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Options to limit property taxes on Forested Land

Fri, Mar 5th, 2010
Posted in Agriculture

Minnesota Extension Forester Mel Baughman explains land owner options. Photo by Karen Reisner

Mel Baughman, professor and Extension Forester, University of Minnesota, led the group of farm and forest property owners through several options and programs that may be available to them to control the property tax bill on forested and some types of agricultural land. The class was offered twice at Eagle Bluff Environmental Learning Center on February 24 and at other locations in southeast Minnesota in recent weeks. DNR Forester Jim Edgar, SWCD Donna Rasmussen and Fillmore County Assessor Cynthia Blagsvedt were on hand to answer questions.

Baughman explained the tax reduction incentive programs are designed to encourage the development of healthy, productive forests. About 41 percent of the forested land in the state is privately owned. The programs will protect forests from development, at least for a time, as forests enrolled in a couple of the programs would not be able to be developed for at least eight to ten years.

The two reduced property tax programs detailed were the Rural Preserve Program and the 2c Managed Forest Land Classification which was created in 2008. These programs are available options for some of the land enrolled in Green Acres, which will no longer qualify for that program by 2013. Baughman also detailed the Sustainable Forest Incentive Act, which has been around since 2001. It is a cash incentive program through the Minnesota Department of Revenue. Baughman said property owners need to determine what they qualify for to get the best deal they can on their property taxes.

Green Acres

Green Acres, which was enacted in 1967 as the Minnesota Agricultural Property Tax Law, has allowed eligible farm properties to be taxed at a value less than their full market value. Estimated Market Value (EMV) is the value of the property at its "highest and best use," which would reflect values of recreational or developed property. Green Acres values a property at its agricultural value. When a property owner withdraws from Green Acres, they are required to pay three years deferred taxes and special assessments. The deferred taxes are the difference between the tax rate at the EMV and the agricultural value.

The assessor determines the EMV and the agricultural value. The qualifying landowner is taxed on the agricultural value and most special assessments are deferred. In 2007, an audit found 13 percent of the total agricultural land in the state was in the Green Acres program. In 2008, an audit showed that about $35 million less in property taxes was collected than would have been without the program. When taxes are reduced for some property owners, the total tax burden of the other property owners in the jurisdiction will ultimately see some increase.

The Green Acres program was altered in 2008 to eventually limit eligibility to class 2a land. No 2b rural vacant land that has not been grandfathered into Green Acres is eligible for that program. In 2009, after a push back due to the 2008 changes, the legislature allowed "grandfathering" previously enrolled non-productive land into the program until 2013.

Rural Preserve Program and Class 2c Forest Management

The Rural Preserve program was created for class 2b rural vacant land to offer similar tax savings as Green Acres. Those that are in Green Acres with class 2b land must leave the program before January 2013. If the land owner withdraws prior to May 1, 2010, no back taxes will be owed. However, in the future it will be assessed at its EMV or best use.

A second option is to leave the 2b land in Green Acres until 2013, during which time it can be enrolled in the Rural Preserve Program. With this option there will be no back payment of deferred taxes.

A third option is to leave the 2b land in Green Acres until 2013, at which time it will be removed from the program and the assessor will collect three years of deferred taxes. The land will then be valued at its EMV or best use at that point and in the future.

There is another option if the property is eligible for the class 2c Managed Forest Land classification.

If property owners are considering enrolling in the Rural Preserve Program or looking into the 2c Managed Forest Land Classification, they should notify the county assessor of their intention before May 1, 2010. When the requirements to enter the program are complete, property can go into the program May 1, 2011. In the interim, taxes will still be lower with the Green Acres program.

The tax rates for Rural Preserve should be similar to Green Acres. However, overall land values for 2b vacant land may show an increase. Green Acres and Rural Preserve Value are based on 50 percent of the county's average tillable value, which for Fillmore County is currently $3,450. Rural Preserve Program land must be covered by a Conservation Management or Forest Management Plan, land owners must agree to stay in the program for at least ten years and when, and if, the covenant is terminated, three years deferred taxes would be due.

The SWCD personnel can do the Conservation Management Plan. The Forest Management Plan must be done by an approved plan writer, DNR forester or a private consultant. The DNR used to write these plans for free, but because of budget cuts, they charge about two-thirds of the cost which starts at $230.

The 2c Managed Forest Land Classification requires an active forest management plan written within the last ten years. Land owners need to notify the assessor prior to May 1 and then the DNR will verify eligibility. The land would not be entered into the program until the following year, as with the Rural Reserve. The 2c Managed Forest Land Classification has a one-year minimum enrollment. Property is taxed at a .65 percent rate. Baughman said the management plan gets the property owner a 35 percent reduction in property taxes.

Sustainable Forest Incentive Program

This program is through the MN Department of Revenue and an incentive program. It guarantees $7 per acre payment minimum and the payments are taxable. There is an eightyear minimum enrollment and a Forest Management Plan is required. The property must be at least 50 percent forested.

Baughman suggested land owners do some calculating to determine which program is best for them and their goals.


Most questions and comments from the audience were aimed toward what is qualified and what isn't. One woman asked why they would want to have anyone telling them what to do? She went on to say she would rather do things on her own than have a big stick held over her head. Baughman responded by saying we are here to explain your options, and it is up to you to do what you want to do.

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