Ag, Timber and Wildlife: Exemption or Valuation?
At the end of the day, it’s a property tax savings, but using the right terms can help avoid confusion.
As we have learned over more than two decades of helping landowners with ag and wildlife exemptions (turns out that’s what most people call them), 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. Some of our recent efforts to better understand how people find information on wildlife management exemptions has brought this to the forefront, so I thought a primer on the subject was warranted.
So what is it called?:
- wildlife exemption
- ag exemption for wildlife
- agricultural appraisal for wildlife
- 1-d-1 exemption
- 1-d-1 valuation
- agricultural land in wildlife management use
- agricultural tax appraisal based on wildlife management
- agricultural property tax valuation
- wildlife management use valuation
- (just) wildlife management
- open-space special appraisal
- 1-d-1 open-space wildlife management special property tax valuation (that one’s a mouthful)
There are more, but that went on long enough. They are different names for the same animal. Any and all of these are used 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.
The way words are used in everyday language often differs from their technical definitions. Stomach “flu” isn’t caused by a flu virus and Texans know hot dogs and hamburgers on a grill aren’t “barbecue,” 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 tax law, 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 is not taxable. Most government property, property used for charitable purposes, et al is fully exempt from taxation. Residence homesteads are partially exempt, meaning only a portion of the market value is not taxable.
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 (special) way of assigning value, rather than an exemption of any part of the value. You will no doubt recognize many of the terms in the Constitution from the list above. 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 a value other than market value is assigned to a property for tax purposes.
So why does it matter?
In the end, if you are getting good advice and doing what is required to receive the wildlife exemption (aka valuation or special appraisal), then it doesn’t matter. You still get the tax break. There’s no quiz 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 relief – we are here to help.