Is machinery used at a cattle feedlot exempt from property tax in Texas?

Plain-English summary

Representative Harvey Hilderbran, chair of the House Committee on Ways & Means, asked the Attorney General a property-tax question about cattle feedlots. Tax Code section 11.161 says that machinery and equipment "used in the production of farm or ranch products," whatever the equipment was originally designed for, count as implements of husbandry and are exempt from ad valorem (property) taxation. The representative wanted to know whether a cattle feedlot is engaged in the "production of farm or ranch products," which would bring its machinery and equipment within that exemption. He explained that appraisal districts around the state were treating feedlot owners inconsistently, partly because of disagreement over whether a feedlot "produces" anything.

The Tax Code does not define "farm or ranch products" for section 11.161, and at the time no court or prior AG opinion had construed the phrase. The Attorney General looked to how related statutes treat the same idea: a separate Tax Code provision defines "farm products" to include livestock, the Agriculture Code defines livestock to include cattle, and the Labor Code defines "production of livestock" to include "production of livestock in feedlots." Those parallels supported reading a feedlot as a producer of farm or ranch products.

The Comptroller had already reached that conclusion in guidance to chief appraisers, relying in part on the sales-tax exemption in Tax Code section 151.316, which defines "farm or ranch" to expressly include feedlots. Because the Comptroller has broad statutory authority over property appraisal and sales-tax administration, the AG explained that her reasonable construction of the statute is entitled to serious consideration as long as it does not contradict the plain language. The AG concluded that the Comptroller's reading is plainly reasonable and does not contravene any statute, so a court would likely uphold it.

Currency note

This opinion was issued in 2013. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

The House Committee on Ways & Means (as the opinion described it): The opinion answered the committee's general question rather than the tax status of any one machine. It concluded that the Comptroller's position, that a cattle feedlot is engaged in the production of farm or ranch products under section 11.161, was reasonable and would likely be upheld in court. The opinion noted that whether any particular piece of equipment qualifies as an implement of husbandry still depends on the facts of the situation.

Cattle feedlot owners and appraisal districts (as the opinion described it): The opinion described feedlot machinery and equipment used in the production of livestock as falling within the section 11.161 implements-of-husbandry exemption, consistent with the Comptroller's guidance to chief appraisers. It treated the Comptroller's interpretation as the construction a court would likely accept, while leaving item-by-item determinations to the facts.

Common questions

Did the AG say cattle feedlot equipment is exempt from property tax?
The opinion concluded that the Comptroller's interpretation, treating a feedlot as engaged in the production of farm or ranch products under section 11.161, was reasonable and would likely be upheld. Under that reading, machinery and equipment used in the feedlot's production of livestock are implements of husbandry exempt from ad valorem taxation.

Why did it matter whether a feedlot "produces" anything?
Section 11.161 only exempts machinery and equipment "used in the production of farm or ranch products." If a feedlot is not producing such products, its equipment would not qualify. The opinion explained that livestock raised at a feedlot is a farm or ranch product, drawing on definitions in the Tax Code, Agriculture Code, and Labor Code.

Does this mean every machine at a feedlot is automatically exempt?
No. Footnote 2 of the opinion noted that whether any particular item is ultimately exempt as an implement of husbandry depends on the facts, and that a prior opinion had read the phrase to exclude improvements to real property or fixtures.

Why did the AG defer to the Comptroller?
The opinion explained that the Legislature charged the Comptroller with guiding appraisal districts and administering sales tax, so her reasonable construction of the Tax Code is entitled to serious consideration as long as it does not contradict the plain language of the statute.

Background and statutory framework

The opinion started from Tax Code section 11.161 and article VIII, section 19a of the Texas Constitution, which together exempt machinery and equipment used in the production of farm or ranch products as implements of husbandry. Because the Tax Code does not define "farm or ranch products" for that section, the AG looked to related definitions: section 11.16(c)(1) (defining "farm products" to include livestock), Agriculture Code section 1.003(3) (defining "livestock" to include cattle), and Labor Code section 62.160(c)(3) (defining "production of livestock" to include "production of livestock in feedlots"). The opinion cited Guthery v. Taylor for the principle that a court may consider the meaning of similar language used in another act of similar nature.

On deference, the opinion relied on R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, a Texas Supreme Court decision holding that an enforcing agency's reasonable construction is entitled to serious consideration if it does not contradict the statute's plain language. It described the Comptroller's broad authority over local taxation under sections 5.03-.16 and her reliance on the sales-tax exemption in section 151.316(a)(7) and the section 151.316(c) definition of "farm or ranch" that expressly includes feedlots. The opinion also cited In re ExxonMobil Corp. for the Comptroller's substantial involvement in the work of appraisal districts and Hawkins v. Van Zandt Cnty. Appraisal Dist. for the fact-specific nature of any individual exemption.

Citations

Cases:

• Hawkins v. Van Zandt Cnty. Appraisal Dist., 834 S.W.2d 619, 621 (Tex. App.-Eastland 1992, writ denied)
• Guthery v. Taylor, 112 S.W.3d 715, 721 (Tex. App.-Houston [14th Dist.] 2003, no pet.)
• In re ExxonMobil Corp., 153 S.W.3d 605, 611 n.11 (Tex. App.-Amarillo 2004, pet. denied)
• R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 624-25 (Tex. 2011)

Statutes:

• Tex. Tax Code Ann. § 11.161 (West 2008); § 5.08(a); § 11.16(c)(1); §§ 5.03-.16; §§ 5.03, 5.04-5.041, 5.05; § 151.316(a)(7), (c); §§ 321.301, 323.301
• Tex. Const. art. VIII, § 19a
• Tex. Agric. Code Ann. § 1.003(3) (West Supp. 2012)
• Tex. Lab. Code Ann. § 62.160(c)(3) (West Supp. 2012)

Other authority:

• Tex. Att'y Gen. Op. No. MW-451 (1982) at 3-5
• Tex. Att'y Gen. Op. No. JM-718 (1987) at 4

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-1015
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2013/ga1015.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

July 22, 2013

The Honorable Harvey Hilderbran Opinion No. GA-1015
Chair, Committee on Ways & Means
Texas House of Representatives Re: Whether machinery and equipment at a
Post Office Box 2910 cattle feedlot are used in the "production of
Austin, Texas 78768-2910 farm or ranch products" for purposes of Tax
Code section 11.161 (RQ-1113-GA)

Dear Representative Hilderbran:

Section 11.161 of the Tax Code provides that "[m]achinery and equipment items that are used in the production of farm or ranch products . . . regardless of their primary design, are considered to be implements of husbandry and are exempt from ad valorem taxation." TEX. TAX CODE ANN. § 11.161 (West 2008); see also TEX. CONST. art. VIII, § 19a. You ask whether machinery and equipment used at a cattle feedlot are "used in the production of farm or ranch products" and therefore exempt from ad valorem taxation under section 11.161.[1] Your question concerns not the tax status of a specific item of machinery and equipment but whether, generally speaking, "a cattle feedlot is engaged in the production of farm or ranch products" for purposes of section 11.161? Request Letter at 1 (emphasis omitted). You tell us the Comptroller has issued administrative guidance to all chief appraisers in the state regarding section 11.161, in which she concludes that "machinery and equipment used at a feedlot for the production of livestock held for sale in the regular course of business is exempt from property taxation." Id. at 4; see also TEX. TAX CODE ANN. § 5.08(a) (West 2008) (authorizing the Comptroller to provide professional and technical assistance in appraising property). Despite the Comptroller's guidance, you are concerned about apparently inconsistent property tax treatment among cattle feedlot owners statewide, which you attribute in part to confusion about whether a cattle feedlot "produces" farm or ranch products. Request Letter at 1, 4.

The Tax Code does not define the phrase "farm or ranch products" for purposes of section 11.161, and no court or opinion of this office has considered the question. However, in a related agricultural provision exempting certain farm products from taxation, the Tax Code defines the term "farm products" to include "livestock." TEX. TAX CODE ANN. § 11.16(c)(1) (West 2008); see also TEX. AGRIC. CODE ANN. § 1.003(3) (West Supp. 2012) (defining "livestock" to include cattle). Similarly, the Labor Code defines the term "production of livestock" for purposes of exempting agricultural employers from certain minimum wage provisions to include "production of livestock in feedlots." TEX. LAB. CODE ANN. § 62.160(c)(3) (West Supp. 2012); see also Guthery v. Taylor, 112 S.W.3d 715, 721 (Tex. App.-Houston [14th Dist.] 2003, no pet.) (providing that "when construing a statutory word or phrase, a court may take into consideration the meaning of the same or similar language used . . . in another act of similar nature"). While such definitions elsewhere in the Tax Code do not conclusively establish the meaning of "farm or ranch products" for purposes of section 11.161, they lend strong support to the view that livestock is a farm or ranch product that a cattle feedlot produces.

As you note, the Comptroller has already determined that a cattle feedlot is engaged in the production of farm or ranch products for purposes of section 11.161. Request Letter at 3-4.[3] The Comptroller has extensive authority with respect to local taxation. See generally TEX. TAX CODE ANN. §§ 5.03-.16 (West 2008 & Supp. 2012). In particular, the Legislature has charged the Comptroller with providing guidance to appraisal districts, including adopting rules establishing minimum standards for the administration and operation of appraisal districts, training appraisers and appraisal review board members, issuing appraisal manuals and other publications, and as she has done here, providing professional and technical assistance in appraising property. Id. §§ 5.03, 5.04-5.041, 5.05, 5.08(a); see also In re ExxonMobil Corp., 153 S.W.3d 605, 611 n.11 (Tex. App.-Amarillo 2004, pet. denied) (describing the "substantial involvement" of the Comptroller under the Tax Code in the work of appraisal districts). The Comptroller has advised chief appraisers that formal administrative hearing decisions and opinions of her office "support the proposition that feed lots are farms or ranches" for sales tax purposes and should be treated as such for property tax purposes. Comptroller's Guidance at 2. The Comptroller cited Tax Code subsection 151.316(a)(7), which exempts from sales tax certain equipment used on a farm or ranch, and subsection 151.316(c), which defines "farm or ranch" for purposes of the exemption to expressly include "feedlots." Id. at 1; see TEX. TAX CODE ANN. § 151.316(a)(7), (c) (West Supp. 2012). The Comptroller also relied on previous sales tax determinations of her office in which the terms "machinery and equipment" and "farm or ranch" were extended to encompass feedlots. Comptroller's Guidance at 1-2. On this basis, she determined that feedlot operations are farms or ranches for purposes of Tax Code section 11.161. Id. at 2.

Construction of a statute by the administrative agency charged with its enforcement "is entitled to 'serious consideration,' so long as the construction is reasonable" and "'does not contradict the plain language of the statute.'" R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 624-25 (Tex. 2011) (citations omitted). Given the Legislature's designation of the Comptroller as an authority on matters related to the appraisal of property and her role in administering sales tax, her reasonable interpretation of the Tax Code is entitled to serious consideration. The Comptroller's construction of the phrase "production of farm or ranch products" to include the operation of a cattle feedlot is plainly reasonable and does not contravene any statute. See TEX. TAX CODE ANN. §§ 5.03, 5.04-5.041, 5.05, 5.08(a) (West 2008 & Supp. 2012); see also id. §§ 321.301, 323.301 (West 2008) (authorizing the Comptroller to oversee the administration of municipal and county sales taxes). Accordingly, a court would likely uphold the Comptroller's interpretation of Tax Code section 11.161 that a cattle feedlot is engaged in the production of farm or ranch products.

SUMMARY

The Comptroller's interpretation of Tax Code section 11.161, that a cattle feedlot is engaged in the "production of farm or ranch products," is reasonable and does not contravene any statute. Accordingly, a court would likely uphold the Comptroller's interpretation of section 11.161.

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

Becky P. Casares
Assistant Attorney General, Opinion Committee

[1] Letter from Honorable Harvey Hilderbran, Chair, House Comm. on Ways & Means, to Honorable Greg Abbott, Tex. Att'y Gen. at 1, 4 (Feb. 15, 2013), http://www.texasattorneygeneral.gov/opin ("Request Letter").

[2] Whether any particular piece of equipment or machinery is ultimately exempt from ad valorem taxation as an implement of husbandry under section 11.161 depends, of course, on the facts of the situation. Hawkins v. Van Zandt Cnty. Appraisal Dist., 834 S.W.2d 619, 621 (Tex. App.-Eastland 1992, writ denied); Tex. Att'y Gen. Op. No. MW-451 (1982) at 3-5. But see Tex. Att'y Gen. Op. No. JM-718 (1987) at 4 (construing the phrase "implements of husbandry" in section 11.161 to exclude improvements to real property or fixtures).

[3] See Letter from Ms. Deborah Cartwright, Dir., Prop. Tax Assistance Div., Office of the Comptroller, to Chief Appraisers (June 1, 2010) (on file with the Op. Comm.) ("Comptroller's Guidance").