What Every Broker Should Know About Open Space Valuations

1. What Every Broker Should Know About Open Space Valuations

2. Top Tips for Open Space Valuations • How to qualify for ag, wildlife, timber and Ecolab • No minimum size requirement • New owners must re-apply • Buyers need to know ag-history • Owners should protest market value • Developers should use phase in approach • Rollback taxes only apply if change in use

3. What is 1-d-1 Open- space Valuation? • Found in the Texas Constitution Article 8, Section 1-d-1 • Four ways to qualify: • Agricultural use • Wildlife Management Use • Ecological Laboratory (Ecolab) • Timber Production • “Special Valuation” not an “Exemption” • Property appraised at its “Productive Value” rather than its “Market Value”

4. Agricultural Use • Property Tax Code Sec 23.51 • Land is “devoted principally” to agriculture • Agricultural use must be to the “degree of intensity generally accepted in the area” • Must be used for agriculture for 5 of 7 previous years • Application to Central Appraisal District before May 1.

5. Examples of Agricultural Use • Producing crops for human food, animal feed, including crop rotation • Planting seed for the production of fiber • Floriculture, viticulture, horticulture • Raising or keeping livestock • Raising or keeping exotic animals for food / fiber production • Timber production • Beekeeping

6. What does not qualify? • Harvesting native plants • Harvesting native animals • Processing plants or animals • Exotic game hunting • Recreational fishing • Boarding / training horses • Land located within a city

7. Ag Categories • Irrigated cropland • Dry cropland • Improved pasture • Native pasture • Orchard • Waste

8. The New Landowner’s Concerns • Today’s buyer of rural land is a new kind of buyer. • They want recreational land, not Ag land. • They have no experience with Ag operations. • They’d rather not share their land– i.e. they don’t want to deal with lessees. • They are worried about affording large parcels of land without an “Ag exemption.

9. Wildlife Management Value as a Solution • Wildlife Management Valuation meets these concerns: • Most urbanites would rather own a “wildlife preserve” than a farm or ranch. • Wildlife Management requirements often fit within the goals of the recreational landowner and conservation organizations. • Many of the recommended practices can be done by the landowner, without special equipment or much training and/or with the assistance of a Land Trust. • Landowners can afford larger tracks of land if the tax exposure is maintained at an affordable level.

10. Section 23.51(7)(A), Tax Code • Wildlife management (WM) is an alternative to a traditional “agriculture” appraisal. • Land must be used to propagate a breeding, migrating, wintering population of indigenous wild animals for human use. • At least 3 eligible management practices performed to required level of intensity.

11. THE BIG SEVEN • Habitat control • Erosion control • Predator control • Providing supplemental supplies of water • Providing supplemental supplies of food • Providing shelters • Making census counts to determine population

12. Wildlife Management Requirements • Existing 1-d-1 open space appraisal • Primary use is wildlife management • WM plan being followed • WM takes priority over other uses • Secondary uses do not interfere • Degree of intensity • Minimum acreage

13. Texas Property Tax Code Amendments§23.51(7)(B),(C) and (8) • (7)(B) land used to protect endangered species under a federal permit if : • (i) in a habitat preserve and subject to a conservation easement; or • (ii) part of a conservation development under an HCP; or • (C) land used for a conservation or restoration project to compensate for natural resource damages. • (8) “Endangered species,” “federal permit,” and “habitat preserve” have the meanings assigned by Section 83.011, Parks and Wildlife Code

14. What exactly is an EcoLab? • The Texas Tax Code Section 23.51 • Similar to an agricultural or wildlife management valuation • Landowners partner with universities to host confidential research • Alternative for landowners interested in wildlife management • Research must be in furtherance of farming, ranching or wildlife management. .

15. Saving Money While Supporting Research • Perfect for properties that are paying market value taxes • Usually takes 6 years of grazing or farming to reduce taxes • Reduce property taxes within one year to $2.00/acre • Landowner provides grant money to fund research • Grants are tax deductible

16. Advantages • No requirement to do five years of grazing or farming • Move into wildlife management after two years • Advances important scientific research • Enhances relationships with universities and professors

17. Qualifications • Properties larger than 50 acres work best • Land must be contiguous if more than one owner • Property must be principally used for research by a college and/or university • Landowner commits to funding and accommodating research projects for 2 year period • Property needs at least three researchers

18. How is the Land Used? • Landowners choose which research to host and fund • Researchers will conduct research on property • Study of grasses, insects, birds, soil sampling, small mammals, fish • Landowners can use property recreationally

19. No Size Limit for 1-d-1 Valuations • BUT… still have to meet legal tests of principal use and intensity. • No minimum size requirement for wildlife UNLESS…. property has been subdivided in previous year, then appraisal district’s minimum acreage applies. • Form Wildlife Management Property Association • Beekeeping is limited to 5-20 acres

20. Tips for Buyers • New owners must re-apply by May 1st. • Buyers need to know ag-history of property • Owners should protest market value every year • Review Notice of Appraised Value

21. Tips for Developers • Know the minimum acreage requirements • Developer should use phase in approach • Rollback taxes only apply if change in use • The difference between “Market Value” taxes and “productive Value” taxes for the previous 5 years, plus 7% interest accrued.

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