"Letting researchers study plants and animals on your Texas land can get you a property tax break" was first published by The Texas Tribune, a nonprofit, nonpartisan media organization that informs Texans — and engages with them — about public policy, politics, government and statewide issues.
As a former mayor, five-term state senator and champion of limited government, state Sen. Robert Nichols was familiar with the Texas property tax code.
But in 2016, in a visit with a local appraiser, the Jacksonville Republican was surprised to learn there was something strange happening on properties across central Texas.
“It’s kind of like a creeping cancer that’s moving across the state,” he told fellow senators at a hearing in February. “Slowly but surely — and it puts the burden of taxation on other people.”
The offender was an ill-defined and “little-known category of open-space land,” he said, that allows landowners to lower their taxes with little oversight: ecolabs.
This session, as lawmakers look for every available dollar to pump into reforming the state's property tax and school finance systems, Nichols is trying to tighten a state statute that offers tax breaks to landowners who use a small ecological laboratories program to host university research on their property.
Though ecolab language was inserted into the tax code decades ago, there are few rules regulating its use. The state’s comptroller does not track how many ecolabs there are in Texas and it's unclear how much landowners have saved through ecolab tax reductions.
Still, lawmakers like Nichols fear ecolabs are growing in number, fanned by enterprising lawyers who connect researchers with landowners seeking tax savings.
“It was never defined," Nichols said of the ecolabs. No one wrote “into the law what it is or how it all works or anything like that.”
“That’s where the problem is," he said.
“I didn’t see any harm in it”
Ecolabs were added to the Texas tax code in 1978, alongside other tax exemptions meant to preserve family farms and open-space land.
The bill came at a time of rapid growth in the state. Big cities had begun to spread outward, driving up the price of nearby property, and prompting some farmers to sell.
A bill analysis from the 1970s described a fear some lawmakers harbored. The "good land is taken out of production and used for a subdivision, shopping center or Taco Bell,” it read. “Eventually the state and nation will suffer from this loss of food and fiber.”
Led by then-state Rep. Bill Sullivant, the Legislature carved out an allowance to protect the state's farmers and ranchers. Under the new law, open-space land that had been used for farming, ranching or timber production for at least five years would be appraised differently than other property — using a formula that based its value on productivity, and dramatically slashed the taxes owed.
Another category was added to the bill — and it came in a short amendment filed on the House floor: Land used by universities for research, or ecological laboratories, would also be eligible for the tax reductions.
But there's little about ecolabs in the tax code. No description of what an ecolab is. No direction for how landowners can host one. And, as Nichols’ later found out, apparently no five-year wait before the tax savings could flow.
Former state Rep. Lyndon Olson, the author of the amendment and a former chair of the higher education committee, wrote years later that he’d sought to help university researchers gain access to private land, and that ecolabs were the “perfect vehicle” to incentivize a partnership.
“I didn’t see any harm in it,” said Sullivant, the author of the 1977 bill, in an interview with The Texas Tribune. The Gainesville Democrat said the labs were just “another qualifying type of use," and that he intended for the five-year waiting period to similarly apply.
The provision passed. But by almost all counts, it then laid dormant for decades. In fact, it wasn’t until 2018 or so that Sullivant heard the term “ecolab” debated again.
A "tiny" program
David Braun and Cassie Gresham may have been uniquely suited to understand the ecolab provision. A biochemist and a biologist by training, respectively, the pair anchor a niche law practice focused on conservation and the protection of land. When some of their clients expressed an interest in using the ecolab provision, Gresham said they “just started coupling” the landowners with researchers.
In 2004, the firm sent in their first application for ecolab status.
The state comptroller publishes a 55-page manual on how to appraise agricultural land, and the state’s Parks and Wildlife Department issues guidelines for another category of open space land, called “wildlife management.” But the state statute on ecolabs was vague, and there appeared to be no agency providing guidance about what kind of research qualified, and what was required of landowners who sought the ecolab tax break. So Braun and Gresham began to informally set parameters on the program, asking individual appraisers what they wanted to see, and tailoring their responses to each preference.
Interest in the ecolabs grew. The overwhelming majority of Texas land is privately-owned, and public parks posed difficulties for researchers — who often found the environments they hoped to study were disturbed by visitors, even if they posted signs or cordoned it off.
In 15 years, the firm's program increased tenfold — and researchers at several universities have participated, some coming from as far away as Starkville, Mississippi and Hempstead, New York.
Still, said Gresham, the ecolab program is "tiny." More than 140 million acres in Texas qualified as agricultural or open-space land in 2017; by contrast, the firm has arranged ecolabs on 60,700 acres since 2004.
“There’s probably 400 landowners across the state of Texas who have ever utilized this,” Gresham said.
The lawyers typically urge landowners to help defray researchers' travel costs and encourage the landowners to transition after two years to a wildlife management exemption, which usually requires at least a five-year wait.
"They're studying what?"
Bill Jackson, the chief appraiser for Henderson County, and the official who first contacted Nichols, remembers the first time an ecolab application crossed his desk.
“It was brand new to us,” he said. “We had to do our research and sure enough, there it was in the code.”
Other appraisers were similarly baffled.
“I’ve never seen this before,” thought Wendy Grams, chief appraiser in Bandera County, when she first received ecolab paperwork in the mail. “You read it and are like ‘They’re studying what?’”
Her appraisal district has had 23 ecolabs arranged by the Braun and Gresham firm in the last decade, with research related to cactuses, moths and a “yellow flower that grows off the side of rocks,” Grams said.
The program has proven “hard to manage because there are no parameters,” she said — “no guidelines.”
Gresham said the firm was equally eager for guidance on how to administer the ecolab exemption. So before the 2009 legislative session, they backed an attempt at reform that would have added requirements for how and when the tax break could be applied. Coming as the national economy teetered over a financial cliff and into the Great Recession, the reforms failed to pass. Gresham said the firm opted to work individually with appraisal districts to enact some provisions that could have become law, because it was too time-consuming and expensive to continue pushing for change through the legislative process.
“There's nothing in the law — there's just one line,” she said. “And over time we've created an application that we submit to the appraisal district that is very substantial.”
But in 2016, Nichols visited Jackson’s office, and paged through a sheaf of ecolab research reports they had collected. They were minor reports, he recalled to lawmakers in February.
“I looked at this grassy area, I looked at this brushy area, I looked at this thorn area, and I looked at this woodpile and we counted the number of ticks in each one,” he said of one.
It was "laudable" to encourage landowners to partner with ecological researchers, he said — "I support" it. But the arrangement was being "subsidized by the taxpayers via generous tax breaks."
“There are other ways for the state to fund research"
In 2017, Braun and Gresham were dragged into the legislative spotlight, when Nichols proposed a bill to rid the state of the ecolab provision. It was unanimously approved by the Senate and a House committee, but ultimately did not pass.
Still, the issue lingered in lawmakers’ minds. State Rep. Drew Springer, R-Muenster, who carried the 2017 bill in the House, said ecolabs have now sprung up in dozens of locations, with most of the growth happening in the past few years and centered around Hays County.
"There are other ways for the state to fund research other than giving tax breaks,” Springer said. "I think you could approach an awful lot of land owners with $10,000 cash in hand. In fact, if you looked at your alumni association, you'd probably get them to let you on for free in most cases.”
He and Nichols have proposed new legislation that would require a landowner to host an ecolab for five years before becoming eligible for a tax reduction. University researchers and landowners protested the bills at hearings in February and March — arguing they would impinge on their ability to conduct vital research by restricting their access to different habitats. Several of the landowners mentioned they were interested in preserving their land but had property with rocky soil or steep topography that made it ineligible for the agricultural and wildlife exemptions.
Springer said: “Look, I would say it was gray in the rules and we're just going to clarify."
Meanwhile, the lawyers, Braun and Gresham, say a five-year waiting period would remove the incentive for landowners to host research on their property; in turn, limiting researchers' ability to access it. They instead believe adding guidelines about what qualifies — similar to the recommendations they'd backed in 2008 — could assuage concerns about the program.
Open-space valuations, like ecolab, are a key mechanism Texans can use to protect their property as the price of land increases, Gresham said.
"We should be preserving open space and incentivizing land owners to do that," she added. "From our perspective, from the landowner perspective — this is a good thing."
Disclosure: The Texas Parks and Wildlife Department has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.
This article originally appeared in The Texas Tribune at https://www.texastribune.org/2019/04/08/need-texas-property-tax-relief-heres-one-strange-loophole/.
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