Seasons – November 2020

At the end of the day, it’s a property tax savings, but using the right terms can help avoid confusion.

With the Texas legislature coming into session in 2021, I would normally expect at least one or two newspaper articles next spring about how some landowners are getting tax “exemptions” for having a few cows or some wildlife on their property and thus not paying their fair share of property taxes. Bigger issues are likely to dominate this coming session, but taxes and revenue are always in play. I’ve written before about why open-space appraisals are fiscally and socially sound, but I think the language we use helps contribute to misunderstanding.

As Plateau has learned over more than two decades of helping landowners with ag and wildlife “exemptions”, misunderstandings are common and conventional wisdom can be misleading. Even something as simple as what to call this significant property tax benefit can be confusing.

So what is it called?

1. ag exemption
2. timber exemption
3. wildlife exemption
4. ag exemption for wildlife
5. agricultural appraisal for wildlife
6. 1-d-1 exemption
7. 1-d-1 valuation
8. agricultural land in wildlife management use
9. agricultural tax appraisal based on wildlife management
10. agricultural property tax valuation
11. wildlife management use valuation
12. (just) wildlife management
13. open-space special appraisal
14. 1-d-1 open-space wildlife management special property tax valuation (that one’s a mouthful)
    

There are more, but you see my point. These are different names for the same animal. People use any and all of these in everyday conversations and internet searches. And it is not just the public… many appraisal districts list Ag, Timber, and Wildlife codes under “Exemptions” on the tax rolls alongside the true exemptions like homestead, over 65, and others. Your recent tax bill may even have listed Ag under your exemptions. No wonder there’s confusion.

The way we use words in our everyday language often differs from their technical definitions. The flu virus doesn’t cause stomach “flu” and Texans know putting hot dogs and hamburgers on a grill isn’t “barbecuing”, but that doesn’t stop people from using the terms that way. Many common names for plants and wildlife are good examples of this as well, but that’s another article. Language is dynamic, and what starts as a slang term may come to be a dictionary definition of a word. However, legal terms have very specific definitions… even though they are not always clear (hence lawsuits).

Technically, the wildlife exemption (or Ag or Timber) is a special appraisal based on productivity value. The Texas Constitution Article 8, Section 1 requires that all property “be taxed in proportion to its (market) value”. As with most taxes, the Constitution then lays out all the exceptions to this rule. Some property is exempt in whole or in part. An exemption means the value, or a portion of it, is not taxable. Most government property, property used for charitable purposes, et al. are fully exempt from taxation. Residence homesteads are partially exempt, meaning only a portion of the market value is not taxable.

Article 8, Section 1-d-1 of the Texas Constitution permits “open-space land devoted to farm, ranch, or wildlife management purposes” (timber, too) to be taxed based on its “productive capacity”. This is a different (i.e. special) way of assigning value, rather than an exemption of any part of the value. Notice that I used many of the terms from the Constitution in my earlier list. The Tax Code and the Comptroller’s Manual for the Appraisal of Agricultural Land dictate how the productive capacity is determined. Those details are not necessary to understand that the appraisal district assigns a value other than market value to a property for open-space tax purposes.

Why does it matter?

In the end, if you are getting good advice and doing what is required to receive your ag or wildlife exemption/valuation/special appraisal, then it doesn’t matter. You still get the tax break. There’s no quiz on legal terms required.

We know from experience, however, that the term “exemption” can cause confusion in other ways. Exemptions are often (not always) received based on a property’s status (ownership or classification, for instance). You have to earn a special appraisal based on the use of the land. There is some overlap here, but to avoid more confusion, let’s keep it simple. Land doesn’t receive an ag or wildlife valuation simply because of its status as rural land suitable for agriculture. The best wildlife habitat in the state isn’t automatically eligible for a “wildlife exemption”. It has to be used for agricultural or wildlife purposes in accordance with the established rules to qualify for a special appraisal. What you do with the land is what matters.

Another common point of confusion is with the actual ag or timber exemption – for sales tax. The ag and timber exemption for sales taxes is a true “exemption”. Certain products are not subject to sales and use tax. It’s important to point out that sales taxes and property taxes have nothing to do with each other and qualifying your property for an ag “exemption” for property taxes does not automatically qualify you for an ag exemption for sales taxes (or vice versa). The sales tax exemption (with some exceptions, of course) is based on your use of the purchased goods to produce agricultural or timber products for sale. Your land can qualify for an agricultural or wildlife valuation without any income requirements, but purchases are not exempt from sales taxes unless you are selling agricultural products.

We strive to provide the best available advice to landowners, so we prefer to use the technically correct language whenever possible. Our expertise won’t do you much good if we are speaking a different language, though, so having a shared vocabulary is important if we want to reach every landowner that needs advice. To that end, you will see us use wildlife exemption and ag exemption in an effort to make this information accessible to as many landowners as possible.

Whatever you call it – exemption, valuation, or just property tax savings – we are here to help. Contact us at (512) 894-3479 or [email protected] if you have questions, or would like to discuss your property tax options.

Service Spotlight: FREE Wildlife Exemption Webinar Series

LAST CHANCE TO REGISTER FOR A FREE WEBINAR!

Whether you’re already a Plateau customer or someone that wants to learn more about Wildlife Management, everyone is invited to join us for our FREE 2020 Wildlife Management fall webinar series. Connect with experts and other Texas landowners in Wildlife Management and learn all about:

• Wildlife Management Exemption
• Wildlife Management 101
• Qualifying Wildlife Activities
• Property Taxes
• Wildlife Management Plans
• Annual Reports
• County Requirements
• Issues Related to Your Texas Region
• Open Questions & Answers

REGISTER TODAY!

Webinars will be hosted every Tuesday and Thursday through November 12th. Visit www.plateauwildlife.com/webinars to register for the date and topic you choose. Register for as many as you’d like. If you miss one, no problem, just sign up for the next webinar!

Questions? Give us a call at (512) 894-3479 or email [email protected]