Perspective: Problems (and solutions) with Minnesota’s property tax code

Property taxes are among the most pressing issues for family forest owners.

In our first foray into video, and our first “Perspective” piece, we feature a November 2008 discussion with Jeff Forester, Executive Director of Minnesota Seasonal and Recreational Property Owners (MSRPO). Jeff discusses his book, The Forest for the Trees: How humans shaped the north woods and how the property tax code affects seasonal recreational landowners.

We’d love to hear your thoughts after you watch the video.  Post a comment and you could win a free copy of Jeff’s 2004 book! Details below.

Post a reply and win a copy of Jeff’s book.

After you watch the video, we’d love to hear your thoughts.  Everyone who leaves a comment below has a chance to win a free signed hardcover copy of Jeff’s book, The Forest for the Trees: How humans shaped the north woods.

Everyone who comments has an equal chance to win–entries are not judged, we just want to hear your thoughts.

To enter, leave a comment below.  Use your real name. We’ll announce the winner in our January email update.

The year in review: Minnesota’s top 5 forestry stories of 2008

Passage of 2c Managed Forest Land tax classification

Minnesota woodland owners scored a major victory this year with creation of a new property tax classification for vacant rural land.  The new 2c Managed Forest Land class rate is 35% lower than comparable land in the 2b timberland class.  Property tax reform of this nature reduces financial pressure that can force individual and family woodland owners to subdivide and/or sell their woodlands.

MN Statewide Conservation Plan cover

Property tax reform of this nature was recommended in Minnesota’s new statewide conservation plan and advocated by a number of organizations including the Minnesota Forestry Association, Minnesota Seasonal Recreational Property Owners, and [many others].  For more info on the new 2c Managed Forest Land classification, check the following links: overview and enrollment, clarification of eligibility, info from the MN Dept. of Revenue, and discussion.

Market downturns, community and landowner impacts

Driven largely by the weak housing market and reductions in new construction starts, major mill closures continued in Minnesota this year.  This year major mills have closed in Cook and Bemidji indefinitely and Grand Rapids permanently. This is a huge story for many reasons. Among them:

• These closures have huge impacts on local communities and loggers who make their living harvesting, selling, and delivering local wood to these mills.
• By reducing local demand for wood products, they also affect stumpage prices, making it harder for woodland owners large and small to manage their land.
• According to a 2004 DNR brochure called Value Added Economic Impact of Timber Harvest in Minnesota, for every dollar of timber harvested, there is $41.60 in value-added manufacturing.  As capacity for value-added processing is reduced, there will be corresponding overall losses to rural communities.

For more information about the economic impact of these changes, see a report by Jim Skurla at the University of Minnesota Duluth: Part 1 and Part 2.

Emergence of carbon markets

Carbon credit markets have been a tantalizing concept in Minnesota for years. In 2008, this issue has boiled up to the surface.  The basic concept is that growing forests capture and store atmospheric carbon.  Because atmospheric carbon is a major contributor to global climate change, reductions may slow the climate change process.  Under carbon trading systems, woodland owners who actively grow and tend their woods may be eligible to receive payments for the carbon sequestered and stored.

Although these markets are not yet well established in Minnesota, some Minnesota woodland owners are already receiving carbon credit payments for new plantings.  With speculation that the new administration and congress may move forward on national carbon cap & trade legislation, there is a great deal of interest in potential future market development.

You can learn more at our carbon credits page, which includes a link to an excellent guide to carbon credits for Minnesota woodland owners.  There’s an excellent article on carbon credits in the Fall 2008 issue (PDF) of DNR-Forestry’s Market Place newsletter. There’s also an exciting conference in the works for Cloquet in late February 2009 on carbon credits and other ecosystem services (more here soon…).

Biomass, biomass, biomass

Woody biomass also made a lot of headlines this year. Much of this attention was driven by sharp fuel price increases leading to consideration of alternative fuel sources.  Woody biomass, in addition to being local and perhaps less expensive that fossil fuels, is closer to carbon neutral to the degree that it offsets fossil fuel consumption.

The Minnesota Forest Resources Council, with input from a wide variety of stakeholders, published guidelines for the sustainable harvest of woody biomass from forest and brushland sites.  These guidelines are now part of the MFRC’s voluntary site-level forest management guidelines, which help to ensure sustainable timber harvest in Minnesota.

How will all this interest in woody biomass energy affect Minnesota’s family forest owners?  High fuel prices make alternative energy more attractive on the one hand, but also increase transportation costs, some think prohibitively.  Either way, biomass has become a major story in 2008.  Some say we’ve been down this road before and that interest will fade as it has in the past.  Others feel that concern about climate change may give biomass energy the boost it needs to succeed on a large scale this time.  Only time will tell.

Passage of legacy amendment

Minnesota voters did much more than help elect a new president this fall:  They also voted to approve a constitutional amendment that will allocate a new 3/8 of 1% sales tax to natural resources and the arts for the next 25 years.  The (more than) $64,000 question about how the money will be allocated remains unanswered, but a council has been named to answer this question.

According to the Minnesota DNR (source), new revenues under this amendment will be allocated as follows:

• 33% to a newly created Outdoor Heritage Fund to be spent only to restore, protect, and enhance wetlands, prairies, forests, and habitat for game, fish, and wildlife (approximately $80 million in FY 2010 and $91 million in FY 2011);
• 33% to a newly-created Clean Water Fund to be spent only to protect, enhance, and restore water quality in lakes, rivers, streams, and groundwater, with at least 5% of the fund spent to protect drinking water sources (approximately $80 million in FY 2010 and $91 million in FY 2011);
• 14.25% to a newly created Parks and Trails Fund to be spent only to support parks and trails of regional or statewide significance (approximately $35 million in FY 2010 and $39 million in FY 2011);
• 19.75% to a newly created Arts and Cultural Heritage Fund to be spent only for arts, arts education, and arts access, and to preserve Minnesota’s history and cultural heritage (approximately $48 million in FY 2010 and $54.5 million in FY 2011) (source).

Learn more about the natural resources portion of the legacy amendment from the Minnesota DNR.

What do YOU think are the biggest stories of the year?  Post a reply and let us know.

New 2c Managed Forest Land tax classification

The Minnesota legislature has created a new property tax classification for which many Minnesota woodland owners are eligible. This is big news–the new class rate is 0.65 percent, which is a 35 percent reduction.

This new Department of Revenue property tax classification is called 2c Managed Forest Land.

“In addition to leadership from the Minnesota Forestry Association and all the partners who helped, we need to especially thank Senator Tom Bakk and Representative Larry Hosch for sponsoring legislation that led to the 2c Managed Forest Law. The Departments of Revenue and Natural Resources were also very cooperative in drawing up the application and final rules to allow landowners easy access to the program” said Tom Kroll, Arboretum Director at Saint John’s University.

Who’s eligible for this new classification? Any landowner with at least 20 wooded acres (but not more than 1,920 acres) under a current forest stewardship management plan. The forest management plan must be registered with the Department of Natural Resources, Division of Forestry, and must be no more than ten years old. Landowners who don’t have a forest management plan can contact their local DNR Forestry office to request one.

Land already enrolled in a tax reducing program such as Sustainable Forest Incentive Act or Green Acres, to name a few, are not eligible for the 2c Managed Forest Land program. Landowners may also want to confirm that enrolling into 2c will benefit their tax situation. In some instances landowners might currently be taxed at 0.50% rate and enrolling into 2c would raise their tax rate.

Eligible landowners can apply for a change of classification through their county assessor. The assessors have the application form and can provide additional information. (The application form can also be downloaded here.) Landowners who wish to participate for the 2009 tax year need to submit their application by September 1, 2008 through their county assessor.

More detail on eligible acreage (from the application form):

(1) Unplatted real estate that is rural in character, is not used for agricultural purposes, and is not improved with a structure; may qualify for a reduced class rate of 0.65 percent if the property meets all existing requirements. The property must have a qualifying forest management plan (forest stewardship plan) in place, but the property cannot be enrolled in the Sustainable Forest Incentive Act (SFIA) program. A minor ancillary, non-residential structure (see instructions for description) does not disqualify a property from this classification. The commissioner of natural resources must confirm that a property qualifies for the classification.

A property that is improved with a structure that is not a minor ancillary non-residential structure will be split-classified, with 10 acres being assigned to the structure.

[Update: For much more information on eligible acreage, see this post.]

Change in highest and best use rules: According to Kroll, the law also changed the rules on “highest and best use” as regards classification. This means that someone with eligible forest land and a plan is entitled to be in the new 2c class (Even if it has lakeshore or is just down the road from a big development.) In the past such properties would have been classed to seasonal recreational or commercial based on their “highest and best use.”

To be clear, the valuation method of property will not change. Property values will continue to be estimated based on comparable sales of similar properties by willing sellers to willing buyers.

“This new tax class is a good thing for Minnesota woodland owners, and the Minnesota Forestry Association is proud to have helped move it forward” said MFA president John O’Reilly.

How to get a forest stewardship plan: Forest stewardship plans are prepared by Minnesota Department of Natural Resources (DNR) professionals and their private forest management (PFM) partners. PFM partners include private consulting foresters, Soil and Water Conservation Districts, and others. Landowners who do not already have a qualifying plan are unlikely to be able to obtain one in time to enroll in the 2c classification for the 2009 tax year (before September 1, 2008).

The DNR expects a major increase in requests for stewardship plans in the coming months, due largely to the availability of the new 2c classification. As a consequence, landowners may experience delays in processing their plan requests. More information on this process will be available from DNR, and through this site, in coming months.

To sign up for a stewardship plan, contact your local DNR Forestry office. You’ll be added to a list and your plan will be prepared either by a DNR forester or an approved contractor.

For more information: Contact your county tax assessor, DNR Forestry office, or the Department of Revenue. If you’re currently enrolled in the Green Acres program, you may want to read this thread on our discussion board about the relationship between Green Acres and the new 2c Managed Forest Land classification.

Questions: Feel free to add your questions either below or on the discussion board, and we’ll do our best to answer them.

Changes to MN woodland property tax rate

Bruce ZumBahlen wrote a guest post yesterday on the Vital Forests / Vital Communities blog describing changes to Minnesota’s property tax. These are exciting changes, favoring active sustainable management through consultation with a professional forester.

Every Minnesota woodland owner should know about these changes! An excerpt:

For the first time, MN has a law that provides the opportunity for woodland owners who are managing their property under a forest stewardship plan to receive a reduction in their property taxes payable in 2009 and thereafter.

Bruce and the Minnesota Forestry Association deserve great credit for their work to advance this issue.

Click here to read Bruce’s summary.
-eli

Minnesota woodland property tax: More Information

Where to find more information: Part of a detailed overview of Minnesota woodland property tax relief options, focusing on two recent programs: the Sustainable Forests Incentive Act (SFIA) and the 2c Managed Forest Lands tax classification.

Minnesota woodland property tax: Comparing 2C and SFIA

Comparing SFIA and 2c Managed Forest Lands: Calculations from a hypothetical property: Part of a detailed overview of Minnesota woodland property tax relief options, focusing on two recent programs: the Sustainable Forests Incentive Act (SFIA) and the 2c Managed Forest Lands tax classification.

Minnesota woodland property tax: 2C Managed Forest Land

About the 2c Managed Forest Land tax classification: Part of a detailed overview of Minnesota woodland property tax relief options, focusing on two recent programs: the Sustainable Forests Incentive Act (SFIA) and the 2c Managed Forest Land tax classification.

Minnesota woodland property tax: Sustainable Forests Incentive Act

About the Sustainable Forests Incentive Act (SFIA): Part of a detailed overview of Minnesota woodland property tax relief options, focusing on two recent programs: the Sustainable Forests Incentive Act (SFIA) and the 2c Managed Forest Land tax classification.

Minnesota woodland property tax: Overview

A detailed overview of Minnesota woodland property tax relief options, focusing on two recent programs: the Sustainable Forests Incentive Act (SFIA) and the 2c Managed Forest Land tax classification.