In response to a controversial bill over how much short-term rental owners should pay in state taxes, two of Colorado’s Democratic lawmakers are gearing up to introduce a rival measure that completely contradicts the one already being considered.
The first measure, also sponsored by Democrats, would nearly quadruple taxes on short-term rentals occupied for more than 90 days per year. Senate Bill 33 is already one of the most contentious proposals of the legislative session, as lawmakers have been inundated with emails about the bill and a group of property owners filled the halls of the Capitol last week to protest the proposed legislation.
The new bill offers a different way of deciding who faces the higher tab. Instead of setting short-term rental taxes based on the number of days the property is used — as Senate Bill 33 would — the new proposal would make the determination based on the number of properties each owner operates, according to a draft of the bill obtained by Summit Daily.
Both bills seek to address consequences of the ballooning number of short-term rentals in the state, particularly in ski towns. Many local governments say the short-term rentals are squeezing their already-tight housing market, taking up units that could otherwise be used by local employees. Others complain the rentals, which are currently taxed by the state at its relatively low residential rate, should be taxed at the same rate as hotels and help pay for local services like schools and fire districts.
Those opposed to Senate Bill 33 worry that the change, which would apply to tens of thousands of short-term rental properties in the state, will have a devastating impact on tourist-driven economies.
Short-term rental owners and business groups alike have come out strongly against Senate Bill 33.
“This bill, as written, would trigger a veritable economic disaster,” wrote Julie Koster, executive director of Summit Alliance of Vacation Rental Managers, which represents more than 4,500 vacation rental properties in Summit County. “An independent economic study commissioned by the Colorado Lodging and Resort Alliance estimates that $1.2 to $1.4 billion dollars in revenue will be lost along with thousands of jobs if the bill passes.”
Sen. Chris Hansen, D-Denver, is the prime sponsor of Senate Bill 33 and has said he plans to suggest changes to it when it is considered by the Senate Finance committee on Feb. 20.
The new bill, which could be introduced into the House as soon as this week, would allow homeowners to use their primary and secondary homes as short-term rentals as much as they want and still be taxed under the residential rate. But any additional properties used for those rentals, like third, fourth or fifth homes, would be automatically taxed under the much higher lodging rate.
Out-of-state owners would be under the same restrictions, with their primary home in another state being included in the count. A second home in Colorado used for short-term rentals would be taxed at the residential rate, but third, fourth and so on homes used for those rentals would be taxed at the lodging rate.
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Under the bill, a short-term unit is one that allows rentals for fewer than 30 consecutive days.
Rep. Shannon Bird, a Westminster Democrat and one of the primary sponsors of the bill, said she hopes it will allow Coloradans who live in other parts of the state to have a vacation home in the mountains.
“That is a Colorado way of life for so many people,” she said “And I know that having that opportunity is also good for a lot of economies.”
The Colorado Association of Realtors helped draft Bird’s bill “to protect small real estate investors,” said Brian Tanner, vice president of public policy for the organization. The association opposes Senate Bill 33.
Bird said ideally, the issue would be dealt with at the local level, “But there’s a lot of energy at the Capitol and advocacy for there to be some guardrails.”
The bill’s path through the Legislature is uncertain, as it will directly challenge Senate Bill 33.
The measures contradict one another, meaning only one of them could become law. Bird said another possibility is that the sponsors of the two measures work together so they’re changed to become compatible with one another.
In a written statement released through a spokesperson, Gov. Jared Polis didn’t explicitly support either bill but said he believes there is “inequity in the tax structure between short-term rentals and comparable commercial properties like hotels.”
“He looks forward to a thoughtful conversation on this issue and is monitoring any bills in this area as they move through the legislative process,” according to the statement.
Local officials and lawmakers haven’t yet come out in support or against the bill. Chris Romer, president of the Vail Valley Partnership, said his group has “initial concerns” about the new bill.
“We believe that STR’s are best managed at a local level through local regulations, zoning and sales tax collections,” Romer said. “There is no ‘one-size-fits-all’ state approach that will effectively recognize the difference between the various regions of Colorado.”
Under the bill, which is also sponsored by Sen. Kyle Mullica, D-Thornton, short-term rental owners would be required to annually submit a signed affidavit saying if they will use the property as a short-term rental and if so, whether the property is their primary or secondary home. Lying on that affidavit would be a class 2 misdemeanor, punishable by 120 days in jail and/or up to $750 in fines.
The fight at the Capitol comes after years of local governments working to sort out their own solutions. In 2022, Steamboat Springs voters approved a 9% short-term rental tax with the funding to go toward affordable housing. Summit County put new limits on accessory dwelling units, stopping property owners from using them for short-term rentals.
