Solar and wind leases: what happens to your Texas ag valuation

The question is what happens on the ground

Ag valuation is the common name. The law calls it 1-d-1 open-space appraisal. When a developer approaches you, start with the planned use of the land, not just the lease payment.

Texas Attorney General Opinion JC-0299 (2000) puts the rollback question this way: "No change of use occurs if the land continues to be used for agricultural purposes even though the land may no longer qualify for open-space land appraisal."

That distinction matters. Losing eligibility and changing use are not the same thing. The chief appraiser decides whether a change of use occurred. Ask your district in writing how it would treat the proposed project, including any development phase before construction or power production.

Do not assume a lease signature settles the tax question either way. Give the district the proposed layout and describe what agricultural work will continue.

Panels, pads, roadsThe footprint that changes use. Rollback for the 3 prior years on those acres.Rollback risk

The rest of the tractStill grazed, hayed, in timber or wildlife. Ask the district in writing.Can keep valuation

After removalThe land needs 5 of the preceding 7 years in ag use again.Years to requalify

From Tax Code §§23.51 and 23.55. Details below.

Rollback tax covers the part that changes use

Under Tax Code §23.55(a), when the use of 1-d-1 land changes, "an additional tax is imposed". That is the rollback tax. It equals the difference between the taxes paid under ag valuation and the taxes that would have been paid at market value "for each of the three years preceding the year in which the change of use occurs."

Section 23.55(d) limits that tax to the affected part of a parcel when only part changes use. The project footprint matters. Map the panels, pads, roads and substations. Then ask the district which acres it would treat as changed use.

Keep grazing, hay, timber or qualifying wildlife use going on the rest. Ask the district in writing how it will treat those remaining acres. Do not assume either that the whole parcel is lost or that everything outside the equipment stays qualified.

Use our rollback calculator for an estimate. Ask the district in writing about the affected acreage and tax treatment before using that estimate to weigh the lease offer.

Solar and wind do not have the oil-and-gas carve-out

The Comptroller's ag manual says oil and gas operations by a lessee do not end eligibility for the rest of the land that still qualifies. The law has that carve-out for oil and gas. We found no similar one for solar or wind.

That is not a ruling that every solar or wind lease changes the use of every acre. It means you should not use the oil-and-gas treatment as your answer. Ask your district in writing about your project.

Section 23.55(f) lists rollback exceptions for a sale for right-of-way, condemnation, a transfer to the state or a political subdivision for public use, and certain economic-development transfers. Solar and wind leases are not on that list.

Separate the land taxes from the equipment taxes

The land and the equipment need separate questions in the lease review. Under Tax Code §23.26, commercial solar equipment is appraised by the cost method. Its useful life for that appraisal is no more than 10 years, with a floor of 20% of value.

Who pays the equipment tax depends on the lease. Get the document to say who pays equipment taxes, any rollback tax and added land taxes. Do not leave those costs inside a general promise to handle taxes.

The lease term matters, too. Texas A&M-Kingsville's King Ranch Institute says solar leases typically run a minimum of 20 years and often up to 50. They often include a development phase with lower payments before power production.

Compare those payment phases with the tax responsibilities written into the lease. Ask the district in writing when it would consider the land use changed. Do not assume lower development payments mean the tax treatment stays unchanged.

If a notice arrives, check the delivery date

Under §23.55(e), the chief appraiser sends notice of a change-of-use decision and explains the right to protest. The owner can protest to the appraisal review board within 30 days after the notice is delivered, under §41.44(a)(3). The Comptroller says to count those 30 days from the date the district mails the notice, not the day it reaches you.

The rollback bill has a separate payment deadline. It is due before the next February 1 that is at least 20 days after the bill is delivered. Rollback tax under current 1-d-1 law has no interest unless the bill becomes delinquent.

Keep the notice and bill together. Check their delivery dates separately. If the deadline or treatment is unclear, ask the district in writing rather than guessing.

Plan for the land after removal

Removing the project does not bring 1-d-1 back immediately. Tax Code §23.51(1) requires agricultural or timber use "for five of the preceding seven years". The land has to build that use history again before 1-d-1 returns.

Before signing, work through this list:

1. Map the full project footprint, including roads and substations.
2. Ask the district in writing how it will treat the project and the acres outside it.
3. Get rollback and added-tax responsibilities stated in the lease.
4. Keep qualifying use going on the remaining land.
5. Plan for the five-of-seven-year use history after removal.

Keep My Acres provides general information, not legal advice. For your parcel's treatment, ask your district in writing.

Your county

General information, not legal or tax advice. Your appraisal district makes the final call.