Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB3857 by Thimesch (Relating to the eligibility of land for appraisal for ad valorem tax purposes as qualified open-space land.), As Introduced
No significant fiscal implication to the State is anticipated.
The bill would amend Chapter 23 of the Tax Code, relating to Property Tax Appraisal Methods and Procedures, to revise the definition of qualified open-space land to require the chief appraiser to distinguish between the degree of intensity required for various agricultural production methods, including organic, sustainable, pastured poultry, rotational grazing, and other uncommon production methods or systems. The bill would revise the definition of agricultural use to include the production of fruits and vegetables.
The bill would require the Comptroller, in consultation with the Texas A&M AgriLife Extension Service and selected stakeholders, to develop guidelines for determining the conditions under which the cumulative effect of multiple agricultural uses of a tract of land meets the degree of intensity generally accepted in the area, and the conditions under which land under 10 acres in size used for the production of fruits, vegetables, poultry, hogs, sheep, or goats qualifies for special open-space appraisal. The guidelines would be required to provide that land under 10 acres in size that qualifies for special open-space appraisal solely on the basis of the guidelines developed as provided by the bill may not subsequently qualify for special open-space appraisal if the owner changes the use of the land to wildlife management.
In developing the guidelines, the Comptroller would be allowed to consider: 1) the financial investment of a producer in an agricultural use of a tract of land, 2) the degree of active management of a producer in the agricultural use of a tract of land, 3) the percentage of a tract of land used by a producer for agricultural uses, and 4) any other factor the Comptroller considers appropriate.
The Comptroller would be required to cooperate with appraisal districts to provide educational resources to help implement the guidelines. The Comptroller would be required to distribute the guidelines to each appraisal district by September 1, 2024.
The bill's proposed changes to the definitions of qualified open space land and agricultural use would increase the number of acres subject to special open space land appraisal. Qualified open space land is appraised based on the productivity value that results in an appraised value that is significantly less than market value. As a result, any changes in the law that increase the number of acres that are appraised based on productivity value result in decreased appraised property value and a cost to the state through the school finance formulas.
Passage of the bill would increase the acreage that is appraised based on productivity value which would result in a decrease in taxable property value. Under provisions of the Education Code, the school district tax revenue loss is partially transferred to the state. However, the cost is not anticipated to be significant.
The bill would take effect on September 1, 2023, but would apply only to the property tax appraisal of land for a tax year that begins on or after January 1, 2025.
Local Government Impact
Passage of the bill would increase the acreage that is appraised based on productivity value which would result in a decrease in taxable property value. However, the no-new-revenue and voter-approval tax rates as provided by Section 26.04, Tax Code could be higher as a consequence of the reduction in taxable property value proposed by the bill.
Under provisions of the Education Code, the school district tax revenue loss is partially transferred to the state. However, the cost is not anticipated to be significant.
Source Agencies:
304 Comptroller of Public Accounts, 555 Texas A&M AgriLife Extension Service