Lately, I have been working with a lot of farm and ranch properties, so I decided to do a blog post on a topic related to something rather omnious in the farm and ranch world...Ag Exemptions!
Now the words "agricultural exemption" are thrown around quite a bit when talking about farm and ranch transactions, but I like to make sure my clients know exactly what it is and how to receive AND who can receive them.
According to the Texas A&M University Real Estate Center, there are two ways to have your rural property qualify for an ag exemption: An Agricultural-Use Appraisal and an Open Space Appraisal.
The Agricultural-Use exemption is reserved for landowners whose primary occupation and source of income are agriculture. In order to receive this exmeption the land owner AND the land must meet these four requirements:
• The land must have been devoted exclusively to or developed continuously for agriculture during the past three years.
• The owner’s primary occupation and source of income are agriculture.
• The owner intends to use the land for agriculture and as an occupation or business for profit during the coming year.
• The owner files an application by sworn statement with the chief appraiser before May 1 of each year with all the documentation required to determine the validity of the claim. For good cause, the chief appraiser may extend the filing deadline 60 days
In order to be eligible for the Open Space Appraisal the land must meet these three requirements:
• The land must be currently devoted principally to agricultural use to the degree of intensity generally accepted in the area.
• The land has been devoted principally to agricultural use or production of timber or forest products for five of the preceding seven years.
• The owner files a prescribed form provided by the appraisal office with the chief appraiser before May 1 with all the necessary information to determine the validity of the claim. For good cause, the chief appraiser may extend the filing deadline 60 days.
Agricultural Use, as defined by the Texas Comptroller, includes the following:
- farming or ranching for the purpose of raising agricultural products for sale;
- timber production (including contract logging);
- feedlot operation;
- commercial fish farm operation;
- bee keeping;
- custom harvesting;
- crop dusting (as defined by 14 CFR Section 137.3);
- growing plants for sale in a commercial nursery;
- a veterinary business that makes farm or ranch calls;
- Future Farmers of America or 4-H; or
- teaching an agricultural vocational course
If you are able to get an agricultural exemption, get one! However, if you are not ready to commit to one of the above agricultural activities, that is okay too! Farm and ranch property is a great investment either way!
Thinking of purchasing farm and ranch property? I'd love to help!
Alexis Brown '18
To learn more about Ag Exemptions, check out the article by the Texas A&M University Real Estate Center and the Texas Comptroller's website!