Changes to Maine Tree Growth and Open Space Tax Laws
Robert H. Levin, Attorney at Law
Last Spring, the Maine Legislature enacted significant changes to the Tree Growth and Open Space property tax programs when it passed 2012 Public Law Chapter 618 (L.D. 1138). The bill took effect on August 1, 2012, and has certain provisions that might affect land trusts, as well as landowners whose property is subject to a conservation easement.
Overview of Tree Growth Eligibility Requirements
Before delving into the new aspects of the Maine Tree Growth Tax Law, it is helpful to summarize the fundamental requirements for Tree Growth classification, as set forth in the original 1970 bill and through subsequent amendments. These requirements set forth in 36 M.R.S. § 574-B, are as follows:
- A tax parcel containing at least 10 acres of "forest land."
- A forest management and harvest plan, to be updated at least once every 10 years.
- A statement signed by a licensed professional forester that the landowner is managing the parcel according to harvesting schedules of the forest management plan, submitted to the tax assessor at least every 10 years.
As with any statute, definitions are key to interpreting the eligibility requirements. "Forest land" is defined as "land used primarily for growth of trees to be harvested for commercial use, but does not include ledge, marsh, open swamp, bog, water and similar areas, which are unsuitable for growing a forest product or for harvesting for commercial use." § 573(3)(emphasis added). The statute also defines "commercial harvesting" or "harvesting for commercial use" as the "harvesting of forest products that have commercial value." § 573(2-A). Although the Tree Growth statute does not define the term "harvest," another statute, the Forest Practices Act, does define the very similar term "timber harvesting." See 12 M.R.S. 8868(4), which defines "timber harvesting" as "the cutting or removal of timber for the primary purpose of selling or processing forest products." Thus, there is some statutory ambiguity due to the lack of a definition of "harvest" in the Tree Growth statute proper.
This primary use requirement is and always has been the crux of the entire statute. The statute has been amended over the years to make clear that as long as the primary use is harvesting for commercial use, other uses such as recreation and mineral exploration will not render a parcel ineligible. § 573(3)(A),(D). Furthermore, two narrow exceptions to the primary use requirement apply: the existence of zoning or land use laws that prevent commercial harvesting, and deed restrictions (presumably including conservation easements) that prevent commercial harvesting, if those restrictions were in place prior to 1982. § 573(3)(B),(C).
Attestation Requirement. A landowner claiming Tree Growth classification must now attest, at the time of enrollment and upon any update to the forest management plan sent to the assessor, that the primary use of any classified land is to "grow trees to be harvested for commercial use," or that the land fits within the two exceptions noted above. § 574-B(4). The statutory language of the attestation requirement is somewhat clumsy insofar as it also refers to recreational use and mineral exploration use categories in § 573(3)(A) and (D), also discussed above. But this phrasing does not appear to override the primary use requirement. In other words, land used for recreation or mineral exploration will qualify under Tree Growth only if the primary use is commercial forest management.
What is important to appreciate from the outset is that the attestation requirement is not a change to the primary use requirement. Rather, the attestation is simply a way to ensure that the primary use requirement is being followed. Until now, only the forester had to sign a statement that the forest management plan was being complied with. By making the landowner periodically attest to the primary use, the Legislature presumably hopes to increase compliance. Furthermore, by formalizing the statement as an attestation, the landowner is subject to perjury penalties for any untrue statements, and indeed, the new Tree Growth form uses the perjury language in the attestation section.
This new primary use attestation requirement may present difficulties for land trusts that have properties enrolled in Tree Growth, but that do not primarily use the land to grow trees for commercial harvesting. Similarly, there may be certain landowners whose property is protected by a conservation easement granted after 1981 (as were the vast majority of conservation easements in Maine) that prohibits commercial forest management on all or a portion of the parcel, but who nevertheless have continued to claim Tree Growth classification for the entire parcel. The attestation requirement puts these landowners under the spotlight of a signed statement.
Managed Forest Open Space Land. Although most of the bill concerns the Tree Growth program, one section makes an important change to the Open Space program by establishing a new category called "managed forest open space land." 36 M.R.S. § 1106-A(3)(D). Qualifying land is eligible for an additional 10% reduction in value in the optional valuation formula available to assessors. This new category creates an alternative to "forever wild." For example, if a landowner protects forest land with a conservation easement that allows for forest management (commercial or otherwise, as discussed below) and does not qualify for forever wild, until now the landowner could only seek the 20% reduction for open space land and a 30% reduction for permanent protection via the conservation easement, for a 50% cumulative reduction (assuming no public access). Now, that same landowner can claim an additional 10% reduction via the "managed forest open space land" category, for a 60% cumulative reduction.
As with Tree Growth classification, the landowner claiming "managed forest open space land" must commission a forest management and harvest plan and update and share it with the assessor at least every 10 years. However, in a key difference, the parcel does not have to be used for commercial forest management to be eligible for this new category. Thus, as long as some minimal level of tree cutting is called for under the forest management and harvest plan and it in fact takes place, the property should qualify as "managed forest open space land." Felled trees would not have to be sold or processed, and could lie fallen on the parcel in order to create wildlife habitat, restore nutrients to the soil, or foster old growth communities among the remaining standing trees. There is still a bit of ambiguity about this point because § 1106-A(3)(D) uses the word "harvest" in several sentences, and as noted above, the term "timber harvesting" in the Forest Practices Act means some sort of commercial use. But a common sense and widespread understanding of § 1106-A(3)(D) is that no commercial use is required in order to be eligible for this new Open Space category.
Other Changes to Tree Growth Law.
- Graduated Warning Procedure -- The bill establishes a three-step notification system for landowners who do not update their forest management plans every 10 years and make the attendant attestation. Small Woodland Owners Association of Maine, among others, had long pushed for such reforms to the withdrawal process, in order to prevent a landowner from being suddenly withdrawn and slapped with significant penalties. § 581(1-A).
- Minimum Lot Size Exclusions -- If there is a structure on the property for which a minimum lot size is required under state or municipal law (e.g., a residential or commercial structure), then the area of land containing the structure, at least ½ acre in size, must be excluded from Tree Growth classification. If the property is in a Shoreland Area and contains a residential structure, then an area of at least ½ acre and with at least 100 feet of shoreland frontage (or the minimum shoreland frontage required under law) must be excluded. § 574-C.
- Tree Growth Withdrawal Penalty Still Applies If Withdrawn within 10 years after transferring to Open Space - This provision closes a loophole that allowed a landowner to escape the harsher Tree Growth withdrawal penalty by first transferring to Open Space classification and then withdrawing. § 1112.
What Does It All Mean For Land Trusts and Conservation Easement Landowners?
To be sure, conservation easement properties and land trust preserve properties can still qualify for Tree Growth, as long as the primary use is commercial forest management. There is no minimum threshold of harvesting set forth in the statute, and the only substantive requirement is that the forest management plan be consistent with "sound silvicultural practices." § 573(3-A). Thus, a forest management plan calling for very infrequent and minimal harvesting, so as to allow for old growth forests to develop and thrive, would appear to qualify.
In certain cases, a conservation easement or a management plan might allow for commercial forest management on one area of a property, but not another. For example, many easements establish buffer zones around water bodies, in which no commercial cutting is permitted. Such buffer zones are not eligible for Tree Growth, but the remainder of the property would be eligible if commercial harvesting is permitted under the easement or management plan and in fact takes place according to a forest management plan.
As has always been the case, even prior to this statutory amendment, when planning and drafting conservation easements, land trusts and landowners should go out of their way to determine whether all or a portion of the property is already in Tree Growth, or whether there is an intention to enroll it in the near future. If so, the easement should be drafted so as to expressly permit commercial forest management, or else the property will have to be transferred to Open Space or face a withdrawal penalty.
Many land trusts are not concerned about Tree Growth or Open Space classification because they do seek full property tax exemption for their preserves. But property tax exemption is increasingly being challenged by municipalities and so these Tree Growth and Open Space changes might take on added importance in the years to come.