Almost every Texas landowner who carries an agricultural valuation asks the same question when a pipeline, highway or transmission line takes a strip: does losing the ag use on that strip trigger a rollback tax bill?
For a taking, the answer under Texas law is no. Texas Tax Code § 23.55(f) says the rollback sanctions do not apply when the change of use is the result of a condemnation or a sale for right-of-way. That is worth understanding before you sit down with a right-of-way agent, because the fear of a rollback bill is one of the things that pushes owners into signing early.
The short answer
A change of use caused by condemnation or by a sale for right-of-way does not trigger Texas rollback taxes on the land taken. The exemption is written into the statute. It is not a negotiating position, and it is not something the condemning authority grants you as a favor.
What a rollback tax is in the first place
Texas lets qualifying farm and ranch land be appraised on its productivity value rather than its market value. That is the 1-d-1 “ag exemption” most owners know. When land that has been carrying that valuation stops being used for agriculture, Texas Tax Code § 23.55(a) claws back the difference between what was paid on productivity value and what would have been paid on market value.
Under the current statute that clawback reaches the three years preceding the year the change of use occurs, plus penalties and interest as provided by law for ad valorem taxes. On a large tract that had been sitting at productivity value for years, it is a real number, which is exactly why owners worry about it.
What § 23.55(f) actually says
Subsection (f) lists the situations where those sanctions do not apply. The change of use is exempt if it occurs as a result of:
- a sale for right-of-way;
- a condemnation;
- a transfer of the property to the state or a political subdivision of the state to be used for a public purpose; or
- certain economic development transfers out of state or municipal ownership that meet a revenue test set out in the statute.
The first two are the ones that matter to a landowner facing a taking. A negotiated easement sale to a utility acquiring right-of-way and a formal condemnation both sit inside the exemption. The provision has been in the code for decades; the section was last amended in 2021.
What this does not protect you from
This is where owners get caught, and where a first offer often stays quiet.
Section 23.55(f) addresses the rollback sanction on the change of use caused by the taking. It does not promise that the rest of your operation is unaffected. Two separate questions survive it:
- Does the remainder still qualify? If the corridor splits a field, strands a corner, or drops your grazing or cultivated acreage below what your appraisal district requires for the degree of intensity standard, the ag valuation on land outside the easement can be at risk. That is a different question from the rollback on the strip, and it is a compensable damage-to-the-remainder issue, not a tax technicality.
- What changes on the ground? Towers, pads, access roads and permanent structures inside the easement take that ground out of production. Whether the surrounding use still meets your district’s standard is a fact question your appraisal district decides.
The question to actually ask your appraisal district
Do not ask “will I owe rollback taxes.” Ask these instead, in writing, and keep the answer:
- Given the acreage being taken and where it sits on my tract, does my remainder still meet your degree of intensity standard for this class of ag use?
- If it does not, what would I need to do to keep the valuation?
- How do you treat the easement acreage itself for valuation purposes going forward?
A written answer from the district is worth more in a compensation negotiation than any assurance from the acquiring agent, because it is the district — not the utility — that decides your valuation.
Where this comes up in a transmission easement
On a 765 kV line the permanent easement runs about 200 feet wide, roughly 24.2 acres for every mile it crosses. On a working tract that is enough to change field shape, clip a pivot, or cut a pasture into pieces that are harder to run. The rollback exemption means you are not taxed for that change of use. It does not mean you have been paid for it.
Those are the two things to keep separate when an offer arrives: the tax consequence, which the statute largely handles, and the compensation consequence, which is negotiable and which first offers routinely underprice. If you are on one of the Texas 765 kV routes, our page covering all five PUCT dockets shows where each project stands and which counties are affected.
Related reading
- Farmland eminent domain: what agricultural landowners need to know
- Damages to the remainder
- Transmission line easements
One caution
National ROW is a right-of-way and condemnation consulting firm. We are not a law firm and we are not tax advisors, and nothing here is legal or tax advice. Statutes are amended and appraisal districts apply the degree of intensity standard differently county to county. Confirm your own situation with your appraisal district and your own advisor before you rely on it.