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TAXATION and FOREST LAND
Article #115, January 2007
By Bill Cook, Forester/Biologist, Michigan State University Extension
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There are ways to reduce property taxes and income taxes from timber sales. Forest management and timber harvesting are very productive tools in not only achieving ownership objectives, but in also paying off the mortgage. For the savvy forest owner, tax burdens can be significantly reduced. |
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TAX TIPS FOR 2009
TAX TIPS FOR 2008
TAX TIPS FOR 2007
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These bulletins summarizes key federal income tax provisions related to owning and managing forest land. |
| Minimizing Federal Income Tax for Forest Landowners |
This bulletin provides a general guide to federal income tax for forest landowners. |
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National Timber Tax Web Site
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This comprehensive web site provides extensive information about timber taxes. Begin at Getting Started page:
- Timberland Acquisition
- Structuring Ownership
- Timberland Appraisal
- Determine Your Basis
- Record Keeping
- Management & Operating
- Expenses
- etc... etc...
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| Michigans New Property Tax Laws, summarized from Bill Cook Article listed above. |
Property taxes can be significantly reduced by enrolling forested property into programs offered through the State of Michigan. The legislature recognizes the importance of keeping as much forest land as forest, so it has enacted two programs to help accomplish this. The Commercial Forest Program (CFP) has been around in one form or another for decades. The Qualified Forest Program (QFP) is new in 2007. Both programs "buy" sustainable forest management on private land through property tax reductions.
If you are not genuinely interested in forest management, then neither program should be considered.
The CFP was updated for 2007. The program description is available on the DNR website. For eligible forest property, there's a tax rate of $1.10 per acre with regular nickel increases every five years. The major barrier for many forest owners is the requirement of allowing public access (foot only) for hunting and fishing.
The new QFP does not require public access. The tax reduction comes in the form of an exemption from public school taxes.
Both programs require forest management plans, have eligibility rules, application procedures, various fees, and withdrawal penalties. There are also important differences. Early indications are that membership in a forest certification program, like the Grossman Forestry Tree Farm Group will significantly help in applying for the QFP. Make sure that you do your homework.
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| QFP - PA 378 |
The Governor signed this new law in September 2006. If you are brave you can read the actual law at:
PA378. or Recent MSU Extension Publication at: MSU
PA378-APPLICATION
Summary of key provisions:
- Enrolled property will not pay 18+- local school millage.
- No public access required.
- DNR approved forest management plan (preliminary indications are that members of Grossman Forestry Tree Farm Group will be "pre-approved.")
- 20 to 320 acres per tax collecting unit.
- 80% productive forest.
- Stocked with forest products.
- No buildings or structures.
- Penalties for withdrawl = current SEV x mills x 7 if one of more timber harvests have taken place or current SEV xmills x 14 if no timber harvests have taken place.
PA378-Annual_Report_FORM
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Social Responsibility to Schools
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While some have argued that the State Legislature will make up the lost revenue to the schools from PA378, many observers are very skeptical. It is likely that Michigan rural schools will continue to suffer from declining revenue.
One Michigan Forest Association member indicated that forestland owners are generally very generous and understand long term investments in forests and children. It was suggested that Michigan landowners may be more receptive to voluntary charitable contributions to schools rather than mandatory taxes.
Please consider a charitable contribution to the school or school foundation where your property is located:
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