Texas Property Tax Consultant Practice Exam

What happens when there is a change of use on land granted special use valuation for agricultural purposes?

1. An additional tax is imposed based on the market value of the property from the previous tax year

2. An additional tax is imposed based on the market value of the property for each of the preceding 3 years

3. An additional tax is imposed based on the difference between the taxes imposed and market value for each of the preceding 5 years, plus interest

4. No additional taxes are imposed

The correct answer is: An additional tax is imposed based on the difference between the taxes imposed and market value for each of the preceding 5 years, plus interest

When land that has been granted special use valuation for agricultural purposes undergoes a change of use, the additional tax implications are significant. In this scenario, the correct approach is to impose an additional tax based on the difference between the taxes that were imposed on the property and the market value for each of the preceding five years. This is in conjunction with the application of interest on the unpaid amount. Special use valuation allows for reduced property tax assessments for agricultural land, which is generally assessed at a lower value compared to its market value. When the use of the land changes, it can result in a re-assessment at its market value, potentially recognizing substantial revenue from that property if it is transitioned for non-agricultural purposes. The recovery mechanism ensures that the tax authority captures the difference in tax revenue that was previously waived due to the agricultural valuation. This adjustment also serves to maintain equity within the property taxation system, ensuring that landowners who change the use of their property are contributing taxes commensurate with its value. This specific provision, which involves reviewing a five-year history, is designed to ensure that the adjustment is fair and takes into account changes over a significant period, providing a clearer picture of the impact of the change in use.