Select a state from the list below to learn more about how forest property is treated for tax purposes.
What are Property Taxes -
In general, a property tax is considered to be a tax on property measured by the property's value as of a specified date. Some states collect a forest property tax on both the value of the land and the trees while others collect the tax on the value of the land only. And as such they can be separated into four major types:
Ad valorem property tax - the value of the land and the trees form the basis for tax collection.
Flat property tax - under this system the same amount of money per acre is collected on any acre of timberland regardless of its value.
For an overview of each states forest property taxation system click here!!
Taxable Property -
State property tax systems typically follow one of two schemes:
- that all property, without enumeration, is taxable unless specifically exempt or
- that only such classes of property as are specifically enumerated are taxable.
In virtually every state, the property tax follows a market-value based system under which property is taxed on the basis of its fair market value. The concept is commonly understood to represent the price the property would bring at a fair, voluntary sale. In other words, the value at which the property would change hands between a willing buyer and a willing seller, neither being under any obligation to buy or sell and both having reasonable knowledge of relevant facts.
The extent to which a given parcel or item of property is subject to taxation is generally dependent on several issues. The first is whether the property constitutes real property, tangible personal property, or intangible property. Next is who owns the property and to what use the property is put, because that ownership and/or usage may dictate that the property is entitled to full or partial exemption from taxation.
State definitions of "real property" generally include land, any improvements permanently attached to the land, as well as all rights and benefits from ownership of any lifetime or greater interests in such land improvements. "Personal property" is generally defined by way of exclusion, with all property other than that falling within the definition of real property being considered personal property.
The distinction between tangible and intangible property is then commonly made by considering any item of personal property that may be seen, touched, or moved about to be tangible personal property. The following definitions are representative of the law in most states.
Real Property - means land, an improvement, a mine or quarry, a mineral in place, standing timber, or an estate or interest in any such property.
Personal property - means property that is not real property.
Tangible personal property - means personal property that can be seen, weighed, measured, felt, or otherwise perceived by the senses, but does not include a document or other perceptible object that constitutes evidence of a valuable interest, claim, or right and has negligible or no intrinsic value.
Intangible personal property - means a claim, interest (other than an interest in tangible property), right, or other thing that has value but cannot be seen, felt, weighed, measured, or otherwise perceived by the senses, although its existence may be evidenced by a document.
Yield and Severance Tax:
Yield Tax - is a tax on the value of the harvested timber. The tax is collected after the timber is harvested.
Severance Tax - is a flat tax on a specific unit of volume harvested (i.e., board feet, cubic feet, cords, tonnage etc.). The tax is collected after the timber is harvested.
Who is the taxpayer -
Who owns a given parcel or item of property is important for property tax purposes because the owner of the property on the assessment date is primarily responsible for paying the property taxes. The identification of the owner is also important because property may be exempt from tax or otherwise receive special tax benefits merely on the basis of who owns the property.
In most cases the owner of the property is straight forward, that being the person on record as the owner on the date of the assessment. However, there are certain situations where it is not so clear.
Agents and Assignees - Agents and assignees may be required to pay tax and file reports on property held in their capacity as such, although their principals and assignors, respectively, remain primarily liable for the tax.
Joint Owners - Any person holding property jointly or in common can be held liable for the tax as to the whole property, or as to his or her proportionate interest.
Lessors and Lessees - Generally, because property is taxable to the owner, lessors are liable for taxes on leased property. However, lessees are not necessarily relieved of any property tax obligations with respect to leased property, and are frequently held liable when:
- they are in possession of the leased property and the assessor is unable to determine who the lessor is or where the lessor can be located;
- they make improvements to the leased property that increases its value;
- they lease property from an exempt entity such as the state or municipality; or
- when the lease is of such an extended duration that it is considered a permanent or perpetual leasehold.
Owners of Severable Interests - The owner of mineral rights, surface rights or crops, timber, quarry and similar interests that have been separated from the land is usually liable for tax on those separate interests.
How is the property being used -
State legislatures can, subject to certain limitations, exempt any persons or property from taxation or provide comparable tax benefits such as abatements, credits, or reduced assessment ratios. In general the tax benefit must serve a public purpose and the classification on which it is based cannot be arbitrary. In most cases the availability of the benefit will be conditioned on the property being used for a specific purpose.