Subtitle D. Appraisal and Assessment
Chapter 23. Appraisal Methods and Procedures
Subchapter D. Appraisal of Agricultural Land
Sec. 23.51. Definitions.
Sec. 23.52. Appraisal of Qualified Agricultural Land.
Sec. 23.521. Standards for Qualification of Land for Appraisal Based on Wildlife Management.
Sec. 23.53. Capitalization Rate.
Sec. 23.54. Application.
Sec. 23.541. Late Application for Appraisal as Agricultural Land.
Sec. 23.55. Change of Use of Land.
Sec. 23.56. Land Ineligible for Appraisal as Open-Space Land.
Sec. 23.57. Action on Applications.
Sec. 23.58. Loan Secured by Lien on Open-Space Land.
Sec 23.59. Appraisal of Open-Space Land that is Converted to Timber Production.
[Sections 23.60 to 23.70 reserved for expansion]
(a) The chief appraiser shall accept and approve or deny an application for appraisal under this subchapter after the deadline for filing it has passed if it is filed before approval of the appraisal records by the appraisal review board.
(b) If appraisal under this subchapter is approved when the application is filed late, the owner is liable for a penalty of 10 percent of the difference between the amount of tax imposed on the property and the amount that would be imposed if the property were taxed at market value.
(c) The chief appraiser shall make an entry on the appraisal records indicating the person's liability for the penalty and shall deliver written notice of imposition of the penalty, explaining the reason for its imposition, to the person.
(d) The tax assessor for a taxing unit that taxes land based on an appraisal under this subchapter after a late application shall add the amount of the penalty to the owner's tax bill, and the tax collector for the unit shall collect the penalty at the time and in the manner he collects the tax. The amount of the penalty constitutes a lien against the property against which the penalty is imposed, as if it were a tax, and accrues penalty and interest in the same manner as a delinquent tax.
Added by 1981 Tex. Laws (1st C.S.), p. 144, ch. 13, Sec. 70.
Approval of appraisal records by appraisal review board, see Sec. 25.24.
Contents of tax bill, see Sec. 31.01(d).
Penalties and interest on a delinquent tax, see Sec. 33.01.
To qualify land for agricultural use appraisal, the property owner must timely apply. Art. 8, Secs. 1-d and 1-d-1, Tex. Const., grant the legislature the authority to set limitations and sanctions. Fisher v. Kerr County, 739 S.W.2d 434 (Tex. App.-San Antonio 1987, no writ).
(a) If the use of land that has been appraised as provided by this subchapter changes, an additional tax is imposed on the land equal to the difference between the taxes imposed on the land for each of the five years preceding the year in which the change of use occurs that the land was appraised as provided by this subchapter and the tax that would have been imposed had the land been taxed on the basis of market value in each of those years, plus interest at an annual rate of seven percent calculated from the dates on which the differences would have become due. For purposes of this subsection, the chief appraiser may not consider any period during which land is owned by the state in determining whether a change in the use of the land has occurred.
(b) A tax lien attaches to the land on the date the change of use occurs to secure payment of the additional tax and interest imposed by this section and any penalties incurred. The lien exists in favor of all taxing units for which the additional tax is imposed.
(c) The additional tax imposed by this section does not apply to a year for which the tax has already been imposed.
(d) If the change of use applies to only part of a parcel that has been appraised as provided by this subchapter, the additional tax applies only to that part of the parcel and equals the difference between the taxes imposed on that part of the parcel and the taxes that would have been imposed had that part been taxed on the basis of market value.
(e) A determination that a change in use of the land has occurred is made by the chief appraiser. The chief appraiser shall deliver a notice of the determination to the owner of the land as soon as possible after making the determination and shall include in the notice an explanation of the owner's right to protest the determination. If the owner does not file a timely protest or if the final determination of the protest is that the additional taxes are due, the assessor for each taxing unit shall prepare and deliver a bill for the additional taxes plus interest as soon as practicable. The taxes and interest are due and become delinquent and incur penalties and interest as provided by law for ad valorem taxes imposed by the taxing unit if not paid before the next February 1 that is at least 20 days after the date the bill is delivered to the owner of the land.
(f) The sanctions provided by Subsection (a) of this section do not apply if the change of use occurs as a result of:
(1) a sale for right-of-way;
(2) a condemnation;
(3) a transfer of the property to the state or a political subdivision of the state to be used for a public purpose; or
(4) a transfer of the property from the state, a political subdivision of the state, or a nonprofit corporation created by a municipality with a population of more than one million under the Development Corporation Act of 1979 (Article 5190.6, Vernon's Texas Civil Statutes) to an individual or a business entity for purposes of economic development if the comptroller determines that the economic development is likely to generate for deposit in the general revenue fund during the next two fiscal bienniums an amount of taxes and other revenues that equals or exceeds 20 times the amount of additional taxes and interest that would have been imposed under Subsection (a) had the sanctions provided by that subsection applied to the transfer.
(g) If the use of the land changes to a use that qualifies under Subchapter E of this chapter, the sanctions provided by Subsection (a) of this section do not apply.
(h) Additional taxes, if any, for a year in which land was designated for agricultural use as provided by Subchapter C of this chapter (or Article VIII, Section 1-d, of the constitution) are determined as provided by that subchapter, and the additional taxes imposed by this section do not apply for that year.
(i) The use of land does not change for purposes of Subsection (a) of this section solely because the owner of the land claims it as part of his residence homestead for purposes of Section 11.13 of this code.
(j) The sanctions provided by Subsection (a) do not apply to a change in use of land if:
(1) the land is located in an unincorporated area of a county with a population of less than 100,000;
(2) the land does not exceed five acres;
(3) the land is owned by a not-for-profit cemetery organization;
(4) the cemetery organization dedicates the land for a cemetery purpose;
(5) the cemetery organization has not dedicated more than five acres of land in the county for a cemetery purpose in the five years preceding the date the cemetery organization dedicates the land for a cemetery purpose; and
(6) the land is adjacent to a cemetery that has been in existence for more than 100 years.
(k) In Subsection (j), "cemetery," "cemetery organization," and "cemetery purpose" have the meanings assigned those terms by Section 711.001, Health and Safety Code.
(l) The sanctions provided by Subsection (a) of this section do not apply to land owned by an organization that qualifies as a religious organization under Section 11.20(c) of this code if the organization converts the land to a use for which the land is eligible for an exemption under Section 11.20 of this code within five years.
Text of (m) added by HB 2416, 78th Tex. Leg., 2003:
(m) The sanctions provided by Subsection (a) do not apply to land owned by an organization that qualifies as a charitable organization under Section 11.18(c), is organized exclusively to perform religious or charitable purposes, and engages in performing the charitable functions described by Section 11.18(d)(19), if the organization converts the land to a use for which the land is eligible for an exemption under Section 11.18(d)(19) within five years.
Text of (m) and (n) added by SB 480, 78th Tex. Leg., 2003:
(m) For purposes of determining whether a transfer of land qualifies for the exemption from additional taxes provided by Subsection (f)(4), on an application of the entity transferring or proposing to transfer the land or of the individual or entity to which the land is transferred or proposed to be transferred, the comptroller shall determine the amount of taxes and other revenues likely to be generated as a result of the economic development for deposit in the general revenue fund during the next two fiscal bienniums. If the comptroller determines that the amount of those revenues is likely to equal or exceed 20 times the amount of additional taxes and interest that would be imposed under Subsection (a) if the sanctions provided by that subsection applied to the transfer, the comptroller shall issue a letter to the applicant stating the comptroller's determination and shall send a copy of the letter by regular mail to the chief appraiser.
(n) Within one year of the conclusion of the two fiscal bienniums for which the comptroller issued a letter as provided under Subsection (m), the board of directors of the appraisal district, by official board action, may direct the chief appraiser to request the comptroller to determine if the amount of revenues was equal to or exceeded 20 times the amount of taxes and interest that would have been imposed under Subsection (a). The comptroller shall issue a finding as to whether the amount of revenue met the projected increases. The chief appraiser shall review the results of the comptroller's finding and shall make a determination as to whether sanctions under Subsection (a) should be imposed. If the chief appraiser determines that the sanctions provided by Subsection (a) shall be imposed, the sanctions shall be based on the date of the transfer of the property under Subsection (f)(4).
Amended by 1981 Tex. Laws (1st C.S.), p. 145, ch. 13, Sec. 71; amended by 1983 Tex. Laws, p. 4147, ch. 652, Sec. 2; amended by 1983 Tex. Laws, p. 4824, ch. 851, Sec. 12; amended by 1989 Tex. Laws, p. 3598, ch. 796, Sec. 20; amended by 1995 Tex. Laws, p. 3188, ch. 471, Sec. 2, and by p. 4182, ch. 811, Sec. 1; amended by 1997 Tex. Laws, p. 712, ch. 165, Sec. 31.01 (74); p. 1475, ch. 345, Sec. 5; p. 1483, ch. 351, Sec. 1; and, p. 5289, ch. 1411, Sec. 8; amended by HB2416, 78th Tex. Leg., 2003, effective June 18, 2003; amended by SB 480, 78th Tex. Leg., 2003, effective June 20, 2003.
Rollback procedures compared, see Rule Sec. 9.4001.
Contents of tax bills, see Sec. 31.01(c)(3).
Cemetery definitions, see Sec. 711.001, Health and Safety Code.
Cemetery property tax exemption, see Sec. 11.17.
Church property tax exemption, see Sec. 11.20.
Notice of additional tax liability, see Sec. 5.010, Property Code.
HB 2383, 75th Tex. Leg., eff. June 20, 1997, provides that the change to Section 23.55(j), by the 74th Tex. Leg., 1995, applies to a change of use of land: (1) on or after June 12, 1995; or (2) before June 12, 1995, if: (A) the change of use occurred on or after June 12, 1990; and (B) on June 12, 1995, the owner of the land had not been determined to be liable for the sanctions provided by Section 23.55(a), Tax Code, by a final and nonappealable order or judgment.
Because owners of agricultural land are informed of the appraised market value of their land in the notices of appraised value, they are sufficiently alerted to any error in the appraised market value at the time of the appraisal. Therefore, even though they are not taxed on the market value of their land, these owners have the right to protest the appraised market value immediately upon receiving their notice of appraised value, long before any rollback tax may be imposed because of a change in use. Any motion made pursuant to Section 25.25(d), including a motion to correct the appraised market value of agricultural property, must be filed before the date the yearly property taxes -- not the rollback taxes -- on the subject land become delinquent. Tarrant Appraisal District and Tarrant Appraisal Review Board v. Gateway Center Associates, Ltd., 34 S.W.3d 712 (Tex. App.-Fort Worth [2nd Dist.] 2000, no pet.).
A property owner's ability to change the approved tax appraisal rolls is clearly limited. Any motion made pursuant to Section 25.25(d), including a motion to correct the appraised market value of agricultural property, must be filed before the date the yearly property taxes -- not the rollback taxes -- on the subject land become delinquent. The term "taxes" used in Section 25.25(d) refers only to the yearly property taxes. Anderton v. Rockwall Central Appraisal District and Appraisal Review Board, 26 S.W.3d 539 (Tex. App.-Dallas [5th Dist.] 2000, pet. denied).
The legislative changes in 1995 and 1997 that exempted certain property owned by a religious organization from rollback taxes are not retroactive to rollback taxes assessed in 1992. Hilltop Baptist Temple, Inc. v. Williamson County Appraisal District, 995 S.W.2d 905 (Tex. App.-Austin 1999).
Property Tax Code Section 23.55 and the Comptroller's Manual for the Appraisal of Agricultural Land indicate that a rollback assessment is both a penalty and a tax, imposed to prevent individuals from taking their property out of agricultural production. The rollback tax therefore could not be imposed against the federal government, since the federal government's agency is not liable for the penalty because there is no express congressional waiver for such a penalty. Resolution Trust Corporation v. Tarrant County Appraisal District, 926 S.W.2d 797 (Tex. App.-Fort Worth 1996, rehearing overruled).
A property owner denied an agricultural use appraisal and subject to the agricultural rollback tax is entitled to notice of the denial and opportunity to protest the denial as a right of due process of law. State, County of Bexar v. Southoaks Development Company, Inc., 920 S.W.2d 330 (Tex. App.-San Antonio 1995).
Qualification of agricultural open-space land owned by a youth development association qualified for a property tax exemption does not itself constitute a change of use for purposes of the rollback tax, when the land continues to be used for agricultural purposes. Referring to Opinion No. JM-667 (1987), no change of use occurs if the land continues to be used for agricultural purposes even though the land may no longer qualify for open-space land appraisal. Op. Tex. Att'y Gen. No. JC-299 (2000).
State-owned land used for public purposes and exempt under Tax Code Section 11.11 is not subject to the agricultural use rollback tax in Tax Code Section 23.55. Opinion No. JM-949 (1988) held that acquisition alone does not trigger the rollback tax provisions. The rollback tax process is triggered when a change of use occurs from an agricultural use to a nonagricultural use. No Texas courts have addressed directly the rollback tax provision with regard to the state acquiring and changing a qualified land's use. The opinion disagreed with the State Property Tax Board's position in its 1990 rule for the Manual for the Appraisal of Agricultural Land that governmental acquisition and change of use of qualified agricultural land triggered the rollback provisions. Op. Tex. Att'y Gen. No. DM-448 (1997).
Only the chief appraiser has authority to determine under Property Tax Code Section 23.55 of a change in use to trigger imposing the rollback tax on land previously receiving agricultural appraisal. A tax collector has no authority to accept payment of rollback taxes prior to the taxes' imposition. Tex. Att'y Gen. LO-95-054 (1995).
A tax assessor-collector may continue to collect additional taxes under Sec. 23.55(e) only if the collector sent the landowner a statement for the taxes before September 1, 1989. September 1, 1989 represents the effective date of the amendment to Sec. 23.55(e), which transferred authority for determination of the use of agricultural land from the assessor to the chief appraiser. Op. Tex. Att'y Gen. No. DM-220 (1993).
No rollback of taxes occurs when 1-d-1 land is taken in an eminent domain proceeding. Op. Tex. Att'y Gen. No. JM-949 (1988).
When a taxpayer's land that has previously qualified for open-space land valuation no longer qualifies for the special valuation because it is not devoted to agricultural use to the degree of intensity generally accepted in the area, no rollback tax may be imposed unless the land's actual use is changed. Op. Tex. Att'y Gen. No. JM-667 (1987).
Land is not eligible for appraisal as provided by this subchapter if:
(1) the land is located inside the corporate limits of an incorporated city or town, unless:
(A) the city or town is not providing the land with governmental and proprietary services substantially equivalent in standard and scope to those services it provides in other parts of the city or town with similar topography, land utilization, and population density; or
(B) the land has been devoted principally to agricultural use continuously for the preceding five years;
(2) the land is owned by an individual who is a nonresident alien or by a foreign government if that individual or government is required by federal law or by rule adopted pursuant to federal law to register his ownership or acquisition of that property; or
(3) the land is owned by a corporation, partnership, trust, or other legal entity if the entity is required by federal law or by rule adopted pursuant to federal law to register its ownership or acquisition of that land and a nonresident alien or a foreign government or any combination of nonresident aliens and foreign governments own a majority interest in the entity.
Section 23.56(3) violates the equal rights amendment of the Texas Constitution, Article I, Section 3, based upon the Supreme Court's ruling in HL Farm v. Self. GNB, Inc. v. Collin County Appraisal District, 894 S.W.2d 659 (Tex. 1994).
Provisions denying agricultural appraisal if land is owned by an alien or a foreign government do not violate equal protection clauses of the Texas and U.S. Constitution, art. VII, Sec. 1-d-1, is intended to protect family farms. HL Farm Corporation v. Self, 877 S.W.2d 288 (Tex. 1994).
After the Texas Supreme Court held Section 23.56(3) unconstitutional, the court of appeals held that the taxpayer was not entitled to open-space designation for 1990, 1991, and 1993, because the taxpayer failed to exhaust its administrative remedies when it was denied the special appraisal. Refunds for taxes previously paid under the statute declared invalid would be only to taxpayers who had followed administrative procedures and timely filed it for each tax year. Henderson County Appraisal District v. HL Farm Corporation, 956 S.W.2d 672 (Tex. App.-Eastland 1997).
An appraisal district may not deny open-space land appraisal to a non-resident corporation solely because of the status as a non-resident. HL Farm Corp. v. Henderson County Appraisal District, 894 S.W.2d 830 (Tex. App.-Tyler 1995, no writ).
In a case involving the denial of an open-space land designation to a foreign corporation, based upon Property Tax Code Sec. 23.56(3), the Texas Supreme Court found that the classification created by Sec. 23.56(3), which excludes foreign owners from receiving an open-space land designation, was not rationally related to the promotion and preservation of open-space land. As a result, the Court held that Sec. 23.56(3), Tax Code, violates the equal rights amendment of the Texas Constitution, art. 1, Sec. 3. This opinion reverses the court of appeals' judgment in HL Farm Corp. v. Self, 820 S.W.2d 372 (Tex. App.-Dallas 1991). The Court also disapproved Alexander Ranch, Inc. v. Central Appraisal District of Erath County, 733 S.W.2d 303 (Tex. App.-Eastland 1987, writ ref'd n.r.e.). HL Farm Corporation v. Self, 877 S.W.2d 288 (Tex. 1994).
Agricultural corporation not owned by Netherlands nationals was properly denied agricultural appraisal. Treaty between U. S. and Netherlands would, however, allow a corporation owned by Netherlands nationals to receive agricultural appraisal. Hidalgo County Appraisal District v. Engfar N.V. and Monfar N.V., 756 S.W.2d 754 (Tex. App.-Corpus Christi 1989, no writ).
Purpose of open-space appraisal is to preserve and benefit family farms. Tax Code Sec. 23.56, providing that land owned by a corporation controlled by non-resident aliens, does not qualify for open-space appraisal, supersedes Sec. 5.005, Property Code, providing that aliens have the same property rights as U.S. Citizens. Sec. 23.56 does not violate equal protection clause of U.S. Constitution. Alexander Ranch, Inc. v. Central Appraisal District of Erath County, 733 S.W.2d 303 (Tex. App.-Eastland 1987, writ ref'd n.r.e.), rev'd by HL Farm Corporation v. Self, 877 S.W.2d 288 (Tex. 1994).
(a) The chief appraiser shall determine separately each applicant's right to have his land appraised under this subchapter. After considering the application and all relevant information, the chief appraiser shall, as the law and facts warrant:
(1) approve the application and allow appraisal under this subchapter;
(2) disapprove the application and request additional information from the applicant in support of the claim; or
(3) deny the application.
(b) If the chief appraiser requests additional information from an applicant, the applicant must furnish it within 30 days after the date of the request or the application is denied. However, for good cause shown the chief appraiser may extend the deadline for furnishing the information by written order for a single period not to exceed 15 days.
(c) The chief appraiser shall determine the validity of each application for appraisal under this subchapter filed with him before he submits the appraisal records for review and determination of protests as provided by Chapter 41 of this code.
(d) If the chief appraiser denies an application, he shall deliver a written notice of the denial to the applicant within five days after the date he makes the determination. He shall include with the notice a brief explanation of the procedures for protesting his action and a full explanation of the reasons for denial of the application.
Added by 1981 Tex. Laws (1st C.S.), p. 145, ch. 13, Sec. 72.
Chief appraiser must deliver notice of denial before submitting records to appraisal review board, see Sec. 25.22(a).
Denial notice by certified mail, see Sec. 1.07(d).
Property owner may protest denial of special appraisal, see Sec. 41.41(1).
Improper grant of special appraisal, see Sec. 23.54(j).
Challenge of improper grant of special appraisal, see Sec. 41.03(4).
Chief appraiser must deliver notice denying special appraisal before submitting records to appraisal review board, see Sec. 25.22(a).
(a) A lender may not require as a condition to granting or amending the terms of a loan secured by a lien in favor of the lender on land appraised according to this subchapter that the borrower waive the right to the appraisal or agree not to apply for or receive the appraisal.
(b) A provision in an instrument pertaining to a loan secured by a lien in favor of the lender on land appraised according to this subchapter is void to the extent that the provision attempts to require the borrower to waive the right to the appraisal or to prohibit the borrower from applying for or receiving the appraisal.
(c) A provision in an instrument pertaining to a loan secured by a lien in favor of the lender on land appraised according to this subchapter that requires the borrower to make a payment to protect the lender from loss because of the imposition of additional taxes and interest under Section 23.55 is void unless the provision:
(1) requires the borrower to pay into an escrow account established by the lender an amount equal to the additional taxes and interest that would be due under Section 23.55 if a change of use occurred on January 1 of the year in which the loan is granted or amended;
(2) requires the escrow account to bear interest to be credited to the account monthly;
(3) permits the lender to apply money in the escrow account to the payment of a bill for additional taxes and interest under Section 23.55 before the loan is paid and requires the lender to refund the balance remaining in the escrow account after the bill is paid to the borrower; and
(4) requires the lender to refund the money in the escrow account to the borrower on the payment of the loan.
(d) On the request of the borrower or the borrower's representative, the assessor for each taxing unit shall compute the additional taxes and interest that would be due that taxing unit under Section 23.55 if a change of use occurred on January 1 of the year in which the loan is granted or amended. The assessor may charge a reasonable fee not to exceed the actual cost of making the computation.
(e) In this section, "lender" has the meaning assigned by Section 23.47(e).
Added by 1995 Tex. Laws, p. 852, ch. 82, Sec. 2.
Loan secured on agricultural-use land, see Sec. 23.47.
Rollback taxes for sale or change of use, see Sec. 23.55.
Rollback tax procedures compared, see Rule Sec. 9.4001.
(a) If land that has been appraised under this subchapter for at least five preceding years is converted to production of timber after September 1, 1997, the owner may elect to have the land continue to be appraised under this subchapter for 15 years after the date of the conversion, so long as the land qualifies for appraisal as timber land under Subchapter E. In that event, the land is deemed to be the same category of land under this subchapter as it was immediately before conversion to timber production.
(b) The election must be made by a new application filed as provided by Section 23.54 and remains in effect for 15 years or until a change in use of the land occurs.
(c) This section applies to the appraisal of land converted to timber production only until the end of the tax year in which the 15th anniversary of the date of the conversion occurs. In the 16th and subsequent years, the land shall be appraised as timber land as provided by Subchapter E, so long as it qualifies as timber land under Subchapter E.
Added by 1997 Tex. Laws., p. 2452, ch. 765, Sec. 1.
[Sections 23.60 to 23.70 reserved for expansion]