Property Taxes and the Importance of Agricultural Special Appraisal Designation
By Chris Becker/CC Becker Property Tax Consulting 9/7/2019
Note: This paper is for general information purposes and does not include all aspects of the property tax code. Readers are encouraged to seek professional assistance from qualified personnel before making any decisions or taking any actions regarding property tax issues.
Table of Contents:
What is the “Ag Exemption”? 1-d-1 Open Space Land
1-d-1 Timber Land
1-d-1 Wildlife Management
Why is Agricultural Value so Important? What is a Rollback Tax?
How CC Becker can help you
What is the “Ag Exemption”?
Tax Code Section 23.51(1) defines qualified agricultural land as:” Land that is currently and principally devoted to agricultural use to the degree of intensity typical for the area and has been used for agriculture or timber for at least five of the preceding seven years”.
Although commonly referred to as the “Ag Exemption” in Texas, it is technically a special appraisal based on the “agricultural productivity” of the land. If you don’t understand what these means don’t feel alone, most people don’t until they must deal with it on their own property. There are several types of “special appraisal” in Texas. Much of the information provided here can be found online at the Texas Comptroller of Texas website comptroller.texas.gov.
The Comptroller’s Manual for the Appraisal of Agricultural Land explains the eligibility requirements and the appraisal procedures for agricultural land, as provided by Tax Code Chapter 23, Subchapters C and D, and is adopted by the Texas Comptroller of Public Accounts under Comptroller Rule 9.4001 as required by Tax Code Section 23.52(d).
“Property owners may qualify for an agricultural appraisal if the land meets the following criteria.
• The land must be currently devoted principally to agricultural use. Agricultural use includes producing crops, livestock, poultry, fish, or cover crops. It also can include leaving the land idle while participating in a government program or for a normal crop or livestock rotation. Land used for raising certain exotic animals (including exotic birds) to produce human food or other items of commercial value qualifies. Cutting wood for use in fences or structures on adjacent agricultural land also qualifies.
• Using land for wildlife management is agricultural use if such land was previously qualified open-space land or timberland and is actively used for wildlife management. Wildlife management land must be used in at least three of seven specific ways to propagate a sustaining breeding, migrating or wintering population of indigenous wild animals for human use.
• Agricultural land must be devoted to production at a level of intensity that is generally accepted in the local area.
• The land must have been devoted to agricultural or timber production for at least five of the past seven years. However, land within an incorporated city or town must meet not only the criteria applicable to 1-d-1 land but also must meet one of the following additional criteria:
• The city or town must not provide the land with general services comparable to those provided in other parts of the city or town having similar features and population.
• The land must have been devoted principally to agricultural use continuously for the preceding five years.
• The land has been devoted principally to agricultural use or to the production of timber or forest products continuously for the preceding five years and the land is used for wildlife management.”
1-d-1 open space land as defined by the Texas Property Tax Code section 23.41 (a): “ Land designated for agricultural use is appraised at its value based on the land’s capacity to produce agricultural products. The value of land-based on its capacity to produce agricultural products is determined by capitalizing the average net income the land would have yielded under prudent management from the production of agricultural products during the five years preceding the current year. However, if the value of land as determined by the capitalization of average net income exceeds the market value of the land as determined by other generally accepted appraisal methods, the land shall be appraised by application of the other appraisal methods.”
The Comptroller further states:
“Eligibility Requirements for Timber Productivity Appraisal The Texas Constitution permits timber productivity appraisal only if the property and its owner meet specific requirements defining timber use. The land will not qualify simply because it has timber standing on it. In addition, timberland that is used principally for aesthetic or recreational purposes will not qualify. The Tax Code, Section 23.72, sets the standards for determining whether land qualifies: “Land qualifies for appraisal . . . if it is currently and actively devoted principally to production of timber or forest products to the degree of intensity generally accepted in the area with intent to produce income and has been devoted principally to production of timber or forest products or to agricultural use that would qualify the land for appraisal . . . for five of the preceding seven years.”
To qualify for timber productivity appraisal, landowners must meet each of the following six eligibility requirements.
• The land must be currently and actively devoted to timber production.
• The land must be used principally for timber production.
• The land must be devoted to timber production to the degree of intensity generally accepted for the area.
• The owner must have the intent to produce income.
• The land must have been dedicated principally to agriculture or timber production for any five of the preceding seven years.
• The property owner must file a timely and valid application form.
1-d-1 Wildlife Management:
“Section 23.51(2) Tax Code includes wildlife management in the definition of agricultural uses of land. Section 23.51(7) Tax Code defines wildlife management as: Actively using land that at the time the wildlife management began was appraised as qualified open-space land under this subchapter in at least three of the following ways to propagate a sustaining breeding, migrating, or wintering population of indigenous wild animals for human use, including food, medicine, or recreation: “
A. habitat control;
B. erosion control;
C. predator control;
D. providing supplemental supplies of water;
E. providing supplemental supplies of food;
F. providing shelters; and
G. making census counts to determine population.
In order the qualify for Wildlife Management, the state adds another layer of requirements:
The written Wildlife Management Plan is key to qualifying for the special appraisal. Many landowners hire a wildlife biologist or property tax consultant to design, write and implement the plan. To further complicate the wildlife management process, the Comptroller now requires landowners to file an “Annual Report” with the appraisal district that shows how the landowner is following the written wildlife management plan.
What is a Rollback Tax?
Generally speaking, if the Chief Appraiser determines that the use has changed from agriculture use to a non-agriculture use on land that was previously taxed at the agriculture value, a “Rollback Tax” is assessed based on the difference between ag value and market value for the last 5 years + interest. A change in use could include pretty much anything that is not producing agricultural products or wildlife. Not using the land for anything, include agriculture, constitutes a change in use.
At CC Becker Property Tax Consulting, we can take the stress and worry off you, and minimize the risk of adverse actions by the assessor. We have computer systems and procedures in place to make sure applications get filed in a timely manner, notices and other correspondence is handled appropriately, and if necessary, appeals are filed, and you are represented by a professional who knows the property tax system.
Appraisal districts commonly want to come to the property and visually inspect it to make sure it qualifies. We can meet with them onsite and guide them through the property and explain your operation to them in terms that they understand, saving you from having to take off work. We save you time, money, and heartache. I have built a career around developing good working relationships with appraisal district staff in Texas and other states, which makes the chances of success that much better. You can outsource your entire property tax component to us and know that your interests are being protected.