34 TAC §9.4001

The Comptroller of Public Accounts adopts amendments to §9.4001, concerning valuation of open-space and agricultural lands, without changes to the proposed text as published in the March 31, 2017, issue of the Texas Register (42 TexReg 1728). These amendments are to reflect updates and revisions to the manual for the appraisal of agricultural land.

The amendments update and revise the manual for the appraisal of agricultural land that has been in effect since 1990. The manual sets forth the methods to apply and the procedures to use in qualifying and appraising land used for agriculture and open-space land under Tax Code, Chapter 23, Subchapters C and D. The updates and revisions to the manual generally reflect statutory changes; changes dictated by case law; changes to examples to reference more current prices, expenses, and values; changes to organization names and information available from different sources; the addition of footnotes for citations to Tax Code sections and case law referenced; and the removal of verbatim Tax Code sections. The proposed amendments also provide that appraisal districts are required to use this manual in qualifying and appraising open-space land. Pursuant to Tax Code, §23.52(d), a majority of the committee composed of the governor, the comptroller, the attorney general, the agriculture commissioner, and the Commissioner of the General Land Office, or their designees, has approved of the updated and revised manual for the appraisal of agricultural land.

The comptroller received numerous comments regarding these amendments.

Carla Pope-Osborne, a property tax practitioner, requests that the manual not be approved until after the 85th Legislative Session is over so that changes made during the session can be reflected in the manual. The comptroller is going forward with adoption of the manual since it has already been approved by a majority of the committee of public officials as required by Tax Code, §23.52(d). In the near future the comptroller intends on updating the manual for changes made by the 85th Legislature and after every session thereafter as necessary.

Frank McAllister, a member of the Texas and Southwestern Cattle Raisers Association, suggests that the comptroller's agricultural manual should "clearly state that chief appraisers are required by law to implement and follow the processes, procedures, and eligibility rules as provided by this Manual, and its updates." The comptroller declines to adopt this change because the suggested addition is addressed in the rule and the introduction of the manual on page 1. Mr. McAllister also requests that the comptroller add specific examples of "all special depreciated deduction methodologies and example calculations" to the manual. The comptroller declines to make this change because the purpose of the manual is to provide guidance on overall methodologies and calculations specific to the appraisal of agricultural land and applicable across all appraisal districts, leaving the treatment of special depreciated deductions to the professional judgment of the individual chief appraiser.

Mr. McAllister also requests that the comptroller define all "incomes and expenses used in determining the net to land" and provide "a transparent process and procedure for their determination" in the manual. The comptroller understands the commenter is asking for more specificity in the manual regarding particular types of income and expenses in determining the net-to-land value; the comptroller responds that the purpose of the manual is to provide guidance on agricultural appraisal issues and not detailed appraisal instructions. The comptroller declines to make the change regarding transparency because the suggested addition is addressed on page 18 regarding the Uniform Standards of Professional Appraisal Practice (USPAP) Record Keeping Rule. Mr. McAllister asks that the comptroller add a requirement to the manual that chief appraisers are to complete and return the Comptroller's Farm & Ranch Survey each year. The comptroller declines to add this requirement as it is outside the scope of the manual.

J. Scott Morris, an attorney who represents several ranches in Texas, suggested that the proposed manual does not adequately or properly address language added by H.B. 3607, 78th Legislature, amending Tax Code, §23.51(4), which states that for land that qualifies as wildlife management property, the chief appraiser may not consider in the calculation of net to land income due the property owner under a hunting or recreational use of the land. Mr. Morris requests that several references to this provision be added several places throughout the manual. The comptroller notes that reference to this provision is included on page 17 of the manual which states that income received from hunting or recreational leases on qualified open space land, other than wildlife management land, is also included in the net-to-land calculations. The comptroller believes that this reference is adequate and correct and notes that wildlife management can be more fully addressed when the wildlife management manual is revised.

Amanda Sauls, with the Williamson Central Appraisal District, comments that on page 6 of the manual which addresses current and principal agricultural use, the manual discusses swine and poultry. She notes that on page 8 the manual addresses fish and horses along with exotic animals more in depth, but does not include poultry or swine. Ms. Sauls suggests that poultry and swine should also be addressed more in depth on page 8. The comptroller believes that the manual adequately addresses current and principal agricultural use and additional examples of this issue specific to poultry and swine are not necessary. Ms. Sauls also comments that the manual should include guidance on the use of greenhouses and plants grown in containers and whether they qualify for open space appraisal. The comptroller believes that the treatment of greenhouses and plants grown in containers is a fact intensive issue which should be left to the discretion of the chief appraiser.

Ms. Sauls comments that additional information should be included regarding the chief appraiser's ability to set a degree of intensity for maintaining an animal, in particular horses. She suggests that a question be added to the FAQs regarding a property qualifying if the degree of intensity is typical and is set by the chief appraiser. The comptroller is of the opinion that the ability of a chief appraiser to establish a degree of intensity standard is adequately addressed on pages 9 and 10 of the manual.

Ms. Sauls states that she would like information regarding the time period requirement for the qualification of ecological laboratories. She then goes on to pose a series of questions regarding ecological laboratories converting to wildlife management treatment. The comptroller points out that the manual provides that once land qualifies under Tax Code, Chapter 23, Subchapter D as a type of open space land, then the land - including land used principally as an ecological laboratory - can convert to wildlife management. Ms. Sauls would like elaboration in the manual on the definition of ecological laboratory and the requirements to qualify. The comptroller notes that there is no statutory definition of an ecological laboratory nor are there any statutory requirements for qualification. A definition and eligibility requirements would have to be provided by the legislature. Article VIII, Section 1-d-1(a) creates open-space land appraisal and provides that the legislature by general law may provide eligibility limitations under Section 1-d-1. Ms. Sauls asks that examples of qualifying or non-qualifying conditions be included in the manual. The comptroller believes that any examples of the application of any eligibility requirements that would be applicable statewide would have to be provided by the legislature; consequently, this issue cannot be specifically addressed in the manual. Ms. Sauls asks that the ecological laboratories section be rewritten to include a definition of ecological laboratory and to include certain requests for certain information in the ecological laboratories application. The comptroller believes that a definition needs to be provided by statute. Adding requests for information to the application (Form 50-166) may be considered by the comptroller apart from this rulemaking.

Ms. Sauls points out that in the third paragraph, the last sentence on page 13 has a reference to Tax Code, §23.54(a), which is not relevant to the topic addressed in the paragraph. The comptroller believes that the footnote 85 reference to Tax Code, §23.54(a), is appropriate since it addresses the filing of a valid application with the chief appraiser which is the subject matter of the paragraph. Ms. Sauls requests that the manual reiterate the property owner's responsibility of notifying the chief appraiser of any changes of use and possible penalties. The comptroller believes that the references to this issue on pages 14 and 16 are sufficient to address informing property owners of their obligation of notifying the chief appraiser of changes of use.

The Tarrant Appraisal District (TAD) submitted comments based on language in the proposed manual regarding the application of the court's holding in Bexar Appraisal District v. Sivage Investments, Ltd., et al, 2014 Tex. App. LEXIS 12472 (Tex. App. - San Antonio, November 19, 2014) (memorandum opinion). TAD comments that the mention of Sivage should be moved from the discussion of rollback procedures on page 31 to page 15 which discusses property which erroneously receives agricultural appraisal. TAD also comments that if the reference to Sivage is not moved, there should at least be a cross-reference to the discussion of erroneously granted special appraisal. TAD also asks that the manual should make clear that Sivage only deals with reappraisal situations. The comptroller makes no change. The reference to the Sivage case in the manual is minimal and is correct in the context in which it is referenced. The passage in the manual in discussing the court's holding does reference reappraisal.

These amendments are adopted under Tax Code, §§5.05 (Appraisal Manuals and Other Materials); 23.41 (Appraisal); and 23.52 (Appraisal of Qualified Agricultural Land), which provide the comptroller with the authority to prepare and issue publications relating to the appraisal of property and to promulgate rules specifying the methods to apply and the procedures to use in appraising qualified agricultural and open-space land for ad valorem tax purposes.

These amendments implement Tax Code, §23.41 (Appraisal) and §23.52 (Appraisal of Qualified Agricultural Land).

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on July 26, 2017.


Lita Gonzalez

General Counsel

Comptroller of Public Accounts

Effective date: August 15, 2017

Proposal publication date: March 31, 2017

For further information, please call: (512) 475-0387