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Joint Report of the New York State Department of Environmental Conservation and Board of Equalization and Assessment on the Forest Tax Laws (Sections 480 and 480A of the Real Property Tax Law)

December 1993


Program consistency

It is recommended that Sections 480 and 480-a be merged, to form a single exemption program which provides consistent benefits and eligibility/participation requirements. Section 480 currently provides widely variable benefits to similarly situated taxpayers and presents major administrative problems which can not be fixed without significant changes. For example, some participants may receive a large tax reduction and others may experience a liability, depending on the assessment level at the time they placed their land in the program and subsequent reassessment activity. Further, assessors have the responsibility for determining stumpage values for Section 480 timber harvests, but most lack the expertise to do so. And, because Section 480 provides no revocation procedure and the withdrawal penalty (paying a stumpage tax) is too small, there is little to deter conversions.

Upon merger of the two programs, current Section 480 participants should be granted eligibility even if they can not satisfy the minimum tract size of fifty acres now required by Section 480-a. To further assure protection of existing participants, Section 480 should not be fully repealed until two years after the revised forest tax law takes effect. This would allow time for the development of plans and the filing of applications necessary for participation in this program.

State assumption of program costs

It is recommended that a program of State reimbursement be instituted to offset the local tax shifts caused by forest land exemptions in those taxing jurisdictions whose tax bases are significantly impacted by the programs. In this way, assistance be targeted on those taxing jurisdictions most severely affected; where the effect is minor or inconsequential, there is no need for state payments.

Some threshold measures, based on the percentage of the tax base and/or the total land area affected, need to be established to help identify those jurisdictions most in need of assistance. In addition, a mechanism for limiting the maximum amount of reimbursement per acre needs to be devised in order to preclude the possibility of local exploitation of assistance payments by placing unrealistically high assessments on the eligible lands. Use of these approaches would result in the state assuming responsibility for program costs only in certain instances, and to a predictable and limited extent. Consequently, the projected cost to the state would be lower than the total local tax shift caused by the programs at the present time.

The appropriate threshold eligibility level should be one percent of the local tax base. For the 480-a program, this would result in compensation of approximately twenty towns (see Table 2) plus the counties and school districts in question. No good data are available for the Section 480 (Fisher) program, but it is reasonable to expect that a similar number of municipalities would be affected, mostly in the Adirondack area. This will resolve the most pressing existing tax shift problems and will avoid significant local impacts should the new program result in participation by additional property owners.

Level of program benefits

It is recommended that the current level of exemption provided in Section 480-a (80 percent of the assessed value of the eligible land) be retained, and the alternative exemption formula (allowing exemption of any assessment in excess of $40 of equalized value) be deleted from the revised law. Under this recommendation, all enrolled lands would be taxed on the same percentage basis. Presently, the alternative exemption formula is only relevant where eligible lands are worth less than $200 per acre, a relatively unusual occurrence. In all other instances, including the vast majority of enrolled lands, the 80 percent formula now applies. However, as recommended below, those owners voluntarily granting meaningful public access to their lands should be eligible for some additional percentage tax relief (see Public Access to Enrolled Lands recommendation).

We do not see the "current use" approach as a viable means of determining reliable forest values and fear that it would result in both considerable controversy and additional administrative costs. Experience with assessment of forest land indicates that, although several states claim to have "current use" tax programs, these programs are no less arbitrary than New York's in arriving at a value for property tax purposes. Moreover, New York has had first hand experience with the problems associated with calculating 'use values" for agricultural lands since 1971. Notwithstanding the fact that there is a basis for this concept in economic and valuation theory, finding a practical methodology has proven to be impossible. As a result, the procedure used has been substantially revised on two occasions and it has been the subject of much controversy over the past two decades. Thus, there appear to be no real advantages and several serious drawbacks to the "use value" approach.

Program management objectives

It is recommended, based on considerable testimony received, that the present level of management oversight currently exercised by DEC under Section 480-a be lowered to avoid "micromanagement" of property enrolled in the revised forest tax law. Participants should be allowed to manage for a broader array of forest values rather than just for timber production, and the current level of management plan oversight should be reduced. Instead, participants should be required to have forest management plans that are similar to those developed under the Forest Stewardship Program. Under this program, a management plan is developed which focuses on a variety of landowner goals and addresses the interrelationship of and impacts of management on soil, water, wildlife, fisheries, rare species, recreation, aesthetics, riparian and wetland areas, as well as timber production. Timber production would thus no longer be required to be the primary focus; rather, participants could choose wildlife management, recreation, or other management goals which are not inconsistent with good forestry practices.

Pre-commercial forest stand improvement would no longer be a requirement under the forest tax law, but would be both allowed and encouraged. At the time of harvest, cutting should be in accord with best management practices and the silvicultural standards and prescriptions approved by DEC foresters (and agreed to by the land owner). Failure to follow these standards would result in a notice of violation followed by possible fines, temporary loss of exemption, full revocation of exemption, and/or associated penalties depending on the severity of the violation of the agreed-to standards. This approach would insure that forest resources are protected at the time of harvest, when damage is most likely to occur, while at the same time giving landowners much more flexibility than the current requirements allow.

Lands eligible for enrollment

It is recommended that rock outcrops, swamps, ponds, non-agricultural openings, protection forest, Christmas tree plantations, maple sugar bushes and similar areas which are not currently eligible for participation should become eligible for enrollment under the revised forest tax law. These areas offer resource features and values which are compatible with the broader forest stewardship concept espoused above and thus should be included. However, other aspects of program eligibility, including tract size and length of commitment, are not in need of revision at this time.

Program administration

It is recommended the present 480-a filing procedures should be retained. Various modifications to the existing administrative procedures were discussed and considered; however, the need to reduce red tape must be balanced with the need to keep the participant informed and involved and the scope of the continuing commitment clear for the owners' own protection. Under the revised forest tax law, amendments, revocations and voluntary withdrawals would thus follow the present Section 480-a procedures, but the Department would perform random inspections of certified tracts to assure ongoing compliance with program objectives. Work schedules, except for timber harvesting, would be optional, but conversion of land to another use or management in conflict with agreed-to standards and goals would trigger the fine, penalty and/or revocation process based on the scope of the violation.

It is also recommended that changes be made to the stumpage tax and penalty administration procedures. The stumpage tax and penalties should be maintained at current levels, and a schedule of fines added for more minor violations. However, all such monies should be collected by the state rather than by local governments, and used to help offset the cost of the proposed reimbursement program. This approach would overcome administrative confusion in the existing forest tax laws regarding responsibility for determining, collecting, and distributing stumpage taxes and penalties.

Public access to enrolled lands

It is recommended that the granting of public access to enrolled forest lands be encouraged through an additional tax incentive (i.e., an exemption of more than 80 percent), as opposed to being a requirement for program eligibility. Considerable testimony received in the hearings related to the need for private property rights to be protected and the potential for public access to result in damage to land and timber. However, an additional level of exemption could be granted to those participants who would willingly allow a significant degree of free public access to their property. The arrangements for 'meaningful" access should insure that such participants retain a reasonable level of control so as to protect both the resource and the landowner. Such access to a given property could, for example, include hunting, fishing, hiking, and cross-country skiing and exclude camping, all terrain vehicles or similar activities. The use could be controlled as a part of the management plan, which would he individually negotiated based on the resources present on the subject property and the owner's needs.

Structural development

It is recommended that the issue of structural development be carefully examined to address the possible proliferation of structures (cabins and home sites) within and adjacent to certified tracts. This "pockmarking" of open space can have significant impacts on wildlife habitat, timber production and other open space values. At present, landowners can create this type of situation if they place some of their land in the forest tax program while excluding additional land in key locations which they subsequently develop or allow others to develop. Since the minimum tract size under the 480-a program is fifty acres, it is clear that many home sites could be reserved in this way on a large parcel, allowing the owner to receive tax benefits even though forest and open space values are being compromised.

One means of controlling such development would be to allow only one contiguous compound for structures, with a sliding scale to designate the number of structures allowed based on tract size. In other words, the number of allowable structures should not be determined simply as the total ownership divided by the minimum tract size of fifty acres. For larger tracts, one structure per 100, 200, or even 500 acres is more realistic. This concept should be built into a restructured forest tax program, with provision for loss of eligibility if residential construction exceeds the stated norms.

There also should be accommodation of owners who wish to retain the right to build a home or two for themselves or family members, provided that such activity is of limited scope and does not limit forest management. Many people purchase a rural property to retire to, planning to build a home at some time in the future, or they decide to build a home for a child who may be involved with the management of the property. In such instances, the entire property should be eligible for exemption and managed accordingly until such time as the residence is needed, whereupon the current procedure for dealing with partial withdrawal and conversion would be followed. Situations of this type must be distinguished clearly from development activity involving construction of multiple residences, multiple locations on the property, and leasing or selling lots to others.

It is important that all future structural development on lands that have previously received forest tax exemptions be monitored to determine the effects of such development on the program's objectives. Ongoing monitoring is essential both to foster accountability in expenditures of public funds for promotion of silvicultural and environmental objectives and to insure that the development activities in question do not violate the spirit and intent of the forest tax law.

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