Print Friendly HOUSE BILL NO. 126 – Forest lands/tax/productivity optn
HOUSE BILL NO. 126
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H0126...............................................by REVENUE AND TAXATION
FOREST LANDS - TAXATION - Amends existing law relating to the taxation of
forest lands and forest products; to provide for taxation of forest lands
under the productivity option; to authorize and direct the State Tax
Commission to take certain action; and to provide for the Committee on
Forest Land Taxation Methodologies.
02/07 House intro - 1st rdg - to printing
02/08 Rpt prt - to Rev/Tax
02/15 Rpt out - rec d/p - to 2nd rdg
02/16 2nd rdg - to 3rd rdg
02/17 3rd rdg - PASSED - 69-0-1
AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer,
Bedke, Bell, Bilbao, Black, Block, Boe, Bolz, Cannon, Chadderdon,
Clark, Collins, Crow, Deal, Denney, Edmunson, Ellsworth, Eskridge,
Field(18), Field(23), Garrett, Hart, Harwood, Henbest, Henderson,
Jaquet, Jones, Kemp, Lake, LeFavour, Loertscher, Martinez, Mathews,
McGeachin, McKague, Miller, Mitchell, Moyle, Nielsen, Nonini,
Pasley-Stuart, Pence, Raybould, Ring, Ringo, Roberts, Rusche,
Rydalch, Sali, Sayler, Schaefer, Shepherd(2), Shepherd(8), Shirley,
Skippen, Smith(30), Smith(24), Smylie(Telleria), Snodgrass,
Stevenson, Trail, Wills, Wood, Mr. Speaker
NAYS -- None
Absent and excused -- Bradford
Floor Sponsor - Denney
Title apvd - to Senate
02/18 Senate intro - 1st rdg - to Loc Gov
02/23 Rpt out - rec d/p - to 2nd rdg
02/24 2nd rdg - to 3rd rdg
02/25 3rd rdg - PASSED - 34-0-1
AYES -- Andreason, Brandt, Bunderson, Burkett, Burtenshaw, Cameron,
Coiner, Compton, Corder, Darrington, Davis, Gannon, Geddes, Goedde,
Hill, Jorgenson, Kelly, Keough, Langhorst, Little, Lodge, Malepeai,
Marley, McGee, McKenzie, Noble, Pearce, Richardson, Schroeder,
Stegner, Stennett, Sweet, Werk, Williams
NAYS -- None
Absent and excused -- Broadsword
Floor Sponsor - Stegner
Title apvd - to House
02/25 To enrol
02/28 Rpt enrol - Sp signed
03/01 Pres signed - To Governor
03/01 Governor signed
Session Law Chapter 24
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-eighth Legislature First Regular Session - 2005
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 126
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO TAXATION OF FOREST LANDS AND FOREST PRODUCTS; AMENDING SECTION
3 63-1701, IDAHO CODE, TO REVISE A DEFINITION AND TO DEFINE TERMS; AND
4 AMENDING SECTION 63-1705, IDAHO CODE, TO PROVIDE FOR TAXATION OF FOREST
5 LANDS UNDER THE PRODUCTIVITY OPTION, TO PROVIDE A PROCESS, TO AUTHORIZE
6 AND DIRECT THE STATE TAX COMMISSION TO TAKE CERTAIN ACTION AND TO PROVIDE
7 FOR THE COMMITTEE ON FOREST LAND TAXATION METHODOLOGIES; DECLARING AN
8 EMERGENCY AND PROVIDING RETROACTIVE APPLICATION.
9 Be It Enacted by the Legislature of the State of Idaho:
10 SECTION 1. That Section 63-1701, Idaho Code, be, and the same is hereby
11 amended to read as follows:
12 63-1701. DEFINITIONS. As used in this chapter, unless the context
13 requires otherwise:
14 (1) "Average annual net wood production" means the average net usable
15 volume of wood one (1) acre of forest land will grow in one (1) year under
16 average current and actual forest conditions and under current and reasonable
17 management practices for each forest value zone.
18 (2) "Designation period" means any one (1) ten (10) year period in a
19 sequence of ten (10) year periods which begin January 1, 1983.
20 (3) "Forest" means forest land and the timber thereon.
21 (4) "Forest land" means privately owned land being held and used primar-
22 ily for the continuous purpose of growing and harvesting trees of a marketable
23 species. Having met the above criteria, forest land may be further identified
24 by the consideration of any of the following criteria:
25 (a) Forest land is land evidenced by present use and silvicultural treat-
27 (b) Forest land is land which has a dedicated use that is further evi-
28 denced by a forest land management plan that includes eventual harvest of
29 the forest crop.
30 (c) Forest land is land bearing forest growth or land which has not been
31 converted to another use.
32 (d) Forest land is land which has had the trees removed by man through
33 harvest, including clear-cuts or by natural disaster, such as but not lim-
34 ited to fire, and which within five (5) years after harvest or initial
35 assessment will be reforested as specified in the forest practices act
36 (chapter 13, title 38, Idaho Code).
37 (5) "Forest landowner" means the legal entity which holds the property
38 rights under law to the forest land surface.
39 (6) "Forest products" means any forest crop harvested from forest land.
40 (7) "Forest products yield tax" means a tax levied on the value of forest
41 products harvested from a parcel as prescribed in sections 63-1703 and
42 63-1706, Idaho Code.
43 (8) "Forest value" means the market value for assessment purposes as
1 determined only on the basis of its ability to produce timber, other forest
2 products, and associated agricultural products through an income approach the
3 timber productivity valuation process as prescribed by section 63-1705, Idaho
5 (9) "Stumpage value" means the value of timber, whether standing or
6 downed by other than an intentional act of severance, expressed in terms of
7 dollars per unit of measure.
8 (10) "Timber" means wood growth, of any species and of any size, standing
9 or down on privately owned lands.
10 (11) "Bare land value" means the value of forest land exclusive of the
11 value of timber and other products growing or being thereon.
12 (12) "Stumpage owner" means the legal entity which holds the property
13 rights under law to the timber growing on private lands.
14 (13) "A substantial change of use" means any use other than as forest land
15 as defined in subsection (4) of this section.
16 (14) "Deferred taxes" as used in section 63-1703, Idaho Code, means a tax
17 levied to recapture the difference between taxes that were collected on a par-
18 cel designated under section 63-1706, Idaho Code, and what would have been
19 collected on the parcel, had it been designated under section 63-1702 or
20 63-1705, Idaho Code.
21 (15) "Custodial expense" shall mean those expenses incurred in the mainte-
22 nance of the forest land and limited to the following:
23 (a) Reforestation;
24 (b) Road maintenance;
25 (c) Managing public use;
26 (d) Forest inventory;
27 (e) Forest management planning;
28 (f) Facility operations and maintenance;
29 (g) Environmental analysis and documentation;
30 (h) Appeals and litigation;
31 (i) Land survey;
32 (j) Forest fire suppression;
33 (k) Other management expenses; and
34 (l) Labor associated with items (a) through (k) of this subsection, but
35 shall not include the salaries or expenses, or any portion thereof, of any
36 person or officer not directly engaged in the management of the forest
38 (16) "CFTM" means the committee on forest land taxation methodologies as
39 provided in section 63-1705, Idaho Code.
40 SECTION 2. That Section 63-1705, Idaho Code, be, and the same is hereby
41 amended to read as follows:
42 63-1705. TAXATION OF LARGE-SIZE FOREST TRACTS LANDS UNDER THE PRODUCTIV-
43 ITY OPTION. (1) In order to encourage private forest landowners to retain and
44 improve their holdings of forest lands and to promote better forest manage-
45 ment, large-size forest tracts lands subject to this option shall be
46 appraised, assessed and taxed as real property under the provisions of this
48 (2) The inventory of timber and other forest products growing on large-
49 size forest tracts shall not be included as a part of the total forest asset.
50 The forest land value shall be determined by an income approach the timber
51 productivity valuation process, as provided for in the committee on forest
52 land taxation methodologies, User's Guide to the Timber Productivity Option's
53 Valuation Method - 2005 (Schlosser, January 1, 2005, Moscow, Idaho), referred
1 to in this chapter as the "user's guide," on file with the Idaho state tax
2 commission, available on the website of the Idaho state tax commission, and
3 which shall be made available in the office of each county assessor, which
4 capitalizes the values of the average annual net wood production over a rea-
5 sonable rotation period plus other agricultural-related income, if any, less
6 annualized custodial expenses including, but not limited to, the establish-
7 ment, protection, maintenance, improvement and management of the crop over the
8 rotation period as defined in section 63-1701, Idaho Code. Pursuant to the
9 provisions of this section, the inventory of forest products shall not be
10 included as part of the valuation of the forest land as provided in section
11 63-602W, Idaho Code. The state tax commission shall promulgate rules relating
12 to the timber productivity valuation process, including custodial expenses, as
13 provided for in the user's guide and the provisions of this chapter.
14 (3) Effective January 1, 200 05, through January 1, 2006, the market value
15 for assessment purposes shall be determined annually by the county assessor
16 either under rules prescribed by the state tax commission or the market values
17 contained in subsection (5) of this section, whichever is less. In prescribing
18 such rules, using the timber productivity valuation process developed by the
19 CFTM, and as further prescribed in rule. Notwithstanding any other provision
20 of law, the state tax commission is authorized to cite the user's guide in its
21 rules and shall:
22 (a) Divide the state into appropriate forest valuation zones, with each
23 zone designated so as to recognize the uniqueness of marketing areas, tim-
24 ber types, growth rates, access, operability, and other pertinent factors
25 of that zone; and
26 (b) Establish a uniform system of forest land classification which con-
27 siders the productive capacity of the soil to grow forest products and
28 furnish other associated agricultural uses .;
29 (c) Provide for the annual input to the timber productivity valuation
30 process including the stumpage value, rotation length, mean annual incre-
31 ment, guiding discount rate, annualized custodial expenses, appropriate
32 property tax rates, and real price appreciation rate of stumpage according
33 to the user's guide. The guiding discount rate and the real price appreci-
34 ation rate for timber products shall remain constant at four percent (4%)
35 and one and one-quarter percent (1.25%) respectively, until January 1,
37 (d) Conduct a forest management cost study every five (5) years to deter-
38 mine the annualized custodial expenses to be used in the timber productiv-
39 ity valuation process as provided in the user's guide. The first study
40 shall be conducted in 2005 and evaluated by the CFTM, with the results
41 incorporated into the user's guide timber productivity valuation process
42 on January 1, 2007. The forest management cost study shall be funded by
43 the state tax commission, subject to appropriation by the legislature; and
44 (e) Provide for any additional data as needed.
45 (4) The state tax commission shall by March 1 of each year, furnish all
46 input for the timber productivity valuation process to the county assessor.
47 for each value zone the capitalization rate, stumpage value, agricultural-
48 related income, if any, and expense component to be used in determining the
49 forest value. From January 1, 1999, until January 1, 2006, the capitalization
50 rate shall be the interest rate for the farm credit bank district serving
51 Idaho, as set forth in the most current revenue ruling made pursuant to sec-
52 tion 2032A(e)(7)(A) of the Internal Revenue Code and 26 CFR 20.2032A-4(e),
53 plus eighty-five one hundredths percent (.85%), plus a component for the local
54 tax rate.
55 (5) Stumpage values shall be based upon the preceding five (5) year
1 rolling average value of timber harvested within the forest value zone from
2 state timber sales and/or the best available data for the same five (5) year
3 period. Average agricultural-related income and the average expense component
4 for each forest value zone shall be determined for the same time period as the
5 period used to determine average stumpage values.
6 (5) The following are the alternative market values for assessment pur-
7 poses for the period January 1, 2000, until January 1, 2006. The rules pre-
8 scribed by the state tax commission in effect on January 1, 2000, are applica-
9 ble to these alternative market values.
10 Alternative Forest Land Values
12 2000 Productivity Class 2003 Productivity Class
13 Zone Good Medium Poor Zone Good Medium Poor
14 I 733 470 207 I 564 361 159
15 II 700 449 198 II 539 346 152
16 III 553 368 172 III 426 283 132
17 IV 379 252 117 IV 291 194 90
18 2001 Productivity Class 2004 Productivity Class
19 Zone Good Medium Poor Zone Good Medium Poor
20 I 676 434 191 I 507 325 143
21 II 646 415 183 II 485 311 137
22 III 511 339 159 III 383 255 119
23 IV 350 232 108 IV 262 174 81
24 2002 Productivity Class 2005 Productivity Class
25 Zone Good Medium Poor Zone Good Medium Poor
26 I 620 398 175 I 451 289 127
27 II 592 380 167 II 431 277 122
28 III 468 311 145 III 341 226 106
29 IV 321 213 99 IV 233 155 72
30 (6) Forest lands upon which, at any time after January 1, 1982, the trees
31 are destroyed by fire, disease, insect infestation or other natural disaster
32 such that the lands affected will not meet minimum stocking requirements under
33 rules adopted pursuant to chapter 13, title 38, Idaho Code, shall be eligible
34 for a reduction in value for the first ten (10) property tax years following
35 the loss. The amount of reduction shall be determined by dividing the average
36 age of the trees destroyed by the rotation age for the specific forest value
37 zone in which the property is located productivity class appropriate for the
38 affected acres. In no instance shall the annual reduction exceed eighty per-
39 cent (80%) of the original forest value per year. In order to obtain a reduc-
40 tion, the landowner shall, on or before January 1, following the destruction,
41 make written application to the assessor indicating the legal description of
42 the lands in question and stating all pertinent facts. The assessor may inves-
43 tigate the facts and may request assistance from the state tax commission in
44 performing such investigations. If the requirements are met, such forest lands
45 shall be assessed and taxed on the reduced basis herein provided.
46 (7) Buildings and other improvements, other than roads, located on forest
47 lands shall be appraised, assessed and taxed as provided by applicable laws
48 and rules.
49 (8) Effective January 1, 2004, there is created within the Idaho state
50 tax commission the committee on forest land taxation methodologies CFTM. The
51 membership of the committee CFTM shall be:
1 (a) A nonvoting chairman who shall be the member of the Idaho state tax
2 commission assigned to property tax matters;
3 (b) Four (4) members selected from the membership of the intermountain
4 forest association;
5 (c) One (1) member selected from the membership of the Idaho forest
6 owners' association;
7 (d) Five (5) members selected from the membership of the Idaho associa-
8 tion of counties; and
9 (e) The state superintendent of public instruction or his/her designee,
10 in a nonvoting capacity.
11 The committee shall CFTM may retain a forest economist selected by a majority
12 of its members to advise the committee CFTM.
13 The costs of each committee CFTM member shall be borne by the respective
14 member. The fees and costs of the forest economist shall be borne as deter-
15 mined by the committee CFTM.
16 The committee shall review forest land valuation in Idaho and consider
17 replacement of the current income methodology found in this section by review-
18 ing all income and soil expectation methodologies to determine forest land
20 The committee shall CFTM may prepare and deliver written reports to the
21 house of representatives revenue and taxation and senate local government and
22 taxation committees of its findings and recommendations for legislation by no
23 later than January 15, 2005 as the need may arise. The CFTM may meet periodi-
24 cally as determined by its chairman or the CFTM.
25 During the first regular session of the fifty-eighth Idaho legislature the
26 house of representatives revenue and taxation and senate local government and
27 taxation committees, shall review the values and formula used to compute for-
28 est land values to determine if modification to this section is appropriate
29 and necessary.
30 SECTION 3. An emergency existing therefor, which emergency is hereby
31 declared to exist, this act shall be in full force and effect on and after its
32 passage and approval, and retroactively to January 1, 2005.
STATEMENT OF PURPOSE
Passage of this legislation will encourage private forest land
owners in taxation category 6 to retain and improve their
holdings of forest lands and to promote better forest
management by putting in place a new method of valuing
forest land. The new method, as outlined in the 2005 Users
Guide, developed by the statutorily designated Committee on
Forestland Taxation Methodologies (CFTM), uses the soil
expectation/net present value approach to value forest lands
in category 6. Passage of the legislation will require the
adoption of rules necessary for implementation of the new
Enactment of this legislation will have no effect upon the
States' general fund but will stabilize forest land property
tax revenues that support county and school budgets.
Name: Dan Chadwick, Executive Director, IAC Phone: 287-4830
Name: Mark Munkittrick, IFOA, Phone: 762-8630
Name: Jane Gorsuch, Vice President, IFA Phone: 342-3454
STATEMENT OF PURPOSE/FISCAL NOTE H 126