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W isconsin W oodland O wners A ssociation Wisconsin’s Private Woodland Stewards. MFL It’s Been A Great Program Is it still a Sweet Deal?. NOT ANYMORE. MFL WI’s Forest Landowner Incentive Program has achieved sustainable forest management on thousands of acres BUT
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Wisconsin Woodland Owners Association Wisconsin’s Private Woodland Stewards
MFL It’s Been A Great ProgramIs it still a Sweet Deal? NOT ANYMORE
MFL WI’s Forest Landowner Incentive Program has achieved sustainable forest management on thousands of acres BUT is it still viewed as an incentive program by woodland owners?
Property Tax Situation2009 Fair Market Value = $2200 mill rate = $18/$1000 • Options: • 50 acres productive forest = $1980 • 50 acres ag-forest = $990 • 50 acres MFL @ $8.37/ac = $418 • 50 acres MFL open @ $1.67 = $83.50 • 50 acres pasture = $69
Pasture the Woods? Tax = $69 Tax = $990
Ag-Forest Option • 50 acres ag-forest = $990/yr vs $418/yr MFL • No application fee or program requirements to track, • Maintain ability to lease at $750/yr, • Maintain the ability to receive DNR forestry assistance, • Maintain ability to receive cost sharing for forestry practices (with voluntary stewardship plan), • Sell timber when desired with no yield tax or regulations to follow, • No constraints on sale of land or parcel splitting
Penalties Associated with Agricultural Programs • Use Value -There is a penalty for conversion of land classified as agricultural to residential/commercial. Most conversions avoid the penalty by allowing the land to be classified as “undeveloped” for one year. There is no penalty going from undeveloped to residential/commercial. • Working Lands Zoning – The penalty for changing zoning from agriculture to residential is approximately $800/acre. (Actual value varies dependent on area) • MFL – payment of all back taxes and only whole parcels can be withdrawn.
MFL Option • 50 acres in MFL = $418/yr vs $990/yr • Cost of plan and entry - $1000+, • No leasing or other income opportunities, • Yield tax on harvest - $4000 (estimate), • Loss of ability to split land or build on it, • Potential reduction in sale price, • Significant penalty for withdrawal, • And….
OTHER MFL REQUIREMENTS - Regardless of Landowner Goals • Endangered and Threatened Species -NHI • Historical Sites - Cultural and Archeological • Water – BMPs for Water Quality • Soil – • BMPs for Water Quality • Biomass Harvesting Guidelines – mandatory on January 1, 2011 • Ecological Diversity – • Natural Heritage Inventory • BMPs for Invasive Species AND……. Photo by Eric Epstein - WDNR
A PIG IN A POKEWhat Will They Do To Me Next? • 17 statutory changes to MFL • 1985 Act 29 – July 19, 1985 • 1991 Act 39 – August 14, 1991 • 1993 Act 16 – August 11, 1993 • 1993 Act 131 – March 18, 1994 • 1993 Act 301 – April 28, 1994 • 1995 Act 27 – July 28, 1995 • 1997 Act 27 – October 13, 1997 • 1997 Act 35 – December 30, 1997 • 1997 Act 237 – June 16, 1998 • 2001 Act 109 – July 29, 2002 • 2003 Act 228 – April 27, 2004 • 2005 Act 64 – January 5, 2006 • 2005 Act 299 – April 20, 2006 • 2007 Act 20 – October 26, 2007 • 2009 Act 28 – June 29, 2009 • 2009 Act 186 – March 29, 2010 • 2009 Act 365 – May 19, 2010
Pasturing would provide the greatest tax break but the resultant negative impacts – soil compaction and erosion, reduced timber quality, loss of ecological values, and water quality degradation – would not be worth the $900/yr tax savings. • MFL would provide a moderate reduction in annual taxes but the negatives are not worth the $500 annual tax savings. • DECISION – When current contract expires evaluate a harvest and work with assessor to assure land will be taxed at the Ag-Forest rate. The Bottom Line
The benefits the Managed Forest Law has provided to Wisconsin’s woodlands are many, but the time has come for a comprehensive re-evaluation of the program.
Cost of Community Services (FY96) Ratio of greater than 1 indicates a particular land use costs more than the revenue it provides. A ratio of less than 1 indicates a land use provides more revenue to a community than it requires in costs of public services. Source, Mary Edwards, et al. 2000. Paying for Local Services: The Cost of Community Services for Nine Wisconsin Communities. WI: Wisconsin Land Use Research Program
Rural Land Property Tax Incentives in 2002(Millions of Dollars)
Changes in Land Use and TaxesTown of Coon 96/97 - 02/03 Acres in Land Class
Changes in Land Use and TaxesTown of Coon 96/97 - 02/03 Net Tax per Acre
Use Value 101 – History, Intent & How it Functions WI State Constitution ARTICLE VIII. FINANCE Rule of taxation uniform; income, privilege and occupation taxes. SECTION 1. [As amended Nov. 1908, April 1927, April 1941 April 1961 and April 1974] The rule of taxation shall be uniform but the legislature may empower cities, villages, or towns to collect and return taxes on real estate located therein by optional methods. Taxes shall be levied upon such property with such classifications as to forests and minerals including or separate or severed from the land, as the legislature shall prescribe. Taxation of agricultural land and undeveloped land, both as defined by law, need not be uniform with the taxation of each other nor with the taxation of other real property.
ASSESSMENT CLASSIFICATIONS 1. Residential 2. Commercial 3. Manufacturing 4. Agricultural 5. Undeveloped – 50% of FMV 5m. Agricultural Forest – 50% of FMV 6. Productive Forest Land 7. Other
4. Agricultural • (a) First grade tillable cropland • (b) Second grade tillable cropland • (c) Third grade tillable cropland • (d) Pasture • (e) Specialty land Value of land in each category is set by a calculation of it’s value based on it’s present use. Every municipality has values calculated by DOR each year.
4. Agricultural Use Value ExampleTown of LaGrange 2010 Category Guideline Value/Acre Tax/Acre • 1st Grade Tillable $ 303 $6.06 • 2nd Grade Tillable $ 255 $5.10 • 3rd Grade Tillable $ 185 $3.70 • Pasture $ 74 $1.48
5m. Agricultural Forest (Taxes are 50% of Fair Market Value) • 2.1 Million Acres in 2009 • Acres of pastured forest?
AGRICULTURAL FOREST • Land that is producing or is capable of producing commercial forest products AND any of the following: • contiguous to a tax parcel that has been classified in whole as agricultural land owned by the same person • located on a parcel classified as agricultural land in the property tax assessment on January 1, 2004, and on January 1 of the year of assessment • located on a parcel at least 50% by acreage, was converted to land that is classified as agricultural land in the property tax assessment on January 1, 2005, or thereafter
AG – Forest Example, Scenario 6 of 19 DOR’s Ag Assessment Guide for Property Owners
Agricultural Assessment Guide For Wisconsin Property Owners 2010
Forestry - the Other Agricultural Use • Chapter 91.01(2), Stats – “Forest management” is defined as an agricultural use, along with crop production, the raising of livestock, beekeeping, etc. • Wisconsin Capital Gains Taxes on Sale of Farm Assets • Sale of “farm assets” , which includes forestry, was exempted from tax rate increases
Forestry - the Other Agricultural Use • Working Lands Initiative (new program replacing Farmland Preservation) • tax credit of $7.50/acre, $10.00/acre if in an Agricultural Enterprise zone • All of your farm land, including your forest, can be eligible • Tied to proper ZONING (Different than use value and current MFL) • Penalty - Even if you do not claim a tax credit and you are subject to a penalty of approximately $800/ac if your land is ever rezoned out of agricultural use. • Minimum income requirements - $6000/yr ($18,000 over • 3 years) in gross revenue from the land. • Must meet basic land conservation performance standards under NR 151 and ATCP 50.
Wisconsin Working Lands Agricultural Performance Stds. ATCP 50 and NR151 Cropland Soil Erosion – meet “T” (tolerable soil loss) Nutrient Management Plan Manure Storage Facilities and Clean Water Diversions Manure Management Prohibitions No overflowing storage facilities No unconfined manure stacks in water mgt areas No direct runoff from manure facility or feedlot area No livestock access to waters if adequate sod or vegetative cover cannot be maintained
Summary of Issues and Recommendations • Technical Assistance - DNR technical assistance is critically important. • Contractual Language - MFL program needs to provide a landowner long-term agreement assurances. • Leasing and other Income – Prohibition on compatible income needs to be changed. • Public Access – Continue to provide open/closed options at reasonable rates.
Summary of Issues and Recommendations • Flexibility and Scope of MFL – Provide more flexibility on lands eligible for enrollment and provide waiver capability in rules for exceptional situations as long as program objectives are met. • Tax Levels - Need to be reasonable for growing a long-term crop. • Yield Tax – Transparent process and simplify calculation method. • Equitability – Forestry is long-term ag use.
