Maine’s Tree Growth Tax Program: A Win-Win

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In 1972, the Maine Legislature enacted the Tree Growth Tax Law to promote better forest management and to encourage landowners to retain and improve their holdings of forestland.

According to the law, all registered forestlands are taxed based on their productivity. This means the property value of forestland enrolled in a bonafide tree growth plan is based on its ability to grow trees rather than its “highest and best use,” thus creating a property tax incentive for landowners who elect to maintain acreage in tree growth. Plus, the land managed for timber harvesting can provide many other benefits, including wildlife habitat, scenic beauty, recreation and clean water.

In order to enroll a property in the Maine Tree Growth Tax Program, individuals must own at least 10 acres of forestland to be managed primarily for the production of commercial forest products. If individuals own more than 10 acres, they do not have to enroll their entire property. For instance, if an individual owned 25 acres, they could choose to enroll 10 acres and use the other 15 acres for another purpose.

To enroll in Maine’s Tree Growth Tax Program, individuals must fill out an application and include a Forest Management Plan, generally drawn up by a forester. A well-written Forest Management Plan should begin with a statement of the landowner’s long and short-term goals for ownership. The plan should provide continuity through successive generations of owners, as well as proposed timber harvests schedules, thinning schedules, site preparation timetables and re-growth or re-planting methods. It’s important to note that in order to remain active, this plan must be updated at least every 10 years or as conditions change or as the objectives of the owner change.

Once completed, the application and Forest Management Plan are submitted to the individuals’ local municipality for acceptance. Once an application is approved, the assessor values the acreage based on rates set annually by the State of Maine. The rates for 2018 in Midcoast Maine range from: $337 to $431 per acre for softwoods, $263 to $364 per acre for hardwoods and $408 to $455 per acre for mixed wood. Property taxes are figured by multiplying the valuation by the acreage, dividing by 1,000 and multiplying it by the tax rate for your town.

When considering the pros and cons of creating a tree growth plan, be sure to look at the long-term implications. The property tax benefits associated with the Tree Growth Tax Program may make it more affordable to own and manage land. However, the penalties for removing land from the program can be high, so consider all the aspects before enrolling.

If it does become necessary to withdraw some, or all, of the property from the Tree Growth Tax Program, there is a sliding scale penalty assessed based on the number of years in the program. The penalty will be an amount equal to 30 percent of the difference between the 100 percent Tree Growth valuation and the just value of the property on the date of withdrawal.

If the land has been classified for more than 10 years, the percentages decline to as low as 20 percent after 20 years. The withdrawal penalty imposed may not be less than “the tax which would have been imposed over the five years preceding that change of use had that real estate been assessed at its highest and best use, less all taxes paid on that real estate over the preceding five years and interest.” If only a portion of the property is removed, the penalty will be restricted only to the portion withdrawn, not the whole parcel.

Maine’s Tree Growth Tax Law was created to promote forests and to help landowners retain and improve their forestland holdings through thoughtful management of one of Maine’s greatest resources. If you, or someone you know, is interested in learning more, consult with a private, licensed consulting forester. It’s important to understand all of the benefits, obligations and potential penalties of Maine’s Tree Growth Tax Law before enrolling.