How a few cattle and open land can mean a big tax break in Texas’ urban areas
Tucked in the middle of shops and restaurants in far north Fort Worth is an unexpected sight.
Nearly 13 empty acres bordered by barbed wire.
At times, two longhorns roam the land.
These two properties on the edge of Alliance Town Center, just off Interstate 35, have a market value assigned by the county of $1.1 million. The tax bills for that property? A total of $42.61, a break of more than $30,500 for its owners, AIL Investment LP, a Hillwood Property entity.
The land is among more than 1,320 properties in Fort Worth and Arlington that get a tax break because they are designated for agricultural use.
Agriculture designations have been available for qualified land since the 1960s, when lawmakers provided the break to slow urban encroachment. It is designed to keep family ranches and farms, once the backbone of the state’s economy, alive and thriving.
But as the state becomes more urban, it’s not uncommon to see crops or a few cattle grazing on plots smaller than 10 acres, surrounded by apartments, strip malls and fast food restaurants.
Tarrant County is home to 4,819 agriculture accounts with a market value of $2.2 billion, said Jeff Law, Tarrant’s chief appraiser. The tax break will cost the county $5.14 million and the city of Fort Worth $3.89 million.
“The issue is that some developers and land owners aren’t really into farming at all,” said Chandler Crouch, a real estate agent who helps people with their appraisal protests for free. “All they’ve done is figure out the minimum qualifications for the agricultural exemption and then basically exploit it for a tax break.”
Texas homeowners, he said, have “to pick up the slack when commercial owners and developers get out of paying taxes.”
Supporters say agricultural designations have been key in helping developers keep property together until they are able to do large, high quality developments, which end up generating jobs and tax dollars for communities across the state.
Change in law
To qualify for the exemption, Texans must have land used for agricultural purposes for at least five of the past seven years. Texans can farm on that land, keep animals, such as cattle there, or even use it for bee keeping, crop dusting or timber production.
A new tax break went into effect Sept. 1 for owners who lose their agricultural designation because they change the use of the land, perhaps to build on it.
In the past, property owners would pay five years in back taxes based on the full value plus 7% interest once they change the use of their land from agricultural to another use. The new law reduces the penalty to three years and 5% interest.
The change is projected to cost $64.6 million in 2020 for Texas cities, counties, school districts and the Foundation School Fund, according to a Legislative Budget Board fiscal note.
State Rep. Tracy King, D-Batesville, said he has studied this issue for years and believes the new law is a compromise between proposals to eliminate the rollback tax and leave it alone.
“There are people, in my opinion, that take advantage of this program,” he said. “But ag (designations) were designed to let family farms continue to exist.”
He and others aren’t concerned about large acreages of land that are home to cattle ranches or farms across the state. It’s the smaller, urban pieces of land, surrounded by new development, that could be ripe for abuse.
Few lawmakers were willing to speak publicly on the issue because it is controversial. Privately, some said it is legal to take advantage of the system, but it’s not fair to other taxpayers who have to pick up the slack.
Even so, this valuation has been crucial for some farms and ranches across Texas, said state Rep. Charlie Geren, R-Fort Worth.
Without it, “there was no way they would be able to pay the taxes,” Geren said. “It was causing people to sell.”
Tax breaks
The Tarrant Appraisal District receives a few complaints each year from those who believe some property owners wrongly receive the agriculture designation — and the tax break, Law said.
“We get complaints all the time from people who say they understand (neighbors) are getting a big tax break for agricultural use, but they see no cows,” said Law, who spent about 16 years doing agricultural inspections in other counties before coming to Tarrant County.
When that happens, TAD investigates and determines whether the land should receive that designation, sending inspectors to take pictures and make sure the agriculture designation is warranted.
“If they raise cattle on a property, there should be droppings all over there, whether they are old or fresh,” Law said. “If they are growing hay, you can see hay bales.”
If there’s not enough evidence to prove an agriculture designation is applicable, the case goes before the Appraisal Review Board, which will make the final decision.
That board also reviews requests for the agricultural designation on land less than 10 acres.
As for corporations that might have cattle grazing on their corporate land, “there’s nothing that says they can’t get the agricultural designation,” Law said.
“Take all the Alliance properties,” he said. “There’s thousands and thousands of acres they are running cattle on. If another Amazon came along,” they could convert the use of that land for development.
At least two Hillwood entities, AIL Investment LP and ADL Development LP, have a combined 120 accounts averaging 13.5 acres in the Alliance corridor valued at $60.19 million, according to a Star-Telegram review of agricultural designations in Fort Worth and Arlington compiled by the Tarrant Appraisial District. The agricultural designation on that land drops the total appraised value — which is the portion taxes are paid on — to $140,555, a tax break of more than $1 million.
A Hillwood spokesman was not available to respond to a Star-Telegram request for comment.
A Hillwood report shows that since 1989, land that once was farmland and wheat fields has generated more than $2.5 billion in taxes to cities, school districts and counties that cover the 26,000 acres developed by AllianceTexas . Those developments created more than 61,000 jobs and more than 143,000 indirect jobs.
In another part of Forth Worth, Mercantile Partners has 28 properties valued at $18.6 million just southeast of Interstate 35W and Loop 820 getting an agricultural exemption.
Dick Lavine, a senior fiscal analyst at the Austin-based Center for Public Policy Priorities, said he believes land owners who plan to develop their property “should start paying more of what it’s worth.”
Through the years, Law said he has seen questionable requests.
In one case outside Tarrant County, a person who owned a five-acre tract in a residential area that included a house and one cow asked for the agriculture designation.
That request was denied.
“The agricultural designation is not supposed to be something people are using just for tax breaks,” he said.
A needed change?
Some say they have no problem with the designation or the change in law.
Texas Realtors was among the groups that sent out a legislative update after the session adjourned earlier this year, updating readers about various laws, including this one.
The Texas and Southwestern Cattle Raisers Association included this measure in its legislative update as well. The group noted that “the additional tax and interest imposed on open-space land or timber land when a change in use occurs is outdated and excessive.”
Others say Texans should get all the tax exemptions they can.
“Any exemption anyone can get on land I fully support,” Julie McCarty, who heads the tea party group renamed the True Texas Project, told the Star-Telegram in an email. “I am all for lowering taxes for everyone and limiting the money that government has to spend.
“Until they learn how to responsibly spend other people’s money, which they never will, they should not be entrusted with it.”
BEHIND THE STORY
MOREHow we did this story
The Star-Telegram requested the the agricultural exemptions in Fort Worth and Arlington, including the market value, the appraised value and the size of the property. The properties smaller than 10 acres were included in the map.
This story was originally published November 25, 2019 at 6:00 AM.
