                 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).




                                      -6243-
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




                                     -6244-
    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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