Indutries not getting 'just a free ride'

By JULIET BRISKIN | Staff writer

May 6, 2004 -- When the value of a piece of farmland results in taxes that exceed the income it can generate, Texas stands to lose another farm.

In the 1960s, to help circumvent this problem, the Texas Legislature passed a law that allowed for large tax breaks to landowners when their property was used primarily for agriculture.

The majority of states in the U.S. have some sort of agricultural use exemption in place, and according to a recent Associated Press investigation, corporations and developers in many of these states are taking advantage of the system.

"I don't think the corporations in Texas are taking advantage," said Dale Rector, senior productivity appraiser for Tarrant County. "It is in the law that they have the right to these exemptions, just like if you or I owned some land and we were using it for agriculture. It's a smart thing to do if you have the land and are using it for agriculture."

Most of the land in Texas that is granted an agricultural designation is done so under the open-space valuation law. This law states that the specific piece of land must be devoted principally to agricultural use, but it does not place any stipulations on landowner income sources.

"Of course, yes, everybody that takes an ag-use exemption is not making their living from farming or ranching and the laws don't mandate that they have to be," Rector explained. "What we have to look at is the use of the land regardless of who owns it. Is that land being used in a prudent agricultural manner? That is what we have to consider."

According to Rector, when a corporation is granted an agriculture use tax exemption it is not necessarily a boon for them. "In order for us to qualify land as ag-use it has to have a prior agricultural history of five of the last seven years," he detailed. "Any time there is a stoppage or cessation of agricultural use it triggers the rollback taxes. This is not just a free ride."

Tom Walker, senior appraiser for McLennan County, explained that once the land designation is changed to commercial a corporation or developer has to pay back taxes for the five years preceding the change plus a 7 percent interest penalty for each year those taxes were due.

"There's a formula in the tax code where you take the difference between the ag value and the market value of the land plus a percentage of interest," detailed Walker. "We advise developers to just go ahead and take the ag designation off if they plan on developing the land."

"One way to look at this," stated Rector, "is that at the same time the corporations are receiving this benefit they are keeping that land in agricultural production."