Corporations cash in on tax breaks for farmers, ranchers

AUSTIN (KXAN) - The same provision in the Texas Constitution that protects farmers and ranchers from excessive taxes on the land it takes to produce food for a hungry population also helps some of Central Texas' wealthiest corporations save thousands of dollars when the tax man comes calling.

Texas law allows for special agricultural land use designation and property valuation when the primary use of the land is for agricultural. The intent of the law was to protect farmers and ranchers, especially during tough economic times.

But as a KXAN investigation shows, large corporations are getting in on the agricultural valuation and saving tens, even hundreds, of thousands of dollars in property taxes every year

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Farmer’s like Larry Mellenbruch are becoming harder to find around Austin and other Texas cities. 

“What we do out here is try to produce something that'll satisfy the people's needs,” says Mellenbruch a Travis County farmer and rancher. 

Mellenbruch knows all too well that farming and ranching in Central Texas is often at the mercy of Mother Nature.  But farming is also at the mercy of property taxes. And that's why the Texas Constitution allows a special agriculture designation to the state's farmers and ranchers to prevent them from being taxed out of their farm land.

Property taxes are paid on the agricultural value of the land, not the market value. Farmers and ranchers pay property taxes on what they produce, not what the land is worth.

“I could not net enough out of this operation to probably pay the taxes that is assigned to it at its market value right now,” Mellenbruch told KXAN.

But it’s not just farmers and ranchers getting the tax breaks. 

Circuit of The Americas' wildlife habitat

When the Circuit of The Americas built its racetrack in Elroy for next month's multimillion Formula One race, it set aside 617 acres for "agricultural use."

Circuit of The Americas told KXAN in a lengthy written statement the land is not part of its sports and entertainment venue and does not produce any revenue. Instead, it gets a special agriculture valuation, because 580 acres is a “ wildlife habitat for several species of birds. ”

Cathy Olive is a goat rancher who lives directly across the street from the CoTA property.  She questions whether the land truly remains as a birds and wildlife habitat

“There could be a few possums walking down in the creek bed,” Olive said. “There could be a few raccoons Definitely some rats,” Olive said. “When they brought the bulldozers in and cleared it, the wildlife left. There is no wildlife over there anymore.”

And while that land may not currently produce revenue, the agricultural designation does produce savings.

According to records provided by the Travis Central Appraisal District, the property taxes on the 617 acres would be an estimated $171,209 at market value.

But with the wildlife preserve designation, Circuit of The Americas will only pay $1,563, which is a difference of about $169,646 a year. Olive say that’s potential tax revenue not going toward schools, roads, parks and police.

“Who is being hurt? The county is being hurt," Olive said. "The school district is being hurt.”

Carrying 'their fair share?'

And Travis County’s former Tax Assessor Collector Bill Aleshire agrees. 

“Businesses ought to be welcome to come to Texas and carry their fair share,” said Aleshire, who also served as Travis County judge. “When you see these tricks used with what is otherwise a good exemption to have available, I can understand why taxpayers would get mad about it.”

Circuit of The Americas submitted the required “wildlife management plan,” which includes pictures of bird feeders, watering troughs and predator control -- such as destroyed ant mounds -- as well as a count of observed birds.

But that was in January, and the designation can change when TCAD inspectors check again during appraisal season. 

“Clearly there's been a lot of activity out there throughout this year,” said Paul Snyder, deputy chief appraiser with the Travis Central Appraisal District.  “So we're definitely going to be out there towards the end of this year.”

Snyder says about 38 percent of the land in Travis County receives an agricultural designation of some kind.  TCAD appraisers check those properties once a year and they only monitor how the land is used, not who owns it.

“Our mission is to make sure the land qualifies, and not the owner,” said Snyder. “We are looking at the land exclusively.”

And so is KXAN. Our investigation found plenty of big businesses getting in on the big tax breaks with agricultural property valuations.  Dell is among them. 

Tallying up the numbers

According to records obtained from TCAD, Dell has a total of 264 acres on six properties with agricultural valuations. Property taxes on its market value of all those properties would be an estimated

$382,201.

But instead, Dell pays only about $1,088 in property taxes on those 264 acres, a difference of $381,113.

One of the Dell properties is a 65-acre tract along Louis Henna Boulevard, right across from the Dell campus. In fact, it’s only a few steps from a major shopping center and sandwiched between commercial developments.

The property taxes on the market value of the 65-acre tract would be about $85,694 a year.  But because the Dell property has cows on it, and has an agricultural valuation, the company pays a mere estimated $219.

A corporation's response

KXAN asked Dell about its ag-designated properties. The company sent a statement saying:

"The property across from our main campus has been leased as agricultural land for grazing cattle since 2008." 

The statement went on to say:

“The AG exemption provides a deferral of the taxes on this property. If and when the use of the land changes and is no longer used for agricultural purposes, we would have to pay all of the back taxes plus interest.”

The roll-back is actually only for the previous five years. So, if a property owner keeps the land longer than five years, it can avoid paying roll back taxes for the prior years. 

“Those are developer strategies to try and get a tax break, and they’re really not accomplishing the preservation of wildlife in the long term or really helping production of agriculture,” said Aleshire. “I haven’t seen a Dell Steak lately”

But Paul Snyder says Dell has met the requirements. 

“They've submitted a plan and they submit their annual report and we have not had any issues with them in their compliance,” Snyder said.

How the process works

It’s not uncommon for corporations to lease their undeveloped property for cattle grazing or growing hay to qualify for the ag valuation.  Dell leases its undeveloped land to farmers who drop their cattle on it to graze. That makes it Agriculture land. And it’s not uncommon.

Leasing land for farming and ranching

“It’s actually much easier for corporations who are not in the business of producing ag, to lease it to someone who does that,” said Snyder.

To qualify for an ag valuation with livestock, Snyder says the property must have at least four animals and has to be the primary use of the property.  On cropland owners are required to plant and harvest a crop that has commercial value. But they don't have to sell it. 

Samsung also has ag-designated land. The high-tech giant has about 50 acres next to its main facility in northeast Austin that it claims as open land and wildlife preserve. Property taxes on that land at market value would be an estimated $22,299. But instead, Samsung only pays about $141.

In a statement to KXAN, a Samsung representative wrote:

“Our 54-acre wildlife preservation area has been described by a city of Austin environmental scientist, as one of the most pristine wild life areas in the county. The property serves as home to various fowl such as purple martin, doves and turkey.  We also have three Red Stag that live in this wild life area. Our site consists of 300 acres so the preserve is a very small portion of our holdings.  Even so, the preserve is a proud part of our overall environmental management program.  Notably, the preserve is subject to audit each year and our tax savings from this exemption are very modest — about $25,000 a year. I am not in a position to comment on expansion that is simply too speculative to discuss at this time.”

Previously, the same Samsung representative said the company hopes to expand its Austin facility soon.      

Austin White Lime has been quarrying lime for more than 100 years. The company has more than 3,404 acres of land with agricultural designation. 

Anyone driving along McNeil Road in Round Rock can see cows roaming the land along with large dump trucks hauling lime. Property taxes at market value on that land would put $741,552.71 on the tax rolls.  But because of the special valuation, Austin White Lime only pays about $2,596 on that land.

We asked Austin White Lime why the company claimed the agricultural designation and how much of its land is consumed by its industrial operations each year, but the company responded via email stating it had no comment.

Texas Crushed Stone is also in the limestone quarrying business. The Limestone giant has 5,352 acres of its property as ag-designated land. Instead of paying what would be an estimated $1,848,977 in property taxes on the market value of that land, the company only pays about $6,205 in taxes on the ag-value, according to records obtained from Williamson County.

Farmers like Mellenbruch who live off of their land and what it produces believe any preservation of open land and wildlife is a good thing and that’s when the special valuations and tax breaks are warranted.

“You want to use them right and there is some abuse out there, there's no question. But it’s a tough thing to struggle with,” Mellenbruch said.   

In Travis County there are a total of 251,135 acres with