Bills to Give Tax Breaks for Forest Management
February 14th, 2012Private, non-industrial landowners hold about 60 percent of Michigan’s timber supply, which is also critical wildlife habitat and prime hunting land. MUCC supports incentives to encourage these landowners to actively manage their forest, which will benefit wildlife, forest health, and the forest products industry in Michigan. We thank Representatives Frank Foster (R-Pellston), Ed McBroom (R-Vulcan), and Matt Huuki (R-Atlantic Mines) for their leadership in bringing forward this important issue into the legislative arena.
Last year, three bills were introduced in the Michigan House of Representatives that would give private forest landowners a break on their non-homestead property taxes if they have a forest managements plan and agree to follow it. A principal residence is exempt from taxes levied by a local school district for operating purposes. However, if you have additional hunting or recreation property that you don’t claim as your principal residence, you pay up to 18 mills to the local school district. The new and improved Qualified Forest Act proposed in this package of legislation would allow the landowner to be exempt from these taxes.
No tax relief program comes without some conditions, but several conservation and forestry groups, including MUCC, teamed up to ensure that this program would be easier for the landowner, the local unit of government, and the DNR to work with and will remove some key barriers to enrolling in the Qualified Forest Properties program (QFP). The bills have also been amended in subcommittee to address a few concerns brought up in earlier versions.
First, HB 4302 (H-3 version) sponsored by Rep. Ed McBroom fixes the onerous recapture tax provisions. Under the current program, it has been said that the formula may require a landowner to be enrolled for 80 years to make it worthwhile given the harsh penalties they would be faced with for exiting–this has been a major deterrent for many landowners to enroll. For a landowner who chooses to exit the QFP program under the new legislation, they will now have to only pay back up to 7 years worth of the tax benefits they have received (however this would be doubled if no commercial harvest had taken place while the property was enrolled).
The other major improvement is the allowance of certain structures on the property. HB 4969 (H-2) sponsored by Rep. Frank Foster explains the meat of the program, particularly Section 51417 that allows for small or rustic structures on the property. Current QFP rules do not allow any structures on a qualifying property regardless of how much land there is or what benefits would be gained by managing them. For example, if a small pole barn sits on a cleared acre at roadside on a 160-acre parcel of forest, that parcel cannot qualify for QFP status, regardless of the fact that there are 159 perfectly suitable wooded acres there that could be improved for forestry and wildlife. While this new program would still not allow a fully functional second home to skirt the 18 mills, we hope this language allows for more flexibility for those landowners who currently have or may in the future build some type of hunting shack or storage building on their property. Anyone with a structure that exceeds these criteria in the bill can still request a split of their parcel with their local unit of government in order to separate a second home from the forested property for taxation purposes.
Rep. Huuki sponsored HB 4970 (H-1), which cleans up the references in the General Property Tax Act and also removes the statewide cap for enrollment. The cap in the existing law is set at 1.2 million acres, yet the program currently only has approximately 70,000 acres enrolled. The statewide cap is unnecessary for this program.
These bills were voted out of the House Committee on Natural Resources, Tourism, and Outdoor Recreation on February 14, 2012. Please take the time to contact your local representative and let them know that these program changes are important for wildlife and forests as well as Michigan’s hunting heritage and forest products industry.
