Part 1.
COMPTROLLER OF PUBLIC ACCOUNTS
Chapter 9.
PROPERTY TAX ADMINISTRATION
Subchapter I. VALIDATION PROCEDURES
34 TAC §9.4011
The Comptroller of Public Accounts proposes an amendment
to §9.4011, concerning appraisal of timberlands.
The amendment provides the methods and procedures for qualifying and appraising
timberland. In addition, the manual addresses the application process, discusses
the methods for determining if a change of use has occurred on timberland
and the calculation of the rollback tax. It establishes the procedures and
methods for the productivity appraisal of timberland and restricted use timberland.
Chapter I of this manual tells what the manual is, its purpose, why it
is required and where to find copies of the manual.
Chapter II of the manual deals with qualifying timberland for productivity
appraisal. To implement the requirements of Senate Bill 977, 76th Legislature,
the Comptroller is amending the definition of "farm products" to include timber
that is exempt from taxation and amending the definition of "in the hands
of the producer" to include standing timber or timber that has been harvested
and on January 1 is located on the real property on which it was produced
and is under the ownership of the person who owned the timber when it was
standing.
Also in Chapter II, to implement the requirements of House Bill 1723, 75th
Legislature, the Comptroller is adding information to address timber in transition
- giving the landowner the option for the land to continue to be appraised
under the same agricultural category for 15 years from the date of the conversion
to timberland. The Comptroller is adding information to implement Senate Bill
841, 75th Legislature, to require the chief appraiser to send notices denying
an application for special appraisal by certified mail.
To implement the requirements of House Bill 1358, 74th Legislature, the
Comptroller is removing language requiring open-space qualification on January
1, 1992 before land could qualify for wildlife management purposes and requiring
that land be "actively" used for at least three of the wildlife management
purposes listed in the Tax Code.
In Chapter III, House Bill 958, 76th Legislature, is the basis for the
changes to provide that the rollback tax for the change of use for open space
land does not apply to a change of use occurring as a result of a transfer
of land to the state or a political subdivision of the state to be used for
a public purpose. Also, the Comptroller is adding language to implement the
requirements of Senate Bill 977, 76th Legislature, to provide that rollback
taxes for a change of use to timberland qualifying under the new Subchapter
H (timber at restricted use) are not imposed if the land qualified under Subchapter
C (agricultural appraisal) or Subchapter D (timber appraisal).
The Comptroller is deleting the portion of this chapter providing for rollback
of taxes for the year the timber use changes because it is not consistent
with Tax Code, §23.76(a). The portion on the penalty for failure to notify
of a change use was deleted as it is duplicating what is discussed in the
application section in Chapter II.
In Chapter IV of this manual, the Comptroller is amending the definition
of "net-to-land" to implement the requirements of Senate Bill 1646, 78th Legislature.
The new definition provides that, in addition to pine and hardwood sawtimber
and pulpwood, small pine sawtimber (chip-n-saw) and other significant timber
products are to be considered when determining value and that cutting contracts
and gatewood sales are to be included in determining stumpage prices. Calculations
for timber values will be made from information for the timber region as a
whole, rather than two regions previously used. The management costs used
to determine net-to-land are those of a prudent manager seeking to maximize
return. This bill also amended the method for determining the capitalization
(cap) rate to be used in calculating timberland value. The cap rate will be
the greater of the interest rate specified by the Farm Credit Bank of Texas
on December 31 of the previous year plus 2 1/2 percent or the cap rate used
the previous year (Method A). In the first year the cap rate determined by
Method A is 10 percent or greater, the cap rate will be determined by adding
2 1/2 percent to the interest rate specified by the Farm Credit Bank of Texas
on December 31 of the previous year (Method B). In all subsequent years, the
cap rate will be determined by averaging the current year's cap rate from
Method B and the cap rates used for the preceding four years. The years included
in this average cannot be years prior to the first year the cap rate, determined
by Method A, was 10 percent or greater.
A new Chapter V was added to implement the provisions of Senate Bill 977,
76th Legislature, which added a new Subchapter H to Chapter 23 (§23.9801
through 23.9807, Tax Code) providing for special appraisal of Restricted Use
Timber Land. New appraisal methods would apply where timber harvesting is
restricted: (1) for aesthetic or conservation purposes, including maintenance
of standing timber adjacent to highways and roads and to preserve forests
designated by the Texas Forest Service as special and unique (aesthetic management
zones); (2) to provide benefits or protections for plant or animal wildlife
designated as endangered or threatened under the federal Endangered Species
Act or the Parks and Wildlife Code (critical wildlife habitat zones); or (3)
to protect water quality or preserve a waterway, including a lake, river,
stream, or creek (streamside management zones). Land would also qualify for
appraisal under this new subchapter if it is regenerated for timber production
following a harvest occurring in a year for which the land was appraised under
Subchapter E appraisal provisions for timberland. Land would cease to qualify
for appraisal under the new subchapter on the tenth anniversary of the date
the timber is harvested. Restricted-use timberland will be appraised at one-half
of the appraised value as determined under current appraisal methodology for
timberland and the appraised value can not exceed the lesser of the market
value of the land determined by other methods or the appraised value of the
land for the year preceding the first year of appraisal under the new subchapter.
The owner of land appraised under the new subchapter will be required to notify
the chief appraiser if the land's eligibility ends, subject to a penalty equal
to 10 percent of the difference in appraised value under the new subchapter
and the appraised value under Subchapter E. The chief appraiser will be allowed
to impose the penalty to any year in which the land was ineligible but received
appraisal under the new subchapter.
Through out the manual changes were to correct grammatical and typographical
errors; to update references to reflect program changes, terminology, federal
law, and tables and examples to reflect current data; and to clarify common
practices.
James LeBas, Chief Revenue Estimator, has determined that for the first
five-year period the rule will be in effect, there will be no significant
revenue impact on the state or units of local government.
Mr. LeBas also has determined that for each year of the first five years
the rule is in effect, the public benefit anticipated as a result of enforcing
the rule will be in providing updated information to taxpayers regarding their
tax responsibilities. The proposed amendment would have no significant fiscal
impact on small businesses.
Comments on the amendment may be submitted to Buddy Breivogel, Manager,
Property Tax Division, P.O. Box 13528, Austin, Texas 78711-3528.
The amendment is proposed under Tax Code, §23.73(b), which
requires the comptroller to set forth the method of qualifying and appraising
for productivity appraisal land used to produce timber.
The amendment implements Tax Code, Chapter 23, Subchapter E and Subchapter
H.
§9.4011.Appraisal of Timberlands.
Adoption of the Manual for the Appraisal of Timberland.
This manual sets out both the eligibility requirements for timberland to qualify
for productivity appraisal and the methodology for appraising qualified timberland
and restricted use timberland. Appraisal districts are required by law to
follow the procedures and methodology set out in this manual. The Comptroller
of Public Accounts adopts by reference the Manual for the Appraisal of Timberland.
Copies of this manual can be obtained from the Comptroller of Public Accounts,
Property Tax Division, P.O. Box 13528, Austin, Texas 78711-3528. Copies may
also be requested by calling our toll-free number 1-800-252-9121. In Austin,
call (512) 305-9999. From a Telecommunications Device for the Deaf (TDD),
call 1-800-248-4099, toll free. In Austin, the local TDD number is (512) 463-4621.
This manual and those that have been superseded are available from the Comptroller's
office as well as the State Archives.
[(a)
Adoption of the Manual for the Appraisal
of Timberland. The Comptroller of Public Accounts adopts Manual for the Appraisal
of Timberland. This document is published in booklet format by and is available
from the Comptroller of Public Accounts, Property Tax Division, P.O. Box 13528,
Austin, Texas 78711-3528.]
[(b)
Introductory comments concerning the
timber manual.]
[(1)
In 1978, voters approved a constitutional amendment, Article
VIII, §1-d-1, permitting appraisal based on the productive capacity or
"productivity value" of timberland. The new constitutional amendment took
effect in 1979. In enacting the Property Tax Code that year, the 66th Legislature,
1979, adopted Property Tax Code, §§23.71-79, implementing §1-d-1
for land qualified for timber productivity appraisal.]
[(2)
The Property Tax Code assigns most qualified timber appraisal
responsibilities to the chief appraiser. However, the Property Tax Code, §23.73
and §23.75, direct the comptroller to develop a manual for appraising
qualified timber and an application form and distribute them to appraisal
districts. Property Tax Code, §23.73, also directs the comptroller to
develop procedures for verifying that land qualifies for timber use appraisal.]
[(3)
This manual sets out both the eligibility requirements
for timberland to qualify for productivity appraisal and the methodology for
appraising qualified timberland. Appraisal districts are required by law to
follow the procedures and methodology set out in this manual.]
[(c)
The qualification of timberland for productivity
appraisal.]
[
[(2)
Timberland in Texas varies in many ways. A pine plantation
may have trees just over a year old, while another pine plantation may have
much older and taller trees. Hardwoods may be the only timber on one tract,
while other tracts may have pine trees or a mixture of hardwoods and pine.
In addition, soil productivity--a key determinant of timber growth--often
varies dramatically from one timber tract to another, even within the same
county.]
[(3)
The degree of intensity with which timber producers manage
the land also differs. Some owners practice custodial care, which means the
owner does nothing to manage the land, while other owners manage their land
intensively. Timber plantations are usually managed intensively. However,
some plantation land may require little management for a few years, then need
sophisticated, intensive management for several years. For example, a timber
plantation that is between thinning activities and prescribed burning may
need little management, but final harvest and preparation for replanting require
intensive management.]
[(4)
These variations among timber tracts and timber growing
operations make determining eligibility for timber productivity appraisal
a challenge for a chief appraiser. The chief appraiser must be familiar with
timber activities in the immediate area and the forest region of which the
appraisal district is a part.]
[(5)
A valuable source of information about timber activity
and timberland use in the area is the "agricultural appraisal advisory board."
The Property Tax Code, §6.12, requires the chief appraiser to appoint,
with the advice and consent of the appraisal district's board of directors,
an agricultural appraisal advisory board consisting of three or more members
as determined by the board of directors. The law requires that one of the
members must be a representative of the county agricultural stabilization
and conservation service. The other members must own land in the district
that qualifies for productivity appraisal and must have been residents of
the district for at least five years. The function of this board is to advise
the chief appraiser on the valuation and use of land qualified for productivity
appraisal, including agricultural land and timberland.]
[(6)
If chief appraisers plan to seek the advisory board's
advice on timber characteristics and timber management activities within their
respective appraisal districts, they should appoint individuals who are knowledgeable
about the area's timber.]
[(7)
The Texas Constitution permits timber productivity appraisal
only if the property and its owner meet specific requirements defining timber
use. Land will not qualify simply because it has timber standing on it. In
addition, timberland that is used principally for aesthetic or recreational
purposes will not qualify.]
[(8)
The Property Tax Code, §23.72, sets the standards
for determining whether land qualifies: "Land qualifies for appraisal . .
. if it is currently and actively devoted principally to production of timber
or forest products to the degree of intensity generally accepted in the area
with intent to produce income and has been devoted principally to production
of timber or forest products or to agricultural use that would qualify the
land for appraisal . . . for five of the preceding seven years."]
[(9)
To qualify land for timber productivity appraisal, a property
owner must show the chief appraiser that the land meets the Property Tax Code, §23.72,
standard. To do so, the property owner must apply for the appraisal and give
the chief appraiser the information necessary to determine if the land qualifies.
The owner also must notify the chief appraiser of any changes in the land's
status.]
[(10)
To qualify for timber productivity appraisal, landowners
must meet each of the following six eligibility requirements.]
[(A)
The land must be currently and actively devoted to timber
production.]
[(B)
The land must be used principally for timber production.]
[(C)
The land must be devoted to timber production to the degree
of intensity generally accepted for the area.]
[(D)
The owner must have an intent to produce income.]
[(E)
The land must have been dedicated principally to agriculture
or timber production for any five of the preceding seven years.]
[(F)
The property owner must file a timely and valid application
form.]
[(11)
Timber appraisal applies only to land and its potential
for growing timber. It does not apply to improvements on land or to minerals.
If the land is qualified for timber productivity appraisal, the timber standing
on it may not be taxed separately.]
[(A)
Improvements. Buildings and structures such as barns,
sheds, or other outbuildings must be appraised separately at market value.
Fences, however, are appurtenances and are not appraised separately. Land
beneath out-buildings and other improvements related to timber use qualifies
for the special appraisal because the owner uses it in the timber producing
operation.]
[(B)
Minerals. Oil, gas, or any hard mineral must be appraised
separately at market value.]
[(C)
Harvested timber. Harvested timber in the owner's hands
on January 1 is personal property and taxed separately from the land.]
[(12)
Some man-made alterations of, or additions to, timberland
are appraised as part of the land. These appurtenances to the land--canals,
water wells, roads, stock tanks, and other similar reshaping of the soil--are
included in the value of the land and are not separately appraised.]
[(13)
Under the Property Tax Code, §23.72, land must be
"currently and actively devoted to timber use" to qualify for timber productivity
appraisal. Unlike other types of property, the land may not have visible physical
characteristics of qualification on January 1, but may still qualify. If timber
use is not evident on January 1, the chief appraiser should investigate further
to see if the owner can show that the land will be devoted to active timber
production for the calendar year for which he or she is applying, by reason
of other indications or evidence of current and active devotion. ]
[(14)
Determining if the owner is currently and actively devoting
land to timber production is often a difficult and complicated task. Consider
the following situations.]
[(A)
The chief appraiser may not be able to see signs of activity
when a timber operation is young, even though the owner may have spent a great
deal of time, money, and effort to start the operation and is currently and
actively devoting the land to timber use.]
[(B)
A chief appraiser may not be able to see any management
activity at the time of inspection if the owner has not harvested for some
time.]
[(C)
The chief appraiser may not be able to find evidence of
active devotion if the size of the tract means that management activities
take place away from the roads that give the chief appraiser access to the
land.]
[(15)
However, the absence of visible physical timber activities
on the land does not mean that the land is not currently and actively devoted
to timber production. The chief appraiser should look for other indications
of current and active devotion. The following are some indications of current,
active devotion.]
[(A)
Timber activity records. Is the owner able to produce
records showing timber management activity? Some records that show timber
management activity are documents showing the timber has been harvested, canceled
checks for services, contracts of sale, and land leases.]
[(B)
Forest management plan. The owner operates under a current,
written forest management plan. A forest management plan must be developed
for the present time. An outdated plan is of no use as a management document.
The plan also should be in writing and signed by the individual who prepared
it. However, the existence of a current management plan does not always mean
the owner is following the plan. The owner should be able to show that he
or she is using or intends to use the plan for timber production. Knowledgeable
timberland owners may prepare their own plans. If the owner of a marginal
tract cannot afford a privately developed forest management plan, is on a
waiting list to have a plan developed by a public agency, or lacks the expertise
to develop his or her own plan, the chief appraiser should look for other
evidence of current and active devotion.]
[(C)
Timber cost-sharing programs. The owner receives Texas
Reforestation Foundation (TRe), Forestry Incentive Program (FIP), Agricultural
Conservation Program (ACP) or Stewardship Incentive Program (SIP) cost sharing
funds for reforestation and timber stand improvement. The Texas Forest Service
coordinates the federal FIP, ACP and SIP programs. TRe is a privately funded
cost-sharing program.]
[(D)
Efforts to sell timber. The owner has letters or other
documents showing efforts to sell the timber.]
[(E)
Salvage activity. The owner has documentation showing
that he or she has attempted to salvage damaged or dead timber that continues
to have value.]
[(F)
Registered tree farm. A registered tree farm is privately
owned, protected, and managed timberland. Timberland must meet several qualifications
for certification as a registered tree farm: private ownership, management
for growth and repeated timber crop harvests, adequate protection from fire,
insects, disease, and destructive grazing. In addition, the owner's harvesting
practices must assure prompt reforestation with desirable trees. A registered
tree farm is inspected by professional foresters before it may qualify for
the program. Each registered tree farm is reinspected periodically. Most registered
tree farms are easily recognized by the green diamond-shaped "TREE FARM" marker
placed in front of the property.]
[(G)
Memberships in associations. The owner is a member of
the Texas Forestry Association or a county or local timber growers association.]
[(H)
Assistance programs. Does the owner participate in a forest
industry landowner assistance program? Many firms in the forest products and
the pulp and paper industry have entered into agreements with private timberland
owners to manage their timber in exchange for first chance to buy the timber
when it is ready to harvest.]
[(I)
Participation in forestry extension activities. The Texas
Agricultural Extension Service offers periodic programs for timberland owners.
These programs cover timber management practices. The Service also offers
a correspondence course to show timber owners how to prepare a timber management
plan.]
[(J)
Consulting foresters. Has the owner contracted with or
hired a private consulting forester to help manage his or her timber? What
were the results of this collaboration? Is the owner operating on the written
advice of a consulting forester?]
[(16)
Land that is currently and actively devoted to timber
production will not qualify for productivity appraisal unless timber production
is the land's primary use. If the owner uses the land for more than one purpose,
the principal use must be growing timber. Although the distinction between
"currently and active devotion" and "primary use" may be subtle, there is
a difference between the two criteria.]
[(17)
While timber production must be the primary use of the
land, other compatible uses do not prevent land from qualifying if timber
production remains the primary use. For example, an owner may use land principally
to grow timber and lease it for hunting. However, if hunting activities are
the primary use of the land, and the timber is used to create an environment
for wildlife production, then the land would not qualify.]
[(18)
The chief appraiser must determine all the uses to which
the owner puts the land and decide which use is the primary one. If any use
is incompatible with timber production, or if it replaces timber production
as the primary use of land, the land is not principally devoted to timberland
use and cannot qualify for productivity appraisal.]
[(19)
There are situations where timber production may not
be the land's primary use. The primary use test is particularly important
for timberland because the kind of intensive management required to grow agricultural
crops is not necessary to grow timber. This less visible management activity
can make determining the land's primary use a difficult job.]
[(20)
The following situations are intended to illustrate situations
in which timber production may not be the land's primary use, although the
land appears to be currently and actively devoted to timber production. In
these or comparable situations, the chief appraiser should use the situation
as a trigger for further, careful investigation of the application.]
[(A)
Presence of deer-proof fences on the property. Although
this is not always the case, the existence of deer-proof fences around the
property may indicate that the property is being used for wildlife production.
The chief appraiser must then determine if the owner's principal use is timber
production, hunting or wildlife production.]
[(B)
Presence of stock or wildlife ponds on the property. Ponds
are not normally necessary for the conduct of timber management activities
or timber harvesting. The existence of ponds may trigger further investigation
of the land's primary use.]
[(C)
Land being readied or held for development. Some timber
harvests may indicate that the land is being prepared for housing development
rather than used principally to grow timber. (These are commonly referred
to as "real estate cuts.") Another possible indication that land is being
used principally for development is a sign offering the land for development
or one indicating it is zoned for industrial or residential use.]
[(D)
Presence of homes, vacation facilities, retreats, and
recreational facilities on the property. The existence of dwellings and recreational
facilities, such as retreats, camps, lodges, and similar facilities, may indicate
that the timberland is being used to provide an aesthetic environment for
these facilities. If this is indeed the case, timber production is not the
land's primary use and the land would not qualify for productivity appraisal.]
[(21)
A chief appraiser may establish a policy to follow reasonable
and carefully developed guidelines for determining primary use. Establishing
guidelines requires the chief appraiser to become familiar with timber activity
in the area. The chief appraiser may also rely on the expertise of the agricultural
appraisal advisory board in establishing primary use guidelines.]
[(22)
Guidelines, however, should serve only as a trigger for
more investigation--they should not be arbitrarily or automatically applied.
For example, a chief appraiser whose guidelines require a management plan
should not automatically deny timber appraisal to an owner who does not have
a plan. A property owner with no forest management plan may actually be managing
the land more actively and intensely than other owners who have management
plans. This land should qualify for productivity appraisal if its use meets
all other eligibility qualification requirements. Instead, the chief appraiser
should use the lack of a plan as a trigger to investigate the application
more closely.]
[(23)
Guidelines that are applied arbitrarily or by rote can
produce incorrect results. An application for timber productivity appraisal
should not be denied outright because the chief appraiser discovers deer-proof
fences, wildlife ponds, dwellings or recreational facilities on the property.
The presence of these structures is an indication, not proof, that timber
production may not be the land's primary use. In these situations, the chief
appraiser should carefully investigate the land's primary use.]
[(24)
To qualify for productivity appraisal, timberland must
be used to the degree of intensity generally accepted for prudent timber growers
in the area. The degree of intensity test is intended to exclude from productivity
appraisal land on which token timber activity occurs simply to get tax relief.]
[(25)
The law doesn't set degree of intensity standards. The
chief appraiser must develop standards after carefully investigating the area's
typical timber operations performed by prudent landowners. After thoroughly
studying the area, the chief appraiser should set minimum degree of intensity
standards. The chief appraiser may also rely on the expertise of the agricultural
appraisal advisory board in determining the typical degree of intensity for
the prudent timber grower.]
[(26)
To set degree of intensity standards, the chief appraiser
should analyze the major types of timber operations in the area. This analysis
should break down the typical steps in producing timber and attempt to specify
how much time, labor, equipment, etc., is typical for each type of timber
operation. The sources listed in subsection (f) of this section may help the
chief appraiser determine how much of these items are typically used.]
[(27)
Degree of intensity standards will vary from one timber
growing area and operation to another. In general, there are three different
levels of management intensity: custodial, minimal, and intensive.]
[(28)
Custodial management is "hands-off" management. The only
activities the owner conducts are payment of property taxes and occasional
visits to the site. However, it is highly unlikely that a timber property
that shows no indication of management activity for two or more decades is
being actively devoted to timber production.]
[(29)
Minimal management may fall anywhere between custodial
management and intensive management. The owner may undertake some activities,
such as periodic thinning, regular site visits, or maintenance of an access
road.]
[(30)
Intensive management can involve many activities, including
careful soil preparation for replanting, regular thinning and/or prescribed
burning to reduce competing vegetation, removal of undesirable trees, following
a program to check for and control insects and disease, prompt actions to
control insects and disease, and building and maintaining all-weather roads
to the site.]
[(31)
Large timber plantations owned by corporations may receive
intensive management; small operations owned by individuals may receive custodial
management. The chief appraiser's degree of intensity standards should recognize
these different levels of management activity and differences among timber
operations.]
[(32)
In most cases, property owners must prove that they are
following the common production steps for their type of operation and using
typical amounts of labor, management, and investment. However, a timber growing
operation is not disqualified simply because it differs from the typical operation
in some respects. Appraisers should not, for example, disqualify a custodial
timber operation because many comparably sized operations are more management
intensive. Nor should an owner who is clearly meeting the degree of intensity
test be disqualified because the operation has some element of the degree
of intensity test missing. The total effort finally determines whether a given
timber growing operation qualifies, not the level of each separate "input."]
[(33)
The degree of intensity test applies to the year of the
appraisal only-it does not apply to the historical use (time period) requirement.
Land used principally for timber for five of the preceding seven years may
qualify although it was not used to the typical degree of intensity during
those years.]
[(34)
The chief appraiser should not apply minimum degree of
intensity standards arbitrarily--they are a trigger for a more careful review
of the application. For example, if the minimum standards require regular
thinning of competing vegetation, the application should not be denied simply
because the land is not thinned regularly. The chief appraiser should instead
carefully review the application and inspect the property to determine if
the land qualifies.]
[(35)
The owner must use the land with an intent to produce
income. Like the degree of intensity test, this test excludes those owners
who aren't producing timber and who are trying to use productivity appraisal
to avoid paying property taxes on the land's market value. In Texas Attorney
General Letter Opinion LO-88-89, the attorney general stated that land used
solely for cutting wood to build fences for ranch operations does not qualify
for timber appraisal. Whether the owner has an intent to produce income is
a fact question for the chief appraiser to decide.]
[(36)
To qualify, the owner is not required to prove that the
land has produced income in the current year. Timberland does not produce
income regularly because the time between harvests is long. At the time of
qualification, however, the owner must show evidence of an intent to produce
income.]
[(37)
Land that does not produce income (in this context, income
means net income) during the time in which a prudent manager would have produced
income may not qualify. Further, an owner probably has no real intent to produce
income if he or she has had no expenses directly related to the timber operation
within the last two decades.]
[(38)
The chief appraiser may use expense receipts, canceled
checks, or current accounts of expenses, labor, and revenues to determine
if the owner has expenses directly related to timber production. An owner
seeking to produce income usually will keep these types of records.]
[(39)
Some examples of evidence of intent to produce income
are:]
[(A)
receipt of revenues through sale of timber;]
[(B)
letters or other documents showing that the owner has
attempted to sell the timber;]
[(C)
a contract of sale;]
[(D)
receipts, canceled checks, and other evidence that the
owner has had expenses or income related to the timberland's use;]
[(E)
investments in improvements to enhance the value of the
existing timber;]
[(F)
purchase of easements to allow loggers access to land-locked
tracts;]
[(G)
investments in substantial amounts of reforestation or
smaller amounts if other parts of the tract are already in commercial timber;]
[(H)
attempts to salvage timber that has value but that is
damaged or dead;]
[(I)
using a consulting forester to help manage the land;]
[(J)
hiring someone to conduct a timber sale; and]
[(K)
seeking recommendations of a public forester before making
a timber sale.]
[(40)
Land used primarily for either timber or agricultural
production during any five of the previous seven years may qualify for timber
productivity appraisal. A landowner may point to a history of agricultural
use that would qualify the land for productivity appraisal in meeting this
requirement.]
[(41)
As long as either timber or agriculture was the principal
use in the preceding years, the land qualifies although that use may not have
met the degree of intensity requirement in all or some of those years. This
historical use requirement attaches to the land. It is not a requirement for
the landowner to show a history of timber production activities.]
[(42)
The Property Tax Code, §23.75(b), requires the comptroller
to prescribe the application form for timber productivity appraisal. The comptroller's
application form has been adopted by §9.402 of this title (relating to
Special Use Application Forms) and is available from the comptroller's Property
Tax Division.]
[(43)
The appraisal district may copy the comptroller's form
and offer it to local property owners. An appraisal district may use a form
that substantially complies with the comptroller's form--that is it has the
same language in the same order as the comptroller form if the district has
written approval from the comptroller.]
[(44)
The comptroller will not approve an appraisal district
form unless the form has the same elements and asks for the same information
as the comptroller form. The comptroller will not approve a form that asks
for any information not required by the agency's form.]
[(45)
These rules do not permit appraisal districts to add
additional questions to the initial application. If, however, the initial
application is valid but does not contain all the information the district
needs to rule on an application, the chief appraiser may require the applicant
to give additional information. This procedure is described later in this
section.]
[(46)
Where the district offers its own form, the applicant
may choose between the comptroller application form and the district's form.
An applicant may not be denied the appraisal because he or she chooses to
use the comptroller form. The applicant must completely provide all information
requested by the comptroller form-an incomplete application is not valid.]
[(47)
Property owners must file applications with the chief
appraiser in the appraisal district where the land is located. Taxpayers whose
land is appraised by more than one appraisal district must file an application
in each district.]
[(48)
The law requires chief appraisers to share appraisal
information on properties within overlapping areas. Chief appraisers are also
required to coordinate appraisal records and appraisal activities relating
to properties in overlapping areas by written agreement. Appraisal districts
must send a comptroller prescribed advisory notice to affected property owners
informing them that required reports and other documents must be filed with
or sent to each appraisal district. This advisory notice must also inform
affected property owners that they should consider sending any other document
relating to the property to each appraisal district.]
[(49)
A property owner may file a single application form covering
all tracts within an appraisal district. Owners need not file a separate form
for each tract as long as they provide sufficient information to show that
all tracts qualify under the law.]
[(50)
The chief appraiser should encourage owners to file a
single form if they are managing several tracts as a unit. The chief appraiser
must view the entire timber growing operation as a unit--not with respect
to the activities on each individual parcel. The single application form notifies
the appraisal district of the operation's unity.]
[(51)
An application must be postmarked or filed no later than
midnight, April 30. For good cause and only on the property owner's request,
the chief appraiser may extend the filing deadline in individual cases for
not more than 60 days. The property owner must request an extension before
the filing deadline.]
[(52)
The Property Tax Code does not define "good cause." However,
it is commonly something the applicant cannot control. Illness or injury or
an inability to transact normal business for a period that effectively prevents
filing on time is usually good cause. Travel out of town on business or vacation
or simply forgetting about the filing deadline is not good cause.]
[(53)
A property owner who misses the deadline may file a late
application until the appraisal review board approves records for that year
(usually about July 20). However, there is a penalty for late application.
An application filed after April 30 is subject to a penalty equal to 10% of
the difference between the tax if imposed at market value and the tax imposed
at the timber productivity value. If the chief appraiser extended the deadline
for that property owner, this penalty does not apply.]
[(54)
Chief appraisers must note imposition of the penalty
in the appraisal records. They also must send the property owner written notice
of the penalty and explain the reasons. The tax assessor adds the penalty
amount to the tax bill and collects the penalty along with the annual tax
payment.]
[(55)
A lien attaches to the property until the penalty is
paid. If the penalty remains unpaid on February 1 of the following year (or
a later delinquency date if tax bills are mailed late), penalty and interest
on the penalty amount accrue as if it were a delinquent tax.]
[(56)
If a person does not file a valid application before
the appraisal review board approves the appraisal roll, the land is ineligible
for productivity appraisal in that tax year.]
[(57)
Once the application is filed and approved, the land
continues to receive productivity appraisal every year without a new application
unless the ownership changes, the land's eligibility changes, or the chief
appraiser requires a new application. The chief appraiser may require a new
application if he or she has good cause to believe that the land's eligibility
for productivity has ended. If the chief appraiser requires a new application,
the property owner must meet the deadlines that apply to a new applicant.
To better inform the taxpayer, the chief appraiser may wish to state in writing
the reason for a new application.]
[(58)
If the land's eligibility ends or its ownership changes,
the property owner must notify the appraisal office in writing before the
next May 1. New owners are not eligible for timberland productivity appraisal
unless they apply. If the owner fails to do so, one or more penalties will
apply.]
[(59)
If the land remains under the same ownership and the
owner fails to inform the appraisal district that the land is no longer eligible
for productivity appraisal, either because the land is no longer in timber
use or because the degree of intensity has fallen below that typical for the
area, the property owner must pay a penalty equal to 10% of the difference
between the taxes imposed under the timber use and the taxes that would have
been imposed under the new use. This penalty applies for each year the property
received the incorrect appraisal, but for no more than five years.]
[(60)
If the property erroneously receives productivity appraisal
because a new owner failed to file an application or because an owner's use
of the land no longer qualifies, the chief appraiser must calculate the difference
between the land's market value and its productivity value. The owner must
pay taxes and penalties on the difference between these values for the time
that the land erroneously received productivity appraisal, plus a 10% penalty
on these taxes. This additional tax and penalty may not cover a time period
exceeding five years. In the year the chief appraiser discovers the change,
the chief appraiser should add this value to the appraisal roll as property
omitted in a prior year.]
[(61)
For example, if a timber producer reduces the scale of
the operation and timber is no longer the land's principal use, the land will
not be eligible for productivity appraisal. If the landowner fails to notify
the appraisal district and, therefore, receives productivity appraisal, the
land is back assessed. For each year in question (not to exceed five years),
the owner must pay the difference between the taxes based on productivity
appraisal and the taxes based on market value, plus a 10% penalty on that
difference. Because the land has not been taken completely out of timber use,
it is not subject to rollback taxes. (Rollback procedures are discussed in
detail in subsection (d) of this section.)]
[(62)
When a penalty is imposed, the chief appraiser must notify
the property owner. This notice must explain the procedures for protesting
the penalty. The chief appraiser notes the imposition of the penalty in the
appraisal records, and the tax assessor adds the amount of the penalty to
the property's annual tax bill.]
[(63)
The chief appraiser must review each application and
decide whether to:]
[(A)
approve it and grant productivity appraisal;]
[(B)
disapprove it and ask for more information; or]
[(C)
deny the application.]
[(64)
The chief appraiser must determine the validity of all
timely filed applications before turning all appraisal records over to the
district's appraisal review board. The deadline is May 15 or as soon afterward
as is practicable.]
[(65)
The chief appraiser usually gives the appraisal records
to the appraisal review board (ARB) by May 15. Property owners who were denied
productivity appraisal may file a protest with the ARB. In addition, taxing
unit officials who believe productivity appraisal was erroneously granted
to any property owner may seek to remove that grant by filing a challenge
with the ARB.]
[(66)
The chief appraiser must rule on all late-filed applications
before the appraisal review board approves the records for the year. The chief
appraiser must notify the applicant in writing within five days of an application's
denial. This notice must explain the procedures for protest.]
[(67)
The chief appraiser may request additional information.
If the initial application form is valid but the chief appraiser does not
have all the information needed to determine if the land qualifies, the chief
appraiser may request additional information. The chief appraiser may request
only additional information that is necessary to determine if the land qualifies
for productivity appraisal.]
[(68)
In determining whether an application is valid, the chief
appraiser should take care to consider the application as a whole. If the
chief appraiser determines that the omission of a piece of information on
the original application was a mistake, the chief appraiser may, at his or
her discretion, either:]
[(A)
extend the filing deadline for 60 days; or]
[(B)
send a form requesting additional information.]
[(69)
Information contained in income statements and income
tax returns, land lease rates, and lease agreements is not necessary to determine
whether the land qualifies--other less invasive evidence of qualification
exists. If the chief appraiser asks an owner for this type of information,
the request should clearly state that the owner is not required to give the
information to qualify for productivity appraisal.]
[(70)
The applicant must provide additional information within
30 days after the date of the request or the application will be denied.]
[(71)
If there is good cause, the chief appraiser may extend
the deadline to allow additional information. An extension cannot exceed 15
days.]
[(72)
If a chief appraiser denies an application, a notice
of the denial must be delivered to the applicant within five days. The notice
must explain the procedures for protesting to the appraisal review board.
To better inform the taxpayer, the chief appraiser may wish to explain the
reasons for denying the application.]
[(73)
Even if land meets all the preceding conditions, some
situations may block approval of an application. Land within the boundaries
of a city often will not qualify. Land located within an incorporated city
or town must meet all the criteria for productivity appraisal and, in addition,
must meet one of the following:]
[(A)
the city must not provide the land with general services
comparable to those provided in other parts of the municipality having similar
features and population; or]
[(B)
the land must have been devoted principally to production
of timber or forest products continuously for the preceding five years.]
[(74)
Property Tax Code, §23.77(2) and (3), provide that
some kinds of foreign ownership make the land ineligible for productivity
appraisal. Under the law, if the property owner is a non-resident alien (a
non-United States citizen who does not reside in the United States), the land
can't qualify. Similarly, the law states that a corporation can't qualify
its land if a non-resident alien, foreign government, or both control the
corporation.]
[(75)
The Texas Supreme Court has held, however, that Property
Tax Code, §23.56(3), barring foreign corporate and governmental ownership
from qualifying land for agricultural appraisal, unconstitutionally violates
the Texas Constitution's guarantee of equal protection. Although the Court's
opinion did not address the ineligibility of non-resident aliens (Property
Tax Code, §23.56(2)), its reasons for holding subsection (3) of that
statute unconstitutional also applies to the non-resident's eligibility for
timber productivity appraisal. The HL Farms case did not address timber appraisal,
but the law making productivity appraisal unavailable to foreign owners is
identical to the agricultural appraisal law. Property Tax Code, §23.77(2)
and (3), is identical to Property Tax Code, §23.56(2) and (3). Because
of the similarity between the agricultural appraisal and the timber appraisal
sections, a court is likely to hold that HL Farms applies to timberland. Therefore,
a chief appraiser should seek the advice of an attorney if the appraiser is
confronted with an application for timber appraisal submitted by a foreign
owner.]
[(76)
When the Texas Legislature adopted timber productivity
appraisal, the law was written to create a minimum taxable value on timberland.
Property Tax Code, §23.78, provides that the minimum taxable value of
qualified timberland is the market value assigned to the land by the taxing
unit in 1978. The purpose of this section was to ensure that a taxing unit
with a large amount of timberland would not suffer a serious decrease in its
tax base after implementation of productivity appraisal. This means that timberland
qualified for productivity appraisal will not be taxed on its productivity
value if that value is less than the 1978 value.]
[(77)
The Tax Code requires a unit's tax assessor to compare
the total productivity value for the parcel with the unit's 1978 value for
the parcel. If the total productivity value is less than the total 1978 value,
the unit's assessor must substitute the 1978 value for the entire parcel.]
[(78)
If the nature of the parcel has changed, the assessor
must use historical value to reconstruct what the entire parcel's value would
have been in 1978. For example, if a parcel includes more land in the current
year than it did in 1978, the assessor may not substitute a 1978 per acre
average for the new acreage. Instead, a unit's assessor must use historical
data to determine what the 1978 value for the entire tract would have been
for the unit.]
[(79)
A unit that did not exist in 1978, or that did not levy
an ad valorem tax in 1978, may not substitute a 1978 value for the land's
productivity value. The law permits only substitution of the 1978 value "for
the unit." A unit that did not exist or that had no property tax in 1978 has
no market value to substitute for the productivity value.]
[(80)
The tax assessor must determine or reconstruct a 1978
value for each unit for which the assessor collects taxes. Each unit's 1978
value must be applied separately from that of other units. The law does not
provide for an average 1978 value that is applied for all units that had a
1978 value. Nor does it provide for a historical reconstruction that combines
the taxing units having a value in 1978.]
[(81)
An owner may waive his right to productivity appraisal.
By barring the land from receiving productivity appraisal, the waiver insures
that a taxing unit may depend on a certain level of tax revenue. This certainty
may be critical to the survival of small taxing units or those that are in
debt.]
[(82)
A waiver is effective for 25 years. Land may not qualify
for productivity appraisal for the duration of the waiver. A change in ownership
does not revoke the waiver. An owner may file a waiver on land that does not
qualify for productivity appraisal. A waiver may be filed with some or all
the units that tax the property.]
[(83)
A waiver filed before May 1 becomes effective when it
is filed. For good cause, the chief appraiser may extend the May 1 deadline
for 60 days. These waivers become effective the year following the filing
year.]
[(84)
To revoke a waiver, the owner must file an application
for revocation with the governing body of each taxing unit where the waiver
is effective. The unit's governing body must vote to approve the revocation
and make a finding the unit's debt obligations will not be affected.]
[(d)
Rollback procedures that relate to timberland.]
[(1)
State law imposes an additional tax on qualified timberland
each time it is taken out of timber use and is no longer eligible for productivity
appraisal. For the purposes of this manual, this additional tax plus accrued
interest is referred to as a "rollback."]
[(2)
The rollback recaptures the taxes the owner would have
paid if his or her property had been taxed at market value each year of the
preceding five-year period plus accrued interest. The rollback has two parts:]
[(A)
back taxes; and]
[(B)
accrued interest on those back taxes. The tax portion
of the rollback equals the difference between the total taxes the owner actually
paid in the five years preceding the change in use and the total taxes the
owner would have paid on the property's market value. The interest portion
of the rollback is calculated from the dates on which the differences would
have been due. A rollback is applicable only if the land was receiving productivity
appraisal before its change of use.]
[(3)
A property owner may take land out of timber use either
by ending timber operations or by diverting the property to a non-timber use.
This "change of use" is the only event that triggers a rollback on timberland.
If the property owner diverts only part of a timber property to a non-timber
use, the rollback applies only to the changed portion.]
[(4)
Technically, the tax is an additional tax imposed by law
on the date the cessation of timber production or change of use occurs. The
rollback tax bill has its own delinquency date different from the delinquency
dates of other tax bills.]
[(5)
A change of use is a physical change. The owner must stop
using the land to produce timber. For example, a timber grower who has been
receiving timber use appraisal may decide to stop timber operations entirely.
The grower has the timber cut, does not plant new trees and shows no intention
of replanting. Because the owner has stopped all timber activity, productivity
appraisal will be lost and the land will incur a rollback tax.]
[(6)
Reduced intensity of use at the owner's option will cause
a loss of productivity appraisal. For example, if the owner decided to use
the land primarily for recreational purposes and timber is no longer the land's
principal use, the land would no longer be eligible for productivity appraisal.
However, as long as the land is used for some kind of timber production, a
rollback will not be triggered.]
[(7)
Reduced intensity resulting from acts of nature and financial
hardships also will not prompt a loss of timber productivity appraisal. For
example, severe fires, droughts or freezes may extend the normal time land
can remain out of timber production. In such cases, the land remains eligible
for productivity appraisal until the owner clearly shows an intent to give
up timber operations permanently.]
[(8)
This principle also applies when damage is done to part
of a tract. If a fire destroys 500 acres of a 3,000 acre forest--forcing the
owner to temporarily cease timber operations on the 500 acres--the owner should
continue to receive productivity appraisal on the destroyed part of the tract.
In years of severe drought, many timber growing operations fail. Because the
owner invested money in the failed operation, planting may be delayed because
money to start an new operation may not be available. Here as well, the land
should continue to qualify until the owner clearly shows that timber production
will no longer take place on the land.]
[(9)
Filing documents to plat land does not trigger imposition
of a rollback. Only evidence that the actual use of the land has changed triggers
the rollback. Plat documents provide some evidence of an intent to change
use, but a physical change must occur, such as ceasing timber operations or
installing utilities. Even in that case, the change of use may affect only
part of the platted land. If the owner ceases timber operations on part of
the platted land, only that part of the land is subject to rollback taxes.]
[(10)
An owner who is required to reapply for productivity
appraisal but who fails to do so may lose his or her eligibility, but will
not suffer a rollback. Rollback requires an affirmative change of use. Failure
to reapply alone does not signal an affirmative use change.]
[(11)
Some changes to a different type of use do not trigger
imposition of a rollback. Changing from timber use to an agricultural use
that qualifies land for 1-d or 1-d-1 appraisal does not trigger a rollback.
Property condemned or sold for right of way is not subject to a rollback even
if its use changes. Filing a waiver of timber use appraisal with the appraisal
district will not trigger a rollback if the use does not change.]
[(12)
Chief appraisers must use great care in determining when
a change of use triggers a rollback. The imposition of a rollback is a serious
economic penalty that should not be imposed when circumstances beyond a property
owner's control cause an abnormally long but temporary suspension of timber
production. Chief appraisers must keep in mind that change of use issues are
often unclear and require a delicate balance between fair applications of
the law and good decisions based on the facts of each situation.]
[(13)
The chief appraiser determines if and when the change
of use occurs and must send the owner written notice of the determination.
The notice must explain the owner's right to protest the determination.]
[(14)
The owner may protest the change of use decision by filing
a protest with the appraisal review board within 30 days after the notice
is mailed. The appraisal review board must hear a timely protest even if appraisal
records have been approved for the year.]
[(15)
There are a number of ways for a chief appraiser to determine
if a change of use has occurred. He or she may learn of a change of use from
the owner's written notification, other filed transactions (such as a sale,
issuance of a building permit), field observations, or word of mouth.]
[(16)
The rollback covers the five calendar years preceding
the year in which the change in use occurred. For example, if the use changed
in 1995, the rollback covers 1994, 1993, 1992, 1991, and 1990. The preceding
years are based on the use from January through December and not on the tax
collection periods.]
[(17)
The tax portion of the rollback is the difference between
the taxes paid under productivity appraisal and the taxes that would have
been paid on the market value of the land each year. For example:]
[
[(18) The assessor for each taxing unit must add 7.0% annual
interest on these amounts from the date these taxes would have become due
each year. The due date for each year is the date tax bills were mailed that
year, which is normally October 1. Discounts for early payment do not apply
to rollback taxes--discounts apply only to ordinary property taxes. The assessor
must compute interest from the date the difference would have become due (normally
October 1) to the date the change of use occurs.]
[(19)
Assuming that the use changed November 1, 1995, and that
the assessor mailed tax bills on October 1 each year, the interest is calculated
as follows:]
[Figure 2: 34 TAC 9.4011 (d)(19)]
[(20)
The five-year rollback period may cover one or more years
when the property did not qualify for timber use appraisal. If the property
used in the example in paragraph (19) of this subsection had been taxed on
market value in 1993, the rollback tax would have been computed for 1994,
1992, 1991, and 1990.]
[(21)
The rollback is due when the rollback tax bill is mailed.
It becomes delinquent if not paid before the February 1 that is at least 20
days after the tax bill is mailed. For example, if the rollback tax bill is
mailed on January 9, 1996, it becomes delinquent on the February 1, 1996,
because there are 20 days between February 1 and January 9. However, if the
bill is mailed January 30, 1996, it becomes delinquent February 1, 1997. On
the delinquency date, the entire amount begins to draw penalty and interest
at the same rate as other delinquent taxes.]
[(22)
A tax lien attaches to the land on the date the use changes.
The lien is imposed on behalf of all taxing units that levy taxes on the timberland.
The lien covers payment of the additional tax, interest, and any penalties.]
[(23)
The sale of timber property does not trigger a rollback
tax. If land is sold and also changes use at the same time, the buyer and
seller may dispute liability. Under the law, the person who has title to the
property on the date the use changes is personally liable for the rollback,
but the lien may be foreclosed against the land regardless of who is liable
for taxes. Tax certificates on land that receives productivity appraisal must
note the appraisal and state that the land may be subject to additional taxes.]
[(24)
Organizations that are exempt from ordinary property
taxes are not exempt from the rollback. If qualified timberland is sold to
an exempt organization and the organization continues timber use on the land,
it continues to be exempt from property taxes. However, if the organization
takes the property out of timber use, the rollback is triggered. In most cases,
the tax lien can be enforced against the property.]
[(25)
Where the state or a political subdivision buys the land
and changes the use, the rollback will be triggered but the lien cannot be
foreclosed. The rollback cannot be collected unless the governmental entity
chooses to pay it. However, the lien against the land continues and could
be enforced against a later buyer.]
[(26)
If land changes from a qualifying use to a non-qualifying
use after the appraisal review board has approved the appraisal records, the
land is assessed for the difference between the property's market value and
its timber use value for the current year's taxes. This assessment is in addition
to the rollback taxes and interest due.]
[(27)
The tax-assessor sends a supplemental bill for current
taxes on the added value. This amount becomes delinquent on the same date
as the original tax bill for the property. If those original taxes have been
paid, the supplemental bill becomes delinquent on February 1 of the year following
the date the bill is mailed or the first day of the next following month that
allows the property owner 21 days to pay the tax, whichever is later.]
[(28)
A property owner who willingly ceases timber production
on land that is receiving timber use appraisal or diverts his timberland to
non-timber use must notify the appraisal district in writing of this change
in use before May 1 after the change. If the property owner fails to notify
the appraisal district of this change in use, the chief appraiser must impose
a penalty on the property equal to 10% of the difference between the taxes
levied on the property in each year it was erroneously allowed appraisal and
the taxes that should have been levied. This penalty is in addition to the
rollback and is similar to the penalty for property left off the roll (omitted
property). The chief appraiser must notify the landowner in writing of the
imposition of a penalty and explain the procedures for protesting the penalty.]
[(29)
The period for back assessing taxes for erroneously granted
productivity appraisals is limited to five years. Landowners may incur other
liabilities in addition to the penalty for failure to notify. For example,
if qualified timberland was taken out of timber use in January, 1990, but
the chief appraiser did not learn of this until 1995, the landowner would
owe the following:]
[(A)
the rollback taxes and interest, computed on the five
years covering the 1985-89 period;]
[(B)
regular delinquent penalty and interest under the Property
Tax Code, §33.01, for the rollback tax bill that became delinquent February
1, 1991;]
[(C)
additional "omitted" taxes equal to the difference between
the taxes actually paid (or assessed) and the taxes due for the tax years
1990-1994 as omitted property value, required by Property Tax Code, §23.75(j)
and §25.21;]
[(D)
interest at 1.0% per month for each year of the 1990-1994
period on the additional "omitted" taxes as required by Property Tax Code, §26.09(d);
and]
[(E)
a "no notice" penalty equal to 10% of the additional "omitted"
taxes due for the 1990-1994 period as required by Property Tax Code, §23.75(h).]
[(30)
Therefore, taxpayers should take great care to notify
their chief appraisers as soon as they permanently cease timber operations.
Otherwise, they may face heavy liabilities for failure to notify.]
[(e)
The appraisal process for timberland.]
[(1)
The productivity value of an acre of timberland equals
the average annual net income a prudent manager could earn from growing timber
over the five-year period preceding the appraisal's effective year, divided
by a statutory capitalization rate. Net income has two parts: gross income
and production cost.]
[(2)
Gross income is calculated by computing potential average
annual timber growth per acre and multiplying this amount by timber's average
annual market price for that year. This computation is performed for each
year of the five-year period.]
[(3)
The average annual cost of producing timber in each of
the five years is subtracted from gross income to find net income for the
year.]
[(4)
Average annual net income is computed by averaging net
income for each year of the five-year period. This five-year average annual
net income is then divided by the statutory capitalization rate to produce
the productivity value of timberland. Timberland's productivity value is determined
in ten basic steps:]
[(A)
classify timberland into three forest types;]
[(B)
classify timberland into four soil types;]
[(C)
estimate average annual timber growth;]
[(D)
convert timber growth into units for estimating gross
income;]
[(E)
estimate average annual timber prices;]
[(F)
estimate average annual potential gross income of timber
growth;]
[(G)
estimate average annual costs of producing timber;]
[(H)
estimate net income of timber growth;]
[(I)
capitalize net income by statutory rate to develop per
acre timber values; and]
[(J)
apply timber values to timber acreage within the district.]
[(5)
The law requires chief appraisers to estimate timber productivity
values for three forest types and four soil types, and apply these values
to the different classes of timber within their respective districts. (At
most, an appraisal district may have 12 classes of timber--four soil types
for each of three forest types. Some districts may not have 12 classes of
timber. For example, a district that contained only pine forest might have
four classes of timber: pine soil class 1, pine soil class 2, pine soil class
3 and pine soil class 4.)]
[(6)
Figure 6: 34 TAC 9.4011(g) through Figure 36: 34 TAC 9.4011(g)
illustrate this methodology, and the text frequently refers to these Figures.]
[(7)
The Property Tax Code, §23.71, requires chief appraisers
to use "the land's potential average annual growth" in computing timber's
gross income. In this context, the word "potential" does not mean actual--it
means "possible." Consequently, the gross income of an acre of timberland
is equal to the value of an average year's worth of possible growth. Chief
appraisers must apply the value of a year's worth of possible growth to all
timber in each forest and soil type category, irrespective of the size of
trees on any one tract.]
[(8)
The result of defining gross income as the value of potential
growth often confuses many timber growers, because trees of dramatically different
ages and sizes may have the same values. Assume, for example, two tracts of
timber, both planted in loblolly pine and both having the same soil type and
other characteristics. One tract has pine seedlings six inches high from a
recent replanting; the other has pine trees 80 feet high and ready for harvest.
If the chief appraiser is following the law's requirements on timber appraisal,
both tracts should have the same appraised values per acre.]
[(9)
The law uses the land's potential income because the tax
is a property tax. If individual tracts were appraised on their individual
incomes, the tax would be an unconstitutional income tax.]
[(10)
The Property Tax Code, §23.71, requires chief appraisers
to use information from five different sources to determine forest types,
soil types, average growth and timber prices. These are:]
[(A)
United States Department of Agriculture (USDA) Forest
Service;]
[(B)
United States Department of Interior Geological Survey;]
[(C)
United States Department of Agriculture (USDA) Natural
Resources Conservation Service (formerly the Soil Conservation Service);]
[(D)
Texas Forest Service; and]
[(E)
Texas colleges and universities.]
[(11)
These sources are mandatory and are described in subsection
(f) of this section. The one exception to this requirement is discussed below
in paragraph (18) of this subsection.]
[(12)
As noted earlier in subsection (c) of this section, the
Property Tax Code, §6.12, requires chief appraisers to appoint an "agricultural
appraisal advisory board." The function of this advisory board is to advise
the chief appraiser on the use and valuation of timberland and agricultural
land within the district. However, the board's advice on the appraisal of
timberland does not take precedence over the law's requirements on data sources
or the appraisal methodology set out in this subsection.]
[(13)
Before using data from any of these mandatory sources,
chief appraisers should check with the relevant agency for updates. For example,
the USDA Forest Service may periodically revise its published Texas timber
survey numbers. The agency makes these revisions available to the Texas Forest
Service. Chief appraisers should check with the Texas Forest Service for revisions
to the Texas timber survey numbers before they use the survey data. In addition,
chief appraisers should not use data from any of these sources in any manner
different from that shown in this manual without first checking with the relevant
agency to be sure they are using the data properly.]
[(14)
Texas has two timber regions: northeast and southeast.
Figure 6: 34 TAC 9.4011(g) contains a map of east Texas counties showing the
boundaries of the northeast and southeast timber regions. Chief appraisers
must use regional data that correspond to their county's location when using
USDA Forest Service survey data and Texas Forest Service price data. Although
the USDA Forest Service reports its Texas survey data at the county level,
this agency cautions that the county data are not reliable because of large
sampling errors. In its 1992 survey of Texas timber, the USDA Forest Service
used sampling methods designed to achieve reasonable sampling errors and reliable
estimates at the state level. Future USDA Forest Service surveys of Texas
timber may be designed to produce growth estimates that are reliable at the
county level. If USDA Forest Service states that its data are reliable at
the county level, the comptroller will work with appraisal districts and taxpayers
to develop standards for use of county level growth data. The Texas Forest
Service reports forest product price data at the region level but not at the
county level.]
[(15)
The comptroller may revise this map if updated data become
available. Chief appraisers will be notified if an updated map becomes available.]
[(16)
The Property Tax Code, §23.71, requires chief appraisers
to estimate timber productivity values for three forest types and four soil
types. Chief appraisers should begin the appraisal process by classifying
the timberland within their districts according to forest type. There are
three basic forest types in Texas: pine, hardwood and mixed. These are as
follows.]
[(A)
Pine (and other softwood) timberland includes all forested
areas in which the trees are predominately green throughout the year and do
not lose their leaves. These trees are called evergreens. Forested areas where
pine and other softwoods make up more than two-thirds of the trees free to
grow are in this category.]
[(B)
Hardwood timberland includes all forested areas with a
predominance of deciduous trees. These trees lose their leaves at the end
of the frost-free season. Stands where hardwoods are more than two-thirds
of the trees free to grow are in this category. Trees free to grow are those
that are not covered by brush or other trees that prevent them from getting
the sunlight necessary to grow.]
[(C)
Mixed timberland includes all forested areas where both
evergreen and deciduous trees are growing and neither predominates. An area
is classified as mixed when evergreen and deciduous trees each make up more
than one-third of the trees.]
[(17)
The Texas Agricultural Experiment Station at Texas A&M
University in College Station has developed maps of forest types for Texas
timber counties. These maps are available upon request for a nominal fee to
cover reproduction costs.]
[(18)
In addition, chief appraisers may use aerial photographs,
forest type maps and soil class maps from any governmental source that is
recognized as competent to determine soil type, soil capability, general topography,
weather, location and any other pertinent factors necessary to classify commercial
timberland by forest type and soil type. If the chief appraiser elects to
use maps from a data source not listed in subsection (f) of this section,
the chief appraiser should exercise great care to be certain that the maps
are the most current and reliable maps available and that the data source
of the maps is a competent governmental source.]
[(19)
The law requires chief appraisers to classify all timber-producing
areas in their districts into four soil types. The chief appraiser should
use data from the USDA Natural Resources Conservation Service (NRCS) soil
surveys to develop soil type maps for his or her district. The NRCS does not
publish soil type maps that the chief appraiser may use in appraising timberland.
However, the Texas Agricultural Experiment Station at Texas A&M University
has used the soil surveys to develop soil type maps for timberland within
most timber-producing counties in Texas. These maps are available upon request
for a nominal fee to cover reproduction costs. Before using soil type maps,
chief appraisers should be certain that the data used to develop the maps
are appropriate for classifying soil for timber appraisal purposes.]
[(20)
Where soil maps based on appropriate NRCS data are not
available, or if the chief appraiser chooses to develop his or her own soil-type
map, the chief appraiser may use NRCS detailed soil surveys, if available,
to develop soil-type maps. These detailed soil surveys show the site index
(discussed later in this section) for each specific soil. A soil-type map
can be derived using this information.]
[(21)
The NRCS's soil classification system is based on the
concept of site index. Site index is a measure of the productive capacity
of a forest site based on the average height of the tallest trees on the site
at an arbitrarily chosen age. For example, if the average height of the five
tallest loblolly pine trees in a fully stocked stand at the age of 50 years
is 75 feet, the site index for loblolly pine trees on that forest site is
75. The NRCS publishes site index information in its soil surveys of Texas
counties.]
[(22)
The NRCS soil surveys provide site index information
for all land capable of growing commercial trees within each county. The NRCS
site index data must be grouped into types that are generally comparable to
the USDA Forest Service site classes, and this information should then be
used to generate soil type maps. This is necessary because the USDA Forest
Service reports timber growth data by site class, which is also a measure
of soil productivity. However, the USDA Forest Service growth data by site
class cannot be mapped since they were derived from a sample of selected sites
in Texas.]
[(23)
The USDA Forest Service classifies all commercial timberland
into five site classes based on the land's potential capacity to grow commercial
wood crops. Site class is a measure of timber growth in cubic feet per year.
The USDA Forest Service determines site class by measuring the height of the
three tallest trees at a particular site, and then selecting the tree providing
the highest estimate of site class. The USDA Forest Service has defined these
five site classes as follows:]
[(A)
land capable of producing more than 165 cubic feet per
acre per year;]
[(B)
land capable of producing 120-165 cubic feet per acre
per year;]
[(C)
land capable of producing 85-120 cubic feet per acre per
year;]
[(D)
land capable of producing 50-85 cubic feet per acre per
year; and]
[(E)
land capable of producing less than 50 cubic feet per
acre year.]
[(24)
To comply with the law's requirement to use four soil
types, chief appraisers must reduce these five site classes to four. The over
165 cubic feet site class should be combined with the 120-165 cubic feet site
class to produce the mandatory four soil types, because this produces a classification
scheme that works well with NRCS site index data discussed below. The site
index data compiled by the Natural Resources Conservation Service show virtually
no trees with a site index of 110 and above, which is the equivalent of site
class 165 and above. Consequently, if the top two USDA Forest Service site
classes were kept separate and the two lower site classes were combined, there
would be no NRCS data for the "over 165 site class" in most of Texas. As explained
below, the NRCS data are necessary to develop soil type maps. In this manual,
this combined site class is called the over 120 cubic feet site class.]
[(25)
As noted earlier, the NRCS site index data must be grouped
into ranges that are roughly comparable with USDA Forest Service's soil types.
This grouping produces the following ranges: USDA Forest Service Site Classes:
Over 120 cu. ft.; 85-120 cu. ft.; 50-84 cu. ft.; Under 50 cu. ft. USDA NRCS
Site Index Range: Over 95 ft.; 80-95 ft.; 60-79 ft.; Under 60 ft.]
[(26)
Chief appraisers must use growth data from private timberland
that is the most current and reliable data available from one of the sources
required by law. (See subsection (f) of this section for a discussion of these
sources.) At the time this manual was written, the most current and reliable
growth data available was the 1992 survey of Texas timber conducted by the
USDA Forest Service. When the USDA Forest Service revises the published data,
it makes the revisions available to the Texas Forest Service for distribution
upon request. Before using any of the Texas survey data, chief appraisers
should check with either the USDA Forest Service, Southern Forest Experiment
Station, Forest Inventory and Analysis Unit in Starkville, Mississippi, or
the Texas Forest Service in College Station for revisions. Figure 7: 34 TAC
9.4011(g) contains summary growth data for private timberland from the 1992
Texas survey. These data, which were prepared by the Texas Forest Service,
show the average annual growth of Texas timber during the 1986-1992 period.
The Texas Forest Service, located in College Station, maintains Texas Forest
survey data collected by the USDA Forest Service. This growth is expressed
in terms of four forest products for each of three forest types and four site
classes for each Texas timber region. Chief appraisers should use the data
in Figure 7: 34 TAC 9.4011(g) to calculate the average annual growth per acre
for each forest type expressed in terms of forest products.]
[(27)
The forest products are pine sawtimber, pine pulpwood,
hardwood sawtimber and hardwood pulpwood, and the forest types are pine, mixed
and hardwood. To avoid confusion, it is important to remember that pine forests--defined
in subsection (e)(15)(A) of this section to be at least two-thirds evergreen
trees--may produce both pine and hardwood forest products. Likewise, hardwood
forests--defined to be at least two-thirds deciduous trees--may product both
pine and hardwood products.[
[(28)
Figures 8-10: 34 TAC 9.4011(g) shows these calculations
for northeast Texas region; Figures 11-13: 34 TAC 9.4011(g) shows comparable
calculations for southeast Texas. All calculations are based on the data in
Figure 7: 34 TAC 9.4011(g). Figures 8-10: 34 TAC 9.4011(g) shows the steps
necessary to compute growth for an average acre of pine in northeast Texas.
For pine sawtimber, for example (the forest product shown in the upper left-hand
box), the chief appraiser should multiply the number of plots in each site
class by the per acre growth for that site class. A "plot" is an area defined
by the USDA Forest Service for its survey work. Multiplying 95 (number of
plots) by 478.13 (average growth per acre in board feet) in site class "120+"
produces 45,422.35, which is the estimated total growth for this site class.
The result of each calculation for the four different site classes is added
and this sum is divided by the total number of plots for all four site classes.
The resulting number, 357.31 board feet, is the average annual amount of pine
sawtimber grown on the average acre of pine in northeast Texas.]
[(29)
The computations necessary to calculate the average annual
growth of the other forest products--pine pulpwood, hardwood sawtimber and
hardwood pulpwood--are identical to those for pine sawtimber. Figure 8: 34
TAC 9.4011(g) shows that the average acre of pine forest in northeast Texas
grows annually 357.31 board feet of pine sawtimber, 20.37 board feet of hardwood
sawtimber, 28.54 cubic feet of pine pulpwood and 4.86 cubic feet of hardwood
pulpwood.]
[(30)
The chief appraiser should use these same procedures
to compute the average annual growth of an average acre of both mixed and
hardwood forests in the rest of northeast Texas. Identical calculations should
be used for all forest types in southeast Texas. Complete calculations for
all forest types are shown in Figures 8-13: 34 TAC 9.4011(g) for northeast
and southeast Texas. The results of the detailed calculations illustrated
in Figures 8-13: 34 TAC 9.4011(g) are summarized in Figure 14: 34 TAC 9.4011(g).]
[(31)
As shown in Figures 7-14: 34 TAC 9.4011(g), the USDA
Forest Service measures sawtimber growth estimates in the International 1/4
inch log rule and measures pulpwood growth estimates in cubic feet. (A "log
rule" is a scale for measuring the amount of sawtimber that can be produced
from a tree. There are dozens of recognized log rules in use in the United
States, and each is based on various assumptions about tree taper, lumber
shrinkage, cutting methods, and waste. The two log rules that are of interest
to the chief appraiser are the International one-fourth inch--used by the
USDA Forest Service--and the Doyle log rule, used by the Texas Forest Service.)
The Texas Forest Service collects timber sales data bi-monthly from timber
buyers and sellers; however, buyers and sellers report sawtimber transactions
in the Doyle log rule and pulpwood transactions in cords. Consequently, the
next step in the appraisal process is conversion of the growth estimates to
the same scales in which forest product selling prices are reported.]
[(32)
The chief appraiser must use a log rule conversion table
to develop factors to convert sawtimber growth from one log rule to another.
Figures 15 and 16: 34 TAC 9.4011(g) contain factors for converting board feet
from the International 1/4 inch log rule to the Doyle log rule for northeast
Texas and southeast Texas, respectively. The individual conversion factors
shown in the fifth column of these tables are for Texas timber. Chief appraisers
should use these log rule conversion factors until subsequent log rule conversion
factors are developed based on reliable and scientific data from sources listed
in subsection (f) of this section and the factors are approved by the comptroller.]
[(33)
The first two columns in Figure 15: 34 TAC 9.4011(g)
are from the 1992 USDA Forest Service survey and show timber volumes by tree
diameter class in northeast Texas. The fourth column, titled percent of total
volume, shows volume for each diameter class as a percent of total volume.
At the top of Figure 15: 34 TAC 9.4011(g), for example, the reported volume
for pine in diameter class 9-10.9 inches is 1,708.5 million board feet. The
1,708.5 million board feet is divided by total volume, 11,947.8 million board
feet, to produce the percentage figure of 0.1430. The fifth column, titled
conversion factor, is for Texas timber. The percentage and conversion factor
for each diameter class are multiplied to produce the weighted contribution
shown in the sixth column. Finally, these weighted contributions are added
to produce the weighted conversion factor for pine in northeast Texas, which
is 0.58817. The computations for the other conversion factors are identical.
The timber volume data shown in both tables are for privately-owned timberland.]
[(34)
After calculating the weighted conversion factors for
sawtimber as illustrated in Figures 15 and 16: 34 TAC 9.4011(g), chief appraisers
should apply these conversion factors to the sawtimber growth estimates summarized
in Figures 14: 34 TAC 9.4011(g). The results of these computations are shown
in Figures 17 and 18: 34 TAC 9.4011(g). In northeast Texas, for example (Figure
17: 34 TAC 9.4011(g)), the chief appraiser should multiply 357.31 board feet
of pine sawtimber in the International 1/4 inch log rule (from Figure 14:
34 TAC 9.4011(g)) by the weighted conversion factor of 0.58817 to get 210.16
board feet of pine sawtimber in the Doyle log rule. To convert the 210.16
board feet to thousand board feet, the chief appraiser should divide 210.16
by 1,000 to get 0.210. The computations for hardwood sawtimber are identical.]
[(35)
In addition, the pulpwood growth volumes shown in Figure
14: 34 TAC 9.4011(g) must be converted from cubic feet into cords because
pulpwood prices are reported in cords. The chief appraiser should use the
pulpwood conversion factors provided by the Texas Forest Service in its bi-monthly
publication, Texas Timber Price Trends. In the September-October, 1994 edition
of Texas Timber Price Trends, the suggested conversion factors for pine pulpwood
and hardwood pulpwood are 81 and 80, respectively. The results of these calculations
also are presented in Figures 17 and 18: 34 TAC 9.4011(g).]
[(36)
Figure 19: 34 TAC 9.4011(g) summarizes the annual average
growth of an acre of timberland by forest type and forest product in both
northeast and southeast Texas. Sawtimber growth is shown as thousand board
feet (MBF) in the Doyle log rule, while pulpwood growth is shown as cords.
As shown in this table, for example, the average annual growth of an acre
of pine forest in northeast Texas is:]
[(A)
0.210 MBF (thousand board feet) of pine sawtimber;]
[(B)
0.013 MBF of hardwood sawtimber;]
[(C)
0.35 cords of pine pulpwood; and]
[(D)
0.06 cords of hardwood pulpwood.]
[(37)
To determine the average annual gross income from an
acre of timber, the chief appraiser should multiply timber growth by its average
annual price, or stumpage price. Stumpage price is the terminology used to
indicate the price of uncut, marketable timber. Before doing this, however,
the chief appraiser must calculate the average annual stumpage price of each
of the four forest products for each year of the five-year period preceding
the year of appraisal.]
[(38)
A readily available source of stumpage price data is
the Texas Forest Service, located in College Station, Texas. The Texas Forest
Service is also an official source of data for timber appraisal. This agency
collects timber prices in its bi-monthly surveys of forest industries, consulting
foresters, government agencies and large landowners and publishes selected
summaries of price data in its publication Texas Timber Price Trends. The
Texas Forest Service also provides summaries of average annual stumpage prices
of various forest products by region for various years. It does not provide
data at the county level. This publication reports selected price data for
pine and hardwood sawtimber sales, pine and hardwood pulpwood sales and other
miscellaneous sales. Unpublished annual summaries of price data at the regional
level are available upon request.]
[(39)
The Texas Forest Service reports both unweighted average
annual prices and weighted average annual prices for various forest products
for both northeast and southeast Texas. These price reports are available
upon request from the Texas Forest Service. Chief appraisers should compute
a simple average of these two reported prices and use this simple average
in their timber appraisals.]
[(40)
Figures 20 and 21: 34 TAC 9.4011(g) show how to calculate
average annual stumpage prices for four forest products for each year of the
1990-1994 period. In northeast Texas, for example (Figure 20: 34 TAC 9.4011(g)),
the average price for pine sawtimber in 1990 was $169.53 per thousand board
feet (MBF); in 1991, $182.17 per MBF; in 1992, $241.52 per MBF, etc.]
[(41)
Chief appraisers should calculate the average annual
potential gross income of timber growth using three steps. The steps in this
calculation are:]
[(A)
compute average annual gross income;]
[(B)
calculate soil productivity multipliers; and]
[(C)
use soil productivity multipliers to adjust average annual
gross income to potential gross income.]
[(42)
First, the chief appraiser should multiply the growth
of each of the four timber products (from Figure 19: 34 TAC 9.4011(g)) by
its respective price (from Figures 20 and 21: 34 TAC 9.4011(g)) for each year
of the five-year period. Figures 22 and 23: 34 TAC 9.4011(g), show these calculations
for northeast and southeast Texas, respectively. As shown in Figure 22: 34
TAC 9.4011(g), for example, the average annual gross income for an acre of
pine forest in northeast Texas was $44.11 in 1990 and $91.93 in 1994. These
numbers were computed by multiplying each forest product growth estimate by
its respective price and then summing the products. Although the Property
Tax Code, §23.51(4), allows the chief appraiser to include "any income
received from hunting or recreational leases" in the computation of net income
of qualified agricultural land, nothing in the Code's sections (23.71-23.79)
governing timber appraisal allows inclusion of lease income in the computation
of net income of qualified timberland.]
[(43)
Next, the chief appraiser must adjust these gross income
estimates to reflect different soil productivities. To do this, the chief
appraiser should develop productivity multipliers to adjust the average gross
income. Productivity multipliers must be computed from statutory data sources
that are current and reliable. (As noted earlier, subsection (f) of this section
contains a listing of official data sources.) At the time this manual was
written, USDA Forest Service data were the only current and reliable data
available for developing soil productivity multipliers.]
[(44)
The USDA Forest Service data needed to compute productivity
multipliers are:]
[(A)
the most recent forest survey data for Texas; and]
[(B)
data contained in the Boyce study, conducted by the USDA
Forest Service.]
[(45)
The Boyce study, named after one of its authors, determined
in 1975 the average annual maximum potential amount of timber that could be
produced on an acre of loblolly pine east of the Mississippi River in each
of four soil productivity classes. The soil productivity classes used in the
Boyce study correspond to the soil classification scheme developed in paragraphs
(19)-(25) of this subsection. Combining that soil classification scheme with
the Boyce study productivity classes produces the following:]
[
[(46) The concepts of site quality class and site index range
were discussed earlier. "Potential timber growth per acre per year" are the
Boyce study estimates of the maximum potential growth of an acre of loblolly
pine in each soil productivity class under ideal conditions.]
[(47)
Figures 24 and 25: 34 TAC 9.4011(g), show how to compute
the average annual potential growth of an average acre. The top part of Figure
24: 34 TAC 9.4011(g) lists acres by site class for each county in northeast
Texas. These data are from the 1992 USDA Forest Service survey of Texas. The
bottom part of Figure 24: 34 TAC 9.4011(g) shows the results of multiplying
the acreage in each site class in each county by the growth potentials developed
in the Boyce study.]
[(48)
For example, the 15,300 acres in site class 165+ in Anderson
County (Figure 24: 34 TAC 9.4011(g)) are multiplied by 163 (the growth potential
for that site type). The result, shown in the lower half of the table, is
2,493,900 cubic feet. This calculation is carried out for all site classes
in each county. The resulting products are added to produce 606,729,100 cubic
feet, which is the estimated total potential growth of timberland in northeast
Texas. This total estimated potential growth is divided by the total number
of acres, 4,897,100, to generate an estimate of the average annual potential
timber growth of an acre of timberland in northeast Texas of 123.9 cubic feet
per acre per year. As noted earlier, "average annual potential growth" is
not the same as "average annual actual growth."]
[(49)
Computations for southeast Texas are identical and are
shown in Figure 25: 34 TAC 9.4011(g).]
[(50)
Figure 26: 34 TAC 9.4011(g), shows how to calculate soil
productivity multipliers for the four productivity classes for northeast and
southeast Texas. Chief appraisers should compute these productivity multipliers
by dividing the growth potentials from the Boyce study by the growth potential
for each region. To compute the productivity multiplier for productivity class
II timberland in northeast Texas, for example, the chief appraiser should
divide 123 by 123.9 to generate a productivity multiplier of 0.99. The chief
appraiser should compute the productivity multiplier for class II timberland
in southeast Texas by dividing 123 by 122.3, which yields a multiplier of
1.01.]
[(51)
Figures 27 and 28: 34 TAC 9.4011(g), show chief appraisers
how to apply productivity multipliers to the average annual gross income estimates,
which were developed in Figures 22 and 23: 34 TAC 9.4011(g). In northeast
Texas in 1990, for example, the annual gross income of pine, $44.11, is multiplied
by the productivity multiplier for each productivity class. This produces
estimates of the average annual potential gross income of each productivity
class in 1990.]
[(52)
It is important to remember that this "potential gross
income" measure is not an estimate of the actual income an individual timber
grower could receive from the sale of timber in a particular year. It is a
measure of the value of a year's worth of possible growth in each timber category
(forest type and soil productivity class) in the region.]
[(53)
Texas law defines timber production costs as reasonable
management costs and other reasonable expenses directly attributable to producing
timber. The costs of producing timber are expenses related to establishing,
owning, protecting, maintaining, and improving timber. These costs may vary
by forest type, soil productivity, management intensity and other factors.]
[(54)
Timber production costs include professional services,
site preparation, tree planting and seeding, timber improvement, protection
against fire, insects and diseases, prescribed burning, maintenance of property
boundaries, road construction and maintenance, measurements of standing timber,
selling costs, property taxes, equipment use, mileage traveled to/from property
for timber management, personnel supervision and administration. Since many
foresters may include several activities under one general classification,
chief appraisers should understand the components of a particular timber management
activity to avoid duplicating or omitting costs.]
[(55)
The cost model in Figure 37: 34 TAC 9.4011(h) lists timber
management activities and a typical frequency for each activity. The chief
appraiser should use this general cost model as a basis for developing a district-specific
cost model that reflects typical activities for a prudent manager in the district.
Chief appraisers may add or delete activities to this model so that it reflects
management activities that are typical for their respective counties districts.]
[(56)
After determining typical management activities and the
frequency of each activity in the district, the chief appraiser should estimate
the average annual cost of each activity. Sources of cost data are the Texas
Forest Service, landowners within the district, private contractors, consulting
foresters, and departments of forestry in Texas colleges and universities.
The chief appraiser must develop costs that reflect typical management activities
and typical frequencies for a prudent manager in the district.]
[(57)
Chief appraisers may develop an average, per acre cost
for all timberland or an average, per acre cost for each type forest type.
In either case, chief appraisers must adjust these costs to reflect different
management costs for each category of timber. This is done because timber
on more productive land is often managed more intensively, resulting in higher
costs per acre. Adjusting average annual costs per acre for soil productivity
classes is analogous to adjusting average annual gross income per acre to
soil productivity classes, as discussed in paragraphs (41)-(52) of this subsection.]
[(58)
Chief appraisers who develop one average cost for all
timberland must adjust this cost to reflect both forest type and soil productivities.
To accomplish this, chief appraisers may use the following cost proration
factors developed by the Texas Agricultural Experiment Station:]
[
[(59)
Figure 29: 34 TAC 9.4011(g) shows hypothetical costs
for a hypothetical county in northeast Texas and in southeast Texas. The numbers
in this table were created to illustrate the timber appraisal process, and
chief appraisers should not use these numbers in their appraisals.]
[(60)
Figures 30 and 31: 34 TAC 9.4011(g) show the results
of applying these cost proration factors to the hypothetical costs shown in
Figure 29: 34 TAC 9.4011(g). The chief appraiser should note that these cost
proration factors are applied to an average cost for all timberland. The proration
factors adjust costs for both forest type and soil productivity class.]
[(61)
If chief appraisers develop an average cost for each
forest type, they must adjust each of these costs to reflect the impact of
different soil productivity classes. To accomplish that, chief appraisers
may apply the relationships within soil classes above to make the adjustments.
For example, assume that the chief appraiser determines that the average annual
management cost of hardwood is $8.00 and that most of the hardwood in the
district in soil class II. This $8.00 figure becomes the management cost for
hardwood soil class II. The management cost for hardwood soil class I would
be $8.00 x 1.25, or $10.00. The 1.25 factor is derived by taking the relationship
from the factors for hardwood in Figure 5 of paragraph (58) of this subsection,
which is 0.75/0.60 = 1.25.]
[(62)
The management cost for hardwood soil class III would
be $8.00 x 0.75, or $6.00. The 0.75 is the quotient of 0.45 divided by 0.60.
The proration factor for hardwood soil class IV would be 0.30/0.60 = 0.50
and the management cost would be $8.00 x 0.50 = $4.00.]
[(63)
To calculate the average annual net income per acre for
each timber type and soil productivity class, the chief appraiser must subtract
the average annual cost per acre from the average annual potential gross income
per acre. This calculation must be performed for each forest type and soil
productivity class. The results are the average annual net income per acre
by forest type and soil productivity class. Figures 32 and 33: 34 TAC 9.4011(g)
show these computations for hypothetical counties in northeast and southeast
Texas, respectively.]
[(64)
To complete the timber appraisal process, chief appraisers
must develop an average net income for each forest type and soil productivity
class for the prior five years of average annual net incomes, capitalize this
average net income and apply these productivity values to the timber acreage
in their appraisal districts. Figure 34: 34 TAC 9.4011(g) shows how to perform
these calculations for hypothetical appraisal districts in both northeast
and southeast Texas.]
[(65)
The productivity value of an acre of timberland is determined
by dividing the average net income per acre for each forest type and productivity
class by the capitalization rate mandated by the Property Tax Code, §23.74.
The law sets the capitalization rate at the interest rate specified by the
Farm Credit Bank of Texas or its successor on December 31 of the preceding
year, plus 2-1/2 percentage points. Chief appraisers also may contact the
comptroller's property tax division to find out the current year's capitalization
rate.]
[(66)
Figure 34: 34 TAC 9.4011(g) shows the results of dividing
the net income per acre by a capitalization rate of 10.75%. For example, in
northeast Texas, pine forest, soil productivity class I, the chief appraiser
would divide $66.30, the net income per acre, by 0.1075, the capitalization
rate, to get $616.74, the productivity value of the average acre of pine forest
in soil productivity class I in northeast Texas. In southeast Texas, the chief
appraiser would divide $53.38 per acre by 0.1075 to get $496.56, the productivity
value of the average acre of pine in soil productivity class I. The chief
appraiser should perform these calculations for each forest type and each
soil productivity class in the appraisal district.]
[(67)
The chief appraiser should apply the per acre values
developed in paragraphs (64) and (65) of this subsection to the respective
acreages of each parcel of qualified timberland in each forest type and soil
productivity class in each taxing jurisdiction. Figures 35 and 36: 34 TAC
9.4011(g) show how to do this calculation for hypothetical counties in both
Northeast and Southeast Texas, respectively.]
[(68)
In determining the forest type and soil productivity
class of qualified timberland in the district, the chief appraiser should
use maps from one or more of the five official sources listed in subsection
(f) of this section. As noted earlier in paragraphs (16)-(18) of this subsection,
chief appraisers may use aerial photographs, forest type maps and soil class
maps from any governmental source that is recognized as competent to determine
soil type, soil capability, general topography, weather, location and any
other pertinent factors necessary to classify commercial timberland by forest
type and soil type. If the chief appraiser elects to use maps for classifying
timberland within his or her district from a data source not listed in subsection
(f) of this section, the chief appraiser should exercise great care to be
certain that the maps are the most current and reliable maps available and
that the source of the maps is a competent governmental source.]
[(f)
Data sources for the chief appraiser.]
[(1)
Chief appraisers are solely responsible for determining
timber productivity values within their respective appraisal districts. To
do so, they must obtain information on forest types, soil types, timber growth
and forest product prices from sources listed in the Property Tax Code. While
the following sources provide information on which to base determinations,
the chief appraiser bears ultimate responsibility for determining timberland
productivity value.]
[(2)
United States Department of Agriculture (USDA) Natural
Resources Conservation Service (NRCS). The NRCS is the federal agency charged
with inventorying and classifying the nation's soils. This agency has detailed
soil surveys of Texas timber-producing counties which show the potential productivity
and site index of common trees in each soil series that is suitable for growing
commercial trees. This information may be used to generate soil productivity
maps.]
[(3)
United States Department of Agriculture Forest Service.
The USDA Forest Service is a branch of the United States Department of Agriculture.
This agency collects voluminous information about average timber growth and
forest characteristics in east Texas timber counties as part of its surveys
of east Texas timber. The USDA Forest Service publishes the results of these
surveys and makes much of the collected data available to the Texas Forest
Service.]
[(4)
United States Department of Interior Geological Survey.
The United States Geological Survey periodically publishes land use/land cover
maps, which classify forest types in a format useful for timberland appraisal.
The agency has negatives of panchromatic (showing all colors in the visible
color spectrum) aerial photographs and positive transparencies of color-infrared
aerial photographs.]
[(5)
Texas Forest Service (TFS). The Texas Forest Service (TFS)
is a state agency and has branch offices throughout the state's timber region.
TFS foresters help timber growers prepare management plans, giving priority
to those with long-term timber production goals who are interested in using
approved management practices, including cost-sharing. TFS headquarters are
located in College Station, where the agency publishes a bi-monthly report
of timber stumpage prices, called Texas Timber Price Trends. In addition,
TFS publishes an annual report of timber harvests called Harvest Trends. This
publication shows harvest information for each product and for each timber-producing
county in Texas. Finally, the TFS has data about timber growth that the agency
develops in cooperation with the United States Department of Agriculture Forest
Service.]
[(6)
Universities and colleges. The College of Forestry at
Stephen F. Austin State University in Nacogdoches, the Department of Forest
Science at Texas A&M University in College Station and other Texas colleges
of forestry and universities with forest science departments often have research-based
information unavailable from other sources. For example, personnel at the
Texas Agricultural Experiment Station at Texas A&M University have developed
forest type maps and soil productivity maps using United States Geological
Survey maps and USDA Natural Resources Conservation Service data, respectively.
These maps are available upon request for a nominal fee to cover reproduction
costs.]
[(g)
Appendix A contains Figures 6-22 which
are referred to in this section. (A map and Tables 1-16B).]
[Figure 5: 34 TAC 9.4011 (g)]
[Figure 6: 34 TAC 9.4011 (g)]
[Figure 7: 34 TAC 9.4011 (g)]
[Figure 8: 34 TAC 9.4011 (g)]
[Figure 9: 34 TAC 9.4011 (g)]
[Figure 10: 34 TAC 9.4011 (g)]
[Figure 11: 34 TAC 9.4011 (g)]
[Figure 12: 34 TAC 9.4011 (g)]
[Figure 13: 34 TAC 9.4011 (g)]
[Figure 14: 34 TAC 9.4011 (g)]
[Figure 15: 34 TAC 9.4011 (g)]
[Figure 16: 34 TAC 9.4011 (g)]
[Figure 17: 34 TAC 9.4011 (g)]
[Figure 18: 34 TAC 9.4011 (g)]
[Figure 19: 34 TAC 9.4011 (g)]
[Figure 20: 34 TAC 9.4011 (g)]
[Figure 21: 34 TAC 9.4011 (g)]
[Figure 22: 34 TAC 9.4011 (g)]
[Figure 23: 34 TAC 9.4011 (g)]
[Figure 24: 34 TAC 9.4011 (g)]
[Figure 25: 34 TAC 9.4011 (g)]
[Figure 26: 34 TAC 9.4011 (g)]
[Figure 27: 34 TAC 9.4011 (g)]
[Figure 28: 34 TAC 9.4011 (g)]
[Figure 29: 34 TAC 9.4011 (g)]
[Figure 30: 34 TAC 9.4011 (g)]
[Figure 31: 34 TAC 9.4011 (g)]
[Figure 32: 34 TAC 9.4011 (g)]
[
[
[
[
[(h)
Appendix B contains Figure 37 (Timber
Cost Model).]
[
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on February 9, 2004.
TRD-200400812
Martin Cherry
Chief Deputy General Counsel
Comptroller of Public Accounts
Earliest possible date of adoption: March 21, 2004
For further information, please call: (512) 475-0387
Chapter 25.
MEMBERSHIP CREDIT
Subchapter H. JOINT SERVICE WITH EMPLOYEES RETIREMENT SYSTEM
34 TAC §25.113
The Teacher Retirement System of Texas (TRS) proposes amendments
to §25.113 concerning transfer of credit between TRS and the Employees
Retirement System of Texas (ERS). The amendments are proposed to implement
House Bill 2359, 78th Texas Legislature, Regular Session, 2003, which repealed
Government Code §805.002(e) regarding reinstatement of service credit
cancelled by termination of membership that occurred after August 31, 1993.
The proposed amendments to §25.113 make corresponding changes to the
TRS rule relating to reinstatement of service credit for purpose of transfer
to ERS or TRS. Additionally, the amendments change the restriction on employment
after retirement from 30 days following retirement to the first full calendar
month following retirement to more closely correspond to the applicable statute
prohibiting employment after retirement in the first month following retirement.
The amendments are necessary for the proper and efficient administration
of the requirements of Government Code §805.002 and §824.005.
Tony C. Galaviz, TRS Chief Financial Officer, has determined that for each
year of the first five-year period the amendments are in effect there will
be no fiscal implications to state or local governments as a result of enforcing
or administering the rule.
Mr. Galaviz also has determined that for each year of the first five years
the amendments are in effect the public benefit anticipated as a result of
the section will be the appropriate implementation of the repeal of Government
Code §805.002(e) and of the provision of Government Code §824.005(b),
requiring revocation of retirement if a person becomes employed in the first
month following the person's effective date of retirement. There will be no
effect on small businesses. There are no anticipated economic costs to the
persons who are required to comply with the proposed amendments.
Comments on the proposal may be submitted to Ronnie Jung, Interim Executive
Director, Teacher Retirement System of Texas, 1000 Red River, Austin, Texas
78701. Comments must be received no later than 30 days after the date the
proposal is published in the
Texas Register.
The amendments are proposed under Government Code, Chapter 825, §825.102,
which authorizes the Board of Trustees of the Teacher Retirement System to
adopt rules for eligibility for membership, the administration of the funds
of the system, and the transaction of business of the Board. They are proposed
also under Government Code, Chapter 805, §805.009, which authorizes TRS
to adopt rules for the administration of Chapter 805 relating to credit transfer
between ERS and TRS.
Government Code §824.005 also is affected by the proposal.
§25.113.Transfer of Credit between TRS and ERS.
(a) - (f)
(No change.)
(g)
Reinstatement of withdrawn service credit.
(1)
An ERS member with at least 36 months service credit in
ERS may reinstate service credit in TRS that was canceled by the person's
withdrawal of a TRS membership account [
(2)
Such reinstatement of TRS credit shall be in the amounts
and rates applicable to TRS members eligible to repurchase such credit.
(3)
A TRS member with three years' service credit may reinstate,
through ERS, service credit canceled by withdrawal of an ERS membership account
[
(4)
No service credit may be transferred based in whole or
in part upon reinstated credit under this section unless the applicant meets
all conditions for membership, amount of service credit, and payments required
for the reinstatement of the credit.
(5)
Any TRS membership service credit reinstated under this
subsection may be applied toward the service credit requirements of TRS laws
and rules for the purchase of out-of-state, military or other special service
credit.
(h)
Termination of membership. The transfer of TRS service
credit to ERS will terminate TRS membership and cancel all rights to benefits
from TRS based on that service.
(i)
Service in the month following retirement. Both TRS and
ERS laws require a separation from employment for a period following a member's
effective retirement date as a condition for retirement with a benefit from
the respective system. With respect to a service retirement by persons using
credit transferred between the systems
(1)
An ERS retiree, whose last place of employment is with
a TRS covered employer must be off the payroll at the TRS covered employer
for the
first full calendar month
[
(2)
An ERS retiree, whose last place of employment is with
an ERS covered agency, may return to work with a TRS covered employer without
restrictions. A retiree from the TRS, whose last place of employment is with
a TRS covered employer, may go to work for an ERS agency without restrictions.
(j)
Average salary. In determining average salary used in
computing benefits available to a person transferring credit under this section,
the receiving system will use the higher of the average compensation factors
derived solely from the service originally established in each system respectively.
Each system will be responsible for determining its respective average salary
factor. The transferring system will certify its average salary factor to
the receiving system. If there is insufficient service to determine an average
salary factor in the transferring system, benefits will be based upon the
average salary factor of the receiving system.
(k) - (n)
(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on February 9, 2004.
TRD-200400791
Ronnie Jung
Interim Executive Director
Teacher Retirement System of Texas
Proposed date of adoption: March 25, 2004
For further information, please call: (512) 542-6115
34 TAC §25.164
The Teacher Retirement System of Texas (TRS) proposes new §25.164
concerning purchase of waiting period service credit. The new section would
address eligibility for purchase of waiting period service credit and the
cost of such service credit. The purpose of the new section is to implement
the provisions of H.B. 3459, 78th Legislature, Regular Session, which require
a 90 day waiting period for certain employees before membership in TRS begins
and authorize a member to purchase service credit for service performed during
the waiting period. The new section would permit a member to purchase such
service credit if the member did not serve a sufficient length of time in
a school year after becoming eligible for TRS membership to earn a year of
membership service credit.
Tony C. Galaviz, Chief Financial Officer, has determined that for each
year of the first five-year period the rule is in effect there will be no
fiscal implications to state or local governments as a result of enforcing
or administering the rule.
Mr. Galaviz has also determined that for each year of the first five years
the rule is in effect the public benefit anticipated will be that procedures
for the purchase of waiting period service credit will be established and
the cost will be determined according to actuarial tables adopted by the Board
of Trustees. There will be no effect on small businesses. There are no anticipated
economic costs to the persons who are required to comply with the rule as
proposed since purchase of the service credit is optional and state law requires
a member who wishes to purchase the service credit to pay the actuarial present
value of the additional benefit that would result from the service credit.
Written comments on the proposal may be submitted to Ronnie Jung, Interim
Executive Director, 1000 Red River, Austin, Texas 78701. The deadline for
comments is 30 days after publication in the
Texas
Register
.
The new section is proposed under Government Code §823.406,
which authorizes the TRS Board of Trustees to adopt rules to administer the
statutory provision authorizing the purchase of waiting period service credit.
The new section also proposed under Government Code, Chapter 825, §825.102,
which authorizes the TRS Board of Trustees to adopt rules for eligibility
for membership, the administration of the funds of the retirement system,
and the transaction of business of the Board.
No other codes are affected by the proposal.
§25.164.Credit for Service During School Year With Membership Waiting Period.
(a)
A member of the Teacher Retirement System of Texas (TRS)
who is subject to a membership waiting period beginning on or after September
1, 2003, pursuant to Government Code §822.001, may purchase one year
of equivalent membership service credit in TRS in accordance with Government
Code §823.406 and this section.
(b)
A member is eligible to purchase one year of service credit
under this section if the following requirements are met:
(1)
the individual served at least 4 1/2 months in an eligible
position during the school year in which the waiting period ended or, in the
alternative, the individual served a full semester of more than four calendar
months in an eligible position during the school year in which the waiting
period ended or the individual entered into an employment contract or oral
or written work agreement for a period which would qualify the individual
for a year of service credit but who actually renders only 90 working days
of service, and
(2)
any portion of that service was performed during the membership
waiting period, and
(3)
the individual did not serve a sufficient length of time
during the school year after becoming eligible for TRS membership to earn
a year of membership service credit in the retirement system.
(c)
A member may not purchase service credit under this section
until after the end of the school year in which the waiting period ended.
If requested by TRS, in order to purchase service credit under this section,
a member shall provide verification of service and salary during the school
year in which the waiting period service was performed. The verification must
be in a form that TRS finds acceptable to determine that the member meets
the requirements of this section.
(d)
Equivalent membership service credit may be established
under this section by depositing with TRS the amount described in this subsection.
To establish service credit for the year, the eligible member must deposit
the actuarial present value, at the time of deposit, of the additional standard
retirement annuity benefits that would be attributable to the service credit
to be purchased under this section.
(e)
Upon receipt by TRS of the required amount, the member
will be credited with the year of service credit. A member may not receive
more than one year of service credit for the service performed in a school
year.
(f)
To calculate the amount required by this section, TRS will
use the cost factors indicated on the "Waiting Period Service Credit Purchase
Table" furnished by the TRS actuary of record. The table cross-references
the member's age in rows with years of credited service (before purchase)
in columns. The intersection of the participant's age and service is the cost
per $1,000 of salary. The cost factor for a participant with more years of
service credit than shown on the table is the same as the factor shown for
the highest number of years of service credit on the table for the participant.
TRS will calculate the cost to purchase service credit under this section
by dividing the salary by 1000 and multiplying the resulting quotient by the
appropriate cost factor obtained from the table. The table sets the cost,
per $1,000 of salary, to purchase one year of service credit. For the purpose
of calculating the required amount, the term "salary" is defined as follows:
(1)
For the upper region of the table (where the factors appear
above the line in italics), salary is the greater of current annual salary
or the average of the member's highest years of compensation, with either
two or three years of compensation used for the average, depending on whether
the member has only two years or has three or more years of service credit
at the time of the calculation; or
(2)
For the lower region of the table (where the factors appear
below the line in bold), salary is the average of the member's highest three
years of compensation. A member's highest three years of compensation shall
be calculated as if the member were retiring at the time the service credit
is purchased. The lower region of the table (where the factors appear below
the line in bold) reflects those age and service combinations where the purchase
of service credit results in immediate eligibility of the member for unreduced
retirement benefits.
Figure: 34 TAC §25.164(f)(2) (.pdf)
(g)
The purchase cost described in subsection (f) of this section
is based on a lump-sum deposit. If deposits are made by installment payments,
the purchase cost will be adjusted to reflect applicable fees and any additional
actuarial cost resulting from the schedule of payments.
(h)
Service credit purchased under this section cannot be used
to determine eligibility for Texas Public School Retired Employees Group Health
Insurance under Insurance Code, Chapter 1575.
(i)
Payments for TRS service credit purchased under this section
shall be paid in a manner consistent with any applicable limitations of United
States Code, Title 26, §415, including any applicable limitations on
payments as a percentage of compensation of the participant from the employer
for the school year in which the payments are sought to be made, pursuant
to Internal Revenue Code §415. A member, or a beneficiary of a member,
if service credit is sought to be established after the death of the member,
may not be permitted to purchase TRS service credit under this section if
payments exceed applicable limitations on contributions.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on February 9, 2004.
TRD-200400792
Ronnie Jung
Interim Executive Director
Teacher Retirement System of Texas
Proposed date of adoption: March 25, 2004
For further information, please call: (512) 542-6115
34 TAC §35.1
The Teacher Retirement System of Texas (TRS) proposes amendments
to §35.1 concerning computation errors. The amendments are proposed to
implement House Bill 258, 78th Texas Legislature, Regular Session, 2003, which
amended Subchapter B, Chapter 802, Government Code, by adding §802.1024
to establish a new three year limit on the length of time a public retirement
system may go back in order to collect an overpayment of a benefit caused
by an error in the records of the retirement system. The proposed amendments
to §35.1 implement the new restriction on collection of overpayments
and describe types of overpayments that are not subject to the restriction.
The amendments are necessary for the proper and efficient administration
of the requirements of Government Code §802.1024.
Tony Galaviz, TRS Chief Financial Officer, has determined that for each
year of the first five-year period the amendments are in effect there will
be no fiscal implications to state or local governments as a result of enforcing
or administering the rule.
Mr. Galaviz also has determined that for each year of the first five years
the amendments are in effect the public benefit anticipated as a result of
the section will be the appropriate implementation of Government Code §802.1024.
There will be no effect on small businesses. There are no anticipated economic
costs to the persons who are required to comply with the rule as proposed.
Comments on the proposal may be submitted to Ronnie Jung, Interim Executive
Director, Teacher Retirement System of Texas, 1000 Red River, Austin, Texas
78701. Comments must be received no later than 30 days after the date the
proposal is published in the
Texas Register.
The amendments are proposed under Government Code, Chapter 825, §825.102,
which authorizes the Board of Trustees of the Teacher Retirement System to
adopt rules for the administration of the funds of the system and the transaction
of business of the Board.
Government Code §825.109 also is affected by the proposal.
§35.1.Computation Error.
(a)
If
[
(b)
If no future payments are due, TRS may
recover an overpayment in any manner that would be permitted for the collection
of any other debt.
(c)
TRS may correct an overpayment of benefits
to a person entitled to receive payments from TRS by the method described
in subsection (a) of this section only for an overpayment made during the
three years preceding the date TRS discovers or discovered the overpayment.
(d)
TRS may not recover from a person entitled
to receive payments from TRS any overpayment made more than three years before
the discovery of the overpayment. This subsection does not apply to recovery
of any payments made after the death of a retiree or beneficiary if such payments
were not due because of the death of the recipient but were paid because TRS
did not receive notice of the recipient's death.
(e)
The limitations in subsections (c) and
(d) of this section do not apply to an overpayment that a reasonable person
should know the person is not entitled to receive.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on February 9, 2004.
TRD-200400790
Ronnie Jung
Interim Executive Director
Teacher Retirement System of Texas
Proposed date of adoption: March 25, 2004
For further information, please call: (512) 542-6115
Subchapter A. RETIREE HEALTH CARE BENEFITS (TRS-CARE)
34 TAC §§41.1, 41.2, 41.10
The Teacher Retirement System of Texas (TRS) proposes amendments
to §41.1 relating to enrollment periods for the Texas Public School Retired
Employees Group Insurance Program (TRS-Care) and §41.10 relating to eligibility
for coverage under the Texas Public School Retired Employees Group Insurance
Program, and a new §41.2 relating to an additional enrollment opportunity
in TRS-Care. The proposed amendments and the new section implement Senate
Bill 1369 and House Bill 3459, 78th Legislature, Regular Session, 2003, and
House Bill 7, 78th Legislature, 3rd Called Session, 2003. The proposed amendments
to §41.1 and §41.10 implement changes to TRS-Care eligibility required
by House Bill 7 for those TRS members taking a service retirement after September
1, 2004. They also address when TRS-Care coverage begins for those retirees.
The proposed amendments set out the four new eligibility criteria that TRS
service retirees must meet to enroll in TRS-Care, as well as the effective
date of their TRS-Care coverage. The proposed amendments implement House Bill
7's requirement that those TRS service retirees who are eligible to enroll
in TRS-Care only under a grandfathering provision pay the total cost of their
and their dependents' participation in the program. The proposed amendments
also give those TRS retirees paying their cost of participation in TRS-Care
a second initial enrollment opportunity when they meet one of the other TRS-Care
eligibility criteria. The proposed new §41.2 addresses an additional
enrollment opportunity for all TRS-Care participants to upgrade their level
of coverage and/or add dependents in the same coverage level.
Tony C. Galaviz, Chief Financial Officer, has determined that for each
year of the first five-year period that the proposed amendments and the new
section are in effect, there will be no fiscal implications to state or local
governments as a result of enforcing or administering the amendments or the
new section. There is no foreseeable effect on local employment or local economies
as a result of the proposed amendments or new section.
Mr. Galaviz has also determined that for each year of the first five years
that the proposed amendments and new section are in effect, the public benefit
anticipated as a result of the amendments will be that TRS rules will comply
with the statutory changes and that those TRS members taking a retirement
after September 1, 2004 will have notice of the new requirements to enroll
in TRS-Care and notice of when their coverage will be effective. Another public
benefit anticipated will be permitting those TRS-Care retirees who must pay
the total cost of their participation in TRS-Care a second opportunity to
enroll in TRS-Care when they meet another TRS-Care eligibility requirement
that does not require payment of the total cost of participation. Mr. Galaviz
has determined that for each year of the first five years that the proposed
new section is in effect, the public benefit anticipated as a result of the
sections will be compliance with the new law and that all retirees will have
an opportunity to change their level of TRS-Care coverage when they become
65. There is no anticipated adverse economic effect on small businesses or
micro-businesses as a result of compliance with the proposed amendments or
new section. Mr. Galaviz has determined that the potential economic costs
to persons required to comply with the proposed amendments are an increase
in the TRS-Care premium for those who are eligible to participate in TRS-Care
under only the grandfathering provision that requires full payment. Mr. Galaviz
has determined that the potential economic costs to persons required to comply
with the proposed new section for each year of the first five years the proposal
will be in effect may be the difference in the amount of premium paid for
the tier of coverage selected as provided by this section and the premium
for the coverage tier in which the retiree was previously enrolled.
Written comments on the proposal may be submitted to Ronnie Jung, Interim
Executive Director, 1000 Red River, Austin, Texas 78701. Comments must be
received within 30 days following the publication in this issue of the
These sections are proposed under Insurance Code §1575.052,
which gives TRS the authority to adopt rules as necessary to administer and
operate the TRS-Care program. The sections are also proposed under Government
Code, Chapter 825, §825.102, which authorizes the Board of Trustees of
the Teacher Retirement System to adopt rules for eligibility for membership;
the administration of the funds of the retirement system; and the transaction
of business of the Board.
There are no other codes affected.
§41.1.Enrollment Periods for the Texas Public School Retired Employees Group Insurance Program (TRS-Care).
(a)
The initial enrollment period in the Texas Public School
Retired Employees Group Insurance Program (TRS-Care) for eligible Teacher
Retirement System of Texas (TRS) retirees
who take a service retirement
before September 1, 2004 expires at the end of the later of
[
[
(1)
[
(2)
[
[
[
(b)
The initial enrollment period in TRS-Care for TRS
retirees who take a service retirement after September 1, 2004 and who are
eligible to enroll in TRS-Care at the time of retirement expires at the end
of the later of:
[
(1)
the 31st day after their effective
retirement date; or
(2)
the 31st day following the
last day of the month in which their election to retire is received by TRS.
(c)
The initial enrollment period in TRS-Care for TRS
retirees who take a service retirement after September 1, 2004 and who are
not eligible to enroll in TRS-Care at the time of retirement but who subsequently
become eligible to enroll expires at the end of the later of:
[
(1)
the 31st day following the last day of the month in
which the retiree becomes eligible to participate in TRS-Care; or
[
(2)
the 31st day after the date of the notice of opportunity
to enroll that is sent to the retiree at the retiree's last known address,
as shown in the TRS-Care records.
[
[
[
(d)
The initial enrollment period in TRS-Care for eligible
TRS disability retirees expires at the end of the 31st day after the date
that the disability retirement is approved by the TRS Medical Board.
[
(e)
The initial enrollment period
in TRS-Care for a surviving spouse and a surviving dependent child of an eligible
retiree expires at the end of the later of:
(1)
the 31st day after the end of the month in which
the eligible retiree died; or
(2)
the 31st day after the date of the notice of
eligibility that is sent to the surviving spouse or the surviving dependent
child at the individual's last known address, as shown in the TRS-Care records.
(f)
The initial enrollment period
for a surviving spouse of a deceased active member and for a surviving dependent
child, as both are defined by §1575.003, Insurance Code, expires at the
end of the later of:
(1)
the 31st day after the end of the month in which
the active member died; or
(2)
the 31st day following the date of the notice
of opportunity to enroll that is sent to the surviving spouse or the surviving
dependent child at the individual's last known address, as shown in the TRS-Care
records.
(g)
TRS retirees who take a service
retirement after September 1, 2004 and who are eligible to enroll in TRS-Care
at the time of retirement under only subsection (c)(4) of §41.10 of this
title (relating to Eligibility to Enroll in under the Texas Public School
Retired Employees Group Insurance Program) ("Grandfathered Retirees") will
have a second initial enrollment period when they first meet the requirements
to enroll in TRS-Care under either subsection (c)(1), (c)(2), or (c)(3) of §41.10
of this title.
(1)
This second initial enrollment period is also
available to Grandfathered Retirees who waive or drop their TRS-Care coverage
during or after their initial enrollment period. The second initial enrollment
period is available when the Grandfathered Retirees first meet the requirements
to enroll in TRS-Care under either subsection (c)(1), (c)(2), or (c)(3) of §41.10
of this title.
(2)
The second initial enrollment period expires
at the end of the later of:
(A)
the 31st day following the last day of the month
in which the Grandfathered Retiree first becomes or would have become eligible
to enroll in TRS-Care under subsection (c)(1), (c)(2), or (c)(3) of §41.10
of this title; or
(B)
the 31st day after the date of the notice of opportunity
to enroll that is sent to the Grandfathered Retiree at the retiree's last
known address, as shown in the TRS-Care records.
(3)
A Grandfathered Retiree can choose any tier
of TRS-Care coverage during the second enrollment period.
(h)
Notwithstanding the other provisions
of this section:
(1)
A participant enrolled in TRS-Care 1 will automatically
have coverage increased to TRS-Care 2 upon becoming eligible for Medicare
Part A;
(2)
A retiree may enroll a new spouse within 31
days of the date on which the retiree marries;
(3)
A retiree or surviving spouse may enroll a child
who becomes a dependent as defined by §1575.003, Insurance Code, within
31 days after the date on which the child becomes a dependent eligible for
coverage under TRS-Care; and
(4)
A participant shall be entitled to all applicable
COBRA rights under the Federal Public Health Service Act.
(i)
If a retiree or surviving spouse
fails to enroll a newly eligible spouse or dependent child within the time
periods set out in subsection (h) of this section, the retiree or surviving
spouse will not be able to enroll the spouse or dependent child in TRS-Care
until a subsequent enrollment period.
§41.2.Additional Enrollment Opportunity.
(a)
The following individuals have an additional enrollment
opportunity in TRS-Care as described in this section when they become 65 years
old:
(1)
all TRS service retirees who are enrolled in TRS-Care;
(2)
dependents, as defined in Insurance Code, §1575.003,
who are enrolled in TRS-Care and who are eligible to enroll in TRS-Care in
their own right as a TRS service or disability retiree; and
(3)
surviving spouses, as defined in Insurance Code, §1575.003
who are enrolled in TRS-Care.
(b)
The individuals defined in subsection (a) of this section
are referred to as "eligible participants" in this section.
(c)
Those eligible participants who are enrolled in TRS-Care
on August 31, 2004, and who are 65 years old or older on that date have an
additional enrollment opportunity on September 1, 2004.
(d)
Those eligible participants who are enrolled in TRS-Care
on August 31, 2004, and who become 65 years old after that date have an additional
enrollment opportunity on the date that they become 65 years old.
(e)
Those eligible participants who enroll in TRS-Care after
August 31, 2004, and who become 65 years old after that date have an additional
enrollment opportunity on the date that they become 65 years old.
(f)
The additional enrollment opportunity for those eligible
participants who enroll in TRS-Care after August 31, 2004, and who are 65
years old or older when they enroll in TRS-Care runs concurrently with the
initial enrollment period as set out in §41.1 of this chapter relating
to Enrollment Periods for the Texas Public School Retired Employees Group
Insurance Program (TRS-Care).
(g)
An eligible participant who is not enrolled in Medicare
Part A at the time of his or her additional enrollment opportunity can enroll
in the next-higher TRS-Care coverage tier, as determined by TRS-Care, and
add dependent coverage in that same coverage tier
(h)
An eligible participant who is enrolled in Medicare Part
A at the time of his or her additional enrollment opportunity can enroll in
any TRS-Care coverage tier and add dependent coverage in that same coverage
tier.
(i)
An eligible participant can choose to remain in the same
TRS-Care coverage tier and add dependent coverage in that coverage tier.
(j)
If an eligible participant waives coverage for a dependent
during the additional enrollment opportunity described in this section, the
eligible participant will be able to enroll that dependent only as a result
of a special enrollment event under the Health Insurance Portability and Accountability
Act of 1996 (HIPAA) or during a subsequent enrollment period set by TRS. To
enroll a dependent in TRS-Care as a result of a special enrollment event,
the eligible participant must submit a TRS-Care application to TRS within
31 days of the date that the person becomes an eligible dependent.
(k)
The additional enrollment period for eligible participants
described in subsection (c) of this section ends on September 30, 2004.
(l)
The additional enrollment period for eligible participants
described in subsection (d) or (e) of this section expires at the end of the
later of:
(1)
the 31st day following the last day of the month in which
the eligible participant becomes 65 years old; or
(2)
the 31st day after the date printed on the notice of the
additional enrollment opportunity sent to the eligible participant at the
eligible participant's last-known address, as shown in the TRS-Care records.
(m)
This section does not affect the right of a TRS service
retiree or surviving spouse enrolled in a TRS-Care coverage tier to drop coverage,
select a lower level of coverage, or drop dependents at any time.
§41.10.Eligibility to Enroll in [
(a)
If they meet the applicable requirements set out in
this section, the
[
(1)
service retirees of the Teacher Retirement System of Texas
(TRS) who are not eligible to
enroll
[
(2)
disability retirees of TRS who are not eligible to
enroll
[
(3)
surviving spouses of deceased service or disability retirees
of TRS
or of certain deceased active TRS members
; and
(4)
surviving dependent children of [
(b)
To be eligible
to enroll in
[
(1)
service credit for actual service
in Texas public schools;
(2)
service credit transferred
to TRS from the Employees Retirement System of Texas (ERS);
(3)
withdrawn service credit that
the member has purchased and that has been credited to the member's account;
(4)
service credit for unreported
service that the member has purchased and that has been credited to the member's
account;
(5)
service credit for substitute
service that the member has purchased and that has been credited to the member's
account; and
(6)
up to five years of out-of-state
service credit that the member has purchased and that has been credited to
the member's account.
(c)
To be eligible to enroll in
TRS-Care under this section, a service retiree of TRS who retires after September
1, 2004 must meet the requirements of at least one of the following paragraphs:
(1)
at the time of retirement, a member:
(A)
is at least 65 years old; and
(B)
has at least 10 years of service credit in the
system, which can include only the following types of service credit:
(i)
service credit for actual service in Texas public
schools;
(ii)
service credit transferred to TRS from ERS;
(iii)
withdrawn service credit that the member has
purchased and that has been credited to the member's account;
(iv)
service credit for unreported service that
the member has purchased and that has been credited to the member's account;
(v)
service credit for substitute service that the
member has purchased and that has been credited to the member's account;
(vi)
up to five years of military service credit
or re-employed veteran's (USERRA) service credit that the member has purchased
and that has been credited to the member's account; and
(vii)
any years of service credit that the member
would have received but for the member's participation in the Deferred Retirement
Option Program (DROP); or
(2)
at the time of retirement, a member:
(A)
meets the requirements of paragraph (1)(B) of
this subsection; and
(B)
meets the TRS-Care Rule of 80, which is determined
by having the sum of the individual's age and the amount of service credit
described in paragraph (1)(B) of this subsection equal or exceed 80; or
(3)
a member:
(A)
purchased any of the following types of service
credit:
(i)
out-of-state service credit;
(ii)
military service credit;
(iii)
re-employed veteran's (USERRA) service credit;
(iv)
developmental leave service credit;
(v)
sick leave service credit;
(vi)
service credit purchase; or
(vii)
service credit for work experience by a certified
career or technology teacher;
(B)
had the service described in paragraph (3)(A)
of this subsection credited by August 31, 2003;
(C)
except as provided by subsection (g) of this
section, at the time of retirement, has the sum of the following equal or
exceed 80 (the "Grandfathered TRS-Care Rule of 80"):
(i)
age;
(ii)
the service credit described in paragraph (3)(A)
of this subsection;
(iii)
service credit for actual service in Texas
public schools;
(iv)
service credit transferred to TRS from ERS;
(v)
withdrawn service credit that the member has
purchased and that has been credited to the member's account;
(vi)
service credit for unreported service that
the member has purchased and that has been credited to the member's account;
and
(vii)
service credit for substitute service that
the member has purchased and that has been credited to the member's account;
(D)
at the time of retirement, has at least 10 years
of service credit in the system, which can include only the following types
of service credit:
(i)
service credit for actual service in Texas public
schools;
(ii)
service credit transferred to TRS from ERS;
(iii)
withdrawn service credit that the member has
purchased and that has been credited to the member's account;
(iv)
service credit for unreported service that
the member has purchased and that has been credited to the member's account;
(v)
service credit for substitute service that the
member has purchased and that has been credited to the member's account; and
(vi)
up to five years of out-of-state service credit
limited to that out-of-state service credit that was credited by August 31,
2003; and
(E)
takes a normal age service retirement as determined
under Government Code, Chapter 824, Subchapter C by August 31, 2009;
(4)
a member:
(A)
was employed in actual service in a Texas public
school during or before the 2003-2004 school year; and
(B)
at the time of retirement, has at least 10 years
of service credit in TRS, which can include only the following types of service
credit:
(i)
service credit for actual service in Texas public
schools;
(ii)
service credit transferred to TRS from ERS;
(iii)
withdrawn service credit that the member has
purchased and that has been credited to the member's account;
(iv)
service credit for unreported service that
the member has purchased and that has been credited to the member's account;
and
(v)
service credit for substitute service that the
member has purchased and that has been credited to the member's account;
(vi)
up to five years of out-of-state service credit
that the member has purchased and that has been credited to the member's account.
(d)
For purposes of this section,
"public school" means an educational institution or organization in this state
that is entitled to be supported in whole or in part by state, county, school
district, or other municipal corporation funds.
(e)
Service retirees who are eligible
to enroll in TRS-Care under only subsection (c)(4) of this section are required
to pay the total cost of their participation in TRS-Care until the date that
they first qualify for TRS-Care under subsection (c)(1), (c)(2), or (c)(3)
of this section.
(f)
Except as provided by subsection
(g) of this section, service retirees retiring after September 1, 2004 who
do not meet the TRS-Care eligibility requirements set out in subsection (c)
of this section at the time of retirement will become eligible to enroll in
TRS-Care on the date that they meet the requirements of subsection (c)(1),
(c)(2), or (c)(3) of this section.
(g)
Notwithstanding subsection
(f) of this section, service retirees who meet all of the requirements of
subsection (c)(3) of this section except the Grandfathered TRS-Care Rule of
80 in subsection (c)(3)(E) of this section at the time of retirement can become
eligible to enroll in TRS-Care under subsection (c)(3) of this section after
retirement only if they meet the Grandfathered TRS-Care Rule of 80 by August
31, 2009.
(h)
[
(i)
[
(j)
[
(1)
died on or after September 1, 1986;
(2)
met the TRS-Care eligibility requirements that were
in effect at the time of the active member's death
[
(3)
made contributions to TRS-Care at the member's last place
of employment in public education in Texas.
(k)
[
(1)
the child must be a natural or adopted child of the deceased
retiree or member or must be a foster child, stepchild, or other child who
lived in a parent-child relationship with the retiree or member; and
(2)
the child must be unmarried and under age 25 or must be
age 25 or older but still unmarried and fully disabled to such an extent as
to have been dependent upon the deceased retiree or
active
member
for support at the time of the retiree's or
active
member's death,
as determined by TRS as trustee and as described by Insurance Code,
§1575.003
[
[
[
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on February 9, 2004.
TRD-200400891
Ronnie Jung
Interim Executive Director
Teacher Retirement System of Texas
Proposed date of adoption: March 25, 2004
For further information, please call: (512) 542-6115
(1)
In this manual, the word "timber" refers to
standing trees that are grown to produce commercial wood products, such as
sawtimber, pulpwood, poles, and chips. "Timberland" refers to forest land
that is capable of producing commercial wood crops.]
Figure 1: 34 TAC 9.4011 (d)(17)]
Figure 3: 34 TAC 9.4011 (e)(45)]
Figure 4: 34 TAC 9.4011 (e)(58)
]
Figure 33: 34 TAC 9.4011 (g)
]
Figure 34: 34 TAC 9.4011 (g)
]
Figure 35: 34 TAC 9.4011 (g)
]
Figure 36: 34 TAC 9.4011 (g)
]
Figure 37: 34 TAC 9.4011 (h)
]
Part 3.
TEACHER RETIREMENT SYSTEM OF TEXAS
prior to September 1, 1993
].
prior to September 1, 1993
].
30 days
] following
retirement at ERS or the ERS retirement will be canceled. A TRS retiree, whose
last place of employment is with an ERS covered agency must be off the payroll
at the ERS agency for the
first full calendar month
[
30 days
] following retirement at the TRS or the TRS retirement will be canceled.
Subchapter L. OTHER SPECIAL SERVICE CREDIT
Chapter 35.
PAYMENTS BY TRS
Should
] any error
in the records results in any member, beneficiary, or alternate payee under
Gov't Code Section 804.005 receiving more or less than the recipient would
have been entitled to receive had the records been correct, the Teacher Retirement
System of Texas (TRS) shall correct such error and so far as practicable shall
adjust
any future
[
the
] payment in such a manner that
the actuarial equivalent of the benefit to which the recipient was correctly
entitled will be paid.
Chapter 41.
HEALTH CARE AND INSURANCE PROGRAMS
, or
surviving spouses of eligible retirees, will end
]:
(1)
for eligible service retirees at the
later of:
]
(A)
]
the 31st day
[
31 days
] after their effective retirement date; or
(B)
] the 31st day following the
last day of the month in which their election to retire is received by TRS.
(2)
for surviving spouses, 31
days after the end of the month in which the eligible retiree died or 31 days
following the date of notice of eligibility sent by TRS-Care to the survivor,
whichever is later.]
(3)
for eligible disability retirees,
31 days after the date that the disability retirement is approved by the TRS
Medical Board.]
The enrollment period for a surviving spouse of
a deceased active member, as defined by Insurance Code, Article 3.50-4, §2,
Subdivision 11, and for a surviving dependent child, as defined by Insurance
Code, Article 3.50-4, §2, Subdivision 13, will end 31 days after the
end of the month in which the eligible member or retiree died or 31 days following
the date of notice of eligibility sent by TRS-Care to the survivor, whichever
is later.
]
Notwithstanding the provisions of subsections (a) and (b) of this section:
]
a participant in TRS-Care 1 will have coverage increased to TRS-Care 2 upon
becoming eligible for Medicare;
]
A retiree may elect coverage
for a spouse within 31 days of the date on which the retiree is married;
]
(3)
A retiree or surviving spouse
may add coverage for children within 31 days after the date on which the retiree
or surviving spouse first acquires a child eligible for coverage under TRS-Care;]
(4)
a participant shall be entitled
to all applicable rights under the Federal Public Health Service Act (COBRA),
Title XXII.]
A participant's dependent coverage, if elected, will continue until the end
of the month of the participant's death.
]
for Coverage under ] the Texas Public School Retired Employees Group Insurance Program.
The
] following persons are eligible to
enroll
[
be enrolled
] in the Texas Public School Retired Employees
Group Insurance Program (TRS-Care):
be enrolled
] as
an employee or retiree
in
[
by
] a plan provided under
the Texas Employees [
Uniform
] Group [
Insurance
] Benefits
Act (Insurance Code,
Chapter 1551
[
Article 3.50-2
]),
or under the [
Texas
] State [
College and
] University
Employees
Uniform Insurance Benefits Act (Insurance Code,
Chapter
1601
[
Article 3.50-3
]);
be enrolled
] as an employee or retiree
in
[
by
] a plan provided under the Texas Employees [
Uniform
] Group
[
Insurance
] Benefits Act (Insurance Code,
Chapter 1551
[
Article 3.50-2
]) or under the [
Texas
] State [
College
and
] University
Employees
Uniform Insurance Benefits Act
(Insurance Code,
Chapter 1601
[
Article 3.50-3
]);
a
] deceased
service or disability
retirees of TRS
[
retiree
]or of
certain
[
a
] deceased active TRS
members
[
member
].
for coverage
under
] TRS-Care under this section, a service retiree of TRS
who
retires before September 1, 2004
must have 10 years of service credit
for actual service in the public schools of Texas
,which can include only
the following types of service credit:
(c)
] A disability retiree with less
than 10 years of service credit will not be eligible for coverage under TRS-Care
when disability retirement benefits terminate.
(d)
] A surviving spouse of a deceased
TRS service or disability retiree is eligible to enroll in TRS-Care if the
deceased TRS service or disability retiree was
enrolled,
eligible
to enroll
,
or would have been eligible to enroll in TRS-Care at
the time of the retiree's death.
(e)
] A surviving spouse of a deceased
active TRS member is eligible to enroll in TRS-Care if the deceased active
member:
had 10 or more
years of actual service credit in TRS
]; and
(f)
] A surviving dependent child
of a deceased TRS retiree or deceased active TRS member is eligible to enroll
in TRS-Care if the deceased retiree met the conditions of subsection
(i)
[
(d)
] of this section or the deceased active member met
the conditions of subsection
(j)
[
(e)
] of this section.
A surviving dependent child must also meet the following conditions:
Article 3.50-4, §3, subdivision (3)
].
(g)
If a service or disability
retiree has a legal spouse or if a retiree or surviving spouse has an eligible
child or children when the retiree or surviving spouse becomes eligible but
does not elect to cover that spouse or that child or children within 31 days,
TRS-Care coverage may not be obtained for the spouse or the child until a
subsequent enrollment period. ]
(h)
If a service or disability
retiree has no spouse or if a retiree or surviving spouse has no eligible
child or children when he or she first becomes eligible, but acquires a spouse
or child or children at a later date, the retiree can obtain spouse or child
or children coverage if he or she makes application within 31 days of the
date the spouse or first eligible child is acquired.]
Subchapter C. TEXAS SCHOOL EMPLOYEES GROUP HEALTH (TRS-ACTIVECARE)