minus, are assigned to the county of original assessment. Stacked days are assigned to the county where the rig is stacked. Travel days are assigned to the destination county.

The repeal of personal property pro-rations described later in this chapter does not affect the apportionment of skid-mounted oil and gas drilling rigs. These drilling rigs can only be valued for the days they were traveling in, were operating within, or were stacked within Colorado.

Proration of Value

Proration, or proportionate valuation, of personal property is a reduction in total taxable value because of the existence of certain circumstances. Proration of value essentially means that property is assessed for less than the full calendar year.

As of January 1, 1996, the only condition that requires a proration of personal property value is the change in taxable status of Works of Art loaned to and used for charitable purposes by an exempt organization.

If other taxable personal property was located in Colorado on the assessment date, it is taxable for the entire assessment year, provided that, if it was newly acquired, it was put into use as of the assessment date. If it was not located in the state on the assessment date, or if it was newly acquired, but was not put into use as of the assessment date, it cannot be taxed until the next assessment year. Personal property exempt on the assessment date retains its exempt status for the entire assessment year except for skid-mounted drilling rigs and for movable equipment, which are apportioned.

Under §39-1-123, C.R.S., real and business personal property that is determined by the county assessor to have been destroyed by a natural cause, as defined in §39-1-102(8.4), may be eligible for a reimbursement of property tax liability for the year in which the natural cause occurred. Please refer to Assessors’ Reference Library, Administrative and Assessment Procedures, Volume 2, Chapter 4, Assessment Math, for procedures regarding this reimbursement.

Works of Art

Any work of art, as defined in § 39-1-102(18), C.R.S., may be subject to proration of its taxable value. The proration provisions are specified in § 39-5-113.5, C.R.S. Detailed criteria pertaining to the qualifying works of art, exempt entities, charitable purposes, and documents required by the assessor are listed in Chapter 2, Discovery, Listing, and Classification.

The proration process is as follows:

1. Determine the actual value (as of the assessment date) of the works of art.
2. Factor actual values to the correct level of value using the appropriate level of value (LOV) adjustment factor for the appropriate year and industry category as found in Chapter 4, Personal Property Tables.
3. Determine assessed value.
4. Prorate the actual value according to the number of days that the property is taxable and exempt compared to the full calendar year.

A cross-check should be completed to ensure that the entire personal property’s actual value has been accounted for by comparing the sum of the taxable and exempt property amounts against the personal property’s total actual value. They should sum to the same total actual value.

The assessor notifies the owner of the works of art of the actual value and the proration no later than June 15. The owner may protest the valuation in the same manner as other personal property.

To take advantage of the works of art exemption, property owners with qualifying personal property must file a signed works of art exemption statement on organization letterhead, with the personal property declaration schedule and proof of the exemption (documentation). Failure to file the appropriate paperwork and documentation may result in forfeiture of a claim for exemption in that calendar year, according to § 39-5-113.5, C.R.S.

SMM & Ad Valorem Tax – Form 301

Mobile machinery and self-propelled construction equipment is designated as Class F personal property and is commonly referred to as Special Mobile Machinery (SMM). SMM is subject to registration and annual specific ownership taxation in lieu of ad valorem taxation as provided in §§ 42-3-103(1) and 106(1), C.R.S. The assessor should list this equipment for ad valorem tax valuation only if the equipment falls under one of the two exceptions to registration listed under Exceptions to Specific Ownership Taxation.

Two agents are authorized to register such equipment and collect the specific ownership tax. The county clerk can register equipment on an annual basis, which is the most common method of registration. Equipment registered by the county clerk must display either an SMM license plate, or more commonly, an SMM decal (Z-tab), which states “(current year) SMM SPECIFIC OWNERSHIP TAX PAID.”

Colorado ports of entry are also authorized to register SMM equipment, but they do so only for equipment that is located in Colorado for less than a full year. This includes equipment coming into the state for less than a full year and equipment based in Colorado that is leaving the state for part of the year. The registration provided by ports of entry is prorated for a period of two to eleven months. Vehicles that receive a prorated registration will not display an SMM license plate or decal. Instead, the owner is provided a Specific Ownership Tax Receipt (SOT). The SOT is an official port of entry form that includes a start date and an end date for the prorated registration. Prorated registration is authorized by § 42-3-107(17).

Because of the specific ownership taxation laws, very little mobile machinery or construction equipment is on the ad valorem tax rolls. Any such equipment discovered which may have escaped specific ownership taxation, or that was registered on a prorated basis for a time period that has expired, is reported to the county clerk's motor vehicle section. Non self-propelled oil and gas drilling rigs are to be listed and valued by the assessor as provided in § 39-5-113.3, C.R.S.

The specific ownership method of taxation is considerably different than that of ad valorem taxation. A graduated, decreasing tax rate is applied to the taxable value of the SMM. Beginning in 1997, the law controlling specific ownership taxation requires calculation of taxable value to be based, in part, on when the equipment was purchased by its current owner. In all cases, the taxable value of SMM, including attachments is calculated exclusive of state and local sales taxes.

Taxable value of the SMM purchased by the current owner on or after 1/1/97 is established in one of the following ways:

• The taxable value is 85 percent of the manufacturer's suggested retail price. When attachments have been added, the total taxable value includes 85 percent of the suggested retail price of the attachments.
• If the manufacturer's suggested retail price is not available, the taxable value is 100 percent of the retail delivered price including 100 percent of the retail delivered price of the attachments.
• If neither of the above is available, the taxable value shall be established by the Property Tax Administrator as 85 percent of the value set forth in a nationally recognized or standard reference for such figures, § 42-3-107(15)(c)(III), C.R.S.

Taxable value of the SMM purchased by the current owner before 1/1/97 is established in one of the following ways:

• The taxable value is 100 percent of the factory list price and, if there are attachments, the taxable value includes 75 percent of the original retail delivered purchase price of the attachments.
• When the factory list price is not available, the taxable value is 75 percent of the original retail delivered price including attachments.
• If none of the above are available, the taxable value is based on the best information available to the Property Tax Administrator, according to § 42-3-107(15)(b)(III), C.R.S.

Taxable value, as determined by one of the owner’s purchase dates described above, is used for all subsequent years during which the special mobile machinery is under the same ownership. A graduated decreasing tax rate is applied to the taxable value as shown in the table below. For most equipment, the manufacturer's suggested retail price is published by the Division in the Mobile Equipment Manual (AH 538). The tax rate schedule, from § 42-3-107(15)(e), C.R.S., is listed below:

The SMM 2% Rental Program is an alternative payment program that allows companies who rent or lease SMM, for at least 30 days in a calendar year, to pay the Ownership Tax on 2% of the rental or lease amount rather than paying the Ownership Tax for a full year. Application must be made at the county clerk and recorder in which the SMM is located to participate in this program. SMM equipment that is enrolled in the 2% Rental Program is required to be registered with the SMM registration and the SMM rental decal expiring concurrently. SMM participating in the 2% Rental Program is required to display the SMM license plate or SMM ownership decal and the SMM rental decal.

Additional information on SMM equipment may be found at the Special Mobile Machinery (SMM) web page.

Exceptions to Specific Ownership Taxation Registration

There are exceptions to registration and specific ownership taxation. See § 42-3-104(3), C.R.S., below:

Exemptions – specific ownership tax registration.

(3) Registration is not required for the following:
(a) Vehicles owned by the United States government or by an agency thereof;
(b) Fire-fighting vehicles;
(c) Police ambulances and patrol wagons;
(d) Farm tractors and implements of husbandry designed primarily for use and used in agricultural operations;
(e) Special mobile machinery used solely on property owned or leased by the owner of such machinery and equipment and not operated on the public highways of the state, if the owner lists all of the machinery or equipment for assessment and taxation under part 1 of article 5 of title 39, C.R.S.
(f) Special mobile machinery not operated on the highways of this state owned by a public utility and taxed under article 4 of title 39, C.R.S.
(g) Special mobile machinery that is covered by a registration exempt certificate issues by the department in accordance with section 42-3-107(16)(e).

§ 42-3-104, C.R.S.

Examples of equipment that do not require registration include: crushers, conveyors, bulldozers, and loaders operating exclusively in a sand and gravel pit; off-highway dump trucks operating exclusively within the boundaries of a mining operation; and fork lifts operating exclusively within a warehouse or lumber yard.

Many owners of equipment that operate solely on property owned or leased by the owner of the equipment elect to register such equipment with the county clerk and pay specific ownership taxes rather than list it with the assessor.

Equipment Moving Through Ports of Entry

SMM registration is usually restricted to machines that have wheels or endless tracks and are self-propelled or capable of being towed. Skid-mounted oil and gas drilling rigs are listed and valued by county assessors. On occasion, equipment such as oil field pumps and compressors has been registered for specific ownership tax purposes. See the Auxiliary Equipment topic earlier in this chapter.

Form 301

A problem develops when mobile equipment that has already been accounted for by the assessor is transported over the highways to a repair facility or to its new owner. This equipment could operate exclusively on property owned or leased by the equipment owner, it may be a piece of equipment that belongs to a skid-mounted drilling rig, or it may otherwise already be accounted for by the local county assessor. If such equipment passes through a port of entry station or a portable weight check station, it may be detained since it does not display an SMM plate or decal and there is no proof that it has already been accounted for by a Colorado county assessor.

To solve this problem, the Division of Property Taxation and Ports of Entry Division agreed to allow movable equipment to pass through check stations if an appropriate form showing proof of current year property tax assessment accompanies the mobile equipment. Form 301 has been approved by both Divisions for this purpose. Form 301 is a three copy, carbonless paper document, which is to be completed in its entirety. There should be no spaces left blank. Movable equipment must be adequately described by year, make, model, common name or description (such as pressure booster pump), serial or identification number (very important), date of purchase, and purchase price.

The certification of assessment must be completed and signed by either the assessor or chief deputy. The document also must be embossed with the county seal. Copies or facsimiles of Form 301 will not be accepted by the Ports of Entry agents. The form is designed so that up to nine separate SMMs may be listed.

Upon stopping at a port of entry, the owner, agent, or driver should present the yellow copy for clearance and point out which of the SMMs listed are being transported at the time. The yellow copy will be returned to the driver. The pink copy is the owner's file copy. It is recommended that, as a matter of public relations, assessors notify owners of assessed mobile equipment about Form 301 and its purpose.

The number of taxpayers involved should be small because use of Form 301 is limited to mobile equipment that may be transported through a port of entry or weigh station and has already been accounted for by a local county assessor’s office. The Form 301 should be furnished by the local county assessor’s office.

A PDF version of the Form 301 may be found on the Forms Index web page.

Business Personal Property Income Tax Credit

As specified in § 39-22-537.5(3)(a), “For income tax years commencing on or after January 1, 2019, a taxpayer is allowed a credit against the tax imposed by this article 22 equal to the property tax paid in Colorado during the income tax year on up to eighteen thousand dollars of the total actual value of the taxpayer’s personal property.” Taxpayers that qualify for this income tax credit must submit a copy of a property tax statement described in §39-10-103, C.R.S., to the Colorado Department of Revenue.

Special Valuation Issues

The purpose of this section is to discuss special issues related to personal property classification and valuation. This section will be periodically updated to include new special personal property issues as they arise.

All Terrain Vehicles (ATVS)

It is recommended that Industry Category (RCN Factor) Table 1 be used for valuing all-terrain vehicles (ATVs). The recommended economic life for ATVs is six (6) years. The ATV category includes: non-licensed three or more wheeled vehicles, snowmobiles, and motorbikes. Note that even though golf carts are not included in the ATV category, they are valued similarly with a recommended economic life of six (6) years.

Cable/Satellite Television Property

The recommended economic life tables, as listed in Chapter 4, Personal Property Tables, contain specific and general categories that adequately cover most personal property used in the cable/satellite television industry. The recommended economic life tables support economic lives ranging from four (4) to eleven (11) years depending on the composition, design, and use of the personal property. The recommended life tables and industry categories should be reviewed to ensure that the appropriate justifiable industry and recommended economic life is assigned to the personal property. If a Colorado industry category where the specific personal property is typically used cannot be clearly determined, “Industry Table 1 – Average of All” should be used for that personal property. Personal property that is not specifically noted in the recommended economic life tables should be classified into the category where it “best fits” with other similar functioning and/or purpose personal property.

The following listing contains examples of categories and types of cable/satellite television personal property and the recommended economic life for each.

1. 4-Year Recommended Economic Life (Technologically Advanced Tables)
   1. Computers – other and stand-alone peripherals
   2. Digital set-top boxes
   3. Encoders and encrypters
   4. Headend personal property (high-tech)
   5. Network controllers and streaming personal property
   6. Modems
   7. Routers
   8. Servers
2. 6-Year Recommended Economic Life
   1. Electronic aggregation personal property
   2. Electronic termination personal property
   3. Electronic transport personal property
   4. Field electronics
   5. Headend personal property (electronic)
   6. Quadrature amplitude modulation (QAM) property
3. 8-Year Recommended Economic Life
   1. Test and service personal property
   2. Oscilloscopes
   3. Spectrum analyzers
   4. Strength meters
4. 9-Year Recommended Economic Life
   1. Microwave systems
   2. Origination personal property
   3. Satellite receiving ground stations
5. 10-Year Recommended Economic Life
   1. Amplifiers
   2. Cable (fiber and coax)
   3. Cable/satellite personal property not otherwise listed
   4. Distribution and subscriber connection property
   5. Drops
   6. Power equipment (including at the node)
6. 11-Year Recommended Economic Life
   1. Converters
   2. Headend personal property (non-high tech/non-electronic)
   3. Modulation equipment
   4. Preamplifiers

Note: The above listing is designed to ensure uniformity in determining reasonable economic lives for cable/satellite television property. It should be used for consistency purposes. Also, note that the list is not an all-inclusive list.

Car Wash Personal Property

A special problem exists with car wash personal property. When a car wash sells, a substantial amount of personal property is included in the selling price. In these cases, an allocation should be requested from the former owner as to the value of personal property included in the transaction. This allocation should be a regular part of the sales confirmation procedure for self-service or automated car washes.

Once a number of these allocations are available, it may be possible to determine the value of personal property, as a percentage of all property transferred for future car wash property transactions. Also, these percentages may be used to help determine BIA valuations for comparable properties and as an office review check tool for other similar account declared costs.

Conditional Sales Agreements vs. True Leases

Questions arise in the responsibility for declaring personal property leased pursuant to a true lease as opposed to a conditional sales agreement or financing lease. In some cases, an agreement identifying itself as a lease may be a conditional sales agreement and vice versa. In Colorado, personal property under a true lease agreement should be assessed to the lessor (owner) of the personal property.

Conditional sales agreements may be assessed to either the lessor or lessee depending on whether legal title to the personal property has passed from the lessor to the lessee. Definitions of a true lease and conditional sales agreement follow:

True Lease

A “true lease” is an agreement under which the owner of personal property gives up possession and use of the property for valuable consideration and for a definite time period. At the end of the time period, the lessor has the right to retake, control, or convey the property. True leases are agreements where there is no intent to transfer ownership from the lessor to the lessee.

Conditional Sales Agreements

Also known as “financing leases,” these are considered to be sales contracts under the Uniform Commercial Code. Specifically, sellers receive periodic payments for the purchase price until full payment is made or until a predetermined date occurs.

Differentiating Between a Lease and a Conditional Sales Agreement

Suggested criteria for differentiating between a lease and conditional sales agreement is shown below:

True Lease

• Lease is cancelable on a monthly or annual basis
• Optional purchase price at the end of the agreement is at market value
• Present value of the lease payments is less than the purchase price of the personal property
• Agreement specifying ownership of the personal property is retained by the lessor
• Lessor is treating the property as a depreciable asset

Conditional Sales Agreement

• Lease period is approximately the same as the economic life of the asset
• Present value of the payments is the same or greater than the purchase price of the personal property
• Lessee is treating the property as a depreciable asset
• Agreement indicates passage of legal title to the lessee with a security interest retained by the lessor until the end of the agreement

Responsibility for the Reporting of Leased Property

Lessors of personal property under true leases are responsible for reporting the installed cost and location of the personal property. In most cases involving conditional sales agreements, the seller retains title to the property for collateral or security purposes during the term of the agreement. In these instances, the seller is considered the legal owner of the property and is responsible for reporting the installed cost and location of the personal property. If, under the provisions of the agreement, legal title is passed to the lessee, it is the lessee’s responsibility to report the location and installed cost to the appropriate county assessor. Note that based on §39-5-104.5, C.R.S., “The owner of taxable personal property on the assessment date shall be responsible for the property tax assessed for the full property tax year without proration.”

Construction Personal Property

Personal property used in construction will have various economic lives depending on the type of equipment. Three economic life categories are listed in Chapter 4, Personal Property Tables:

• Light construction equipment (e.g. drills, forms, hammers)
• General construction equipment (e.g. trenchers, mixers, batch plants, screeners)
• Heavy machinery and equipment (e.g. loaders, excavators, graders, cranes)

Caution should be exercised when identifying construction personal property. Many construction items are classified as Class F personal property. Class F personal property is commonly referred to as Special Mobile Machinery (SMM). SMM is subject to registration and annual specific ownership taxation in lieu of ad valorem taxation as provided in §§ 42-3-103(1) and 106(1), C.R.S. If an item of construction personal property is already tagged as SMM, it should not be inventoried for ad valorem taxation.
 

Gaming Personal Property

The recommended Industry Category (RCN Factor) Table for the valuation of gaming personal property is Industry Category Table 1–Average of All. The recommended economic lives for electronic gaming personal property, such as slot machines, and most other larger gaming personal property, such as tables, are five (5) years and ten (10) years respectively. However, much of the personal property found in a typical gaming establishment may be consumed during the business year and should be classified as exempt “consumable” personal property. Examples include playing cards, dealer's aprons, and betting chips. It is recommended that a detailed listing of personal property be obtained from each gaming establishment prior to determining taxable status of the business personal property.

Medical Personal Property

The recommended economic life tables as listed in Chapter 4, Personal Property Tables, contain specific and general categories that adequately cover most personal property used in the health care industry. The recommended economic life tables support economic lives ranging from three (3) to ten (10) years depending on the composition, design, and use of the personal property. The recommended life tables and industry categories should be reviewed to ensure that the appropriate justifiable industry and recommended economic life is assigned to the personal property. If a Colorado industry category where the specific personal property is typically used cannot be clearly determined “Industry Table 1 – Average of All” should be used for that personal property. Personal property that is not specifically noted in the recommended economic life tables should be classified into the category where it “best fits” with other similar functioning and/or purpose personal property.

The following listing contains examples of categories and types of medical personal property and the recommended economic life for each.

1. 3-Year Recommended Economic Life (Technologically Advanced Tables)
   1. Computers – personal and accessories
   2. Computers – laptop
2. 4-Year Recommended Economic Life (Technologically Advanced Tables)
   1. Computers – other and stand-alone peripherals
   2. Computer – integrated machinery and equipment
   3. Telecommunication machinery and equipment
3. 4-Year Recommended Economic Life
   1. Lasers (coronary)
4. 6-Year Recommended Economic Life
   1. Anesthesia unit and equipment
   2. Analyzer equipment
   3. Blood pressure devices/machines
   4. Blood warmer machines
   5. Bypass/heart – lung system
   6. Cameras and associated equipment
   7. Cash registers (electronic)
   8. Copiers and duplicators
   9. Defibrillators
   10. Dopplers
   11. Echocardiograph system (EKG)
   12. Electrocardiographs
   13. Electronic equipment, except computers
   14. Electronic charting equipment
   15. Electronic pulmonary equipment
   16. Floor cleaning/polishing machinery
   17. Isotope equipment
   18. Lithotripters, extracorporeal shock-wave (ESWL)
   19. Lasers (positioner, surgical, other not including coronary)
   20. Magnetic resonance imaging equipment (MRI) (Electronic portion)
   21. Mammography units
   22. Monitors (other than those used with a computer)
   23. Optical readers
   24. Scanners
   25. Scopes
   26. Sterilization system equipment
   27. Stretchers (hydraulic)
   28. Telemetry units (cardiac)
   29. Television equipment
   30. Typewriters (electric)
   31. Wheel chairs
   32. X-ray equipment
5. 10-Year Recommended Economic Life
   1. Aspirators
   2. Blanket warmers/dryers
   3. Counters
   4. Conveyor system (used for laundry or trays)
   5. Folding partitions/walls
   6. Forklifts
   7. Furniture (i.e., beds, cabinets, chairs, desks, tables, other)
   8. Lockers
   9. Magnetic resonance imaging equipment (MRI) (Mechanical portion)
   10. Patient lifters
   11. Packaging Machinery
   12. Pneumatic tube system
   13. Pumps, medical
   14. Saws, medical

Note: The above listing is designed to ensure uniformity in determining reasonable economic lives for medical personal property. It should be used for consistency purposes. Also note that the list is not an all-inclusive list.

Personal Property in Storage

All personal property is taxable in Colorado unless specifically exempted by sections 3 to 6 of article X of the Colorado Constitution. Therefore, taxable personal property in storage is still taxable to the personal property owner. However, as maintenance on the personal property may be deferred, the property may suffer from additional physical depreciation, as well as, functional and external obsolescence.

The Division recommends that the county wait until the assessment year following the year that the personal property has been placed in storage to make any related valuation adjustments. During the following assessment year, the owner's intent regarding the personal property should be determined. If the personal property remains in storage and periodic maintenance and/or reconditioning does not take place, the personal property value may be appropriately adjusted. Personal property that is no longer in use and placed into storage to be used as a source of parts for the repair of other personal property with an economic life of one year or less, should be exempted as “consumable” personal property for the assessment year following the date that the personal property was removed from service. The assessor must make these determinations on a case-by-case basis.

Portable Buildings

Portable buildings, mobile offices, office trailers, and skid-mounted buildings that are classified as personal property should be valued by the county in which they are located on the January 1 assessment date, unless they are subject to SMM registration or motor vehicle licensing. Portable buildings that constitute taxable personal property should be assigned the appropriate economic life as listed in Chapter 4, Personal Property Tables.

These procedures do not apply to manufactured homes, mobile homes, modular homes, or tiny homes as defined in § 39-1-102, C.R.S. For more information, see Assessors’ Reference Library, Administrative and Assessment Procedures, Volume 2, Chapter 3.

Security Systems Classification and Valuation

Residential Property Owner’s Security Systems

Residential security systems, equipment, and devices are included as part of the definition of household furnishings exempt from ad valorem taxation in § 39-3-102(1), C.R.S. Such residential security systems are exempt from ad valorem taxation only if they are not associated with the property owner’s production of income at any time during the tax year.

Examples of security systems, equipment, and devices may include, but are not limited to, the following:

1. Photoelectric sensors
2. Point-area detectors, such as:
   1. alarm systems,
   2. alarm glass (wired),
   3. vibration detectors, and
   4. trip switches
3. Remote annunciators (alarms)
4. Security doors and bars
5. Sound, motion, and stress detectors
6. Cameras and digital video recorders

For security system personal property located in non-income-producing residential property and owned by the residential property owner, the Division recommends that the assessor conduct an analysis of the residential sales in each economic area during each reappraisal year to determine if security devices and systems result in an increase in value in that economic area. If it is determined that they do result in an increase in value, those sales which include the devices/systems should be adjusted to exclude the contributory value of the security system personal property.

Leased Security Systems

Residential security systems come in several different designs and technical capabilities. However, many systems used for security today contain assorted detection sensors installed into a subscriber's premises. This sensor system is affixed to and wired throughout the structure of the subscribers' house and connected to the lessor's alarm system.

Leased residential security systems, equipment, and devices are taxable to the owner (lessor) of the leased personal property. Leased residential security personal property should be reported by the lessor to the county assessor in the Personal Property Declaration Schedule.

Generally, once a security system is installed into the structure of a house, the system cannot be removed without significant damage. If a subscriber chooses to discontinue the service contract, the physical wiring of the system is left intact. Typically, there is no influence on the value of the residential property for the intact wiring.

Service Station Property

According to § 39-1-102(11), C.R.S., service station hydraulic lifts, gasoline pumps, and underground storage tanks must be classified and valued as personal property. Service station canopies fit the definition of real property contained in § 39-1-102(14), C.R.S.

Snow Cats

Snow cat economic life research results support the recommended economic lives as noted in Chapter 4 – Personal Property Tables. Heavy use snow cats (averaging 1,300 or more hours of operation per calendar year) remain economically feasible to operate for six (6) years. Heavy use snow cats include snow cats that are used in a ski resort’s snow grooming operations. Moderate use snow cats (averaging less than 1,300 hours of operation per calendar year) remain economically feasible to operate for ten (10) years. Moderate use snow cats include snow cats that are used for surveying, transportation, and/or in search and rescue operations. It is recommended that Industry Category (RCN Factor) Table 1 be used for valuing snow cats.

Software

Software is defined as the programs used to direct the operation of a computer. Software includes documentation such as manuals, diagrams, and operator instructions. It also includes operating systems software, compilers, assemblers, translators, interpreters, and application programs. These programs are intangible personal property and, therefore, exempt under § 39- 3-118, C.R.S.

The following definitions are given as an aid in understanding what constitutes a computer and various forms of software.

A computer is defined as a programmable electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of these processes with or without human intervention. It usually consists of a central processing unit containing extensive storage, logic, arithmetic, and control capabilities.

Included are those production computers which are an integral part of other equipment, such as computers used primarily for process or production control, switching, channeling, and automating distributive trades; and production services such as point of sale (POS) computer systems. Software controlling such production equipment and services is exempt, provided the devices are actually controlled by software rather than hard-wired printed circuit boards.

The following definitions are generally from the Dictionary of Computer and Internet Terms, 12th ed. (Barron’s Business Guide, 2017).

Application program: a computer program that performs useful work not related to the computer itself. Examples include word processing programs, desktop publishing programs, spreadsheets, database management programs, CAD and CAM systems, web browsers, presentation programs, such as Power-Point, and accounting systems.

Assembler: a computer program that translates assembly language into machine language.

Basic Input Output System (BIOS): a set of procedures stored on a ROM chip inside PC-compatible computers. These routines handle all input-output functions, including screen graphics, so that programs do not have to manipulate the hardware directly….The BIOS is not re-entrant and is therefore not easily usable by multitasking programs.

Compiler: a computer program that translates C, C++, BASIC, Pascal, or a similar high-level programming language into machine language. The high-level language program fed into the compiler is called the source program; the generated machine language program is the object program.

Interpreter: a program that executes a source program by reading it one line at a time and performing the specified operations immediately.

Operations or systems programs: control the hardware itself and allow it to compile, assemble and process application programs. This definition is from The Prentice-Hall Standard Glossary of Computer Terminology, Robert A. Edwards (Prentice-Hall, Inc. 1995).

Operating System: a program that controls a computer and makes it possible for users to enter and run their own programs….Under the control of the operating system, the computer recognizes and obeys commands typed by the user. In addition, the operating system provides built-in routines that allow the user’s program to perform input-output operations without specifying the exact hardware configuration of the computer.

Printed circuit (board) is an electric circuit in which the conducting connections are formed by depositing a conducting metal, such as copper in predetermined patterns on an insulating substrate, e.g., a plastic coated fiberboard: other materials, especially semiconductors, are deposited to form various electronic components. This definition is from The American Heritage Dictionary, Second College Edition (Houghton Mifflin Co. 1985). Printed circuit boards are hardware and therefore do not qualify as software.

Translator: a program that exchanges data between application programs.

Utility: a program that assists in the operation of a computer but does not do the main work for which the computer was bought. For instance, programs that compress data or defragment disks are utilities.

Software programs can be custom-built or canned. Canned programs are also referred to as shelf or generic programs.

All software programs, with one exception, are intangible and exempt from ad valorem taxation. All software is exempt except for software that is required to make the personal property work for its intended end user purposes (as an integral part of the hardware). One example of this is the operations or systems programs including machine language that is automatically initiated during the computer startup. This includes the basic input-output system (BIOS), Extensible Firmware Interface (EFI), Unified Extensible Firmware Interface (UEFI), and other types of firmware. It is never stated as a separate part of the computer because without this program the computer cannot function.

When a taxpayer lists a computer on the declaration schedule, they should not include the cost of exempt software. If the taxpayer indicates software was part of the cost, but not a separately priced part, the assessor should work with the taxpayer and/or utilize third-party sources to determine what amount must be deducted from the computer cost to arrive at the original installed cost of the computer hardware.

Contributory value of software that has been included in the computer hardware costs can be valued using the following procedures:

• Cost Approach - The cost approach is applied by determining the original cost of the software to the purchaser, including any installation costs, and applying an allowance for depreciation. Typically, the value of custom software will be based upon its original installed cost, less depreciation. In the case of custom software written in-house, development costs can be used in lieu of acquisition costs.
  
  Custom software programs, (not printed circuit boards, which are hardware), which may be found in products including:, telephone switching systems, computers used primarily for process or production control, robotics, and video games, must have the software portion of the valuation deducted from the total costs. However, the value deducted should be provided by the taxpayer in the form of an invoice from the manufacturer. If an invoice or other acceptable proof of software value is not available, no deduction should be made.
  
  Since most software is short-lived because of rapid technological advances, a four-year average economic life is to be used. The cost approach is generally the most appropriate for appraising computer software.
   
• Market Approach - The resale market for software is limited. However, publications exist which indicate resale values of popular canned software programs, such as Excel and Windows. Typically, customized software does not have an easily discernible resale market value.
• Income Approach - In the income approach, net income attributable to the software is capitalized over an appropriate life cycle. This approach may be appropriate in appraising mainframe software, which is often leased rather than purchased.

When software programs are individually listed on a declaration schedule, the assessor must remove any documented value attributed to the exempt software before determining the taxpayer's personal property value.

Technologically Advanced Personal Property

The Division of Property Taxation has reviewed the published Industry Categories (RCN Factors) and economic lives assigned to computers, other computer personal property and stand-alone computer peripherals, computer-integrated personal property, and telecommunication personal property. As a result, the following technologically advanced personal property categories have been established:

• Personal Computers (PCs) and Accessories
• Other Computers and Stand Alone Peripherals
• Computer-integrated Personal Property
• Telecommunication Personal Property

Personal Computers (PCS) and Accessories

This category of personal property includes stand-alone desktop, laptop, or other related personal computer systems, and accessories. Examples include:

• Central processing units (CPUs)
• Motherboards
• Random access memory (RAM)
• Video cards
• Power supply units
• Hard disks
• Optical drives
• Disk drives
• Computer (PC) modems
• Computer docking stations
• Keyboards
• Computer mice
• Tape storage units
• Monitors

This is not an all-inclusive list. In determining whether to include computer related personal property under this category, the general rule is to include any personal property or accessory that is used in conjunction with the personal or laptop computer and will generally be disposed of at the same time as the computer.

In order to better estimate the effects of technological obsolescence and rapidly changing economics inherent in the personal computer segment of the computer industry, we have assigned personal computers and accessories to Industry Category (RCN Factor) Table 13 (no RCN trend) and to a three (3) year economic life. A separate depreciation table incorporating a seven (7) percent residual value for personal computers and accessories has been developed and can be found in Chapter 4, Personal Property Tables.

Other Computers and Stand Alone Peripherals

This category includes all computers and stand alone peripherals and other listed high technological personal property that is not classified as personal computers and accessories. Examples include:

• Mainframe and Supercomputers
• Card readers (including point of sale (POS) and credit card readers)
• Servers
• Data entry and storage devices
• Copiers
• Desktop/office printers
• Keypunch machines
• Magnetic tape feeds
• Global positioning system (GPS) receivers
• Digital cameras
• Minicomputers
• Bar code scanners
• Personal data assistants (PDAs), personal information managers (PIMs), and smartphones
• Optical character readers
• Plotters
• Kiosks (i.e., DVD vending and CD burning, except for the structural housing)
• Terminals (including LOTTO, except for the structural housing)
• System modems
• Scanners
• TV transmission and receiving personal property systems (i.e., set-top boxes, sound blockers, remote controls, etc.)
• Automated Teller Machines (computer/electronic components/portion excluding the structural housing of the ATMs which should be valued using a ten (10) year economic life)
• Multi-purpose, office computer-based personal property that has two or more separate functions (facsimile, printer, scanner, and/or telecommunication).
• Telecommunication personal property

In order to better estimate the effects of technological obsolescence inherent in this category of personal property, we have assigned Other Computers and Stand Alone Peripherals to Industry Category RCN Factor Table 13 (no RCN trend) and to a four (4) year economic life. A separate depreciation table incorporating a seven (7) percent residual value for Other Computers and Stand Alone Peripherals has been developed and can be found in Chapter 4, Personal Property Tables.

Excluded Personal Property

Examples of personal property excluded from this category include:

• Adding and accounting machines
• Calculators
• Vending machines (not including high tech kiosks)
• Electronic desk calculators
• Printing presses
• Production equipment²
• Typewriters
• Video arcade games³

The above noted personal property is assigned the appropriate industry category based on its use.

²Production equipment that is integrated into other personal property is generally excluded from this category. Examples of this type of personal property include: equipment used primarily for process or production control, switching, channeling, and automating distributive trades as with computerized material conveyance and handling systems, drill and punch presses, wood and metal turning lathes, and similar personal property. See the Computer-integrated Machinery and Personal property topic found later in this chapter.

³ Video arcade game personal property used primarily for amusement or entertainment of the user also is excluded from this category. Refer to the topic Video Arcade Games in this chapter.

Use of Market Guides to Value Computer Personal Property

The market value of used computer personal property reported in published market guides may be substituted for RCNLD actual value estimates, if it produces a lower value than the RCNLD value. These market guides contain sales information on many types and brands of used computer personal property. However, values obtained from these guides must include an allowance for sales/use tax, freight charges to the point of use, and any installation costs.

Computer-Integrated Personal Property

In recent years, computers and/or computer-based controls have become integrated into a variety of personal property categories. This category includes all personal property wherein a computerized control system is built into or incorporated with the components of the personal property in such a way that the computer component is a permanent and necessary part of the personal property.

Personal property is categorized as Computer-Integrated Personal Property if all of the following category criteria are met:

1. The personal property is purchased and/or constructed to function as a single unit. If the original sales invoice or other property sales information separates the computer portion from the mechanical portion of the personal property, then the computer portion should be valued as a stand-alone computer and given a four (4) year economic life. The mechanical portion of personal property should be given the appropriate economic life for personal property that is not computer-integrated. Please refer to the Computer- Integrated v. Modular Computer Personal Property topic later in this chapter.
2. The computer portion is not designed to perform functions outside the personal property and the personal property cannot function without the computer.
3. The personal property is controlled by a programmable central processing unit that is physically integrated within the structure of the personal property.
4. The total cost of both the computer portion and the other parts of the personal property is depreciated as a unit for income tax purposes.
5. The capabilities of the personal property cannot be expanded by substituting a more complex computer for the original. The capability of upgrading operating software will not disqualify personal property from being included in this category. In addition, typical industry practice for the personal property demonstrates that when either the computer or mechanical component of the personal property is no longer functional, the entire property is retired, scrapped, and/or sold for parts.

Computerized lathes used in research and development are one example of computer-integrated personal property.

If one or more of the criteria are not met, the personal property is to be placed in the appropriate category and assigned the appropriate Industry Category (RCN Factor) and economic life. When evaluating a complete manufacturing line or process, each piece of personal property within the line or process must be separately examined to determine whether it meets the computer-integrated personal property criteria.

Computer-integrated personal property should be valued using Industry Category (RCN Factor) Table 13 (no RCN trend), a four (4) year economic life, and the general percent good table with a 15 percent residual. To access the applicable depreciation tables for computer-integrated personal property, please refer to Chapter 4, Personal Property Tables.

Computer-Integrated v. Modular-Controlled Personal Property

Assessors should understand that much of the personal property used in industry today has modular electronic and/or computer controls that direct the operation of the property. These modular controls can be replaced by new controls or updated with new hardware and circuitry as needed by the personal property owner. The modular computer controls typically are not physically integrated with the personal property in such as way that the personal property meets the definition as computer-integrated personal property.

When modular computer-controlled personal property is found, the assessor should classify and value the computer portion as Other Computers and Stand-Alone Peripherals and the mechanical portion at the appropriate economic life assigned for that type of personal property. When modular electronic-controlled personal property is found, the assessor should classify and value the electronic portion as electronic personal property and the mechanical portion at the appropriate economic life assigned for that type of personal property. The taxpayer must provide information and documentation to help the assessor determine a reasonable allocation of the personal property’s original installed costs so that each portion of the personal property may be assigned the appropriate economic life for valuation.

Telecommunication Personal Property

Examples of telecommunication personal property in this category include:

• Internal customer telecommunication systems
• Fax machines
• Key systems
• Teletypes
• PBX systems
• Small telephone systems
• Telephone handsets
• Cell phones

Telecommunication personal property is to be valued using Industry Category RCN Table 13 (no RCN trend) and a four (4) year economic life. The “Other Computers and Stand-Alone Peripherals” depreciation table incorporating a seven percent (7 percent) residual value should be used to value personal property in this category. To access the applicable depreciation table, please refer to Chapter 4, Personal Property Tables.

Personal Property Excluded from This Category

Examples of personal property excluded from this category include:

• Aerial wires
• Antenna
• Cable
• Microwave systems
• Pole lines
• Towers
• Underground conduits

Excluded personal property should be valued using the Industry Category (RCN Factor) Tables that are applicable to the type of personal property. Procedures for the classification and valuation of towers are located in this chapter.

Towers

Discovery and Classification

Towers are defined as personal property designed to facilitate electronic transmissions or relay technologies. Towers are classified as personal property under § 39-1-102(11), C.R.S.

Identifying ownership of towers may be accomplished by discussion with the owner of the land on which the tower is erected or by reviewing construction permits that may contain the tower owner’s name. Current ownership information is necessary to send a declaration schedule and assign tax liability.

Determination of ownership may also be aided by the Federal Communications Commission (FCC) Antenna Structure Registration Listing.

Additional ownership and other related tower information may be found at the Tower Source website and American Tower.com website.

Towers may be owned by either a state assessed company or by a company whose property is subject to local assessment. The Division’s State Assessed Section have incorporated requirements for state assessed companies to list all towers on their Annual Statement of Property (ASOP) rendition.

Both state assessed and locally assessed personal property may be attached to the tower. If the personal property is owned by a state assessed company, it is typically included in the company’s ASOP rendition to the Division. If the personal property is owned by a non-state assessed company, it should be listed on the owner’s declaration schedule that is filed with the local county assessor where the equipment is located on the assessment date. Taxable personal property that is listed on the declaration schedule should be valued by the local county assessor.

Valuation of Towers

Valuation of towers may be accomplished using either factored historical costs or a cost service such as Marshall Valuation Service. If factored historical costs are used, Industry Category Number 1, “Average of All” trending factors and a recommended economic life of twenty years are to be used. If a cost service is to be used, the service’s recommended economic life for towers should be considered.

According to § 39-1-103(13), C.R.S., the cost approach shall establish the maximum value of personal property, if all costs incurred in the acquisition and installation of the property are fully and completely disclosed by the owner to the assessor. Therefore, the market and income approaches may only be employed in the valuation of towers if a value lower than that indicated by the cost approach is indicated.

If subject to state assessment, towers are not subject to local assessment. However, non-state assessed towers are subject to local assessment even if they lease space for equipment to a state assessed company.

Locally assessed electronic transmitting and receiving equipment installed on towers has a recommended economic life of four years.

Associated buildings and/or other improvements are valued as real property.

Video Arcade Games

While there are some similarities, video arcade games are not computers. Video arcade games should be placed in Industry Category Number 1, “Average of All.” Video arcade games should be given a recommended economic life of six (6) years.

Hard-wired circuit boards that control the operation of most video arcade games are not software programs. Thus, there should be no deduction for software when these circuit boards are valued.

However, video arcade games that use interchangeable cartridges to control their operation are using a type of software-based game program cartridges, which is intangible personal property and, therefore, exempt. The value of these cartridges should be deducted, if it is included in original acquisition costs or market values. See the Software topic in this section for a discussion of procedures to determine software deductions.

Renewable Energy Property Assessment

Locally Assessed Renewable Energy Property

Colorado assessors are required to discover, classify, list, and value all locally assessed taxable renewable energy property.

Valuation of real and personal property that produces alternating current electricity from a renewable energy source.

(1) (a) Except as provided in paragraph (b) of this subsection (1), on and after January 1, 2008, all real and personal property used to produce two megawatts or less of alternating current electricity from a renewable energy source shall be valued by the assessor in the county where the property is located in accordance with valuation procedures developed by the administrator.

[…]

(2) In developing the valuation procedures specified in subsection (1)(a) of this section:
(a) Except as set forth in subsection (2)(b) of this section, the administrator shall utilize the procedures adopted for determining the actual value of a renewable energy facility as specified in section 39-4-102(1)(e); and

(b)For a facility that would qualify as a solar energy facility as defined in section 39-4-101(3.5) but it generates and delivers less than two megawatts of energy, the administrator shall utilize the procedures for determining the actual value of a solar energy facility as specified in section 39-4-102(1.5) for property tax years commencing on or after January 1, 2021.

§ 39-5-104.7, C.R.S.

Discovery

Current ownership information is necessary in order for the assessor and staff to send a declaration schedule and assign tax liability. A few of the most readily available renewable energy discovery tools include the local media, area canvassing, permits, and the Internet. Identifying the ownership of renewable energy property may be accomplished by discussion with the owner of the real property on which the renewable energy property is located. Local zoning permits, county approval documents, and property transfer documents may contain the renewable energy property owner’s name and contact information. Legal documents including power purchase agreements (PPA), leases, and contracts should be reviewed as a part of the process.

Classification

Most locally assessed renewable energy property meet the criteria to be classified as personal property under § 39-1-102(11), C.R.S. Refer to Chapter 2, Classification.

Fencing, associated support buildings, and/or other improvements are classified and valued as real property.

For Colorado property taxation purposes, all personal property used to produce two (2) megawatts or less of alternating current (AC) electricity from a renewable energy source is locally assessed. This includes solar energy property (e.g. photovoltaic panels, community solar gardens) used to produce two (2) megawatts or less of AC electricity and wind energy property (e.g. wind turbines) used to produce two (2) megawatts or less of AC electricity are locally assessed. In addition, locally assessed renewable energy property includes small or low impact hydroelectric facilities, geothermal energy facilities, and biomass energy facilities as defined in 39-4-101, C.R.S., used to produce two (2) megawatts or less of AC electricity and placed into service prior to January 1, 2010.

All renewable energy systems with greater than two (2) megawatts of AC electricity generation capacity are valued as public utility property by the State Assessed Properties Section of the Division of Property Taxation (Division). Small or low impact hydroelectric facilities, geothermal energy facilities, and biomass energy facilities, as defined in § 39-4-101, C.R.S., that are put into use on or after January 1, 2010, and not primarily designed to supply electricity for consumption on site, are state assessed regardless of AC generation capacity.

Community Solar Gardens

Pursuant to § 40-2-127(2)(b)(I)(A), C.R.S., a community solar garden is defined as "a solar electric generation facility with a nameplate rating within the range specified under subsection (2)(b)(I)(D) of this section that is located in or near a community served by a qualifying retail utility where the beneficial use of the electricity generated by the facility belongs to the subscribers to the community solar garden. There shall be at least ten subscribers. The owner of the community solar garden may be the qualifying retail utility or any other for-profit or non-profit entity or organization, including a subscriber organization organized under this section, that contracts to sell the output from the community solar garden to the qualifying retail utility."

Section 40-2-127(2)(b)(I)(D), C.R.S., specifies that the nameplate rating for a community solar garden is five (5) megawatts or less. Additionally, on or after July 1, 2023, the Public Utilities Commission may adopt rules to approve community solar gardens with a nameplate rating of up to ten (10) megawatts.

Community solar gardens with a nameplate rating of two (2) megawatts or less (in AC) are locally assessed properties in accordance with § 39-5-104.7, C.R.S. Any community solar garden with a nameplate rating greater than two (2) megawatts (in AC) is considered a state assessed renewable energy facility and classified and valued under §§ 39-4-101 and 102, C.R.S.

Section 39-3-118.7, C.R.S., exempted from the levy and collection of property taxes the percentage of alternating current electricity capacity of a community solar garden that was attributed to residential or governmental subscribers, or to subscribers that were organizations that were granted property tax exemptions pursuant to §§ 39-3-106 to 39-3-113.5, C.R.S. This exemption covered tax years beginning January 1, 2015 and ending before January 1, 2021.

Community Geothermal Gardens

Pursuant to § 40-2-127.5(2)(a)(I), C.R.S., a community geothermal garden is defined as: "a geothermal facility that produces electricity from the earth’s heat with a nameplate rating within the range specified under subsection (2)(b)(IV) of this section that is located in or near a community served by a qualifying retail utility where the beneficial use of the electricity generated by the facility belongs to the subscribers to the community geothermal garden. There must be at least ten subscribers. The owner of the community geothermal garden may be the qualifying retail utility or any other for-profit or nonprofit entity or organization, including a subscriber organization organized under this section, that contracts to sell the output from the community geothermal garden to the qualifying retail utility."

Section 40-2-127.5(2)(a)(IV), C.R.S., specifies that the nameplate rating for a community geothermal garden is five (5) megawatts or less. Additionally, the Public Utilities Commission may adopt rules to approve community geothermal gardens with a nameplate rating of up to ten (10) megawatts.

Community geothermal gardens with a nameplate rating of two (2) megawatts or less (in AC) are locally assessed properties in accordance with § 39-5-104.7, C.R.S. Any community geothermal garden with a nameplate rating greater than two (2) megawatts (in AC) is considered a state assessed renewable energy facility and classified and valued under §§ 39-4-101 and 102, C.R.S.

Agrivoltaics

Agrivoltaics are defined in § 35-1-114(4)(a), C.R.S., as "one or more solar energy generation facilities directly integrated with agricultural activities, including crop production, grazing, animal husbandry, apiaries, cover cropping to improve soil health or insect habitat benefits or carbon sequestration, or production of agricultural commodities for sale in the retail or wholesale market."

Taxability

Renewable energy property in the state is taxable unless specifically exempted by the Colorado Constitution.

Renewable energy personal property that is located on a residentially classified property, owned by the residential property owner, and produces energy that is used by the residential property, is exempt from Colorado property taxation under the household furnishings exemption contained in § 39-3-102, C.R.S. In order to qualify for the household furnishings exemption, residential renewable energy personal property cannot be used to produce income at any time. Pursuant to § 39-3-102(1), “For property tax purposes only, rebates, offsets, credits, and reimbursements specified in section 40-2-124, C.R.S., shall not constitute the production of income.”

The Division recommends that the assessor conduct an analysis of the residential sales with renewable energy personal property in each economic area, during each reappraisal year, to determine if renewable energy personal property results in an increase in value in that economic area. If it is determined that they do result in an increase in value, then those sales that include exempt residential renewable energy personal property should be adjusted to exclude the contributory value of the renewable energy personal property.

Independently owned residential solar electric generation facilities (photovoltaic solar systems) that meet criteria listed in § 39-1-102 (6.8), C.R.S. are exempt from Colorado property taxation under § 39-3-102, C.R.S. To qualify for the exemption the solar electric generation facility must be located on residential real property, used to produce electricity from solar energy primarily for use in the residential improvements, and have a production capacity of no more than one hundred (100) kilowatts of AC electricity.

Pursuant to § 39-3-122(3), C.R.S., on or after January 1, 2024, but before January 2, 2029, machinery or equipment that is part of a solar energy generating system that is used for agrivoltaics is exempt from personal property taxes. In addition to being used for agrivoltaics, the personal property must also:

• incorporate novel designs, technologies, or configurations that significantly expand the potential for agricultural activities, including by:
  • elevating the bottom edge height of the panels at least six feet above the ground;
  • utilizing translucent panels or panels with tubular or other innovative panel geometry that supports agrivoltaics;
  • incorporating alternative solar tracking algorithms that are tailored to optimize vegetative growth;
  • incorporating extended row or panel spacing in a manner that enables agricultural activities;
  • incorporating modified wire management systems that support livestock, including raising, lowering, or burying wiring;
  • incorporating innovative photovoltaic racking structures, including tensioned wire racking systems, suspension-based systems, or other dynamic photovoltaic racking systems or arrangements;
  • incorporating agricultural infrastructure that is typically found on a farm or ranch operation, such as agricultural fences, water sources and distribution, water troughs and tanks, corrals, livestock pens, or produce handling equipment; or
  • incorporating agricultural structures that are typically found on an agricultural operation, such as a tractor shed, a barn, or structures for equipment storage, produce washing, storage, processing, or chilling and packaging;
• be constructed in a manner that minimizes soil compaction underneath and in between panels; and
• be constructed to incorporate design strategies that are planned with the intent to minimize the negative environmental impact of photovoltaic energy production facilities on ecosystems, native vegetation, state and federally listed species, wildlife migration corridors, and the species, habitats, and ecosystems of greatest conservation need.

Abstract of Assessment

Locally assessed renewable energy personal property is assigned to a 2415 subclass code. Associated renewable energy real property is assigned to 2117 (land) or 2217 (improvements). Any other real property is assigned to the appropriate subclass code based on its use as of the January 1 assessment date. State assessed renewable energy property is assigned to 8252 (real property) or 8452 (personal property). For more information on assigning abstract codes for renewable energy property, see Assessors' Reference Library, Volume 2, Chapter 6.

Valuation

Under the provisions of article X, section 3, of the Colorado Constitution, assessors must consider the cost, market, and income approaches to value in their appraisal of taxable personal property. Section 39-5-104.7(1)(a), C.R.S., states that locally assessed renewable energy property, except for solar energy property described in § 39-5-104.7(2)(b), C.R.S., “shall be valued by the assessor…in accordance with valuation procedures developed by the administrator” utilizing the procedures described in § 39-4-102(1)(e), C.R.S.

In accordance with § 39-4-102(1)(e), C.R.S., the Property Tax Administrator has established the following valuation procedures to determine actual value for renewable energy personal property.

The replacement cost new (RCN) estimate is developed based on the following information:

1. The cost per kilowatt of AC electricity published by the Division of Property Taxation, and
2. The AC electricity generating capacity of the property.

With this information, the RCN is developed by multiplying the cost per kilowatt of AC electricity times the AC electricity generating capacity of the subject. The RCN estimate represents the reasonable costs of acquisition and installation of comparable non-renewable property as of the June 30 appraisal date. The RCN estimation method will be applied to all locally assessed renewable energy property except certain solar energy property described in § 39-5-104.7(2)(b), C.R.S.

Renewable energy property cost per kilowatt in AC electricity information is provided under the Renewable Energy section of the Division of Property Taxation website at the Renewable and Clean Energy Assessment web page.

Annual depreciation, based on the age of the system, will be applied utilizing Industry Category 14 (Renewable Energy Personal Property) with a twenty (20) year economic life using the

Division’s “Renewable Energy Percent Good Table” and “Level of Value (LOV) Adjustment Factor” as published in, Chapter 4, Personal Property Tables.

The cost that must be applied for the current tax year valuation is $615 per kilowatt of AC electricity generation capacity.

The steps for utilizing the cost approach to value renewable energy property follow:

1. Ascertain the AC electricity generation capacity (e.g., 30 kilowatts) by adding the generation nameplate capacity of each panel/module together. Also determine the year of acquisition and installation of the renewable energy property. This information comes from the declaration schedule completed by the owner or from additional information requests and contacts, if necessary. If the generation capacity is declared in DC, an AC inverter/transformer rate adjustment must be applied. If the taxpayer does not provide a reasonable documented inverter/transformer rate adjustment, then the National Renewable Energy Laboratories (NREL) PV Watts source may be considered. See the PVWatts® Calculator.
2. Multiply the kilowatt AC electricity generation capacity of the system by the rate per kilowatt for the current tax year. The resulting number represents the estimated replacement cost new of the property as of the assessment date.
3. Adjust for depreciation by multiplying the estimated replacement cost new by the percent good based on the age of the system. The percent good is based on the Renewable Energy Percent Good Table published by the Division of Property Taxation in Chapter 4, Personal Property Tables. The result represents the replacement cost new less depreciation (RCNLD) of the renewable energy property as of the assessment date.
4. Multiply the estimated RCNLD by the Industry Category 14 level of value (LOV) adjustment factor to derive the estimated actual value as of June 30 of the most recent previous even year.

An example of the valuation process is shown below:

During the previous tax year, a roof-mounted thirty (30) kilowatt of AC electricity photovoltaic (PV) solar panel system was installed on a restaurant. The system was installed and in use in the previous tax year and therefore the property is valued for the current tax year as one (1) year old. The energy from the system is consumed on site.

Valuation of the PV system is calculated as follows:

30 Generation capacity in AC electricity (in kilowatts) 
x $615 Rate per kilowatt of AC electricity (current tax year rate)
= $18,450 Estimated RCN 
x 0.95 Percent good from the Renewable Energy Percent Good Table
=$17,528 Estimated RCNLD (rounded) 
x 1.00 Level of value adjustment factor (current tax year LOV)
=$17,528 Estimated actual value as of the June 30 previous even year

The Division has developed and posted a locally assessed renewable property Excel worksheet at the Renewable and Clean Energy Assessment web page. To access the worksheet, click on “Renewable Energy” and then click on the appropriate worksheet. With the appropriate input, the worksheet may be used to apply the above noted formula to calculate the renewable property actual value.

The above valuation methodology only applies to the personal property used to generate alternating current electricity from a renewable energy source (§ 39-5-104.7(1)(a), C.R.S.). Battery storage may be included in this valuation methodology if the battery storage system is part of the renewable energy facility.

Pursuant to § 39-5-104.7(2)(b), C.R.S., for solar energy property that would qualify as a solar energy facility as defined in § 39-4-101(3.5), C.R.S., but generates and delivers less than two (2) megawatts of energy, the Property Tax Administrator is required to established separate valuation procedures in accordance with § 39-4-102(1.5), C.R.S., for property tax years commencing on or after January 1, 2021.

Qualified solar energy property is valued using the income methodology outlined in § 39-4- 102(1.5), C.R.S., and utilizes a “tax factor” which is multiplied by the gross revenues from the sale of energy at the interconnection meter to determine the actual value of the property.

The valuation formula for these facilities is:

Actual Value = Gross Revenues x Tax Factor

For more information on calculating the tax factor, see the “Locally Assessed Tax Factor Template” available on the Renewable Energy section of the Division’s website here: https://dpt.colorado.gov/renewable-energy

Assessment of Renewable Energy Credits by County Assessors

Renewable Energy Credits (RECs), also known as “green tags” or “renewable energy certificates,” are tradable environmental commodities that represent proof that one (1) megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource. These certificates can be sold and traded and the owner of the REC can claim to have purchased renewable energy.

RECs are classified as intangible personal property and, exempt pursuant to § 39-3-118, C.R.S., so they cannot be valued separately by the county assessor.

State Assessed Renewable Energy Systems

All renewable energy systems with greater than two (2) megawatts of AC electricity generation capacity are valued as public utility property by the State Assessed Properties Section of the Division of Property Taxation. Small or low impact hydroelectric facilities, geothermal energy facilities, and biomass energy facilities, as defined in § 39-4-101, C.R.S., that are put into use on or after January 1, 2010 and not primarily designed to supply electricity for consumption on site, are state assessed regardless of AC generation capacity.

Energy storage systems and clean energy resources, as defined in § 39-4-101, C.R.S., are also state assessed properties and valued in a manner similar to renewable energy property. Solar energy facilities, as defined in § 39-4-101(3.5)(a), C.R.S., include agrivoltaics and floatovoltaics, as defined in §§ 35-1-114(4)(a) and 37-60-115(12)(c)(III), C.R.S., respectively.

Pursuant to §39-4-102(1.5)(c), C.R.S, “The location of a small or low impact hydroelectric energy facility, a geothermal energy facility, a biomass energy facility, a wind energy facility, or a solar energy facility on real property shall not affect the classification of that real property for purposes of determining the actual value of that real property as provided in section 39-1- 103.”

Renewable Energy Incentives

Colorado does not have any general statewide property tax incentives for renewable energy. However, §§ 30-11-107.3 and 31-20-101.3, C.R.S., allow county and municipal governments to “offer an incentive, in the form of a [county/municipal] property tax or sales tax credit or rebate, to a residential or commercial property owner who installs a renewable energy fixture on his or her residential or commercial property.”

Local governments can enact incentive payments or property tax rebates under certain circumstances related to economic development. A county, municipality, or special district can enter into negotiations for an incentive payment with owners of new business facilities. A county, municipality, or special district may also negotiate an incentive payment or credit with owners of existing business facilities, located in their jurisdiction, based on verifiable documentation demonstrating that there is a substantial risk that the owner of the existing business facility will relocate it out of state. The incentives cannot exceed 100 percent of the personal property taxes paid to the county, municipality, or special district. For agreements made prior to August 6, 2014, the agreement cannot last more than ten years. For agreements made after August 6, 2014, the agreement may not last longer than thirty-five years, §§ 30-11- 123, 31-15-903, and 32-1-1702, C.R.S. Additional incentives are available through income tax credits, real property tax incentives, and sales tax refunds. For further information on these incentives refer to §§ 39-30-105.1 and 107.5, C.R.S.