S.B. No. 1646




AN ACT

relating to the ad valorem tax appraisal of qualified timberland.             
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Subdivision (2), Section 23.71, 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 the 
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 [average] stumpage value, expressed in price per ton, of large 
pine sawtimber, small pine sawtimber, pine pulpwood, hardwood 
sawtimber, hardwood pulpwood, and any other significant timber 
product, taking into consideration the three forest [general] types 
and [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 
Resources Conservation Service of the United States Department of 
Agriculture [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 the timber that a prudent manager 
of the land and timber, seeking to maximize return, would incur in 
the management of the land and timber.   Stumpage prices shall be 
determined by using information collected for all types of timber 
sales, including 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:
		(1)  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; or
		(2)  the capitalization rate used in determining the 
appraised value of qualified timber land as provided by this 
subchapter for the preceding tax year.
	(b)  Notwithstanding Subsection (a):                                    
		(1)  in the first tax year in which the capitalization 
rate determined under that subsection equals or exceeds 10 percent, 
the capitalization rate for that tax year is the rate determined 
under Subsection (a)(1); and
		(2)  for each tax year following the tax year described 
by Subdivision (1), the capitalization rate is the average of the 
rate determined under Subsection (a)(1) for the current tax year 
and the capitalization rate used for each of the four tax years 
preceding the current tax year other than a tax year preceding the 
tax year described by Subdivision (1).
	SECTION 3.  (a)  This Act takes effect January 1, 2004.                        
	(b)  The change in law made by this Act applies only to the 
appraisal of qualified timberland for ad valorem tax purposes for a 
tax year that begins on or after the effective date of this Act.  The 
appraisal of qualified timberland for ad valorem tax purposes for a 
tax year that began before the effective date of this Act is 
governed by the law in effect when the appraisal of the land was 
made, and the former law is continued in effect for that purpose.

                                                                              




______________________________    ______________________________
President of the Senate             Speaker of the House
	I hereby certify that S.B. No. 1646 passed the Senate on 
May 6, 2003, by a viva-voce vote.




______________________________ 
   Secretary of the Senate             
	I hereby certify that S.B. No. 1646 passed the House on 
May 25, 2003, by a non-record vote.




______________________________ 
   Chief Clerk of the House            



Approved:


______________________________ 
            Date



______________________________ 
          Governor