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SPA Process User’s Guide – Chapter 1 – Introduction to Capital Assets

Land and Land Improvements

Land Definition

Land is the surface or crust of the earth that can be used to support structures and may be used to grow crops, grass, shrubs and trees. Land is characterized as having an unlimited (indefinite) life.

Land Improvement Definition

Land improvements consist of site preparation and site improvements (other than buildings) that ready land for its intended use. The costs associated with improvements to land are added to the land value.

Acquisition of Land

According to Texas Government Code Section 2204.001–003:

  • The governor may purchase land or the right to use land that is required by the state for any type of public service.
  • A state agency, as defined by Chapter 658, Section 658.001 of the Texas Government Code, may not accept a gift or devise of real property or spend appropriated money to purchase real property without statutory authority or other legislative authorization.
  • An institution of higher education, as defined by Education Code Section 61.003, may accept a gift or devise of real property from a private entity to establish scholarships or professorships or to hold in trust for other educational purposes only if done consistently with rules and regulations adopted by the Texas Higher Education Board.

Real Estate Transactions

If the legislature authorizes a real estate transaction involving real property owned or held in trust by the state, the General Land Office (GLO) takes possession and control of the property and negotiates and closes the real estate transaction on behalf of the state (Natural Resource Code Section 31.158).

The GLO may not take possession and control of property under Chapter 2201 of the Texas Government Code if the state agency is ineligible to benefit from the Texas capital trust fund.

Upon notification by the GLO, a state agency initiates the transfer of property in SPA to the GLO. Proceeds from the real estate transaction are entered by the GLO and deposited into the Texas capital trust fund unless the constitution dedicates the proceeds to another fund or the enabling legislation ordering the real estate transaction provides otherwise.

Depreciation Methodology

Land and land improvements are inexhaustible assets and do not depreciate over time.

Capitalization Threshold

All acquisitions of land and land improvements are capitalized.

Examples of Expenditures to Capitalize as Land and Land Improvements:

  • Purchase price or fair market value at time of gift
  • Commissions
  • Professional fees (title searches, architect, legal, engineering, appraisal, surveying, environmental assessments, etc.)
  • Land excavation, fill, grading, drainage
  • Demolition of existing buildings and improvements (less salvage)
  • Removal, relocation or reconstruction of property of others (railroad, telephone and power lines)
  • Interest on mortgages accrued at date of purchase
  • Accrued and unpaid taxes at date of purchase
  • Other costs incurred in acquiring the land
  • Water wells (includes initial cost for drilling, pumps and casings)
  • Right of way
Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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