### TEE AT~,WNEY GENERAL OF TEXAS

November 28, 1972
Honorable Joe Reeweber County Attorney lfarrlr County Courthoure Houston, Texas 77002 Honorable Fred P. Holub County Attorney Natagorda County Courthouee P. 0. Box 1527 Bay City, Texae 77414 Opinion No. PC1271 Re: Meaning of “primary occupation and eource of Income of the owner” whenaeseeeing land used for agricultural purpoeee under Article VIII, Section l-d of the Texae Conetltutlon. Oentlemen : Youhave each eubmltted opinion requeete which involve an Interpretation of Article VIII, Sect$on l-d of the Texae Conetltutlon. Both requeete aek whether land mayreceive the “agricultural uee” deelgnatlon provided byArticle 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 bynatural pereone which 18deelgnated for agricultural uae in accordance with the provision8 of thle Section shall be aeeeeeed for all tax purpoees onthe consideration of only those factors relatlve to such agricultural we. *Agrlcultural use* mean8 the raielng of llveetock or growlng of crope, rrult, flowera, and other products of the roll under natural condition8 as abuelness 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 a8deeignated for agrleultural iwe he shall file with

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. ,. ..Honorable Joe Reetieber, et al, page 2 (M-1271)

the local tax aeeeeeor asworn etatement in writing deecrlblng the uee to which the land Is devoted. (c) Uponreceipt of the eworn statement in writing the local tax asseseor shall determine whether or not such land qualifies for the deelgnation ae to agricultural use as defined herein and in the event it so qualifies he shall deelgnate such land as being for agricultural uee and aeeeee the land accordingly. (d) Such local tax assessor mayinspect the land and require such evidence of use and source of income a8 maybe neceeeary or useful In determining whether or not the agricultural uee provlelon of this article applies. (el Noland mayqualify 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 excluelvely for agricultural uee, or unleee the land ha8 been continuously developed for agriculture during euch time. (f) Each year during which the land Is designated for agricultural use, the local tax assessor shall note onhis records the valuation which would have been made had the land not qualified for such designation under this Section. If designated land 18rubeequently diverted to apurpoee other than that of agricultural use, or is eold, the land shall be eubject to an additional tax. Theaddltlonal 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 onland.aeseered under the provisions of thie Section. (g) Thevaluation 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)

Joe Reeweber suggests Therequest submitted byHonorable 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 asale 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 apremise, it Is submitted that Article VIII, Section l-d(a) 18vlolatlve of the equal protection fnd due process clauses of the Conetltutlon of the United Statee. Therecent decision of Klltgaard v. Calnes, 479 S.W.2d 765 (Tex.Clv.App. 1972, error re? overruled November 1, 1972)) LMtion for Rehearing &?.~r~~f

’the”premlae onwhich 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 prlmary occupation and source of income of the owner.

I In reaching this conclusion, the writer recognizes that, generally speaking, there Is nothing Inthe Federal Conetltutlon which requires that State taxation be equal, uniform or just (citing Shaffer v. Carter, (1920) 252 U.S. 27, 40S.Ct. 221) if the practical operation of the tax beare a relation to opportunities, 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 MortonSalt Co. v. City of South Hutchlnson, (1947) 159 F.2d 898 within an otherwise reasonable classlflcatlon for tax purposes citing Phllllps Chemical Co. v. DumasIndependent School Dlat., 1960) 85SCt 474 361 u s j-f-6) E th hnumerous cases recognize the power’of the-State t; trzi: agz%ltural land dlfferently from non-agricultural land, ataxing scheme which lmposes a greater tax upon ataxpayer 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) 26F.2d 380).

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In Klit aard the taxpayera had lived onthe land for many rb years an , w he exception of afew 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 a8abusiness venture for profit. During the taxable years In queetlon, the taxpayers received moneyfrom 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 onaranch In another county, noproduction of minerals being involved. Three of the ealee involved were to irrevocable trusts created for the benefit of the taxpayers ’ children, for which sales anote waegiven, payable with Interest within five years. Thetrial court found these salse to be b6na fide at market **price** and apart 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 aeale was aleo madeof part **of** aranch in another county which was operated a8a unit with the land for WNahdeelgnatlon wasnought. Inholding that the use of the land oonstituted “agrlcultural use”, the court emphasized the fact that taxpayers ’ primary occupation and source of income.was their farming and ranchfng activities, and that the income received from the transactions aboveenumerated did not conetltute moneyreceived

“in any buainese venture **or** occupation within the meaning of the amendment LArtL 1 se ti l-dJ” Tll tax collecfor’e emphasis onfhat pa&Ton of*thecco%tut&al ;rovision which speaks of the “source of income of the ownera@ and hia position that agricultural use designation wanloet whenaver non-agricultural lncuae exceeded agricultural Income in any one year **wae** l peclflcally rejected. At pagee 769, 770, the court raid:

“Inapplying hi8 dollar balancing teat bydeter-- mining what Is agricultural and non-agricultural income, appellanta

’ tax collector sometimes borrows from the doctrines of the Internal Revenue Service, but not

‘necessarily

’

. Oncross-examination Hr. Klltgaard, the tax collector, waeaeked about Ne guidelines in arriving at agricultural or non-agricultural income. Xl8 rather l

tartllng

reply wae, ‘Wereally have no guidelines, slgnlfloant guldellnee reletlve to the

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law a8written here, and there are manysituation8 that ariee that **are** very difficult tb get anewere to out of the law lteelf.' “Anexamination of the tax collectors ’ determlnatlone as to non-agricultural Income eMm8 to bear out the accuracy of his statement.

...
“Ellglblllty for the benefits of the amendment 18not to be determined by the vagaries of nature or the market, nor by.fortultoue investment or lnherltante. But rather to qualify under the amendment one muet be engaged in abona fide effort to eam,,a profit from the land by agricultural operationa.

... Under the facts aubmltted by Honorable Joe Resweber, there

sale of aportion of the land ‘formerly accorded uee deeignation, which sale dld.not affect aubeewas only one agricultural quent uee of the owner of \ designation. the balaice for farm purpoeee. Under Xlit aard the land 18still entitled to agrlcultura :uee -P-
Thequestion submitted by Honorable Fred P. Holub Is couched In more general terme, and aeks whether agricultural use deelgnation 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. Wereviewed In detail the facts in Kilt aard and T+Ti&eto the court’8 application of the constitutional prov s on because that case furnishes guidelines for tax collector8 in such casee. In each case, the tax collector must conslder all pertlnent facts In the light of Kilt aard + onthe basis of which he muat conclude whether the a$r cu ural uee of the land in queetlon is In fact a “buelnese which “la the primary occupation and sour= nncome of the owner”

. SUMMARY **Where**Income from agricultural use is exceeded bylnoome from other eourcee, an owner of land may still obtain agricultural uee deelgnation under

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### HonorableJoeReeweber, et al, Page6 

### (M-1271) ’

Artlole VIII, Seotlon l-d of theTexa8Constitution If theagrloultural ueeof theland la in && e “bueineee” which 18“the primary 

### ocouprmon end eourae of 

### Incomeof 

### theowner’

.

RDC.MARTIN eyGeneral of 

### Texae PreparedbyHerlotte 

### McOrigorFmyne Aeeiet*nt Attorney Oefyral 

### APPROVED: 0PIHIoNCOMITTEE Kern8 Taylor, Chairman W.

### E. Allen, Co-Chalmmn lierriet Burke Jaok SpaNcn 

### E;pm%dlln
SAMUEL D.MCDANIEL Staff Legal Aeeletant ALFRED WALmR Executive Aeeletmnt NOLA WHITE Flret Ae$letant

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