Property Tax

[Rafter S]

I don't mind paying school taxes or property tax (much). My children are grown, but I do believe that the whole community benefits from the population being educated. About property tax, I'll never forget what I heard an old guy say years ago. "All these people move out to the country because of the low taxes, then complain because they don't have gutters and street lights in front of their house."

 

[greggy]

That is exactly whey the rates/taxes are lower in rural areas in Australia, your not paying for stormwater, gutters, lights and often waste collection and other things.

So, in Australia you may pay 1k a year for 10000 acres, or in some cities or towns, you may pay 5k a year for one tenth of one acre.

I am very happy to have no lights and gutters, for multiple reasons....

 

[greybeard]

I am absolutely 100% AGAINST small acreage hobby farmers with a family cow, a veggie garden, a few goats and a big El Rancho Grande' sign over the paved entrance to their Texas "Ranchette".
With that disclaimer out of the way..........

Tho not directly affected, I have very recently become embroiled in a "discussion" with the county Appraisal District, (AD) and it has erupted into the public domain, most noticeably at the last AD BoD meeting, at which I stood up at the podium and spoke, as did a lot of other people.
My beef was that the county was not following the state guidelines AND, that the county had embarked on a path to reduce future agriculture in this county.
In Texas, the State Comptroller writes the guidelines for ag exemptions.
There are 2 kinds of ag exemptions.
1D, was implemented back in the 60s, which is for producers that derive most of their income from agriculture. The operator or land owner must reapply for it every year. According to the Comptroller, they are supposed to show a profit..not necessarily every year, but at least 1 in five years. The Comptroller leaves it up to the individual counties what minimum acreage is and stocking (degree of intensity) rate is set at.

In 1978, 1D1 was implemented by the legislature, that allows a smaller operation of agriculture, with less stringent rules. Again, because the State is so large and because the climate, geography, annual rainfall, and plant and soil types vary so much from one side of the state to the other, (and North to South as well) the Comptroller left it up to the counties to set stocking rates and degree of intensity and added that the type of ag was to be carried out "in the manner that was normal for the area being appraised". 1D1 does not have to be reapplied for each year, and the Comptroller's guidelines merely state that the landowner MUST receive income from the ag endeavor. (in some places the Comptroller substituted the word "revenue) Unless I missed something when I read the State guidelines that the county Appraisal Districts must follow, the word 'profit' is never mentioned for 1D1.
In both 1D and 1D1, the applicant must have been engaged in ag production on that property for 5 of the last 7 years before getting the ag exemption. That's understandable and I can accept that.

The INTENT of 1D1 by the Texas legislature was to afford some tax relief in order to keep agriculture in areas near cities where market value appraisal and resulting high property taxes were driving the small producer out of the market, as well as to lessen the tax burden on small farms out in rural areas. Appraisal Districts hate both 1D1 and 1D but specifically 1D1.
I suspect very much, that when county fair rolls around, and all the kids are all over the county seat with their 4H and FFA shirts, caps and those blue and gold jackets on, that the AD (and Chief Appraiser) are standin with steam emanating from their ears.."Oh no! Not them..NOT Future Farmers..maybe they'll just go away and become cubicle dwellers in Houston or Austin".

Fence said:

I don't think acres is the way to requlate it, maybe something along the lines of percentage of income idk. It would stop a lot of tax dodging and increase land available to be leased by those truly in agriculture

Fence..I understand what you are saying, but you do NOT want the county AD in your finances!!

No matter what kind of income is derived, it is the LAND that gets the exemption, by way of it's ag productivity. The operation and the type of ag endeavor is irrelevant.

In my county, this is what is on the handout the county Appraisal District gives you:
(for livestock..cattle is the #1 farming endeavor by far in this county)

In most cases, property owners must prove that they are following the common production
steps for their type of operation and using typical amounts of labor, management, and
investment. (that means, "in the manner that is usual for "the area")

A minimum of approximately twenty (20) acres is required.
Water for livestock must be available.
At least six (6) head of reproducing cows. Larger tracts should have one (1) cow to every (additional) ten (10) to fifteen (15) acres



But, if you look harder, they add something in their official guidelines, that is found only on their website:
Native pasture is defined as those pastures that have native vegetation, with minimal
improvements.
Improved pasture is defined as those pastures, with native and improved vegetation, that have
had improvements made to them including but not limited to fertilizer application, weed and
brush control (mechanical or chemical) or over seeding with winter grass.

On the website, it says:

1. A minimum of approximately twenty (20) acres is required.
2. At least 75% is open space for grazing.
3. At least six (6) head of reproducing cows.
4. Larger tracts should have one (1) cow to every ten (10) to fifteen (15) acres

See what they added? The underlined part. You have to clear off 15 of the minimum 20 acres. I don't have a personal issue with that on the land I own, as my property is about 99% clear, but it is an issue for the landowners for 65ac I have leased. I can still run cattle in there and there's plenty of forage, but the landowners were going to lose their exemptions and they've had them for over 20 years. Running cattle "in the woods" here IS the usual manner...I, am an exception to it.

I have a LOT to say about all this, even tho we have been able to get a resolution to the above stated problem, but it took a huge effort to do so and we aren't done with it yet.
My primary personal concern is the current state and future of agriculture in this county. It appears to me, that this and other counties here in East Texas have embarked on a path to destroy ag in this county, in favor of cleared land for future subdivisions.

Other E. Texas counties tho, seem to have gone out of their way to ensure future ag endeavors and make it easier for people to raise cattle, simply by following what the Comptroller's guidelines say.

This is what Anderson County did (It's about 100 miles North of me, still in the piney woods..county seat is Palestine) No minimum stated, as they do it on a case by case basis. They rightfully look at what ya did during the 5 qualifying years prior to applying:

ANDERSON County:
Improved Pasture¹: Includes but not limited to pasture that is mowed, shredded, fertilized, cultivated, seeded, and planted with grasses. (fence and livestock required)
Unimproved Pasture¹: Pasture with native grasses, and has none of the above completed, could have less than 30 trees per acre. (Fence and livestock required)
WOODED Pasture²asture that has less than 200 trees per acre. Must have sufficient forage base to sustain livestock to qualify! (fence and livestock required)

¹ Open pasture should have a minimum of one(1) head of livestock per 3 acres.
(15 acres and less requires a minimum of FIVE (5) head of livestock)

²Wooded Pasture should have a minimum of one(1) head livestock per 5 acre. Wooded pasture must have sufficient forage base to sustain livestock to qualify.
(25 acres and less requires a minimum of five (5) head of livestock)

The state guidelines say that the chief appraiser of any county may create sub classes according to soil types and the land's ability to support agriculture of any kind. Instead of telling the landowner they have to spend thousand of $$ clearing 75% of their land, Anderson County supported their farmers by creating a 3rd class of pasture..wooded pasture.


Strong words to follow later today.

 

[sim.-ang.king]

Property tax should be done away with and go to sale taxes , that way every one pays their share.

I agree, why should I pay more for someone's kids to go to school, or for people to use the roadways in front of my property, while they don't have to pay any?
63% of my property tax goes to schools, and 75% of the 63% goes to schools that aren't even in my district where I live.

Some people always gripe that the rich don't "pay their far share," well I can tell you for a fact that the property owners do.

 

[TexasBred]

Property tax should be done away with and go to sale taxes , that way every one pays their share.

There are ag exemptions for much of that as well. And Joe Blow the store owner still has to collect it. I've seen many NOT collect it, depending on who you are.

 

[CG1]

I don't think i ever agree with anything on these boards haha.

Paying tax is a privilege

Paying school taxes is also something I am happy to continue to.

You all need to ditch the whole fend for yourself motto. It isn't working.

Take care of your old, your sick, your young. My son is going to private school and i would never bat my eye twice to think that my taxes are paying for other children schooling. That's great! We are in this together. Its important that we educate the next generation.

Elderly people here in Canada get cheaper property tax. They get a discount. Your primary residence is also discounted. Farming property tax is reduced if you actually farm it. The more land you use for farming the less tax you pay. For example one of my farms property tax would be $6,800 but it is reduced to $2,500 because i use a large portion of the land for cattle. All you have to do is sell $2,600 a year. I think this system works well.

 

[greybeard]

Elderly people here in Canada get cheaper property tax. They get a discount. Your primary residence is also discounted. Farming property tax is reduced if you actually farm it. The more land you use for farming the less tax you pay. For example one of my farms property tax would be $6,800 but it is reduced to $2,500 because i use a large portion of the land for cattle. All you have to do is sell $2,600 a year. I think this system works well.

Pretty much the same here assuming you qualify.
Ag exemption (it's actually just a different way of valuation for the land) is substantial.
Over 65, primary residence tax is locked in.
The more land you have on ag exemption, the less you pay overall.
My home and the land that makes up my yard is under homestead exemption.

 

[CG1]

Elderly people here in Canada get cheaper property tax. They get a discount. Your primary residence is also discounted. Farming property tax is reduced if you actually farm it. The more land you use for farming the less tax you pay. For example one of my farms property tax would be $6,800 but it is reduced to $2,500 because i use a large portion of the land for cattle. All you have to do is sell $2,600 a year. I think this system works well.

Pretty much the same here assuming you qualify.
Ag exemption (it's actually just a different way of valuation for the land) is substantial.
Over 65, primary residence tax is locked in.
The more land you have on ag exemption, the less you pay overall.
My home and the land that makes up my yard is under homestead exemption.

I am sorry I have to say it but against small farmers like that is a very dangerous opinion. Some people don't want to eat the hormone infested animals. The ones that were crapping themselves in the trailer on the way to get shot in front of their herd. Some actually still enjoy raising their own meat, living off the land etc, and raising animals in the simple way it was intended to happen. We should absolutely support those small farms with tax breaks. Lets not go away with the hobby that is farming. Those farmers you mention are my number 1 customers. That's where the majority of my cattle go.

 

[gcreekrch]

The hobby farm $2500 minimum is just a loophole to avoid paying taxes from people who don't make their primary income from farming. Many of them with high incomes that can certainly afford to pay the extra.

 

[Dave]

In my old job I use to explain to people that they could go to the sale and buy X number of cattle. Take them back to the sale the next week and sell them. The county just wanted to see what you sold. You might lose a few bucks in this process but not even close to how much you would save on your taxes.

 

[greybeard]

Dave, and Greekrch..
That, in my state would probably fall under 1D, which is the program where the preponderance of one's income is derived from agriculture.
For 1D:

Until the 1960's, Texas farm and ranch land was appraised for taxation at its market value - the price
a buyer would pay for it in an ordinary transaction. As Texas became more urban, farm and ranch
land increased in value considerably, especially in developing areas. Concerned that taxes could
become so high that farmers and ranchers would be forced to abandon agriculture, the voters of the
state in 1966 approved an amendment to the Texas Constitution, the first agricultural appraisal law.
Article VIII Section 1-D was added to the constitution providing that certain types of land be
appraised not at market value, but at the land's productivity value - a value based on land's capacity
to produce agricultural products. The original law was restricted to land owned by individuals (it
did not include land owned by corporations) whose primary occupation and primary source of
income was agriculture. The law was later amended to include corporations. Also, qualified land which sold was assessed a rollback tax to recapture the
tax savings from the previous three years, plus interest.

Twelve years after the original law was enabled, in 1978, voters approved another amendment,
Section 1-D-1, which authorized a second, less restrictive agricultural appraisal law that greatly
expanded eligibility for agricultural appraisal.

Sec. 23.42. ELIGIBILITY. (a) An individual is entitled to have land he owns designated for agricultural use if, on January 1:

(1) the land has been devoted exclusively to or developed continuously for agriculture for the three years preceding the current year;

(2) the individual is using and intends to use the land for agriculture as an occupation or a business venture for profit during the current year; and

(3) agriculture is the individual's primary occupation and primary source of income.


(b) Use of land for nonagricultural purposes does not deprive an owner of his right to an agricultural designation if the nonagricultural use is secondary to and compatible with the agricultural use of the land.

(c) Agriculture is an individual's primary occupation and primary source of income if as of January 1 he devotes a greater portion of his time to and derives a greater portion of his gross income from agriculture than any other occupation

1D1 is different. It's rules specifically exclude any property where there is only token agriculture whose primary purpose is to get tax relief, and the law also states that land used primarily for production for your own use is a dis qualifier. Most little hobby farms around here fall under one or both of these categories.
In the example I gave, the family cow would be either for the family to have milk or beef in their own freezer and the goats as well..if the goats were dairy goats....& assuming the goats weren't just pets.
It is the land and it's productivity that gets the exemption, not the operation, and productivity is ultimately measured in financial income.
A typical set of rules for most counties in Texas to qualify for 1D1

REQUIREMENT #3-DEGREE OF INTENSITY TEST
Land must be devoted primarily to a qualifying agricultural use to the degree of intensity that is typical
in the area. The degree of intensity test measures whether the land is being farmed or ranched to the
extent typical for agricultural operations. The previous section described whether a particular use was
primarily a qualifying agricultural use. To receive the agricultural special use valuation, however, the
land must also be used for an agricultural purpose to the degree of intensity typical in the area. This
test is intended to exclude "hobby" farms or ranches, on which a token agricultural use occurs.

The land must be utilized to the degree of intensity generally accepted in the County. Degree of Intensity is measured by local
farming & ranching practices (stocking rates, planting rates, crop rotation, fertilization methods, harvesting and marketing techniques,
etc.) which are those of a typically prudent farm or ranch manager. The land must be producing a product for human or animal
consumption, or for commercial trade within the agricultural economy of the State of Texas, and being farmed or ranched to the extent
typical for agricultural operations. This test is intended to exclude land on which token agricultural use occurs in an effort to obtain tax
relief.
• Land must be managed in a typically prudent manner. Typically prudent may be measured by comparing the actual production of the
subject property to the average yields of the County. A prudent manager conducts his farming or ranching operation in a business-like
fashion, keeping books, and records, and operates as similar businesses are operated. He uses his management ability, to operate under
natural conditions, and as a business venture for income and/or profit. Property owners may actually be their own farm or ranch manager/operator,
however, they must prove that they are following all the common production steps for their type of operation and putting in the typical
amounts of labor, management, and investment. If the taxpayer has personal motives or engages in the agricultural activity for
recreational purposes, his overall profit motives will be suspect.
• The land must be currently devoted principally to agricultural use. Principally is defined as the most important use in comparison with
other uses. Current devotion requires that land be in active agricultural use for the bulk of the calendar year.
• Pursuant to Section 23.51 (1) of the Texas Property Tax Code, land must have been devoted principally to agricultural use for five of the
preceding seven years. Land within the boundaries of a city or town must have been devoted principally to agriculture use continuously
for the preceding five years. This five year use history must first be established before the special agricultural appraisal can be granted.
The agricultural use history must be provided on the application to the best of the current owner's knowledge. The applicant may need
to contact the previous owner, neighbor, operator, etc. The previous owner's agricultural application is a confidential document as per
Section 23.45 of the Texas Property Tax Code. The new owner must supply the information on their application, not the appraisal
district.
• The land must be a substantial tract of land. Substantial means an identifiable tract of land of adequate size to support a typically prudent agricultural operation

1D1 was originally specifically created to prevent ag land just outside urban areas from being taxed out of agricultural use.



Rising market values tho, have thrown a wrench into the cogs. Increased market value and correlating taxation is making it more and more desirable for the land owner to just sell the land to developers, and IMO, county tax assessor/collectors near Houston metroplex are rubbing their hands in anticipation at all the tax $$ that former ag land will be providing once the parcels are subdivided up into 1/10th ac lots, and high $$ homes are built where cattle once grazed.

The Houston Metro area has now spread out of it's original Harris county and now takes in parts Austin, Brazoria, Chambers, Fort Bend, Galveston, Liberty, Montgomery and Waller counties. My county is next in line.

I'm no where near the smartest or most experienced cow guy in any room, but where I am now, I can raise the minimum AU on about 10 acres most years, make a few bucks profit, and have done so, tho not for the purpose of tax relief on that 10-11 acres. (I already had 1d1 on that parcel as part of a bigger piece of land.)
I, like almost everyone else COULDN'T successfully do it in 2011's drought without very significant increases in inputs, but most years, rainfall & water ain't an issue in my county.

 

[Dave]

There is a down side to Washington's open space Ag program. When you go to sell the buyer has to agree in writing to continue in open space before closing. Otherwise the seller is liable 10 years of back taxes plus penalties. You safe a bunch on the property taxes but it can come back to bite you. And bite pretty hard.

 

[greybeard]

Here, it's the buyer that has to pay the rollback. It's generally he that takes it out of production so that's probably the most fair of the 2 options imo.
"Generally", rollback here is for 3 years for 1D with a 1%/month penalty, and 5 years for 1D1 and the penalty is 7 percent per year from the dates on which the differences would have become due.

There's a lot involved in the rollback.