If my farmland is condemned for a public project, do I have to pay back the tax savings from its agricultural-use valuation?

Texas AG Opinion JM-949: Do You Owe the Ag-Use Rollback If Your Land Is Condemned?

Plain-English summary

Texas gives farmers and ranchers a big property-tax break. Instead of paying tax on what their land could sell for on the open market, which near a growing city can be a lot, they can have it taxed on what it produces as farm or ranch land. The trade-off is a rollback: if the land later stops being used for agriculture, the owner has to pay back several years' worth of the taxes they saved. Representative Delco asked a sharp question about that trade-off. What happens when the owner does not choose to stop farming, but the government takes the land by eminent domain? Her concern was real: Austin was looking at condemning agricultural land for a new airport.

The Attorney General's answer was reassuring for landowners: no rollback bill lands on the condemned owner. But the reason splits into two tracks, because Texas actually has two different agricultural tax-break provisions.

The newer one, from 1978, covers "open-space" land taxed on its productive capacity, and the legislature spelled out the answer in the Tax Code itself. A rollback happens only when the use of the land changes, and the statute expressly says the rollback sanctions do not apply when the change of use results from a sale for right-of-way or a condemnation. So if open-space land is condemned, there simply is no rollback, and the taxing jurisdictions recover nothing.

The older provision, from 1966, is the original agricultural-use designation, and the Tax Code does not have that same clean exception for it. But the Attorney General got to the same place by looking at who is actually on the hook. The rollback tax on this older-category land is not a personal debt of the owner. It is a lien that attaches to the land itself at the moment of a sale or change of use. Ordinary property taxes work differently: they are both a lien on the property and a personal liability of the owner. Because the rollback tax is only a lien on the land, and not a personal obligation, the individual whose land is condemned is not the one responsible for paying it. That let the Attorney General sidestep a thornier question, whether a condemnation even counts as a "sale" or a "diversion" of use, because it did not matter to the landowner's bottom line.

The opinion was careful about what it did not decide. It did not address whether a city's act of buying or condemning the property could itself cause a lien to attach, noting there is authority on both sides of related questions about tax liens surviving a government's acquisition of land.

Currency note

This opinion was issued in 1988. Subsequent statutory amendments, court decisions, or later AG 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.

The Tax Code's agricultural and open-space valuation and rollback provisions (chapter 23, subchapters C and D) have been amended several times since 1988, including changes to the rollback period and the calculation of additional taxes and interest. The constitutional agricultural-use and open-space provisions remain, but the implementing statutes control the details. Anyone facing a rollback question on condemned or sold land today should check the current Tax Code provisions and the current condemnation and right-of-way exceptions rather than relying on the 1988 versions cited here.

Who this opinion affected (as of 1988)

Owners of agricultural or open-space land facing condemnation: The opinion told them they would not be personally liable for a rollback of the tax break when their land is taken by eminent domain.

Cities and other condemning authorities, including the City of Austin: The opinion addressed the tax consequences of condemning farm land, which was relevant to the airport-site plan behind the request.

Local taxing jurisdictions: For open-space land, the opinion confirmed they recover no rollback taxes when land is condemned.

Common questions

If my farmland is condemned, do I owe the agricultural-use tax rollback?
No. For open-space land, the Tax Code says the rollback does not apply when the change of use results from a sale for right-of-way or condemnation. For older agricultural-use land, the rollback tax is a lien on the land, not a personal debt, so the condemned owner is not responsible for paying it.

Why are there two different answers for the two types of ag land?
Texas has two constitutional provisions: article VIII, section 1-d (1966 agricultural use) and section 1-d-1 (1978 open-space). The Tax Code has an explicit condemnation exception for the open-space category, while for the older category the Attorney General relied on the rollback tax being a land lien rather than a personal obligation.

Is the rollback tax a personal debt of the landowner?
For section 1-d land, no. The additional tax attaches as a lien on the land as of the sale or change of use; it is not a personal liability of the individual, unlike ordinary property taxes.

Did the opinion decide whether condemnation counts as a "sale"?
No. Because the individual owner would not be responsible for the additional taxes either way, the Attorney General did not need to decide whether a condemnation is a "sale" or a "diversion" of use under section 1-d.

Background and statutory framework

Article VIII, section 1-d of the Texas Constitution was adopted in 1966 to relieve individuals engaged in farming near urban areas from the rising property-tax burden that came with increased market value. If land designated for agricultural use is later diverted to another use or sold, the constitution makes the land subject to an additional tax equal to the difference between taxes payable under the agricultural-use designation and the tax that would have been payable for the preceding three years had the land not been specially valued (Tex. Const. art. VIII, section 1-d(f); Tax Code section 23.46(c)).

Article VIII, section 1-d-1, 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, and to impose eligibility limitations and sanctions in furtherance of that taxation policy. Both sections 1-d and 1-d-1 remove certain agricultural property from the constitutional requirement that property be valued for taxation at market value (Tex. Const. art. VIII, section 1; Harlingen I.S.D. v. Dunlap, 146 S.W.2d 235 (Tex. Civ. App. - San Antonio 1940, writ ref'd)). They differ in that section 1-d sets out detailed self-executing requirements, while section 1-d-1 is a grant of legislative authority requiring implementing legislation.

Open-space land (section 1-d-1). Legislation adopted under section 1-d-1 includes a five-year rollback provision that applies if the use of land appraised as open-space land changes (Tax Code section 23.55(a); see Tax Code ch. 23, subch. D). Such land is subject to a rollback only if the use changes; sale alone does not trigger it. Critically, Tax Code section 23.55(f) provides that the rollback sanctions do not apply if the change of use occurs as a result of a sale for right-of-way or a condemnation. Thus, for land valued under section 1-d-1, condemnation will not bring about a recovery of taxes for the taxing jurisdictions.

Agricultural-use land (section 1-d). The Attorney General reached the same result for section 1-d land, for a different reason. Article VIII, section 1-d provides that if designated land is diverted to a non-agricultural purpose or sold, it becomes subject to an additional tax, with a lien for the additional tax and interest until paid. The land becomes subject to the additional tax as of the time the sale or change of use occurs, so if designated land is sold to a private individual, the new owner is responsible for paying the taxes. By contrast, ordinary property taxes are a special lien on the land and a personal liability of the owner (Tex. Const. art. VIII, section 15). Section 1-d removes the additional rollback tax from that personal-liability regime: the tax is not a personal liability of the individual who sold the land, and the tax lien attaches to the land as of the date the sale or change of use occurs (Tax Code section 23.46(d)). Because the additional taxes are secured only by a lien on the land and are not a personal obligation, the individual whose land is condemned will not be responsible for paying them, and the Attorney General did not need to decide whether the condemnation was a "sale" or a "diversion" of use.

The opinion expressly did not address whether a city's action in purchasing or condemning property can cause a lien to attach to it, noting related authority (Tex. Const. art. XI, section 9; City of Dallas v. State, 28 S.W.2d 937 (Tex. Civ. App. - Fort Worth 1930, writ ref'd); Attorney General Opinion V-441 (1947), concluding that liens for state and county taxes that attached to land before a city acquired it were not extinguished by the acquisition).

Citations

Statutory and constitutional authority:

• Article VIII, section 1-d, Texas Constitution (1966 agricultural-use designation and additional tax)
• Article VIII, section 1-d-1, Texas Constitution (1978 open-space productive-capacity valuation)
• Article VIII, section 15, Texas Constitution (annual assessment as special lien and personal liability)
• Article XI, section 9, Texas Constitution (noted regarding municipal property)
• Section 23.46, Tax Code (additional tax and lien for section 1-d land)
• Section 23.55, Tax Code (open-space rollback; subsection (f) condemnation and right-of-way exception)

Cases:

• Harlingen I.S.D. v. Dunlap, 146 S.W.2d 235 (Tex. Civ. App. - San Antonio 1940, writ ref'd) (Texas appellate court; constitutional valuation requirements)
• City of Dallas v. State, 28 S.W.2d 937 (Tex. Civ. App. - Fort Worth 1930, writ ref'd) (Texas appellate court; tax liens and municipal acquisition)

Prior Attorney General opinions referenced: V-441 (1947).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-949
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1988/jm0949.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; the linked PDF is authoritative.

September 1, 1988

Honorable Wilhelmina Delco
Chairman
Committee on Higher Education
Texas House of Representatives
P.O. Box 2910
Austin, Texas 78769

Opinion No. JM-949

Re: Whether land designated for "agricultural use" is subject to a five-year rollback provision when the property is acquired under eminent domain (RQ-1426)

Dear Representative Delco:

You inquire about the recapture or "rollback" of taxes on land appraised for property taxation at its value for agricultural use if the property is acquired by eminent domain. Your question arises from the possibility that land designated for agricultural use will be condemned by the city of Austin for a new airport site.

Article VIII, section 1-d, of the Texas Constitution was adopted in 1966 to give an individual engaged in farming near urban areas some relief from the increasing property tax burden which resulted from the increased market value of his land. Texas Legislative Council, An Analysis of Proposed Constitutional Amendments: To be voted on November 8, 1966, at 7. If land designated for agricultural use under that provision is later diverted to another use or sold, the constitution provides that the land shall be subject to an additional tax, equal to the difference between taxes payable under the agricultural use designation and the tax that would have been payable for the preceding three years if it had not been specially valued. Tex. Const. art. VIII, section 1-d(f); Tax Code section 23.46(c).

You thus wish to know whether the condemnation of land designated for agricultural use according to article VIII, section 1-d, will bring about a rollback of the agricultural use designation and make the individual landowner liable for the additional taxes.

Article VIII, section 1-d-1 of the Texas Constitution 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. This provision was adopted in 1978 to supplement article VIII, section 1-d with a less restrictive provision. Texas Legislative Council, 9 Proposed Constitutional Amendments Analyzed: For Election November 7, 1978, at 17. Property owners whose land qualified for taxation under both the earlier agricultural use amendment and a law enacted under the new amendment might choose to have their land valued and taxed according to either provision.

Article VIII, section 1-d-1, of the Texas Constitution provides in part:

(a) To promote the preservation of open-space land, the legislature shall provide by general law for taxation of open-space land devoted to farm or ranch purposes on the basis of its productive capacity and may provide by general law for taxation of open-space land devoted to timber production on the basis of its productive capacity. The legislature by general law may provide eligibility limitations under this section and may impose sanctions in furtherance of the taxation policy of this section. (Emphasis added.)

Tex. Const. art. VIII, section 1-d-1.

Both sections 1-d and 1-d-1 of article VIII remove certain agricultural property from the constitutional requirement that property be valued for taxation at market value. Tex. Const. art. VIII, section 1; Harlingen I.S.D. v. Dunlap, 146 S.W.2d 235 (Tex. Civ. App. - San Antonio 1940, writ ref'd). The provisions differ in that section 1-d sets out detailed requirements for implementing the agricultural use designation while section 1-d-1 is a grant of legislative authority and requires legislation to implement its provisions.

Legislation adopted under the authority of article VIII, section 1-d-1, of the Texas Constitution includes a five-year rollback provision which applies "[i]f the use of land that has been appraised as provided by this subchapter changes." Tax Code section 23.55(a). Your request, therefore, also raises the issue of whether a rollback occurs upon condemnation of land that has been assessed as open-space land under the Tax Code provisions adopted by authority of article VIII, section 1-d-1, of the Texas Constitution. See Tax Code ch. 23, subch. D.

The legislature has clearly answered your question as to open-space agricultural land accorded a special valuation under article VIII, section 1-d-1 and the Tax Code provisions which implement that provision. Such land is subject to a rollback only if the use changes; sale alone does not trigger a rollback. Section 23.55 of the Tax Code sets out sanctions consisting of additional taxes and interest which are imposed where there is a change of use. Section 23.55(f) of the Tax Code states as follows:

The sanctions provided by subsection (a) of this section do not apply if the change of use occurs as a result of a sale for right-of-way or a condemnation.

Thus, with respect to land valued in accordance with article VIII, section 1-d-1 and the corresponding legislation, condemnation will not bring about a recovery of taxes for the taxing jurisdictions in which the land is located.

We also conclude, although for different reasons, that the owner of land designated as agricultural land under article VIII, section 1-d will not be liable for additional taxes when his land is taken in an eminent domain proceeding. Article VIII, section 1-d states in part:

If designated land is subsequently diverted to a purpose other than that of agricultural use, or is sold, the land shall be subject to an additional tax. The additional tax shall equal the difference between taxes paid or payable, hereunder, and the amount of tax payable for the preceding three years had the land been otherwise assessed. Until paid, there shall be a lien for additional taxes and interest on land assessed under the provisions of this Section.

Tex. Const. art. VIII, section 1-d(f). The land becomes subject to the additional tax as of the time the sale or change in use occurs. Thus, if designated land is sold to a private individual, the new owner is responsible for paying the taxes. State Property Tax Board, Rollback Provisions Researched for Interpretation, Application, Statement 4, 7 (April 1981) (Questions & Answers).

If the land had not qualified for special valuation with the corresponding tax relief and possibility of recoupment of taxes, a lien for all taxes would attach to it as of the annual assessment date and the property owner would be personally liable for the taxes under article VIII, section 15, of the Texas Constitution, which provides as follows:

The annual assessment made upon landed property shall be a special lien thereon; and all property, both real and personal, belonging to any delinquent taxpayer shall be liable to seizure and sale for the payment of all the taxes and penalties due by such delinquent; and such property may be sold for the payment of the taxes and penalties due by such delinquent, under such regulations as the Legislature may provide.

Tex. Const. art. VIII, section 15.

Article VIII, section 1-d removes from this provision the additional tax recovered upon a sale of land designated for agricultural use. That tax is not a personal liability of the individual who sold the land, and, as section 23.46 of the Tax Code shows, the tax lien attaches to the land as of the sale:

(d) A tax lien attaches to the land on the date the sale or change of use occurs to secure payment of the additional tax and interest imposed . . . and any penalties incurred.

Tax Code section 23.46(d). In answering your question we need not determine whether land designated for agricultural use under article VIII, section 1-d has been "sold" or "diverted to a purpose other than that of agricultural use" when it is taken by a city in an eminent domain proceeding. The individual whose land was condemned will not be responsible for paying the additional taxes. You do not ask, and we do not address, whether a city's action in purchasing or condemning property can cause a lien to attach to it. But see Tex. Const. art. XI, section 9; City of Dallas v. State, 28 S.W.2d 937 (Tex. Civ. App. - Fort Worth 1930, writ ref'd); Attorney General Opinion V-441 (1947) (liens for state and county taxes which attached to land before city acquired it were not extinguished by acquisition).

We therefore advise you that the owners of lands designated for agricultural use under article VIII, section 1-d, of the Texas Constitution or taxed as open-space land under section 1-d-1 of article VIII are not liable for a rollback or recoupment of taxes in the event the land is taken in an eminent domain proceeding.

SUMMARY

If real property that has been valued for tax purposes under article VIII, section 1-d-1, of the Texas Constitution and chapter 23, subchapter D, of the Tax Code is condemned through eminent domain proceedings, no recapture or rollback of taxes occurs. If real property designated as "agricultural land" under article VIII, section 1-d, of the Texas Constitution and chapter 23, subchapter C, of the Tax Code is sold or condemned, the individual who owned the land is not responsible for paying the additional taxes which arise in the event of a rollback.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Susan L. Garrison
Assistant Attorney General