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Senate and House Bills: Tax Break Reforms for Forest Management

May 14th, 2013

Summary: This package of bills has been reintroduced (formerly SB 1057-1062, 1287-1288 of 2012) after failing to reach a final vote at the end of 2012. The new package includes House Bills 4069, 4243-4244, 4320-4345 and Senate Bills 51-59. In the analysis, we have indicated which bill from the Senate or House is proposed to move forward listed first.

The Qualified Forest Property program gives private forest landowners a break on their non-homestead property taxes if they have a forest managements plan and agree to follow it. These bills introduce many improvements into the program, but move the administration of it from the Department of Natural Resources (DNR) to the Michigan Department of Agriculture and Rural Development (MDARD) and Conservation Districts.

Analysis:

SB 51 (HB 4320) will make improvements to the Qualified Forest Property program, including allow structure on these properties (though these structures will not be eligible for the tax exemption), and will transfer authority for the Qualified Forestry Program to MDARD from the DNR. This bill also increases the statewide cap of the program to 2.4 million acres, and reduces the size and amount of forest cover for a qualified parcel.

HB 4243 (SB 52) would amend the General Property Tax Act to revise the requirements for a transferee to file an affidavit upon the transfer of qualified forest property, in order to avoid an adjustment in the property’s taxable value, also known as the “pop up tax”.

HB 4244 (SB 53) modifies the calculation for recapture tax on lands experiencing a change in use. Lands with a change in use will have their recapture tax calculated by multiplying the current taxable value by the number of mills levied in that area and then multiplied by the number of years preceding the change in use (not to exceed 7). If no harvests have occurred since the change in use, multiply the product by 2 to determine the recapture tax. An amendment is planned to ensure that a landowner does not also have to pay as penalty the 2 mills that was provided as a fee to the Private Forestland Enhancement Fund.

SB 54 (HB 4321) modifies the allocation of the recapture tax funds. The treasurer shall credit the proceeds to the state’s general fund if collected before January 1, 2014. After December 31, 2013 the proceeds will be transferred to the established Private Forestland Enhancement Fund to further fund the Qualified Forestry Program.

SB 55 (HB 4322) amends the qualification for designation as qualified agricultural use lands. This bill adds a qualification that lands can be designated agricultural use lands if more than 50% of the parcel’s acreage is devoted to a combination of agricultural use and is exempt as qualified forestry property.

SB 56 (HB 4323) provides expanded authorities for MDARD and local conservation districts. MDARD is now authorized to include CDs in landowner assistance and can review district financial information. Additionally, guidelines for eligibility to receive a $50,000 grant from MDARD require CDs to execute consistent financial reporting to MDARD and outlines actions beyond the authority of an employed forester with the CD. Guidelines for CDs in partnership with MDARD and landowners allows them assistance capabilities but prohibits them from developing forest management plans.

SB 57 (HB 4324) adds authority to on-site evaluations as such that landowners are provided the ability to voluntarily assess the value of managing areas of the land not utilized for traditional or production agriculture practices for environmental, ecological and economic benefits. Secondarily, the bill includes members of the forest community to be appointed by the director to the environmental assurance advisory council. A private consulting forester, a member of the forest products industry and a member of the logging profession shall be able to serve 3-year terms as the discretion of the director.

SB 58 (HB 4325) provides that MDARD and MDNR shall work jointly to encourage the expansion of the forest products industry, retention of current industry companies, and the use of Michigan’s value-added forest products.

HB 4069 (SB 59) modifies eligibility requirements for commercial forest lands and exemptions for withdrawal. Current penalties for withdrawal shall be granted upon payment of a penalty (between $200 and $1,000). The department may withdraw lands if acquired by a federally recognized Indian tribe and such withdrawn lands are exempt from penalty. Landowners preventing open public access shall have lands withdrawn at the discretion of the Department unless the landowner corrects such action. The development of wind energy and meteorological buildings is allowed at the approval of the Department.

Current Status: Only House Bills 4069, 4243, and 4244 have passed both chambers and are making there way to the Governor’s desk. The Senate bills remain on the House floor.

Sponsor: The lead sponsor of the Senate package is Sen. Darwin Booher (R -Evart), along with Sen. Thomas Casperson (R – Escanaba), Sen. Michael Green (R-Mayville), Sen. Arlan Meekhof (R-Olive Twp), and Sen. John Moolenaar (R-Midland). On the House Bills, the sponsors include Representatives Frank Foster (H.B. 4069), Ed McBroom (H.B. 4243), and Bruce Rendon (H.B. 4244).

MUCC Action: MUCC indicated support for SB 52-55, 57-59 and the corresponding House Bills and remains neutral on SB 51 and 56. The Senate Committee on Natural Resources accepted certain amendments to SB 51 that would shorten the time frame that forest plans covered, so that landowners would remain active and engaged in managing their forests. We remain concerned about splitting this particular program away from those in DNR responsible for management of state forests and wildlife, and oversight of commercial forests.

MUCC Policy Resolution: AC250605  MUCC should work with the Legislature to create a  tax structure for privately managed forest land similar to that of agricultural land.

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