Colorado Voters Pass Repeal of Gallagher Amendment

By: K.C. Veio

In yesterday’s general election, Colorado voters passed Amendment B, which repeals a key section of Article X of the State’s Constitution, commonly known as the “Gallagher Amendment.”  Adopted by Colorado voters in 1982, the Gallagher Amendment set residential and non-residential property tax assessment rates in the State.  At the time of its adoption, property classified as “residential” comprised approximately 45% of State’s aggregate property value, with all other classes of property as well as public utilities comprising the remaining 55%. The Gallagher Amendment functioned to freeze this ratio of the State’s aggregate value of residential property (45%) to its aggregate value of non-residential property (55%) in perpetuity. As a result of the Gallagher Amendment’s mandate to maintain the 1982 ratio, since 1982 the State legislature has periodically reduced the property tax assessment rate on residential property (from 21% in 1982, all the way down to 7.15% in 2020). Along with Article X, Section 20 to the State constitution, known as the Taxpayer’s Bill of Rights (“TABOR”)—which, among other things, generally requires voter approval for all proposed taxation increases in the State—the Gallagher Amendment has been a pillar of Colorado property taxation law and has survived several ballot initiatives aimed at its repeal.

In repealing the Gallagher Amendment, Amendment B will have the following impact:

  • The assessment rate for residential real property in Colorado will be frozen at the current rate, 7.15%, making the assessment rate a static ratio similar to that of every other property class in Colorado (all of which have historically been frozen at 29%). The State legislature will no longer be obligated to reduce periodically the residential assessment rate to maintain the 45% to 55% residential-to-non-residential ratio established in 1982.
  • The Colorado Constitution will no longer reference the assessment rates of the other classes of non-residential property (e.g. commercial, agriculture, industrial, etc.), rendering all property tax assessment rates to be set forth solely via statute rather than in the State’s Constitution itself. This change will potentially enable the State legislature to reduce the residential assessment rate, or any of the assessment rates on non-residential classes of property described above, in the future without regard to the 45%-55% ratio previously codified by the Gallagher Amendment.
  • Any increase in the assessment rate on any class of property in the State would still require voter approval under TABOR.

It is anticipated that the repeal of the Gallagher amendment may impact a variety of municipal debt issuances in Colorado, particularly those backed by a pledge of property tax revenues.  For further information, please contact any member of our Public Finance Group.

KAV Welcomes Three New Attorneys

KAV is pleased to announce the arrival of Randy Schump as Of Counsel, Lindsay Conroy as an Associate, and Marc Tawil as an Associate.

Randy Shump: With nearly three decades of tax experience, including eleven years with the Internal Revenue Service—first as Field Agent, then as Attorney for the Office of Chief Counsel in the Tax Exempt & Government Entities Division—Randy Shump brings to KAV invaluable experience in corporate and municipal tax matters. Randy’s practice at KAV includes counseling on tax compliance issues, handling tax controversies, and advising for-profit and nonprofit corporations as well as individual taxpayers on a variety of tax-related matters. Randy also assists in public finance matters involving Section 103 of the Internal Revenue Code.

Lindsay Conroy: Lindsay Conroy is a public finance attorney and has served as bond, disclosure, and underwriter’s counsel in a variety of public finance transactions.  Lindsay’s practice focuses on real estate development projects, special districts, health care, higher education and charter schools. She has worked with a variety of issuers in transactions and has extensive experience working with various state, county and city officials, officers of various state authorities, school officials and real estate developers. Prior to joining KAV, Lindsay was an attorney in the Public Finance department of Ballard Spahr LLP.  Lindsay began her legal career at Kutak Rock LLP where she practiced public finance law for four years before leaving to successfully own and operate a medium-size business in the event industry for ten years. Lindsay returned to practicing law after selling her business.

Marc Tawil: Marc Tawil is an Associate at KAV with experience in corporate finance, mergers and acquisitions, and real estate law. His practice primarily focuses on assisting business entities with real estate and corporate matters, including drafting organizational documents and asset and stock purchase agreements, preparing securities filings, and providing strategic counsel in connection with real estate transactions.  He also assists municipal entities in public finance matters. Marc handles a range of transactions that reflect various sizes and structures.

IRS Issues Guidance on Transition from LIBOR to IBORs

The IRS recently issued guidance relating to the transition from LIBOR and IBOR to alternative reference rates like SOFR.  The intent is to address the issue of whether modifying existing municipal bond documents results in a reissuance for federal tax purposes, and provide guidance for adjustments to a qualified hedge under Treas. Reg. Section 1.148-4.

In summary, the guidance provides that relief only applies to modifications to contracts that a) incorporate an ISDA fallback; 2) incorporate an ARRC fallback; and 3) incorporate either of the foregoing with certain specific deviations like those to confirm that the fallback is enforceable under local law.  The Revenue Procedure is effective for modifications to contracts on or after October 9, 2020 and before January 1, 2023.

Victoria S. Byerly is an attorney in KAV’s Public Finance Group. A specialist in Section 103 of the Internal Revenue Code, her practice is exclusively dedicated to state and federal tax matters related to the issuance of tax-exempt debt obligations.

KAV’s Victoria Byerly Publishes Landmark Treatise on the Taxation of Public Utilities

KAV Tax Partner Victoria S. Byerly, a specialist in Section 103 of the Internal Revenue Code, is the author of Taxation of Public Utilities, which was published by LexisNexis last week. Victoria’s landmark publication is the first comprehensive treatise ever published on the public utility industry’s unique tax problems. Victoria’s treatise thoroughly explains and analyzes the complex interplay of the Internal Revenue Code, the financial accounting rules, and the regulatory and ratemaking processes.  Victoria’s treatise is available for purchase here.

Welcome Diane Wolfson!

Kline Alvarado Veio, P.C. is pleased to announce the arrival of Diane Wolfson as Of Counsel in the firm’s Real Estate practice group.

Diane Wolfson started her career at a multi-national Wall Street law firm and has been a real estate and business lawyer for nearly three decades. Her practice experience includes a broad range of complex commercial and residential transactions and covers the entire life cycle of almost every type of real estate transaction, from acquisition and financing to land use and development, easements and property rights, construction contracts and mechanic’s liens, leases, property management (including multi-use and hospitality) and common interest communities.

Diane arrives at the firm on September 1. She can be reached at dwolfson@kvfirm.com.