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 June 3, 2022, issue of the Texas Register (47 TexReg 3229), but with a change to the manual adopted by reference. The rule will not be republished.

The amendments are to reflect updates and revisions to the manual for the appraisal of agricultural land. The updated manual may be viewed at https://comptroller.texas.gov/taxes/property-tax/docs/.

The amendments update and revise the October 2020 manual for the appraisal of agricultural land. The manual sets forth the methods to apply and the procedures to use in qualifying and appraising land used for agricultural and open-space land under Tax Code, Chapter 23, Subchapters C and D.

Generally, the substantive changes to the manual reflect statutory changes. The manual is updated throughout to reflect the elimination of the annual interest rate component from the calculation of the rollback tax in response to House Bill 3833, 87th Legislature, R.S., 2021. In addition, the updated manual adds interest to the rollback tax if it becomes delinquent. The updated manual excludes chicken coops or rabbit pens used for the noncommercial production of food for personal consumption as real property and therefore are no longer eligible for taxation pursuant to House Bill 2535, 87th Legislature, R.S., 2021. The manual is also updated throughout to reflect the changes to the application process and the added deadlines to implement Senate Bill 63, 87th Legislature, R.S., 2021.

The amended manual implements Senate Bill 725, 87th Legislature, R.S., 2021 by adding the specific circumstances for which special appraisal does not end when the land ceases to be devoted principally to agricultural use to the degree of intensity generally accepted in the area. The years, values, and figures were updated to be more recent.

Pursuant to Tax Code, §23.52(d), these rules have been approved by the comptroller with the review and counsel of the Department of Agriculture.

The comptroller received comments regarding adoption of the amendment from the public.

Mandy Ellifritz, a taxpayer, suggests adding a sentence to both the degree of intensity section and question 2 in Appendix A, Questions and Answers, saying that "all applications should be evaluated based on the specific type of operation and the landowner inputs regardless of parcel size or existing homestead status." The comptroller declines to make these changes. The manual already adequately advises the chief appraiser on pages 9 and 10 on degree of intensity and question 2 addresses arbitrary minimum acre limits. The comptroller declines to state that homestead status should be disregarded because that would inaccurately state the law.

Frank McAlister, a taxpayer, suggests that the comptroller should delete the following on page 6 "Although a water well is an appurtenance, pumps, windmills and other fixed attachments are valued at market value" and replace it with "water wells are holes drilled or bored into the earth providing access to underground water with a pump, windmill and other fixed equipment to extract water to the surface." The comptroller declines to make this change because appurtenances are defined in §23.51(1). Per generally accepted appraisal methods and techniques, pumps, windmills, etc. are considered personal property. Mr. McAlister also requests that the comptroller add livestock water well to our list of property owners' typical expenses on page 25. The comptroller makes no change. A livestock water well is already included under irrigation equipment and the listed expenses are there as a sample of possible expenses and are not comprehensive.

Mr. McAlister suggests adding some specificity on how to determine an irrigation well expense to page 27 where the comptroller currently says "determine the typical variable and fixed expenses." The comptroller understands the commentator is asking for more specificity in the manual regarding particular types of 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.

Kirsten Mills, Deputy Chief of Staff for State Representative Andrew Murr, submitted suggested revisions to the paragraph at the bottom of Step 4 of Exhibit 4 that would add the following sentences: "Under the cash lease method, atypical expenses should be subtracted first from individual leases to get that hunting lease down to typical cash lease terms just like with the grazing lease. Once both grazing and hunting leases are in typical terms and you have determined the one lease value that represents each category (grazing and hunting), you add them together and then subtract the typical expenses from that total."

As a result of this comment, the comptroller adds clarifying language to step 4 in Exhibit 4 on page 26 and on page 56 of the manual on the possibility of multiple types of hunting operations in a county with varying income and expenses.

Ms. Mills also submitted a comment that step 3 of Exhibit 4 on page 26 is unclear on the year or years in which depreciation could be calculated. The comptroller declines to make this change because the manual adequately addresses the calculation of depreciation with the existing sentence in step 3 which states: "Calculate the depreciation cost of fences by dividing the cost of the fences on a typical operation by their life expectancy, then dividing by the typical number of acres."

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 authorize the comptroller 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, Chapter 23, Subchapters C and D.