Is It Time To Change Timber Assessment Options?
The year 2002, marks the second 10-year anniversary of Idaho’s State 1982 Forest Land Taxation Law. Timberland owners of five acres and more, but less than 5000 acres within the State of Idaho, may change their timber designation or category for assessment purposes.
Timberland owners not wishing to change their current timber classification need NOT respond to questionnaires. Their land will continue to be assessed as-is for the next 10-year cycle and/or actively managed.
In accordance to state law, landowners who own timberlands in different counties throughout the state must designate all their timberlands under the same option: All timberlands owned by an individual, corporation, partnership, etc., must be placed in either the Land Productivity (“LP”) or the Bare Land and Yield (“BLY”) option within the state.
Private ownerships, excluding improved sites (homes, shops, outbuildings, public road rights-of-way, etc.) of less than five fully-stocked, treed acres will not qualify for either timber option. Ownership of timberlands within Idaho of 5000 acres and more are designated in the Land Productivity option only.
If timberland owners desire to change from one option to another, they are required to contact the county in which the property lies, and reapply for the new category or option. If no viable management plan is currently in place (based on individual counties), it is mandatory that the timberland owner submits a plan describing silvicultural activities for the parcel through the next commercial harvest.
A landowner may request a change in option beginning January 1, 2002. Submissions of applications and plans are due on or before December 31, 2002. The new option will be effective for the 2003 assessment year.
There are both short-term and long-term ramifications to switching options. Consider the following if you are currently assessed in the Land Productivity option:
- Lands can be changed without any recapture taxes or penalties;
- Assessed value of lands will drop (by 74% to 62%), depending on productivity:
- Once land changes over, any timber harvested will be susceptible to a 3% yield tax and a deferred tax. The deferred tax is collected at the time of the name change or change in use, and/or if parcels should become too small to qualify due to road rights-of-way, home construction, etc.
- There are two ways to calculate deferred taxes: (a) Productivity-to Bare Land and Yield; (b) Market Value-to-bare Land and Yield.
LP (-) BLY: Property is sold in entirety or in part and name change occurs. Formula: Productivity per-acre-rate (-) Bare Land and Yield per-acre-rate (X) current levy rate (X) number of years assessed in BLY [maximum of 10 years] (X) number of acres (-) any Yield Tax paid (=) Deferred tax due. For example, $675/Ac.- $179/Ac. X .01300 X 3 Yr. X 9 Ac. – $125 Yield Tax paid = $49.10 Deferred Tax due.
Market (-) BLY: Change in use in all or portion of the ownership and the ownership remains the same. For example: Build a home on BLY acreage; land is platted to residential lots; land is split; a portion sold; portion retained by original owner; and/or now too small to qualify for timber, etc. Formula: Market Value per-acre-rate (-) BLY per-acre-rate (X) current levy rate (X) number of years assessed in BLY [maximum of 10 years] (X) number of acres (-) Yield Tax paid (=) Deferred Tax due.
Example: $5000/Ac.—$179/Ac. X .01300 X 3 Yr. X 4.99 Ac. (-) $125 Yield Tax paid = $813.22 (Substantially more in this case!) I strongly advise that, if at any time you plan to develop your timberlands into residential properties, do not place them in this category!! This option was set-up to keep timberlands as timberlands.
Consider the following for changing from BLY to LP: (1) A deferred tax will be billed, based on the difference between the LP rate-per-acre and the BLY rate for the number of years lands were assessed as BLY (to the maximum of 10 years); (2) Land assessment rates will go up 74% to 62% , depending on productivity; (3) In 2003, if you harvest, there will be no yield tax billed and no deferred tax due for change in use or sale of property; (4) By the year 2006, the legislature is to consider a new formula (Discounted Cash Flow) to determine LP values, which will ultimately lower them.
If you have questions, call me at (208) 769-4459 ext228 or ext227 (Kootenai County Assessor’s Office).