Ag exemptions common, may be costly (2024)

Agricultural exemptions — which generate substantial tax savings for those involved in agricultural production — are common in Parker County.

Tax rolls list 13,883 accounts with the so-called exemptions — actually tax reductions — out of a total of 78,000 properties categorized as real estate, almost 18 percent.

At the county’s Agrilife extension office, agents field the question, “How can I get an ag exemption?” about once a week, according to agent Jon Green.

A harder question to answer is whether these exemptions are being abused at a cost to other county taxpayers.

The value of an ag exemption

What is typically called an ag exemption is really an assessment valuation based on the income the land can be expected to produce, rather than its market value, Larry Hammonds, chief appraiser for the Parker County Appraisal District, said.

Pasture that has been improved will be assigned a greater value per acre than native pasture, he said, but the average productivity value assigned is around $100 per acre. Market values for the same land could be as high as $20,000 per acre.

“If you average all the market values from Peaster to Millsap to Aledo, you get an average of about $5,000 per acre,” he said. “The tax savings is just huge if you’ve got ag.”

For example, an individual with a one-acre tract with the average market value of $5,000 would pay about $115 in local taxes annually. The same tract valued according to productivity standards — at $100 per acre — requires an annual tax payment of only $2.30.

Exemptions apply only to vacant land, however, Hammonds said. Houses and barns are taxed according to their market value.

How to get an

ag exemption

The appraisal district is fairly lenient in granting ag exemptions because of the county’s agricultural history, Hammonds said.

To qualify, property owners must meet three basic criteria.

First, the land must be dedicated principally to agricultural use, with the production of crops, livestock, poultry, fish or exotic or wild animals to produce human food or other items of commercial value.

Secondly, the production must be at the same intensity as is common in the area. Property owners cannot claim an ag exemption if they have one cow on 100 acres, for example, if area stocking rates are higher.

Finally, property owners must show that their land has been dedicated to agricultural production for at least five of the past seven years.

Green said what strikes him most about the interest in ag exemptions is the misconception that it is easy to be a farmer.

“People ask me about ag exemptions, and I ask them what it is they want to do, have a peach orchard or raise goats,” he said. “Our job is to educate them on what they want to produce.

“A lot of people I talk to don’t realize the work it takes to be involved in an agricultural commodity.”

Monitoring an

ag exemption

The appraisal district uses aerial photography and conducts reappraisals every two years, Hammonds said, yet still finds it difficult to determine whether all the properties that have been given an ag exemption continue to merit one.

No further applications or annual filings are required once an ag exemption has been awarded. In addition, property owners can “lay out for two years,” since they only need to have the land in ag use for five of the past seven years.

“Someone may be letting their land stand idle because they didn’t get any rain,” Hammonds said. “But what it means is that we have to watch the property for two years [before we decide it no longer qualifies.]”

Another difficulty is Parker County’s 904 square miles have been carved into a large number of small-acreage tracts.

“If we had 100, 30,000-acre tracts, that would be one thing,” Hammonds said, “but we continue to subdivide the land, and we have thousands of 10- and 20-acre tracts.

“There’s no way we can be 100 percent [policing exemptions]. We may miss one or two here or there. But we are aware of how much the savings is, and we watch it pretty closely. We are not missing the big ranches.”

Green said he was unaware of any Parker County property owners who may be avoiding taxes through outdated ag exemptions.

Penalties for

a false claim

The law doesn’t really provide a penalty for continuing to claim an ag exemption after ag production ceases, Hammonds said.

“Once we determine the ag use has changed, we can trigger a tax rollback for up to a maximum of five years,” he said. “The amount is the difference between what should have been paid [with the land appraised at market value] and what was paid [with the land appraised for ag productivity] plus an annual interest rate of 7 percent.”

Hammonds said this year. fewer than 10 property owners received a certified letter stating the appraisal district suspected the ag use of their land had changed.

Stopping the abuse

The state constitution underwent changes in 1978, Hammonds said, that made it easier for property owners to claim ag exemptions.

“It used to be that to qualify you had to prove that 50 percent of your income was from agriculture,” he said, “and you had to apply for an exemption every year. But the law was amended so that it was geared more toward the preservation of open space. That made it easier.”

Hammonds said he doesn’t know how to end the abuse of ag exemptions and neither do elected representatives.

“This is a hot topic with legislators,” he said. “They have been looking at making it harder, but it is difficult to tighten up [after loosening the restrictions]. I don’t know the answer to avoiding and eliminating abuses.”

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