DENVER—The Colorado Department of Revenue says it found wildly inflated land values when they had appraisals done last year after landowners appealed conservation-easement tax credits that were later denied.
Phil Horwitz, director of tax policy analysis, said the department looked at 67 appraisals of 600 that were questioned and found some property was overvalued as much as 22,000 percent. The average was 2,800 percent, costing the state $41 million.
“We continue to believe they’re bad credits,” he told state lawmakers.
He refused to identify the property owners, citing taxpayer privacy.
At issue are tax credits that were granted to property owners in exchange for not developing their land. The credits were later denied.
The House Finance Committee approved a measure Wednesday that would allow property owners to go directly to district court to dispute the state’s assessment, or give the Department of Revenue three years to settle disputes administratively after property owners said it was taking years to have their appeals heard.
Stanley Mann questioned the department’s figures and said the department denied valid credits. The former law professor said he and two dozen others owned 1,000 acres near Walsenburg that they were going to divide into one-acre lots that could have been worth $20 million or more if they were developed, but they decided to take a $3 million conservation easement tax credit not to develop the property. He said the group even sought water permits for the planned housing subdivision. The state now says the tax credits are worth nothing because the property owners can’t prove their claims.
“They’re desperately trying to do anything then can to justify their position,” Mann said.
Horwitz told lawmakers the department knew there were problems with the conservation easement program in 2006 when the IRS raised questions, but they weren’t aware of the huge disparities until they had 67 appraisals done on some off the 600 properties in question. Horwitz said if the appraisal was within 200 percent of their appraised value, the state granted the tax credits.
At issue are tax credits that were granted to property owners in exchange for not developing their land. Some of those credits were later denied.
Those who were denied are now required to appeal to the state Department of Revenue before they can go to court. Also affected are people who bought the tax credits as investments.
Rep. Marsha Looper, a Republican from Calhan, said it could take years at the current rate to resolve disputes and she wants a three-year limit on resolving back cases.
State budget officials say it could cost the state $223 million to settle the claims and another $3.4 million to hire judges and handle claims if the bill passes.
Looper said the cases have dragged on since 2003.
“This way, they would be able to bypass some of the delays and get their cases settled in two or three years, instead of 10 years it will take to get these cases resolved,” Looper said.
Mark Couch, a spokesman for the state Department of Revenue that is handling the appeals, said previously that taxpayers asked for their hearings to be delayed over the past year while lawmakers considered legislation to settle their claims outright. But those bills were killed because state lawmakers and former Gov. Bill Ritter said the state needed the money to cope with a $1.1 billion revenue shortfall.
