HB 561

83(R) - 2013

Vote Recommendation

  • Neutral
  • Positive
  • Neutral
  • Neutral
  • Neutral


Paul Workman

Bill Caption

Relating to an exemption for land owned by a school from the additional tax imposed on the change of use of land appraised for ad valorem tax purposes as qualified open-space land.

Fiscal Notes

Passage of the bill would reduce the amount of additional taxes collected by local taxing units when the use of qualifying agricultural land changes by exempting certain school organizations from paying the additional tax. As a result, taxable property values would be reduced and the related costs to the Foundation School Fund would be increased through the operation of the school finance formulas.

Bill Analysis

Summary: HB 561 would exempt schools from a tax penalty normally levied on entities that convert tax exempt agricultural land to be used for educational purposes within five years. Qualifying organizations must be operated primarily for an educational purpose, retain regular faculty, curriculum, and students, and use their assets to perform educational functions.

Current law makes agricultural land tax exempt and requires landowners that change their land’s intended use from agriculture to pay additional property taxes, including interest, to make up for five years of taxes that were exempt because of the property’s agricultural use. However, the tax code currently exempts certain religious or charitable organizations that use converted land for religious or charitable uses from paying this five year, back tax penalty. HB 561 would extend this exemption to schools. Portions of law that exempt land devoted to school use from property tax would remain in effect.

Analysis: HB 561 continues the practice of treating certain entities preferentially through the tax code. Generally we do not favor targeted preferential tax treatment that serves to complicate the tax code and distort markets. However, in this instance HB 561 makes the tax code marginally fairer and transparent by ensuring that school are treated the same as other entities in the same tax classification (religious and charitable organizations). Furthermore, schools are already exempt from property taxes without regard to land use designation. It doesn't make sense to charge a school five years back property taxes because of a land use change when they are already property tax exempt.

HB 561 speaks volumes about Texas’ complicated tax code, replete with preferential treatment for interests Texans are forced to subsidize. Regardless of the value of education, religion, charity, or other causes, legislators should not force Texas taxpayers to value causes with their tax dollars. Picking winners through the tax code socializes the cost of favoritism among all taxpayers, limiting the individual liberty of all to use their resources as they see fit. Such preferential tax treatment constitutes an implicit acknowledgement that tax rates are too high to begin with. A broad base, low rate, transparent tax system would eliminate the need for preferential exemptions altogether. Legislators could work toward this goal by refraining from the creation of special exemptions, deductions, and other carve-outs that favor special interests at the expense of Texas taxpayers.

We rank this bill favorably in terms of property rights because it extends equal treatment to schools as a property tax exempt organization, putting it level with religious and charitable organizations. Vote Yes for HB 561.