New Hotel Taxes, Senior Property Breaks, and a $60K Exemption for Your Business

The Bottom Line

If you run a local business, manage a short-term rental, or live in a tourist-heavy mountain town, this sweeping tax bill has your name on it. It gives local towns new powers to tax hotel stays to fund workforce housing, changes how resort properties are valued, and locks in a new baseline for business equipment taxes.

What This Bill Actually Does

At its core, this bill reorganizes how Colorado handles several distinct types of property and local taxes, trying to balance community needs with business realities.

First up is the municipal lodging tax. Under this legislation, towns and cities get the green light to ask voters for a local lodging tax of up to 6% on hotel rooms and short-term rentals. Historically, lodging taxes were almost exclusively funneled into marketing and tourism boards to attract more visitors. This bill flips that script. It allows towns to use this new revenue for things communities actually need to sustain that tourism: housing and childcare for the local workforce, public infrastructure, visitor enhancements, or even public safety services like police, fire, and EMS. While existing local taxes are grandfathered in, starting January 1, 2027, towns cannot create new lodging taxes unless they follow this strict state framework.

Second, the bill changes how commercial real estate—specifically hotels and resorts—is valued for property taxes. When county assessors use the "income approach" to figure out what a property is worth, they are now legally required to factor in net rental income and resort fee income. This closes a widely debated gray area. If a hotel charges a mandatory daily resort fee on top of the room rate, that revenue must now officially count toward the building's valuation.

Finally, the bill tackles the Business Personal Property Tax—the tax businesses pay on physical equipment like computers, desks, and heavy machinery. Starting in 2027, the bill sets a permanent exemption threshold (around $60,000 depending on final amendments) and stops adjusting it for inflation every two years. It also addresses the mechanics around the portable qualified-senior primary residence benefit, dealing with the parameters of how older homeowners can carry their hard-earned tax breaks with them when they downsize.

What It Means for You

If you live in a tourist-heavy mountain town, a bustling suburb, or anywhere visitors tend to flock, expect to see ballot measures popping up over the next few years asking to tax those visitors. The 6% maximum municipal lodging tax is a direct way for your town to generate revenue from out-of-towners to solve hyper-local problems.

For a resident, the biggest win here is that this money can be explicitly earmarked for workforce housing and childcare. We all know the pain of seeing a favorite local restaurant close two days a week because they simply cannot find staff, largely because service workers cannot afford local rent. This tax is designed to help subsidize those community needs, ideally making your town more livable for the people who actually run it.

On the flip side, if you like to "staycation" at Colorado hotels or book short-term rentals in different parts of the state, be prepared for slightly higher checkout bills. Between the new local lodging taxes and the state mandate that assessors must include resort fee income in a hotel's property valuation, those increased operating costs are highly likely to be passed down to you, the consumer. A 6% local bump on a $300-a-night room is an extra $18 per night, plus whatever the property might add to cover its own increased property tax burden.

For older Coloradans, the mechanics around the senior primary residence benefit are critical to keep an eye on. The core goal of these ongoing property tax tweaks is to ensure that seniors who want to downsize into smaller, more manageable homes don't lose the property tax protections they've earned over decades. This keeps more money in fixed-income pockets while simultaneously freeing up larger housing stock for younger, growing families.

What It Means for Your Business

This legislation represents a massive operational shift if you operate in the hospitality space—whether you own a boutique hotel, manage a sprawling resort, or run a portfolio of short-term rentals.

First, you need to prepare for the valuation change. Assessors must now look at your net rental income and any resort fee income when calculating your property taxes using the income approach. If your business model has leaned on "resort fees" to boost bottom-line revenue while keeping your base room rate (and associated taxes) looking lower to consumers, the state has effectively closed that loophole. Your property tax valuation will likely jump, meaning you need to start modeling those increased tax liabilities into your forecasting immediately.

You also need to watch your local municipal elections closely. The state isn't imposing the 6% lodging tax itself, but it is handing local city councils the exact blueprint to do so. If your town passes this tax, the Department of Revenue will handle the collection, administration, and enforcement. That means you will have mandatory electronic filing and payment requirements going directly to the state, not just your local town hall. Your accounting software, point-of-sale systems, and booking platforms will need to be updated to capture and remit these specific tax lines seamlessly.

Finally, for standard brick-and-mortar small businesses across all industries, pay close attention to the Business Personal Property Tax exemption. By locking the exemption threshold at a static figure starting January 1, 2027—and eliminating the automatic biennial inflation adjustments—more businesses will eventually cross that line as the cost of equipment naturally rises over the years. If you plan on doing a massive equipment upgrade, opening a new location, or buying heavy machinery, you will want to run the math with your CPA to see if you will trigger the threshold and suddenly owe property taxes on those physical assets.

Follow the Money

At the state level, the biggest fiscal shift here revolves around how Colorado handles the "backfill" for the Business Personal Property Tax exemption. Right now, the state reimburses local governments millions annually to make up for the tax revenue lost when small business equipment is exempted. Under this bill, the state will essentially freeze those reimbursement payments at the FY 2026-27 levels (projected around $16.7 million). This costs the state an extra $173,000 in FY 2027-28 but will ultimately save the state money in the long run as it caps the liability.

For local governments, eliminating the inflation adjustment on business equipment means that over time, as equipment values rise, more businesses will cross the taxable threshold. This will slowly increase property tax revenues for local jurisdictions, eventually offsetting the capped reimbursements they receive from the state. As for the new local lodging taxes, they won't cost the state anything. In fact, the state will skim up to 3.33% of the collected revenue (or the actual incremental cost, whichever is lower) to cover the Department of Revenue’s administrative and collection costs before passing the rest of the funds down to the local municipalities.

Where This Bill Stands

SB26-116 is currently Signed Into Law. The latest official action came on 06/02/2026: Governor Signed.

That means the legislative process is complete and the bill is now law. The remaining questions are about implementation timing and how agencies, businesses, or local governments respond.