Property Tax Relief for Forest Landowners

Mel BaughmanMel BaughmanExtension Forester & Program LeaderExtension Forester & Program Leader

Mike ReichenbachMike ReichenbachExtension EducatorExtension Educator

University of MinnesotaUniversity of MinnesotaDepartment of Forest ResourcesDepartment of Forest Resources

I am interested in learning about

1.1. The SFIA The SFIA programprogram

2.2. Changes in the Changes in the Green Acres Green Acres programprogram

3.3. The 2c Managed The 2c Managed Forest Land Forest Land ClassificationClassification

4.4. OtherOther

Select all that apply

Press the # for statement(s) that apply to you. I am

Select all that apply

1.1. A Forestland ownerA Forestland owner

2.2. Actively engaged in Actively engaged in farmingfarming

3.3. Interested in Interested in reducing my reducing my property taxesproperty taxes

4.4. Interested in Interested in reducing my income reducing my income taxestaxes

1.1. A Forestland ownerA Forestland owner

2.2. Actively engaged in Actively engaged in farmingfarming

3.3. Interested in Interested in reducing my reducing my property taxesproperty taxes

4.4. Interested in Interested in reducing my income reducing my income taxestaxes

Introduction

• Non-forest programs

• Sustainable Forestry Incentive Act

• Green Acres

• 2c Managed Forest land

Non-forest programs

RefundsRefunds

Senior citizen property tax deferralSenior citizen property tax deferral

Seasonal recreational creditSeasonal recreational credit

Disability homesteadDisability homestead

Disaster relief (area specific)Disaster relief (area specific)

The Sustainable Forest Incentive ActThe Sustainable Forest Incentive Act

Updated October 2008

Why SFIA?

• 1/3 of Minnesota is forested

• Nearly 50% is family owned

• Wood

• Recreation

• Wildlife

Why participate?

• Promote healthy, productive forests• Protect forests from development

Payments and Enrollment

• At least $7.00

• In 2007 -- $8.61

• Enrolled in 2008• 1010 owners• 706,676 acres

Eligibility• At least 20 contiguous acres

•At least ½ must have trees OR

•Be managed for trees

• Approved forest management plan

• Forest management guidelines

Eligibility continued

• Property taxes paid

• > than 1920 acres must allow non-motorized public access

• No structures or CRP, CREP, RIM, Green Acres or Ag Preserves lands

Activity

Apply for enrollment

Decision on application

Certification forms mailed

Return certification form

Incentive payment

Deadline

September 30th

Within 90 days

July 1

August 15th

October 1st

Application process

• File a covenant with the county

• Complete Revenue Form TH1

• Attach copies of •Forest management plan map

•Covenant on file with the county recorder

•Property tax statement

• Submit by September 30

I applied! Now what?

• The DOR will notify you within 90 days

• If denied, •Appeal process

•Revenue will issue a document to release the covenant

Annual certification letter

• July 1: Certification letter• requirements for enrollment are being met

• report any changes to parcel information,

• return signed certification by August 15

• October 1: Incentive payment

• Payment is taxable income

What if I don’t follow the rules?

• ALL property will be removed

• Pay back payments received during past 4 years, plus interest

• Covenant will remain in effect

How do I get out of SFIA?

• File a written request after a 4 year waiting period

• Withdrawal occurs 4 years after application is made

• Lands are withdrawn on January 1st

• Cannot not re-enroll for 3 years

Why SFIA?

1.1. Strongly AgreeStrongly Agree

2.2. AgreeAgree

3.3. DisagreeDisagree

4.4. Strongly DisagreeStrongly Disagree

SFIA incentive payments recognize the public value that private forests provide.

I will not apply because

1.1. The covenant is too The covenant is too restrictiverestrictive

2.2. The incentive is not The incentive is not high enoughhigh enough

3.3. If I try to sell the If I try to sell the property buyers may property buyers may not want SFIAnot want SFIA

4.4. The program does The program does not apply to menot apply to me

5.5. OtherOther

Information

MN Department of Revenue

• http://www.taxes.state.mn.us/

• (651) 556-6088

• Proptax.questions@state.mn.us

Frequently asked questions

• http://cfc.cfans.umn.edu/nryb/nrr/

Questions on SFIA?

Property tax classifications

Rate % Class & Property Description

0.50

1.00

2a. Agricultural Homestead first $890,000

2a. over $890,000

1.001.00 2b. Non-homestead Agricultural Land2b. Non-homestead Agricultural Land

1.001.00 2b. Timberland 2b. Timberland

0.650.65 2c. Managed Forest Land 2c. Managed Forest Land

1.001.00

1.251.25

Seasonal residential recreat, non-commercialSeasonal residential recreat, non-commercial

4c(1) first $500,0004c(1) first $500,000

4c(1) over $500,000 4c(1) over $500,000

2a. Agricultural classification

10 acres in active farming, <10 acres if used for10 acres in active farming, <10 acres if used for– drying or storage of grain or farming equipment from drying or storage of grain or farming equipment from

the same farm operationthe same farm operation– Nursery productionNursery production– Livestock or poultry confinementLivestock or poultry confinement– Market farmingMarket farming

No RIM or CRP, grandfather exemptionNo RIM or CRP, grandfather exemption

Only includes productive landOnly includes productive land

Green AcresPayback period changes

– 3 yr payback on productive acres that 3 yr payback on productive acres that continue to qualify (same)continue to qualify (same)

– 3 yr payback on non-productive acres if sold, 3 yr payback on non-productive acres if sold, withdrawn or transferred before Jan 2, 2009withdrawn or transferred before Jan 2, 2009

– 7 yr payback on non-productive acres sold 7 yr payback on non-productive acres sold transferred or subdivided after Jan 2, 2009transferred or subdivided after Jan 2, 2009

Green AcresAdditional Changes

Grandfather clause for ineligible landGrandfather clause for ineligible land Method developed to determine Ag value Method developed to determine Ag value

for land in Green Acresfor land in Green Acres Income qualifications eliminatedIncome qualifications eliminated Clarification on corporations and Clarification on corporations and

partnership eligibilitypartnership eligibility Watershed district levies not deferrableWatershed district levies not deferrable RIM and CRP not eligibleRIM and CRP not eligible

2c Managed Forest Land

Available beginning 2008

0.65% property tax rate

Must apply to receive

Eligibility requirements

20 contiguous acres20 contiguous acres Max. 1,920 acres per taxpayerMax. 1,920 acres per taxpayer Be unplatted property Be unplatted property Rural in characterRural in character Not used for agricultureNot used for agriculture Active forest management planActive forest management plan Not enrolled in SFIA programNot enrolled in SFIA program

Structures or multi-use

Nonresidential structure <300 sq. ft. OKNonresidential structure <300 sq. ft. OK

Parcel must be split classified if Parcel must be split classified if – any structure(s) totals >300 sq. ft any structure(s) totals >300 sq. ft – Structure is used as a residenceStructure is used as a residence– Improved building siteImproved building site– Forest and non-forest use on the propertyForest and non-forest use on the property

Class 2c application procedures

Application form CR-2cMFL-08 Application form CR-2cMFL-08 – County assessor County assessor – MN Revenue websiteMN Revenue website

Forest management plan Forest management plan

Apply to county assessor Apply to county assessor – Deadline not set -- MN DOR recommends May 1Deadline not set -- MN DOR recommends May 1

Certified plan writers

– provide application formsprovide application forms

– determine eligible acresdetermine eligible acres

– provide a copy of your management planprovide a copy of your management plan

– revise out-dated plans revise out-dated plans

– write new plans write new plans

– answer questionsanswer questions

Assistance

Contact DNR Contact DNR – Free assistanceFree assistance– List of plan writersList of plan writers

Pay a consultant or SWCDPay a consultant or SWCD

Minnesota Association of Consulting Minnesota Association of Consulting Foresters www.paulbunyan.net/users/norfor/Foresters www.paulbunyan.net/users/norfor/

DNR priorities

1.1. Current plans <10 yrsCurrent plans <10 yrs

2.2. Existing plans >10 yrs Existing plans >10 yrs – Following the planFollowing the plan

3.3. New plansNew plans

4.4. Existing plans > 10 yrsExisting plans > 10 yrs– No management No management

For more information Class 2c Managed Forest Land

Applications at Applications at Your county assessorYour county assessor

www.taxes.state.mn.uswww.taxes.state.mn.us

MN DOR

Drew Imes, State Program Administrator Drew Imes, State Program Administrator

(651) 556-6084 (651) 556-6084

Drew.Imes@state.mn.us Drew.Imes@state.mn.us

Questions about Class 2c?