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Update: Maine's Commercial Forestry Excise Tax

In 2010 some Maine land trusts began receiving bills from the Maine Revenue Service for a Commercial Forestry Excise Tax for the first time. This tax was established in 1985 to fund some of the forest fighting capability of the Department of Conservation and is assessed to landowners (even to landowners that are exempt from paying property taxes) with more than 500 acres of forest land (in aggregate). For more information about the law, (Title 36, Chapter 367, Section 2721 et seq), look here.

The tax is not applied to the first 500 acres, i.e. if a landowner owns 501 acres they must pay the tax on one acre. Some landowners, especially those not in tree growth and with smaller parcels of land, have not been paying this tax, and have in fact been unaware that it even existed. Maine Revenue Services has been unaware that these landowners owning enough land in the aggregate to be taxed were not reporting to them as required by statute. We hoped to get some clarification on this tax and so Jane Arbuckle, MCHT's Director of Stewardship, Jeff Romano, Public Policy Coordinator and I met with David Ledew, Director of the Property Tax Division and two of his colleagues just before the holidays.

In 2010 the Appropriations Committee of the Maine legislature instructed the Maine Revenue Service (MRS) to increase their auditing efforts to find landowners that have not been reporting and paying the commercial forestry excise tax. It was estimated a stepped up discovery and assessment process, approximately $400,000 in additional revenue could be collected to help support the Department of Conservation budget for forest fire fighting capability.

After consulting with the Attorney General's office for some clarification, a determination was made that unless forested tracts specifically prohibited commercial forestry it had to be considered a "commercial forest" that would be subject to this tax. The theory is that although many large forested tracts remain untouched for decades, they are harvested to some degree at some point. A landowner may not consider their property to be a commercial forest today, but might one day decide that financial, ecological or safety needs require a harvest.

MRS received no specific instruction from the legislature concerning the number of back years to assess. The statute does not limit the number of years MRS could assess back taxes for if the taxpayer has not filed a return with the State. However, MRS typically employs a 6-year limit to back taxes when returns have not been filed, MRS also choose to generally waive penalties, knowing that most landowners simply were unaware that the tax existed or that it applied to them.

The MRS is open to working with individual landowners to establish a payment schedule for paying this tax, and will review special circumstances and requests on a parcel by parcel basis. You are encouraged to write a letter to state your case for your particular situation:

Property Tax Division
Maine Revenue Services
PO Box 9106
14 Edison Drive
Augusta, ME 04332

The landowners, including land trusts, which have been contacted thus far were identified by examining the Tree Growth Program enrollments. In the next year or two, however, the MRS will be using other resources to identify landowners with more than 500 acres of property (in aggregate). These landowners will be contacted and required to fill out a form that identifies the number of forested vs. non-forested acres owned. Where there are more than 500 acres of forested land, this tax will be levied against the number of acres exceeding 500. In short, even if you haven't been contacted yet, you may be in the future.

The Maine Revenue Service is receiving a lot of complaints about this from many quarters, but at this point they are trying to enforce what many feel is an "imperfect" law. MCHT is not formally opposed to the Commercial Forestry Excise Tax - forest fire suppression is a service that any landowner may have to utilize and which we believe we should support. However, we believe that the requirement to assess back taxes is unreasonable.

We recently discovered that Representative McCabe of Skowhegan will be introducing a bill that may address some of our concerns: "An Act to Clarify the Collection Process of the Commercial Forestry Excise Tax". We plan to work with Representative McCabe on this bill, and hope that the legislature will include language that eliminates collection of back taxes. If such a law passes it is uncertain if it would also apply to tax bills already levied, although that would be our goal.

Again, we encourage you to write to the Property Tax Division with concerns and requests regarding specific parcels, to contact your legislator to express your concern about the law or support provisions in Representative McCabe's bill after it has been printed, or contact Warren Whitney, Maine Land Trust Program Manager, with further questions.