Property Tax Solutions for Developers: Grazing Associations & WMPAs

By Joanne Hatton, Attorney & Counselor.

As the populations of many rural communities in Texas continue to grow, there is a movement to provide an alternative to the typical suburban-style neighborhood and to foster development that preserves the rural character of these expanding communities. Large lots often come with a hefty annual property tax price tag, so many buyers move to the country only to end up in a neighborhood that looks similar to those found in most suburbs. Wildlife management property associations (WMPAs) and grazing associations can offer an appealing alternative to buyers who are interested in purchasing land without the hefty price tag.

Property Tax Solutions:

Braun & Gresham has helped many developers provide alternatives to rural buyers. Some developers acquire large swaths of land with current agricultural (Ag) valuations and then subdivide the land into 10 to 25 acre lots managed by a WMPA. The WMPA ensures that wildlife management use remains the primary use of all lots within the subdivision and supports the continuation of an Ag valuation on each of the subdivided parcels. The lot size required to qualify for an Ag valuation within a WMPA varies by county, but the smallest size that has been allowed by any county is 10 acres. A purchase of this size is still a stretch for many buyers. The solution for developers, buyers, and some rural communities has been the creation of grazing associations, which may provide the opportunity for the subdivision of a large swath of land into parcels as small as 5 acres depending on the position of the particular appraisal district.

Qualifying for Agricultural (Ag) Valuation:

The tax code provides that for land to receive an Ag valuation, the land must be devoted to agriculture as its principal use to the degree of intensity generally accepted in the area. Counties have different guidelines as to what constitutes principal use and what constitutes the degree of intensity necessary to qualify for an Ag valuation. These standards are set by the chief appraiser in the area. While counties have the latitude to set their own guidelines, the Comptroller Manual for the Appraisal of Agricultural Land provides guidance which seems to encourage innovation, stating:

1. “Where a landowner applies practices that are not typical, the chief appraiser should be careful not to discourage experimentation or innovation,” and
2. “Both property owners and appraisal districts need to be alert to the possibility that a particular parcel may be used as part of a larger operation. Appraisal districts should inform potential applicants and applicants should point out larger uses to the appraisal district.”

Therefore, other uses of the land and smaller lot sizes do not necessarily disqualify any parcel for an Ag valuation.

Grazing Association Guidelines & Benefits:

The guidelines are set by the tax code, the comptroller rules and manuals, and the county guidelines of each specific county. Generally, one acre of each lot is used for residential purposes and the remainder of the lot is left open to grazing. The one acre used for residential purposes is typically taxed based upon a market valuation and the remainder based upon an Ag valuation. Some counties specifically state that smaller acreage may qualify for a 1-d-1 valuation if a lessee has enough contiguous land to meet the minimum standard tract size for the particular class of land. The grazing association meets the requirements for an Ag valuation over a subdivision by executing a grazing lease with a lessee over all the contiguous tracts of land (over all the lots in the subdivision). Some grazing associations, depending on the requirements of the county, own and manage the cattle that graze throughout the subdivision.

Occasionally owners will simply enter into a joint grazing lease without CCRs (Covenants, Conditions and Restrictions) or the formation of an association or organization. While this can work for a while, the decisions of one or more neighbors to no longer participate can impact or cause the termination of the Ag valuation for the other owners. Grazing associations, along with corresponding deed restrictions implemented by the developer or the landowners, can ensure that owners of lots in a planned grazing community adhere to certain restrictions so that the entire subdivision maintains agriculture, particularly grazing, as its principal use under all the applicable laws, rules, regulations, and guidelines, ensuring the continuation of grazing as the principal use of the property.

Benefits of WMPAs & Grazing Associations:

Owners of lots in a grazing association get real Texas ranch ambiance without the responsibility and burden of managing hundreds of acres. Owners of lots in WMPAs are surrounded by wildlife and are part of a community that preserves the natural environment. These buyers are able to do this at a price point lower than most suburban lots and save on their tax bill in the process.

Communities benefit from the development of grazing association and WMPA subdivisions as well. Transplants to their communities end up on lots in the middle of preserved rural grazing land or in neighborhoods where everyone is required to support the preservation of wildlife and the natural environment instead of concentrated in suburban-style subdivisions with small lots. The restrictions on the size and use of the lots are part of the deed restrictions so the use is much more permanent than a simple joint grazing lease. Traffic and infrastructure problems caused by new subdivisions and tight concentrations of populations can be mitigated by encouraging buyers to buy these larger lots. Most importantly, by encouraging buyers to embrace the lifestyle in a grazing association or a WMPA, the character of our rural communities are better preserved.

An Experienced Real Estate Attorney can Help:

It is imperative that prior to subdivision or the filing of a plat, developers or landowners contact a real estate attorney experienced in WMPA or grazing valuation matters. Consequences of losing an Ag valuation, include:

• owing market value property tax for at least the next five years on each lot,
• owing rollback taxes on the lot for prior years,
• and the possibility that a particular property may no longer be eligible for an Ag valuation through a use acceptable to the owner of the lot.

If you are a developer interested in creating a grazing association or WMPA for your property, Braun & Gresham can help. We can assist with the creation and implementation, and identify any potential issues that may arise. Contact Joanne Hatton at (512) 894-3479 or [email protected] to discuss these or any other issues related to subdividing property in a way that preserves the rural character of your land.