                                  @ffice       of tfy     !Zlttornep        @mecal
                                                 Mate       of QCexae
                                                   August 14,1997
DAN MORALES
 ,ATTOHSCEY
          CEXERAL

   The Honorable Garry Mauro                                 Opinion No. DM-448
   Commissioner
   Texas General Land Office                                 Re: Whether land designated for “agricultural
   1700 North Congress Avenue                                use” is subject to the live-year rollback provisions
   Austin, Texas 78701-1495                                  when the property is acquired by the state and
                                                             related questions (RQ-911)




             You ask about the recapture or “‘rollback” of taxes on land appraised for property taxation
   at its value for agricultural use when the property is acquired by the state and other related questions.
   Your questions arise as the General Land Office (the “GLO”) prepares to dispose of the real property
   assets of the Superconducting Super Collider project’ since many of the parcels of land acquired for
   that project were classitied, at the time of acquisition by the state, as “agricultural” for property tax
   purposes.

            Article VIII, sections Id and Id-1 of the Texas Constitution, as implemented by the
   provisions of the Tax Code, allow for the designation of certain land for agricultural use and
   appraisal of such land for property tax purposes on the basis of its productive capacity rather than
   its market value. The special valuation has the effect of reducing substantially the property taxes
   on land that qualifies.* When the use of the land is changed,3 however, an additional tax is imposed
   in an amount equal to the difference between the taxes paid during the past three years or five years
   - depending on which particular provisions are applicable4 -- and the taxes that would have been due
   during that period had the land been appraised at market value. Tex. Const. art. VIII, $5 l-d, l-d-l;
   Tax Code $5 23.46, .55(a). The additional tax imposed is a penalty for taking the land out of
   agricultural production and is commonly called a rollback tax because it recaptures the taxes the
   owner would have paid had the property been taxed at market value for each of the years covered
   by the additional tax. Resolution Trust Corp. v. Tarrant County Appraisal Did., 926 S.W.2d 797,



              ‘ma was a project for which Congress failed to appropriate funds. See Gov’t Code 5 2301.001(7) (“‘Super
    collider facility’means any superconducting super collider high-energy research facility that is or is proposed to be
    sponsored, authorized, and funded in part by the United States government.“).

          ‘STATE
               PROPERIY       MANUAL
                      TAXBOARD,                      FOR THE APPRAISAL   OFAGRICULTURAL
                                                                                     LAND1 (1990) [hereinafter
    AGMANUAL].
The Honorable Garry Mauro - Page 2                    (DM-448)




by the additional tax. Resolution Tmt Corp. v. Tarrant County Appraisal Dirt., 926 S.W.2d 797,
799-805 (Tex. App.-Fort Worth 1996, no writ); AG MANUAL, supra note 2, at 31 (The “Rollback’
Tax).

         You first wish to know whether the state’s acquisition of a parcel of land subject to the
special agricultural valuation constitutes a change in use which would trigger the rollback process.
As alluded to above, land is subject to the provisions, including those with respect to additional
taxes, of the constitutional amendment under which the land was designated for agricultural use for
that year. See Tex. Const. art. VIII, $ l-d-l(b); Tax Code 5s 23.52(b), .55(f). Your letter indicates
that the land at issue qualified for agricultural appraisal under article VIII, section 1d-l .5

         Article VIII, section l-d-l of the Texas Constitution, adopted in 1978,’ authorizes the
legislature to provide by general law’ for taxation of open-space land devoted to farm or ranch
purposes on the basis of its productive capacity. Section Id-1 also authorizes the legislature to
provide by general law for eligibility limitations and to impose sanctions to further the taxation
policy of the constitutional amendment.         In 1979’ the legislature implemented the eligibility
limitations and sanctions which are now found in subchapter D, chapter 23 of the Tax Code. See
Tax Code $5 23.51 - .57. Section 23.55(a) of the Tax Code provides that “[i]f the use of land
that has been appraised as provided by this subchapter changes, an additional tax is imposed on the
land. . . .” Open-space land accorded the special valuation by the terms of the statute becomes
subject to the rollback tax only if the use changes; acquisition alone does not trigger the rollback tax
provisions. Attorney General Opinion JM-949 (1988) at 3. Change of use occurs when the use of



         %&ions I-d and l-d-l of article VIII both provide for special appraisals of agriculhtral land and are
implementedby subchaptersC and D of chapter23 of the Tax Code, respectively. Sections l-d and l-d-1, and the Tax
Code provisions adopted thereunder, differ in their scope and procedures. Letter Opinion No. 95-054 (1995) at 1, n.
1; see generally Attorney General Opinion m-949 (1988). Under section l-d of article VIII, tbe rollback tax-is
triggered by diversion of the land to a nonagricultural purpose or a sale of the land. The amount of the rollback tax
imposed under that section equalsthe difference between taxes paid and the amount that would have been payable for
the preceding three years if the land had not been speciallyappraised. Tex. Coast. art. VIII, g Id(f); see also Tax Code
5 23.46(c). Under section Id-l and Tax Code section 23.55, however, Brollback is tiggered only by a change in use
of land designated for agricultural use. Tex. Cm&. art. VIII, 5 l-d-l; Tax Code 5 23.55(a). The Bmountof the tax
imposed by section 23.55(a) equals the difference between the taxes imposed for the preceding five years and the tax
that would have been imposed had the land been ap~raisexiat market value for the period. Tax Code 9 23.55(a). Nearly
all the eligible land in Texas qualifies for the agricultural use designation under section l-d-l of article VIII, and
subchapter D, chapter 23 of the Tax Code. See AGMANUAL, supra note 2, at 2 (95 percent or more of eligible land in
Texas qualifies under section l-d-l).

         ‘See Act of August 8,1978,65th Leg., 2d C.S., H.J.R. 1,1978 Tex. Gen. Laws 54.54

         ‘Sections l-d and Id-1 of articleVIII of the Texas Gmstihltion differ in that l-d is self-enactingwhile section
Id-l is a grant of legislativeauthorityand requires legislation to implement its provisions. Attorney General Opinion
M-949 (1988) at 2.

         ‘See Act of May 28, 1979,66th Leg., R.S., ch. 302,s 1,1979 Tex. Gen. Laws 680,682-83.



                                                    p.   2509
The Honorable      Garry Mauro - Page 3             (DM-448)




the land changes from an agricultural use to a nonagricultural use. Resolution Trust Corp., 926
S.W.2d at 800. Accordingly, cessation of agricultural use constitutes a change of use which triggets
the rollback tax under section 23.55(a) of the Tax Code. Id. Section 23.55(f) of the Tax Code,
additionally, provides that “[tlhe sanctions provided by [section 23.55(a)] do not apply if the change
of use occurs as a result of a sale for right-of-way or a condemnation.”  Neither section Id-1 of the
Texas Constitution nor section 23.55 of the Tax Code provide any exceptions to the rollback
provisions other than those with respect to land acquired by condemnation or purchased for right-of-
way.9

        We begin by noting that insofar as property owned by the state is concerned, exemption from
taxation is the general rule and not the exception. Attorney General Opinion O-1861 (1940) at 5.
As explained in Attorney General Opinion 0- 186 1:

             The object of taxation is to produce the revenues with which to conduct the
             business of the state; it is entirely inconsistent with our theory of government
             for the property of the state to be taxed, in order to produce the money to be
             expended by the state.

                 The purpose of taxation being only for the raising of money with which
             to carry on the governmental functions, to tax the property of the state would
             only amount to taking money out of one pocket and putting it in another.

Id. at 4 (citations omitted). Before state property may be subjected to any form of taxation, the
legislative intent to tax must be demonstrated either by express enactment or clear implication of the
law. Id. at 5.

          Article VIII, section l(b) of the Texas Constitution declares all real property and tangible
personal property to be taxable in proportion to its value unless the property is exempt as the
constitution permits or requires. Attorney General Opinion DM-383 (1996) at 2. Article VIII,
section 2 provides in relevant part that “the legislature may, by general laws, exempt from taxation
public property used for public purposes.“‘0 Pursuant to article VIII, section 2, the legislature
enacted the predecessor to section 11 .l l(a) of the Tax Code governing the taxation of public
property. Id. Section 11.1 l(a) of the Tax Code states that “[elxcept as provided by Subsections (b)



         %Je understand that the land at issue is approximately 17,000 acres, composed of 2300 separate parcels. It
is unclear whether all the land was acquiredby condemnationor ifany of the.parcels were purchased for right-of-way.
See also in@ note 13.

          ‘OArticleXI, section 9 of the Texas Constitution,exempts “property of counties, cities and towns, owned and
held only for public purposes, . . and all other properly devoted exclusively to the use and benefit of the public from
taxation. .” This section is self-executing. Since this last clause has not been construed to apply to prc,pertyowned
by the state, we need not examine this provision. See Attorney General Opinions JM-1085 (1989) at 3 n.1, Jh4-1049
(1989) at 2 n.1.




                                                    p.   2510
The Honorable      Garry Mauro - Page 4              (DM-448)




and (c)‘i of this section, property owned by this state or a political subdivision of this state is exempt
from taxation if the property is used for public purposes.” Thus, as a general matter, by express
legislative enactment, land owned by the state and used for public purposes is not subject to taxation.
Accordingly, state-owned land used for public purposes’* is subject to taxation only if provided for
by another law. See, e.g., Lubbock Indep. Sch. Dist. v. Owens, 217 S.W.2d 186, 189 (Tex. Civ.
App.-Amarillo      1948, writ ref d n.r.e.) (“There is no statute warranting a fixing of a lien against the
land for taxes during the time it was held by the State. The contention that taxes acc~ed against the
property while held by a taxing unit has been rejected by the courts of this state.“).

         We proceed to consider whether the agricultural use provisions provide for the taxation of
state property exempted by section 11.l l(a) of the Tax Code. Neither article VIII, section Id-l of
the Texas Constitution nor section 23.55 of the Tax Code expressly provide for imposition of the
rollback tax on state-owned land. See Tex. Const. art. VIII, 4 l-d-l; Tax Code 5 23.55. It is also
true that neither expressly exempts governmentally owned land.‘r We do not believe, however, that
the failure to specifically exempt such property is significant, or can reasonably be read to imply an
intent to tax state-owned property exempted by section 11.11 (a). First, we think it unlikely that
the state, if it chose to tax itself, would do so by other than express enactment. See Owens, 217
S.W.2d at 189 (need statutory authority to fix tax lien against state property); Attorney General
Opinion G-1861 (1940) at 5 (state has never held itself subject to taxation except by special
enactment). Secondly, a specific exemption for state-owned property is unnecessary. A statute is
presumed to have been enacted by the legislature with complete knowledge of and with reference
to the existing law. I4 A&r v. Texas Water Comm ‘n. 790 S.W.2d 299,301 (Tex. 1990); McBride
v. Clayton, 140 Tex. 71, 166 S.W.2d 125, 128 (Tex. 1942). Furthermore, statutory repeal by
implication is not favored by the law. Acker, 790 S.W.2d at 301; Gordon v. Luke, 356 S.W.2d 138,
139 (Tex. 1962); see also Eppenauer v. Eppenauer, 831 S.W.2d 30,34 (Tex. App.--El Paso 1992,
no writ) (repeal by implication will not be declared unless there is no room for doubt and repeal not
favored by law). Thus, a statute covering the same subject dealt with by the preexisting law but not



         “Subsection (II)of section 11.I 1 subjectsland owned by the PermanentUniversity Fund to county taxes. Tax
code g 11.1l@). Subsection (c) of section 11.l 1 provides that agricultural land owned by a county for the benefit of
public schools under article VII, section 6, of the Texas Constitution, is taxable for all purposes. Id. $ 11.1I(c).

         12Wedo not know the uses made of the parcelsof land at issue. For the purposes of tbis opinion, we assume,
without considering, that the land in question “is used for public purposes,” since the question immediately before us
is whether, as a general matter, state-owned land is subject to the rollback tax.

          ‘%he exemption provided for change of use resulting from condemnation of land does not nor do we believe
is intended to deal with (or circumscribe)the application of the rollback tax on govemmentally owned land. There.are
clearly a number of nongovernmental entities,such as utility,railroad,or tramway companies, that have condemnation
authority. See generally 32 TEX. JUR.30 EminentDomain $5 63-80 (1981) (special pwpose enterprises, railroad
corporations, interurban electric railways, indushical railroads, tramways, individuals and associations).

         ‘%he predecessorto section 11.1l(a) of the Tax Code has existed since 1943. See Act of May 5, 1943,48th
Leg., R.S., ch. 316, $ 1, 1943 Tex. Gen. Laws 472,473.




                                                   p. 2511
The Honorable Garry Mauro - Page 5                  (DM-448)




repealing that law is required to be harmonized with the older law in such a way as to give effect to
both statutes. Acker, 790 S.W.2d at 301; Standard v. Sadler, 383 S.W.2d 391,395 (Tex. 1964);
Co&y v. Daughters ofthe Republic, 156 S.W. 197,201 (Tex. 1913). Section 23.55 can be easily
harmonized with section 11.1 l(a) of the Tax Code by exempting state-owned property used for
public purposes t?om the operation of the rollback tax provisions. Such coordination preserves both
the purpose of section 23.55 to recapture pmperty taxes and penalize taking land out of agricultural
use, and the objective of section 11.1 l(a) to exempt publicly owned property used for public
purposes.    See A&r, 790 S.W.2d at 301; Gov’t Code 5 311.021(3) (in enacting statute, it is
presumed that just and reasonable result is intended). We, therefore, conclude that state-owned land
exempt under section 11.1 l(a) of the Tax Code is not subject to the rollback tax provisions of section
23.55 of the Tax Code.‘s

         No Texas court appears to have directly addressed the application of the rollback tax
provisions to acquisition and change of use of agricultural land by the state or one of its political
subdivisions.‘6   The State Property Tax Board (the “board”),” the agency charged with enforcing
the agricultural use provisions has, however, adopted the position that governmental acquisition and
subsequent change of use of agricultural land triggers the rollback provisions of section 23.55 of the
Tax Code. Pursuant to the authority granted under section 23.52(d) of the Tax Code,i8 the board
promulgated rules with respect to appraisal of agricultural land under article VIII, section l-d-l.
These rules are contained in the Manual For The Appraisal of Agricultural Land (the “mamml”),




         “We note that the legislaturehas passed Senate Bill 728, amending section 23,55(a),effective as of September
1.1997, to expresslyprovide that “If’& the pqxxes of this subsection,the chief appraisermay not consider any period
during which land is owned by the state in d*crmining whether a change in the use of the land has occurred.” See S.B.
728, Act of May 14,1997,7Sth Leg., RS. (eff. Sept. 1, 1997).

         ‘6Th.eDallasCourt of AppeaLsin Rewlutin Trust Corporation determined that the “rollback tax is a penalty,
and not merely a tax on real estate” that could not be enforced against the Resolution Trust Company (“RTC’), an
instrumentalityof the United States. Resolution Trust Corp., 926 S.W.2dat 805. The court held that assessment of the
rollback tax against the RTC was barred based on sovereign immunity. Id. at 798, 805 (construing 12 USC.
§ 1441=(g)).

       ‘%n 1991, the State Property Tax Board~was abolished and its duties and functions transferred to the
Comptroller ofPublic Accounts. See Act of August 25, 1991,72d Leg., 2d C.S., ch. 6, $5 24,67,68, 1991 Tex. Gen.
Laws26,31,41.

         ‘*See id.




                                                   p.   2512
The Honorable Garry Mauro - Page 6                (DM-448)




published in 1990.‘9 With respect to the application of the rollback tax provision, the manual states
the following:

              Exemptions that apply to ordinary property taxes do not apply to
              rollback taxes. Even if the land might be exempt from ordinary taxes in
              the new owner’s hands, the rollback tax still becomes due if that owner
              takes property out of agricultural use. In most cases, the owner will be
              personally liable for the rollback tax, and the tax lien can be enforced
              against the property. where the state or a political subdivirion buys the
              land and changes the use, the rollback tax will be triggered but the lien
              cannot be foreclosed.        The tax can’t be collected unless the
              governmental entity chooses to pay it. However, the lien against the
              land continues and could be enforced against a later buyer.

AG MANUAL, mpra note 2, at 35 (Does the Rollback Tax Appiy to Land Bought and Changed by
an Exempt Organization or Government Entity?) (emphasis added).

          Construction of the agricuhural use statutes by the board is entitled to serious consideration,
but only as long as such construction is reasonable and does not contradict the plain language of the
statute. See, e.g., Turrant County Appraisal Dist. v. Moore, 845 S.W.2d 820, 823 (Tex. 1993);
Stanford v. Butler, 181 S.W.2d 269, 273 (Tex. 1944). A construction that imposes additional
burdens, conditions, or restrictions in excess of or inconsistent with the statutory.provisions will not
be upheld. See Riess v. Williamson County Appraisal Dist., 735 S.W.2d 633,63?-38 (Tex. App.--
Austin 1987, writ denied) (board rule requiring “intensity of use” as part of historical agricultural
use inconsistent with Tax Code 5 23.51). Based on our discussion of section 23.55 above, we
believe the board’s construction is neither reasonable nor consistent with the statute. The board’s
construction imposes the burden of taxation on the state and its political subdivisions when no such
imposition is required by either the express language of, or clear implication in, the statute. See
Riess, 735 S.W.2d at 637-38; Moore, 845 S.W.2d at 823. There appears to be nothing in the
legislative history of article VIII, section la-1 of the Texas Constitution, or of section 23.55 of the
Tax Code, indicating that the rollback tax was intended to apply to governmentally owned land that
was otherwise exempt from property taxes. The board’s construction necessarily repeals by
implication section 11.1 l(a) of the Tax Code without attempting to reconcile section 23.55 with the
older provision even when there is no manifest inconsistency between the two provisions.               See
A&r, 790 S.W.2d at 301; Eppenauer, 831 S.W. 2d at 34 (presume that legislature desired just and
reasonable result and contemplated effect of statutes which are, on their face, conflicting, and both
will be given effect unless manifestly inconsistent). Moreover, the board’s construction is internally
contradictory in that it posits that the governmentally owned land is subject to the tax because the


        IgAllmles and procedures adopted by the board and in effect on September 1, 1991, remained in effect as if
adopted by the Comptroller of Public Accounts until amended, repealed, withdrawn, or otherwise superseded by the
comptxoller. Id. $67(c). The comptroller to date has not amended, repealed, withdrawn, or otherwise superseded the
1990manual.   See34T.AC~9.4001.




                                                  p.   2513
The Honorable     Garry Mauro - Page 7             (DM-448)




section 11.1 l(a) or similar exemption does not apply, but the tax cannot be enforced or collected
from the governmental entity, presumably because of the exemption provided in section 11.1 l(a)
or another provision. *O The result of such construction, that the rollback tax is intended to be
imposed on land owned by, but never collected horn, governmental entities, is neither reasonable
nor feasible of execution. See Gov’t Code $5 311.021(3) (’   m enacting statute, presume just and
reasonable result intended), (4) (presume result feasible of execution intended), .023(5) (in
construing statute, court may consider consequence of particular construction).     We, therefore,
decline to adopt the board’s construction of section 23.55, with respect to the application of the
rollback tax provision to state-owned property.

         Unrelated to the rollback tax provision, you           also ask whether “government ownership
suspend[s] the ‘five out of seven years’ agricultural use       requirement for qualification for the special
agricultural valuation’* and “may the appraisal district        consider only the last seven years of use in
private ownership when determining whether a parcel             is qualified for the special valuation.“2’

         Article VIII, section l-d-1 of the constitution authorizes the legislature to provide by general
law for taxation of “open-space land devoted to farm, ranch, or wildlife management purposes on
the basis of its productive capacity” and “eligibility limitations.” Section 23.5 I( 1) defines “‘qualified
open-space land” as

             land that is currently devoted principally to agricultural use to the degree
             of intensity generally accepted in then area and that has been devoted
             principally to agricultural use or to production of timber or forest
             products for five of the preceding Seven years or land that is used
             principally as an ecological laboratory by a public or private college or
             university.


          %xis position is apparently based on Attorney General Opiiion M-1085. That opinion dealt with land
acquired by the VeteransLand Board subjectto l#ns created by the previous owner’s failure to pay property tax+ Tbe
opinion concluded that taxes may not be imposed on land comprising the Veteran’s Land Fund based on either article
III, se&on 49-b of the Texas Constitution or section 11.1l(a) of tbe Tax Code. Attorney General Opinion N-1085
(1989) at 5-9. The lien searing the taxes owed by the previous owt~e.r,however, remained in force while tbe property
was owned by tbe Veterans’Land Bard, but the lien was utxnfonxable against tbe state. Id. at 17. Attorney General
Opinion JM-1085 and the cases cited therein for the last conclusion would appear to be inapposite to tbe rollback tax
lien: they involve the usual property taxes from which tbe governmental entity in question is exempt under section
 11.1l(a) of the Tax Code or another provision, so no taxes accrued while the property was held by the govemmental
entity; any lien for delinquent taxes that continued when the governmental entity acquired the property but could not
be enforced against the govemmental entity did not attach while the property was held by or because of action of tbe
governmental entity. See e.g., State v. City ofSanAntonio, 209 S.W.2d756,757 (Tex. 1948); Childrew County Y. State,
92 S.W.Zd 1011, 1016 (Tex.1936); Maverick County Water Control & Improvement Dist. No. I v. State, 456 S.W.2d
204 (Tex. Civ. App.-San Antonio 1970, writ ref d); State v. Bean-Medina-Atarcosa   Counties Water Improvement Dirt.,
310 S.W.2d 641,643 (Tex. Civ. App.--San Antonio, 1958,writ refd); Owens, 217 S.W.2d at 188.

         %iven our conclusion that state-owned land used for public purposes is not subject to tbe rollback tax, we
need not address your remaining questions relating to tbe operation of the rollback tax.



                                                   p.   2514
The Honorable Garry Mauro - Page 8                  (DM-448)




Tax Code 5 23.5 l(1) (emphasis added). Section 23.51(2) additionally defines at length the activities
that may constitute “agricultural use.”

        We assume your questions arise in anticipation of sale of the state-owned land to persons
who may want the land to qualify for agricultural designation. You do not provide any particular
factual context for your questions nor any support for the suggestion that intervening governmental
ownership may be disregarded.=       Your questions assume that in all cases the intervening state
ownership resulted in nonagricultural use of the land for the total period of the ownership, which
may not necessarily be the case. Also relevant to analysis of the matter may be the period the use
was changed during the time the land was governmentally owned. In the absence of a specitic
factual context, and development or briefing of the issues, we decline to address this matter.

                                              SUMMARY

                  State-owned land used for public purposes is not subject to the
             rollback tax under section 23.55 of the Tax Code.




                                                      DAN’MORALES
                                                      Attorney General of Texas

JORGE VEGA
First Assistant Attorney General

SARAH J. SHIRLEY
Chair, Opinion Committee

Prepared by Sheela Rai
Assistant Attorney General




         **Youalso indicate, however, that the General Land Office does not have a position on this issue. We note
in regard to tbis matter, that Senate.Bill 728, amending Tax Code section 23.55(a), appears to allow the chief appraiser
to disregard state.ownership only for the purposes of that subsection in determiniig if change of use of the land has
occurred. See supra note 15.



                                                     p. 2515
