### @ffice of tfy !Zlttornep @mecal Mate of QCexae August 14,1997 

### DAN MORALES **,ATTOHSCEY**

**CEXERAL** The Honorable Garry Mauro Commissioner Texas General Land Office 1700 North Congress Avenue Austin, Texas 78701-1495 Opinion No. DM-448
Re: Whether land designated for “agricultural use” is subject to the live-year rollback provisions 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 wasaproject 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 researchfacilitythat is or is proposed to be sponsored, authorized,and funded in part by the United Statesgovernment.“).

‘STATE PROPERIY

TAX BOARD,

**MANUAL FOR**  **THE APPRAISAL**  OF AGRICULTURAL

LAND 1(1990) [hereinafter AG**MANUAL].**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 subchapters C andD of chapter23 ofthe Tax Code,respectively. Sections l-d and l-d-1, and the Tax Code provisions adopted thereunder,differ in their scope andprocedures. 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 landto a nonagriculturalpurpose or a sale of the land. The amount of the rollback tax imposedunderthatsectionequalsthe differencebetween taxespaid and the amount that would have been payable for the precedingthreeyearsifthe landhadnotbeen speciallyappraised. Tex.Coast. art.VIII, g Id(f); see also Tax Code 5 23.46(c). Under sectionId-l andTaxCode section 23.55,however, Brollback is tiggered only by a change in use of land designated for agriculturaluse. Tex. Cm&. art. VIII, 5 l-d-l; Tax Code 5 23.55(a). The Bmountof the tax imposedby section 23.55(a)equalsthe differencebetween the taxes imposed for the preceding five years and the tax thatwouldhavebeenimposedhadthe landbeen ap~raisexi atmarketvalue fortheperiod. Tax Code 9 23.55(a).Nearly all the eligible land in Texas qualifies for the agriculturaluse designation under section l-d-l of article VIII, and **subchapter** D, chapter23 of **the** Tax **Code. See** AG**MANUAL,** supra note 2, at 2 (95percent or more ofeligible land in Texas qualifiesunder section l-d-l).

‘SeeAct ofAugust 8,1978,65th Leg., 2d C.S., H.J.R. 1,1978 Tex. Gen. Laws 54.54

‘Sections l-d and Id-1 ofarticleVIII ofthe TexasGmstihltion differin that l-d is self-enacting while section Id-l is a grantoflegislativeauthorityandrequireslegislationto implement its provisions. Attorney GeneralOpinion M-949 (1988)at 2.

‘SeeAct ofMay 28, 1979,66th Leg., R.S., ch. 302,s 1,1979 Tex. Gen. Laws 680,682-83.

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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-ofway.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 17,000acres, composed of 2300 separateparcels. It isunclearwhetherallthe landwasacquired by condemnationor ifany of the. parcels were purchased for right-of-way. Seealso in@ note 13.

‘OArticle XI, section9 ofthe TexasConstitution,exempts “property of counties, cities and towns, owned and held only forpublicpurposes, . . andallotherproperlydevotedexclusivelyto the use andbenefitofthe public from taxation.

.” This sectionis self-executing.Sincethis last clausehas not been construed to apply to prc,pertyowned by the state,we need not examine thisprovision. See Attorney General Opinions JM-1085 (1989) at 3 n.1, Jh4-1049 (1989) at 2 n.1.

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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 1subjects

landownedby the Permanent UniversityFund to county taxes. Tax code g 11.1

l@). Subsection (c) of section 11 .l 1providesthat agriculturalland owned by a county for the benefit of public schools under articleVII, section 6, ofthe TexasConstitution,istaxablefor all purposes. Id. $ 11.1 I(c). 12We do not know the uses made oftheparcelsoflandat issue. For the purposes of tbis opinion, we assume, withoutconsidering,that the land in question “isused for publicpurposes,” since the question immediately before us is whether, as a general matter, state-ownedlandis subjectto the rollbacktax.

‘%he exemptionprovided forchangeofuseresultingfrom condemnation of land does not nor do we believe is intendedto deal with (orcircumscribe) the applicationofthe rollbacktax on govemmentally owned land. There.are clearlya numberofnongovernmentalentities,suchasutility,railroad,or tramway companies, that have condemnation authority. See generally 32 TEX. JUR.30 Eminent Domain$5 63-80 (1981) (special pwpose enterprises, railroad corporations, interurbanelectric railways,indushicalrailroads,tramways,individuals and associations).

‘%he predecessorto section 11.1 l(a) ofthe Tax Code has existed since 1943. See Act of May 5, 1943,48th Leg., R.S., ch. 316, $ 1, 1943Tex. Gen. Laws472,473.

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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 ofAgricultural Land (the “mamml”),

“We note thatthe legislature haspassedSenateBill 728,amendingsection23,55(a),effectiveas of September 1.1997,to expressly

providethat “If

’&thepqxxes ofthis subsection,the chiefappraiser may not considerany period during whichlandis ownedby the statein d*crmining whethera changeintheuse ofthe landhas occurred.” See S.B. 728, Act of May 14,1997,7Sth Leg., RS. (eff. Sept. 1, 1997).

‘6Th.e DallasCourtofAppeaLs

inRewlutin Trust Corporationdetermined that the “rollbacktax is a penalty, and not merely a tax on real estate” that could not be enforced against the Resolution Trust Company (“RTC’), an instrumentalityofthe United States. Resolution Trust Corp.,926 S.W.2dat 805. The courtheld 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 ComptrollerofPublic Accounts. SeeAct ofAugust 25, 1991,72d Leg., 2d C.S., ch. 6, $5 24,67,68, 1991Tex. Gen. Laws26,31,41.

‘*See id.

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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 apolitical 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
IgAll mles and procedures adoptedby the board and in effect on September 1, 1991,remained in effect as if adopted by the Comptrollerof Public Accounts until amended, repealed,withdrawn, or otherwise superseded by the comptxoller.Id. $67(c). The comptrollerto date has not amended, repealed,withdrawn, or otherwise superseded the 1990manual. See34T.AC~9.4001.

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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 acquiredby the VeteransLand Boardsubjectto l#ns createdby the previousowner’sfailureto pay propertytax+ Tbe opinion concluded thattaxesmaynot be imposedon landcomprising the Veteran’s Land Fund based on either article III, se&on 49-b of the Texas Constitution or section 11.1 l(a) of tbe Tax Code. Attorney General Opinion N-1085 (1989) at 5-9. The lien searing the taxesowedby thepreviousowt~e.r, however, remained in force while tbe property wasowned by tbe Veterans’LandBard, but the lienwasutxnfonxable against tbe state. Id. at 17. Attorney General Opinion JM-1085and the cases cited therein for the last conclusion would appearto be inapposite to tbe rollback tax lien: they involve the usual property taxes from which tbe governmental entity in question is exempt under section 11.1 l(a) of the Tax Code or anotherprovision, so no taxes accruedwhile the property was held by the govemmental entity; any lien for delinquent taxes that continuedwhen the governmental entity acquired the property but could not be enforced againstthe govemmental entity did not attachwhile the property was held by or because of action oftbe governmentalentity. See e.g., State v. City 

### ofSan Antonio, 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, writref d);State v. Bean-Medina-Atarcosa Counties Water Improvement Dirt., 310 S.W.2d 641,643 (Tex. Civ. App.--SanAntonio, 1958,writrefd); Owens,217 S.W.2d at 188. %iven our conclusion that state-ownedland used forpublic purposes is not subject to tbe rollback tax, we need not addressyour remaining questionsrelatingto tbe operation ofthe rollback tax.

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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

**You also indicate, however, thatthe GeneralLand Office does not have a position on this issue. We note in regardto tbismatter,that Senate. Bill 728,amendingTaxCode section23.55(a),appearsto allow the chief appraiser to disregard state.

ownership only for the purposes of that subsectionin determiniig if change of use of the land has occurred. See supra note 15.

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