By:  Christian                                                    H.B. No. 3395



A BILL TO BE ENTITLED

AN ACT

relating to the appraisal of timber land.                                     
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Section 23.71(2), Tax Code, is amended to read as 
follows:       
		(2)  "Net to land" means the average net income that 
would have been earned by a category of land over the preceding five 
years by a person using ordinary prudence in the management of land 
and the timber produced on the land.  The net income for each year is 
determined by multiplying the land's [potential] average annual 
growth, expressed in tons [cords or board feet of wood], by the mean 
Texas [average] stumpage value, expressed in price per ton, of 
large pine saw timber, small pine saw timber, pine pulpwood, 
hardwood saw timber, hardwood pulpwood, and any other significant 
timber product, taking into consideration the three forest types 
and [general types of timber as produced on the] four different soil 
types, as determined by using information for the East Texas 
timber-growing region as a whole from the U.S. Forest Service, the 
Natural Resource Conservation Service, U.S. Geological Survey [the 
Soil Conservation Service], the Texas Forest Service, and colleges 
and universities within this state, and by subtracting from the 
product reasonable management costs and other reasonable expenses 
directly attributable to the production of timber that a prudent 
manager of the land and timber, seeking to maximize return, would 
incur in the management of the land and timber.  The Texas Forest 
Service shall develop a cost model to determine annually the 
reasonable management costs and other expenses a prudent operator 
would incur without regard to actual expenditures by any one or more 
timber growers.  Stumpage prices shall be determined based on data 
collected for all types of timber sales, including timber deed, 
cutting contract, and gatewood sales.
	SECTION 2.  Section 23.74, Tax Code, is amended to read as 
follows:          
	Sec. 23.74.  CAPITALIZATION RATE.  (a)  The capitalization 
rate to be used in determining the appraised value of qualified 
timber  land as provided by this subchapter is the greater of 10 
percent or the interest rate specified by the Farm Credit Bank of 
Texas or its successor on December 31 of the preceding year plus 2 
1/2 percentage points.
	(b)  Subsection (a) of this section takes effect on December 
31 of the year in which the capitalization rate is determined under 
Subsection (a) to be equal to or greater than 10 percent.  In any 
year prior to that year in which the capitalization rate is 
determined to be lower than 10 percent, the capitalization rate to 
be used in determining the appraised value of qualified timber land 
may not be lower than the capitalization rate used in the preceding 
year.  This subsection expires on January 1 of the year in which the 
capitalization rate used to determine the appraised value of 
qualified timber land as provided by this subchapter is equal to or 
exceeds 10 percent.
	SECTION 3.  This Act takes effect January 1, 2004.