Land Production Valuation

Two amendments to the Texas Constitution permit agricultural and open-space land to be taxed generally on its agricultural use, or productivity value. This means that taxes would be assessed against the productive value of the land instead of the selling price of the land in the open market.

The legal basis for special land appraisal is found in the Texas Constitution in Article VIII, Sections 1-d and 1-d-1. The two types of land and valuation are commonly called “ag-use” or “1-d” and “open-space” or “1-d-1.” The corresponding provisions of the Texas Property Tax Code are Sections 23.41 through 23.46, Agricultural Land, and Sections 23.51 through 23.57, Open-Space Land.

The purpose of the two provisions is similar. Under both provisions, the land must be in agricultural use and is valued in the same manner. However, there are differences in the qualifications that must be met in order to receive the productivity valuation.

Ag-Use, 1-d, qualifications include:

  1. The land must be owned by a natural person. Partnerships, corporations, or organizations may not qualify.
  2. The land must have been in agricultural use for three years prior to claiming this valuation.
  3. The owner must apply for the designation each year, and file a sworn statement about use of the land.
  4. The agricultural business must be the land owner’s primary occupation and source of income.

Open-Space, 1-d-1, qualifications include:

  1. The land may be owned by an individual, corporation or partnership.
  2. The land must be currently devoted principally to agricultural use to the degree of intensity generally accepted in the area.
  3. The land must have been devoted to a qualifying agricultural use for at least five (5) of the past seven (7) years.
  4. Agricultural business need not be the principal business of the owner.
  5. Once an application for 1-d-1 is filed and approved a landowner is not required to file again as long as the land qualifies unless the chief appraiser requests another application to confirm current qualifications.

The possibility for a “rollback tax” exists under either form of special land valuation. This liability for additional tax is created under 1-d valuation by either sale of the land or a change in use of the land. It extends back to the three years prior to the year in which the change of sale occurs.

Under 1-d-1, a rollback is triggered by a change in use to a non-agricultural purpose that would not qualify for productivity valuation. Taxes are rolled back or recaptured for the five years preceding the year of the change.

The additional tax is measured by the difference between taxes paid under productivity valuation provisions and the taxes which would have been paid if the land had been put on the tax roll at market value.

These provisions are effective only if applications are filed with the appraisal district office in a timely manner. Applications should be filed between January 1 and before May 1.

Applications received with a postmark date after April 30 but before the appraisal roll is certified are subject to a penalty for late filing. Applications received after the appraisal roll is certified cannot be considered and must be filed again the next year.