Untitled Texas Attorney General Opinion

TEE AT~,WNEY GENERAL
OF TEXAS
November 28, 1972
Honorable Joe Reeweber Opinion No. PC 1271
County Attorney
lfarrlr County Courthoure Re: Meaning of “primary oc-
Houston, Texas 77002 cupation and eource of
Income of the owner”
Honorable Fred P. Holub when aeseeeing land
County Attorney used for agricultural
Natagorda County Courthouee purpoeee under Article
P. 0. Box 1527 VIII, Section l-d of
Bay City, Texae 77414 the Texae Conetltutlon.
Oentlemen :
You have each eubmltted opinion requeete which involve an
Interpretation of Article VIII, Sect$on l-d of the Texae Conetl-
tutlon. Both requeete aek whether land may receive the “agri-
cultural uee” deelgnatlon provided by Article VIII, Section l-d
when the owner’8 Income from other eourcee’ exceeds the Income
derived from agricultural use of the land. Section l-d of
Article VIII reads ‘as followe:
“$1-d. Aeeeeement of land deelgnated for agricultural uee
Sec. l-d. (a) All land owned by natural pereone
which 18 deelgnated for agricultural uae in accordance
with the provision8 of thle Section shall be aeeeeeed
for all tax purpoees on the consideration of only
those factors relatlve to such agricultural we. *Ag-
rlcultural use* mean8 the raielng of llveetock or grow-
lng of crope, rrult, flowera, and other products of
the roll under natural condition8 as a buelness venture
for profit, which business Is the primary occupation
and source of income of the owner.
(b) For each assessment year the owner wishes
to qualify his land under provision8 of thir Section
a8 deeignated for agrleultural iwe he shall file with
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Honorable Joe Reetieber, et al, page 2 (M-1271)
the local tax aeeeeeor a sworn etatement in writing
deecrlblng the uee to which the land Is devoted.
(c) Upon receipt of the eworn statement in
writing the local tax asseseor shall determine
whether or not such land qualifies for the deelg-
nation ae to agricultural use as defined herein
and in the event it so qualifies he shall deelg-
nate such land as being for agricultural uee and
aeeeee the land accordingly.
(d) Such local tax assessor may inspect the
land and require such evidence of use and source of
income a8 may be neceeeary or useful In determining
whether or not the agricultural uee provlelon of
this article applies.
(el No land may qualify for the designation
provided for In this Act unless for at least three
(3) successive years lnunedlately~precedlng the
aeeesement date the land hae been devoted exclu-
elvely for agricultural uee, or unleee the land
ha8 been continuously developed for agriculture
during euch time.
(f) Each year during which the land Is desig-
nated for agricultural use, the local tax assessor
shall note on his records the valuation which would
have been made had the land not qualified for such
designation under this Section. If designated land
18 rubeequently diverted to a purpoee other than
that of agricultural use, or is eold, the land
shall be eubject to an additional tax. The addl-
tlonal tax ehall equal the difference between
taxes paid or payable, hereunder, and the amount
of tax payable for the preceding three years had
the land,been otherwlee aeseseed. Until paid,
there shall be a~lien for additional taxes and
interest on land.aeseered under the provisions of
thie Section.
(g) The valuation and asseesment of any
minerals or subsurface rights to minerals shall
not coma +thin the provisions of this Section.”
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Honorable Joe Reeweber, et al, page 3 (M-1271)
The request submitted by Honorable Joe Reeweber suggests
that Article VIII, Section l-d(a) Is violative of both the equal
protection and due procees clauses of the Conetltutlon of the
United States. In the brlef furnished in connection with this
request, the writer adatunes that where revenue from a sale Of
agricultural land exceeds the profit reeultlng from agricultural
use of the balance of the land, the right to the deelgnatlon of
agricultural use Is lost. Taking this result ae a premise, it
Is submitted that Article VIII, Section l-d(a) 18 vlolatlve of
the equal protection fnd due process clauses of the Conetltutlon
of the United Statee.
The recent decision of Klltgaard v. Calnes, 479 S.W.2d 765
(Tex.Clv.App. 1972, error re? LM tion for Rehearing
overruled November 1, 1972)) &?.~r``f’the”premlae on which the
question of conetltutlonallty 1s predicated. Klltpaard holds
that sporadic sales and other transactions there Involved which
resulted In Income in excess of that derived from agricultural
use of the land did not affect the owner’s right to agricultural
use designation where such use conetltuted the bualnese and prl-
mary occupation and source of income of the owner.
I In reaching this conclusion, the writer recognizes that,
generally speaking, there Is nothing In the Federal Conetltutlon
which requires that State taxation be equal, uniform or just
(citing Shaffer v. Carter, (1920) 252 U.S. 27, 40 S. Ct. 221) if
the practical operation of the tax beare a relation to opportun-
ities, protection or benefits conferred by the State (citing
State of Wisconsin v. J. C. Penney Co., (1941) 61 S. Ct. 246, 311
s 4351 Nevertheless, th due proceee and equal protection
cia&ses aiford protection agzlnst discriminatory taxation (cltl
Morton Salt Co. v. City of South Hutchlnson, (1947) 159 F.2d 898
within an otherwise reasonable classlflcatlon for tax purposes
citing Phllllps Chemical Co. v. Dumas Independent School Dlat.,
1960) 85 S. Ct. 474 361 u s j-f-6) E th h numerous cases
recognize the power’of the-State t; trzi: agz%ltural land dlf-
ferently from non-agricultural land , a taxing scheme which lm-
poses a greater tax upon a taxpayer simply because he Is better
able to bear Its burden amounts to an abusive and unreasonable
discrimination within the class (cftlng Brosiley v. McCaughn,
(Dlst. Ct. Penna., 1928) 26 F.2d 380).
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Honorable Joe Reeweber, et al, page 4 (M-1271)
In Klit aard the taxpayera had lived on the land for many
years an rb, w he exception of a few monthe, had farmed and
ranched it continuously during that time, pereonally supervising
and laboring In ralslng crops and livestock. TNs operation was
conducted at all times a8 a business venture for profit. During
the taxable years In queetlon, the taxpayers received money from
other sources, Including the following: principal and lntereet
on occasional land sales; rental of commercial property acquired
by inheritance; 011 and gas bonua and delay rental8 from certain
mlneral leases on a ranch In another county, no production of
minerals being involved. Three of the ealee involved were to
irrevocable trusts created for the benefit of the taxpayers’
children, for which sales a note wae given, payable with Interest
within five years. The trial court found these salse to be b6na
fide at market price and a part of the taxpayera’ estate plan.
Itfurther expreesly found such sale8 were not a business venture
of the taxpayera. Addltlonal sale8 resulted in partial payment8
being made in the taxable years, and a eale was aleo made of part
of a ranch in another county which was operated a8 a unit with
the land for WNah deelgnatlon was nought.
In holding that the use of the land oonstituted “agrlcul-
tural use”, the court emphasized the fact that taxpayers’ pri-
mary occupation and source of income.was their farming and
ranchfng activities, and that the income received from the
transactions above enumerated did not conetltute money received
“in any buainese venture or occupation within the meaning of
the amendment LArtL 1 se ti l-d J ” Tll t ax collecfor’e
emphasis on fhat pa&Ton of*thecco%tut&al ;rovision which
speaks of the “source of income of the ownera@ and hia position
that agricultural use designation wan loet whenaver non-agricul-
tural lncuae exceeded agricultural Income in any one year wae
lpeclflcally rejected. At pagee 769, 770, the court raid:
“In applying hi8 dollar balancing teat by deter--
mining what Is agricultural and non-agricultural income,
appellanta’ tax collector sometimes borrows from the
doctrines of the Internal Revenue Service, but not
‘necessarily’. On cross-examination Hr. Klltgaard,
the tax collector, wae aeked about Ne guidelines in
arriving at agricultural or non-agricultural income.
Xl8 rather lta r tllng reply wae, ‘We really have no
guidelines, slgnlfloant guldellnee reletlve to the
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Honorable Joe Reeweber, et al, page 5 (M-1271)
law a8 written here, and there are many situation8
that ariee that are very difficult tb get anewere
to out of the law lteelf.'
“An examination of the tax collectors’ deter-
mlnatlone as to non-agricultural Income eMm8 to
bear out the accuracy of his statement. ...
“Ellglblllty for the benefits of the amendment
18 not to be determined by the vagaries of nature or
the market, nor by.fortultoue investment or lnherlt-
ante. But rather to qualify under the amendment one
muet be engaged in a bona fide effort to eam,,a profit
from the land by agricultural operationa. ...
Under the facts aubmltted by Honorable Joe Resweber, there
was only one sale of a portion of the land ‘formerly accorded
agricultural uee deeignation, which sale dld.not affect aubee-
quent uee of the balaice for farm purpoeee. Under Xlit aard
the owner of the land 18 still entitled to agrlcultura-P- :uee
\ designation.
The question submitted by Honorable Fred P. Holub Is couched
In more general terme, and aeks whether agricultural use deelg-
nation must be denied in any case where income derived from any
other eource is more than 50$ of the Income derived from agri-
cultural use. We reviewed In detail the facts in Kilt aard and
the court’8 application of the constitutional prov T+Ti&eto
s on
because that case furnishes guidelines for tax collector8 in such
casee. In each case, the tax collector must conslder all pertl-
nent facts In the light of Kilt aard on the basis of which he
muat conclude whether the a$r + cu ural uee of the land in quee-
tlon is In fact a “buelnese which “la the primary occupation
and sour= nncome of the owner”.
SUMMARY
Where Income from agricultural use is exceeded
by lnoome from other eourcee, an owner of land may
still obtain agricultural uee deelgnation under
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Honorable Joe Reeweber, et al, Page 6 (M-1271) ’
Artlole VIII, Seotlon l-d of the Texa8 Constitution
If the agrloultural uee of the land la in && e
“bueineee” which 18 “the primary ocouprmon end
eourae of Income of the owner’.
RD C. MARTIN
ey General of Texae
Prepared by Herlotte McOrigor Fmyne
Aeeiet*nt Attorney Oefyral
APPROVED:
0PIHIoN COMITTEE
Kern8 Taylor, Chairman
W. E. Allen, Co-Chalmmn
lierriet Burke
Jaok SpaNcn
E;pm%dlln
SAMUEL D. MCDANIEL
Staff Legal Aeeletant
ALFREDWALmR
Executive Aeeletmnt
NOLAWHITE
Flret Ae$letant
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