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MANAGE FORESTS & LAND
  • FOREST TAXATION: TIMBER TAXATION FAQS

    CLICK ON A QUESTION BELOW TO VIEW MORE INFO ABOUT PROPERTY TAXES AND TIMBERLAND APRAISAL.
     + How is property tax determined in Texas?

    Property tax is determined by the appraised value of a property and the tax rate (the amount of property taxes = appraised value x tax rate). The appraised value is set by county appraisal districts each year. The tax rates are set by the taxing authority in that county (city, county, school districts or other special districts).

    For example, a pine parcel for the second most productive type of soils in one county could be appraised at $380/acre. The tax rates, set by the taxing authority in that county might be $1.85 per $100 valuation. Then the amount of property taxes for the landowner is $7/acre ($380 x 0.0185).

    Texas does not have state property taxes. Texas has only local property taxes levied by local taxing authorities.

     + What services do property taxes help provide?
    Property taxes provide a significant source of funding for local services such as public schools, city streets/county roads, police and fire protection.
     + What is the function of the State Comptroller’s Office?

    The Texas Comptroller of Public Accounts is charged with establishing appraisal standards and conducting an annual Property Value Study, among many other functions. The Property Value Study determines the property value within each school district, which is used by the Texas Educational Agency for calculating the amount of state funds each school district receives.

    Note the amount of taxes a taxpayer pays is determined by the county appraisal districts and the local taxing authorities. The Comptroller’s office has no control over determination of taxes set by county or local taxing authorities.

     + What happens when the Property Value Study differs from the locally determined value?

    When the locally assigned property value is within a specified range, that value will be used for school funding calculations. If it is outside that range, the property value set by the Comptroller’s office in the Property Value Study is used for school aid calculation.

    The difference between the locally assigned value and the Property Value Study can positively or negatively affect school state aid depending on the specific circumstances. Because of this, county appraisal districts normally pay close attention to the Property Value Study determined by the Comptroller’s office.

     + Is there a statewide standard for timberland appraisal?
    The state Comptroller’s office has developed timberland appraisal standards and procedures in the Manual for the Appraisal of Timberland. The manual sets out the methods for appraising qualified timberland. County appraisal districts are required by law to follow the procedures and methods set out in the manual.
     + What is a timber-use appraisal?

    Generally, all taxable property is appraised at its market value except certain special appraisals such as timber or agricultural appraisals. Instead of taxing at its higher market value, the tax law allows qualified timberland to be appraised at its productivity value under timber-use appraisal. For example, market value for a tract might be $650/acre while the productivity value might be only $400/acre. The timber-use tax incentive is aimed at encouraging investment in timber growing and protecting of timber resources in the state.

    The productivity value is determined by calculating net income from production of timber by a prudent landowner using a specified formula. The appraised value so determined may not exceed the market value of the timberland. It may not be less than the 1978 appraised value (unless the market value is lower than the 1978 appraised value).

     + What are the requirements for qualifying for timber-use appraisal?

    Timber-use appraisal is granted to those lands that meet all of the following five eligibility requirements:

    1. The land is currently and actively devoted to timber production;
    2. The land must be used principally for timber production;
    3. The land must be devoted to timber production to the degree of intensity generally accepted in the area;
    4. The owner has intent to produce income; and
    5. The land must have been dedicated principally to timber production for five of the preceding seven years.

    According to the Manual for the Appraisal of Timberland, land will not qualify simply because it has timber standing on it.

     + How do I apply for the timber-use appraisal?
    Landowners must apply for timber-use appraisal by submitting an application form and supporting documents to their county appraisal districts. Each appraisal district may have different requirements on the supporting documents. The application deadline is April 30 (though it can be extended for no more than 60 days for good cause). A 10 percent penalty on the difference between market and productivity valuation will be charged for late applications.
     + How is timberland classified for property tax purposes?

    Under the timber-use appraisal, different timberland types will have different appraised values. Each county appraisal district determines timberland classification by two criteria as required in the Manual for the Appraisal of Timberland: forest types (pine, hardwood, or mixed) and soil types (I, II, III, or IV). Thus the 12 types of land are: Pine I, II, III, IV, Hardwood I, II, III, IV, or Mixed I, II, III, and IV.

    Soil type I is most productive and IV the least productive. Soil types normally are determined based on Natural Resource Conservation Service soil survey.

    Forest types are determined this way: a tract will be classified as pine if “pine and other softwood make up more than two-thirds of the trees free to grow.” Stands where hardwoods are more than two-thirds of the trees free to grow are classified as hardwood type. When both softwood and hardwood each make up more than one-third of the trees but neither predominates, that area will be classified as mixed.

    Within the same forest type, the appraised value goes down from I through IV. Between different timber types, for example, Pine II may be higher or lower than Mixed I, depending on the local conditions. If your tract is classified as Mixed II, a neighboring tract with the same type of soil classification but with a pine forest will be classified as Pine II. Obviously it helps to know your timberland classification.

    A Hypothetical Example: Timber Use vs. Market Value

     

    Timber-Use

    Market Value

    Pine I

    $600/acre

    $700/acre

    Pine II

    $415/acre

    $630/acre

    Pine III

    $237/acre

    $565/acre

    Mixed I

    $420/acre

    $610/acre

    Mixed II

    $312/acre

    $580/acre

    Mixed III

    $169/acre

    $530/acre

    Hardwood I

    $129/acre

    $540/acre

    Hardwood II

    $92/acre

    $490/acre

    Hardwood III

    $77/acre

    $440/acre

     + How is the appraised value calculated for qualified timberland?

    For each of the 12 types of timberland under timber-use appraisal, your county appraisal district should calculate the appraised value using this formula:

    Timberland
    Appraised Value
    =
    (timber price x timber growth) - management cost
    capitalization rate

    Timber Price x Timber Growth is “gross income.” The actual calculation involves steps that use soil productivity multiplier and cost proration factors which will not be covered in detail here. Keep the following in mind for understanding the formula:

    1. Five-year average timber price and cost data. An average of five-years’ timber prices and management costs are used when the appraised value is calculated. For example, 2005 property taxes were calculated using an average of timber prices and management costs for 2000-2004.

    2. Data source for timber price and costs. For the purpose of the Property Value Study, the Comptroller uses management cost data from TFS (listed as one of the official agency sources for data). Also, the Comptroller uses timber prices from Texas Timber Price Trends published by TFS.

    Each county appraisal district may use a different set of cost data when justified by local conditions. (Note the amount of property taxes for timberland owners is calculated using the appraised value set by the county appraisal office, not the Property Value Study by the Comptroller’s office.)

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