2019 COA 134
Colo. Ct. App.2019Background
- Centennial Airport is tax-exempt and owned by the Arapahoe County Airport Authority (a political subdivision). The Authority leased airport land to Denver jetCenter (DJC) under a long-term Master Lease.
- DJC subleased ~3 acres to Rare Air (Ground Lease) requiring Rare Air to construct a hangar and vesting title to improvements in Rare Air during the lease term (title to vest in DJC only at lease expiration).
- Rare Air constructed a 30,000 sq. ft. hangar (plus support/office space) in 2012, financed and maintained at its expense; Rare Air has exclusive use, receives revenues, may encumber/assign improvements, and holds depreciation/tax benefits.
- Douglas County assessed the hangar for 2015 property taxes; Rare Air sought abatement arguing DJC (the Master Lessee) should be taxed instead. The Property Tax Administrator denied the abatement.
- The Board of Assessment Appeals (BAA) upheld the Tax Administrator; Rare Air appealed to the Colorado Court of Appeals, which affirmed.
Issues
| Issue | Plaintiff's Argument (Rare Air) | Defendant's Argument (Property Tax Administrator / BAA) | Held |
|---|---|---|---|
| Who holds taxable interest in the hangar (owner for tax purposes)? | DJC (master lessee) should be assessed; Rare Air only a lessee/subtenant so not the taxable owner. | Rare Air holds title and incidents of ownership over the improvements and therefore is the taxable owner. | The court held Rare Air possessed the taxable ownership interest and was properly assessed. |
| Whether assessment is barred or governed solely by § 39-1-103(17) (valuation of possessory interests) | § 39-1-103(17) is the exclusive statutory authority for taxing possessory interests; assessment is improper outside that scheme. | Possessory interests are taxable as real property unless exempt; § 39-1-103(17) governs valuation standards, not the authority to tax. | The court held that § 39-1-103(17) does not prohibit the assessment; possessory interests (or equivalent incidents of ownership) are taxable as real property and the statute addresses valuation standards only. |
| Whether the unit-assessment rule required taxing DJC (fee owner) instead of Rare Air | Unit rule prevents multiple assessments on different interests in the same property; assessment must be to DJC as the fee/leasehold under the Master Lease. | The unit rule applies only when multiple taxpayers have interests in the same unit; here the assessed interest was a single, separate ownership interest in the improvements held by Rare Air. | The court held the unit-assessment rule did not apply because the hangar was a distinct property interest owned by Rare Air; taxing Rare Air did not produce multiple assessments of the same unit. |
Key Cases Cited
- Farny v. Bd. of Equalization, 985 P.2d 106 (Colo. App. 1999) (BAA factfinding and mixed questions of law/fact standard)
- Southard v. Board of Equalization, 996 P.2d 208 (Colo. App. 1999) (lessee with exclusive use, right to encumber, and retention of income may be taxed as owner of improvements)
- Bd. of Cty. Comm’rs v. Vail Assocs., Inc., 19 P.3d 1263 (Colo. 2001) (possessory interests in tax-exempt property are taxable when they exhibit significant incidents of private ownership)
- City & County of Denver v. Bd. of Assessment Appeals, 848 P.2d 355 (Colo. 1993) (unit-assessment rule and principle that the apparent owner is responsible for property taxes)
- El Paso Cty. Bd. of Equalization v. Craddock, 850 P.2d 702 (Colo. 1993) (court not bound by agency misapplication of law; review of legal questions de novo)