Senate Bill No. 100
Introduced By beck
By Request of the Department of Revenue
A Bill for an Act entitled: An Act clarifying the classification of forest land for property tax purposes; clarifying the property tax rate applied to forest land; revising the definitions of "forest land" and "forest productivity value"; amending sections 15-6-143, 15-44-102, and 15-44-103, MCA; and providing an immediate effective date and a retroactive applicability date.
Be it enacted by the Legislature of the State of Montana:
Section 1. Section 15-6-143, MCA, is amended to read:
"15-6-143. Class ten property -- description -- taxable percentage -- alternative classification. (1) Class ten property includes all forest lands as defined in 15-44-102.
(2) Class ten property is taxed at
the percentage rate "P" 0.79% of its forest productivity value. (3) For taxable years beginning January 1, 1994, and thereafter, the taxable percentage rate "P" applicable to class ten
property is 4%/B, where B is the certified statewide percentage increase to be determined by the department of revenue as
provided in subsection (4). The taxable percentage rate "P" must be rounded downward to the nearest 0.01% and must be
calculated by the department before July 1, 1994. (4) (a) Prior to July 1, 1994, the department shall determine the certified statewide percentage increase for class ten
property using the formula B = X/Y, where: (i) X is the appraised value, as of January 1, 1994, of all property in the state, excluding use changes occurring during the
preceding year, classified under class ten as class ten is described in this section; and (ii) Y is the appraised value, as of January 1, 1993, of all property in the state that would be classified under class ten as
class ten is described in this section as this section reads in 1993. (b) B must be rounded downward to the nearest 0.0001%."
Section 2. Section 15-44-102, MCA, is amended to read:
"15-44-102. Definitions. For the purposes of this part, unless the context requires otherwise, the following definitions apply:
(1) "Culmination of mean annual increment" means the point of optimum net wood production on an acre of forest land.
(2) "Cultivated Christmas trees" means Christmas trees that are grown on land prepared by intensive cultivation and tilling, such as by plowing or turning over the soil, and on which all unwanted plant growth is controlled for the exclusive purpose of raising Christmas trees.
(3) "Department" means the department of revenue.
(4) "Forest" means forest land and the timber on the land.
(5) "Forest land" means contiguous land of 15 acres or more in one ownership that is capable of producing timber that can be harvested in commercial quantity and is producing timber unless the trees have been removed by man through harvest, including clearcuts, or by natural disaster, including but not limited to fire. Forest land includes land:
(a) that has not been converted to another use;
that has a dedicated use that is evidenced by a statement of intent by the owner for the eventual harvest of timber on
which the annual net wood production equals or exceeds 25 cubic feet an acre at the culmination of mean annual increment.
(6) "Forest productivity value" means the value of forest land for assessment purposes, which value is determined only on
the basis of its
ability potential to produce timber, other forest products, and associated agricultural products through an
income approach provided for in 15-44-103.
(7) "Harvest" means an activity related to the cutting or removal of timber for use or sale as a forest product.
(8) "Landowner" means an individual, corporation, association, company, firm, joint venture, syndicate, or trust.
(9) "Mean annual net wood production" means the average net usable volume of wood that 1 acre of forest land will grow in 1 year under average current and actual forest conditions and under current and reasonable management practices for each forest valuation zone established under 15-44-103.
(10) "Stumpage value" means the amount that timber would sell for under an arm's-length transaction made in the ordinary course of business, expressed in terms of dollars per unit of measure.
(11) "Timber" means all wood growth on privately owned land, mature or immature, alive or dead, standing or down, that is capable of furnishing raw material used in the manufacture of lumber or other forest products. The term does not include cultivated Christmas trees."
Section 3. Section 15-44-103, MCA, is amended to read:
"15-44-103. Legislative intent -- value of forest lands -- valuation zones. (1) In order to encourage landowners of private forest lands to retain and improve their holdings of forest lands, to promote better forest practices, and to encourage the investment of capital in reforestation, forest lands must be classified and assessed under the provisions of this section.
(2) The forest productivity value of forest land must be determined by:
(a) capitalizing the value of the mean annual net wood production at the culmination of mean annual increment plus other agriculture-related income, if any; less
(b) annualized expenses, including but not limited to the establishment, protection, maintenance, improvement, and management of the crop over the rotation period.
(3) To determine the forest productivity value of forest lands, the department shall:
(a) divide the state into appropriate forest valuation zones, with each zone designated so as to recognize the uniqueness of marketing areas, timber types, growth rates, access, operability, and other pertinent factors of that zone; and
(b) establish a uniform system of forest land classification that takes into consideration the productive capacity of the site to grow forest products and furnish other associated agricultural uses.
(4) In computing the forest land valuation schedules for each forest valuation zone to take effect on January 1, 1994, the department shall determine the productive capacity value of all forest lands in each forest valuation zone using the formula V = I/R, where:
(a) V is the per-acre forest productivity value of the forest land;
(b) I is the per-acre net income of forest lands in each valuation zone and is determined by the department using the formula I = (M x SV) + AI - C, where:
(i) I is the per-acre net income;
(ii) M is the mean annual net wood production;
(iii) SV is the stumpage value;
(iv) AI is the per-acre agriculture-related income; and
(v) C is the per-unit cost of the forest product and agricultural product produced, if any; and
(c) R is the capitalization rate determined by the department as provided in subsection (6).
(5) Net income must:
(a) be calculated for each year of a base period, which is the most recent 5-year period for which data is available;
(b) be based on a rolling average of stumpage value of timber harvested within the forest valuation zone and on the associated production cost data for the base period from sources considered appropriate by the department; and
(c) include agriculture-related net income for the same time period as the period used to determine average stumpage values.
(6) The capitalization rate must be calculated for each year of the base period and is the annual average interest rate on
agricultural loans as reported by the
federal land bank Northwest farm credit services, agricultural credit association of
Spokane, Washington, plus the effective tax rate.
(7) The effective tax rate must be calculated for each year of the base period by dividing the total estimated tax due on forest lands subject to the provisions of this section by the total forest value of those lands.
(8) For the purposes of this section, if forest service sales are used in the determination of stumpage values, the department shall take into account purchaser road credits.
(9) In determining the forest productivity value of forest lands and in computing the forest land valuation schedules, the department shall use information and data provided by the university of Montana-Missoula."
Section 4. Effective date -- retroactive applicability. [This act] is effective on passage and approval and applies retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 1996.