Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2022	$0
2023	($110,520,892)
2024	($115,392,651)
2025	($75,927,685)
2026	($89,671,641)

Fiscal Year	Probable Savings/(Cost) from Foundation School Fund 193	Probable Revenue Gain/(Loss) from School Districts	Probable Revenue Gain/(Loss) from Cities	Probable Revenue Gain/(Loss) from Counties
2022	$0	$0	$0	$0
2023	($110,520,892)	($397,594,000)	($26,074,000)	($120,071,000)
2024	($115,392,651)	($417,473,000)	($27,455,000)	($126,807,000)
2025	($75,927,685)	($438,347,000)	($28,906,000)	($133,910,000)
2026	($89,671,641)	($460,264,000)	($30,432,000)	($141,398,000)

Fiscal Year	Probable Revenue Gain/(Loss) from Other Special Districts
2022	$0
2023	($104,194,000)
2024	($111,214,000)
2025	($118,698,000)
2026	($126,674,000)

Under Chapter 23 of the Tax Code, qualified land is appraised at a value much lower than its market value. Tax Code Sections 23.46 (Subchapter C) and 23.55 (Subchapter D) impose an additional property tax and interest in certain instances when the property owner changes the use of agricultural land that receives a special reduced appraisal as land designated for agricultural use or qualified open-space agricultural land (rollback). The additional tax is computed based on the difference between the market value of the land and the taxable value of the land as reduced by the special appraisal in each of the preceding three years, plus interest. The bill's proposed repeal of these sections would create a cost to school districts and other units of local government because they would no longer receive the additional tax and interest. The loss of the additional tax would also create a cost to the state through the operation of the school funding formula.

The estimated number of acres changing use is based on rollback information from a sample of appraisal districts. The estimated loss is based on average market and productivity values. Information from responding appraisal districts was extrapolated to other districts and the results were projected through the five-year period in the table below. Under provisions of the Education Code, only a portion of the school district loss would be transferred to the state because there would be a collections loss, but no corresponding value loss.

The estimated cost to the Foundation School Program is $110.5 million in fiscal year 2023, $115.4 million in fiscal year 2024, $75.9 million in fiscal year 2025, and $89.7 million in fiscal year 2026.

Repeal of the tax penalty under Subchapter C is contingent upon passage and voter approval of a constitutional amendment (HJR 106). If the constitutional amendment does not pass, only the subchapter D tax penalty is repealed and the cost associated with implementing the provisions of the bill would be reduced, but not significantly. Little agricultural land is qualified under Subchapter C because its qualification requirements are much more stringent. Further, because of its requirement that the owner's income be primarily from the agricultural operations the land tends to be further from urban areas, is less likely to be diverted from an agricultural use, and the difference between the special appraised value and the market value is less.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 87TH LEGISLATIVE REGULAR SESSION


April 25, 2021

TO:	Honorable Morgan Meyer, Chair, House Committee on Ways & Means

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	HB2288 by White (Relating to the repeal of the additional ad valorem taxes imposed as a result of the sale or change in the use of land appraised as agricultural or open-space land.), As Introduced