3 CSR 10- 2.020: Classification and Requirements of Forest Crop Lands After December 1974

(1) Any landowner desiring to have his/her land classifiedas forest [crop land]cropland shall have his/her ownership boundary lines marked and shall maintain those lines so as to be readily traceable during the period his/her land is classified.

 

(2) The [owner]landowner shall make all reasonable efforts to prevent wildfires from starting on or spreading to classified lands and to extinguish any wildfire which threatens or may threaten to burn on to classified lands.

(3) Forest [crop lands]croplands shall be devoted primarily to growing trees but may also be used for other purposes compatible with forestry practices so long as an adequate stocking of trees is maintained, damage to tree growth prevented, and the watershed protected. These lands shall not be used for grazing by domestic livestock, for the erection of permanent buildings on the land, or for the impoundment of water and installation of permanent wildlife food plots [in excess of three percent (3%) of each forty (40) acres]unless specifically authorized in the approved management plan.

 

(4) Forest [crop lands]croplands shall be managed to produce timber and wood products according to a plan submitted by the [owner]landowner and approved by the commission or according to a plan prepared for the tract by the commission and agreed to by the [owner]landowner. Based on the landowner’s objectives, timber stand composition, and general condition of the stand, [This]the plan shall outline and describe those reasonable accomplishments to be completed in a five (5)-year period[ having due regard for timber stand composition, general condition and the owner’s objectives]. Failure to complete accomplishments agreed upon during this period shall be deemed grounds for cancellation of the forest [crop land]cropland classification unless it may be demonstrated that the failure was due to circumstances beyond the control of the [owner]landowner. At the end of five (5) years and for each five (5)-year period thereafter, a new accomplishment agreement shall be reached by and between the landowner and the commission.

 

(5) When the ownership of classified land is transferred, the new [owner]landowner may assume the management accomplishment agreement of the previous [owner]landowner or s/he may elect to enter into a new agreement as outlined previously.

 

(6) Tree [C]cutting must conform to practices outlined in the management plan and shall be conducted within a reasonable time schedule according to the silvicultural requirements of the tract, market conditions, and the overall objective of the landowner.

 

(7) [An]A [owner]landowner shall give written notice to the commission thirty (30) days prior to any cutting of timber. This notice shall include the location of the woodland, the approximate acreage proposed to be cut, and the cutting plan. Notice to the commission is not required for the cutting of firewood, posts, or timber for use on the premises by the [owner]landowner or person controlling the previously described lands.

 

(8) Within one (1) month following a commercial cutting or at the end of each month where the cutting is continuous, the [owner]landowner shall file with the commission a sworn statement showing the quantity of timber cut and the stumpage price received for each species sold. The commission shall compute the yield tax and notify the [owner]landowner of the amount due, [such amount due, the amount]to be paid within thirty (30) days after the date of the notice.

 

(9) No lands will be classified for tax relief if the value exceeds three thousand five hundred dollars ($3,500) per acre. 

 

(10) The commission will pay the county wherein the classified lands are located one dollar ($1.00) per acre per year as a grant in lieu of taxes.

 

(11) Any privately owned lands approved and classified by the commission as forest croplands shall receive partial relief from taxation during a period of time set at fifteen (15) years, after which the classification shall expire unless a renewal is requested and mutually agreed upon by the landowner and the commission. 

 

AUTHORITY: sections 40 and 45 of Art. IV, Mo. Const. and section 254.020, RSMo 1986.* Original rule filed Nov. 27, 1974, effective Dec. 7, 1974.  Amended:  Filed March 14, 2016.

 

PUBLIC ENTITY COST: This proposed amendment will cost state agencies or political subdivisions as much as five hundred thousand dollars ($500,000) annually in the aggregate in payments to counties in-lieu of taxes.  The estimate will vary depending on the number of acres classified in any given year. 

 

Payments to counties in-lieu of taxes on enrolled lands are currently fifty cents ($0.50) per acre per year. With the reinvigoration of the program, it is anticipated that enrollment in the program will surge.  The proposed increase in the in-lieu tax payment by the Department of Conservation to one dollar ($1.00) per acre could increase the cost to the commission to as much as five hundred thousand dollars ($500,000) annually. Payments in-lieu of taxes for private land with classified forest cropland in FY2015 were thirteen thousand dollars ($13,000).  If targets are met for enrollment over a five (5)-year period, increased spending of commission funds of four hundred eighty seven thousand dollars ($487,000) annually will be needed.

 

County governments may receive more or less revenue depending on how they classify forest land for assessment purposes. Payments made by the commission in-lieu of taxes are intended to compensate counties for lost revenue based on forest classified as agriculture soil grade number seven (#7). However, some counties classify forest land in soil grade number six (#6), a higher valued agriculture use. A one dollar ($1.00) payment in-lieu of taxes creates a favorable, or neutral, situation for counties classifying forested land as agricultural soil grade number six (#6) until a six point three percent (6.3%) property tax levy rate is exceeded.  A revenue loss of twelve cents ($0.12) per acre is estimated for these counties with a total property tax levy of seven percent (7%).   More details can be found in the Fiscal Note attached. 

 

PRIVATE ENTITY COST: This proposed amendment will not cost private entities more than five hundred dollars ($500) in the aggregate.

 

NOTICE TO SUBMIT COMMENTS: Anyone may file a statement in support of or in opposition to this proposed amendment with Regulations Committee Chairman, Department of Conservation, P.O. Box 180, Jefferson City, MO 65102-0180, or via the department’s website at http://short.mdc.mo.gov/Z49. To be considered, comments must be received within thirty (30) days after publication of this notice in the Missouri Register. No public hearing is scheduled.

 

  

FISCAL NOTE

PUBLIC COST

 

I.          Department Title: 3 - Department of Conservation

Division Title: 10 - Conservation Commission

Chapter Title:  2 – [Forest Crop Lands]Missouri Managed Woods

 

 

 

II.         SUMMARY OF FISCAL IMPACT

 

 

 

III.        WORKSHEET

Missouri Department of Conservation – Fiscal Impact Calculations 

• 500,000 acres enrolled at $1.00 payment in-lieu of taxes to counties = $500,000
• Current budget of $13,000 annually for enrolled acres

 

$500,000 - $13,000 = $487,000 increase annually

 

County Governments – Fiscal Impact Calculations

Estimated revenue to counties (property tax) on non-Missouri Managed Woods enrolled forestland at a 5% tax levy.

• The property tax paid to the county for forested lands in soil grade #7 would be $0.474 per acre.
• The property tax formula is: (soil grade value)x(12% ( ag use assessment) x (county tax levy) = per acre property tax revenue to counties
  • ($79 (the soil grade #7 value) x .12)  x .05 (the tax levy) = $0.474 (county property tax revenue per acre)

 

Estimated revenue to counties for lands enrolled in the Missouri Managed Woods includes property tax paid by the landowner and payments in-lieu of taxes.

• The landowner pays reduced property taxes based on a $3.00 per acre assessed value
• The property tax formula is: ($3.00 x tax levy) + $ 1.00 per acre payment in-lieu of taxes from Department of Conservation = county property tax revenue per acre
• Missouri Managed Woods lands would generate $1.15 per acre property tax revenue to counties assuming a 5% tax levy
  • ($3.00 assessed value  x .05) + $1.00 (Department of Conservation payment in-lieu of taxes) = county property tax revenue per acre.
  • $0.15 + $1.00 = $1.15 per acre
  • $1.15 - $0.474 = $0.676 gain per acre to the county compared to non-Missouri Managed Woods forested lands
• This relationship varies with the property tax levy rate and the gap between Missouri Managed Woods program lands and non-program lands decreases as the tax levy increases, but stays favorable to Missouri Managed Woods lands until the tax levy rises above 15.4%.  So at a tax rate of about 15.5% or greater, counties would begin to lose money on Missouri Managed Woods lands classified as agriculture soil grade #7

 

However, some counties assess forestland in agriculture soil grade #6. Under this classification the counties would gain revenue on Missouri Managed Woods enrolled acres until the tax levy rises above 6.3%.  At a total property tax levy rate of 6.4% or higher, counties classifying forested land in agriculture soil grade #6 will begin to lose money on lands enrolled in Missouri Managed Woods.  The amount of the loss in property tax revenue per acre will increase as the total property tax levy rate increases above 6.4%.

Assuming a total county property tax levy of 5%:

• Estimated tax revenue for non-Missouri Managed Woods land in agriculture soil grade #6 with a total property tax rate of 5% is $0.948 per acre
  • ($158 (the soil grade #6 value) x .12)  x  tax levy = county property tax revenue generated per acre
  • ($158 x .12) x .05 = $0.948 per acre
• Missouri Managed Woods would still generate a property tax revenue of $1.15 per acre as noted above and would show a gain of $0.202 per acre over non-program lands
  • $1.15 - $0.948 = $0.202 gain per acre to the county compared to non-Missouri Managed Woods forested lands

 

For forested lands assessed in agriculture soil grade #6, and assuming a total property tax levy of 7%:

• Estimated property tax revenue for non-Missouri Managed Woods land in agriculture soil grade #6 with a total property tax levy of 7% is $1.33 per acre
  • ($158 (the soil grade #6 value) x .12)  x  tax levy = county property tax revenue generated per acre
  • ($158 x .12) x .07 = $1.33 per acre
• Missouri Managed Woods would generate a property tax revenue of $1.21 per acre and would create a loss to the county of $0.12 per acre
  • ($3.00 assessed value  x .07) + $1.00 (Department of Conservation payment in-lieu of taxes) = county property tax revenue per acre.
  • $0.21 + $1.00 = $1.21 per acre
  • $1.33 - $1.21 = $0.12 loss per acre to the county compared to non-Missouri Managed Woods forested lands

 

A final scenario to consider is vacant and unused agriculture classification also referred to by some as recreational. Agricultural lands that do not appear to be managed for agricultural purposes are reclassified in this category and the fair market value becomes the value to be assessed. A 12% assessment rate is still used, and the local tax levy applied. 

• Estimated revenue from property taxes would be $9.00 per acre
•  (Fair market value x 0.12) x the local tax levy
• (($1,500 (sample fair market value) x0.12)) x 0.05 (sample tax levy)=$9.00 per acre in county property tax revenue

 

This creates a substantially higher payment to counties that would be not be compensated for by Missouri Managed Woods.  However, all counties currently using this practice provide a remedy to landowners who demonstrate to the county assessor that they are managing their woods or property for agricultural purposes.  They can have the classification of their land returned to that of the appropriate agricultural soil grade if they demonstrate management.  The requirement that landowners participating in the Missouri Managed Woods program be active participants in the American Tree Farm program would provide proof of management to county governments, because membership in Tree Farm requires implementation of the management plan prepared for the property.

 

1. IV.             ASSUMPTIONS

Missouri Department of Conservation – Fiscal Impact Assumptions

• No new positions will be created within the Department of Conservation to administer this change
• Any additional workload will be handled by existing staff
• 500,000 acres enrolled at $1.00 payment in-lieu of taxes to counties = $500,000
• Current budget of $13,000 annually for enrolled acres

 

County Governments – Fiscal Impact Assumptions

Provided below is background information to assist with understanding the impact of this program on county revenue.

• Agricultural and horticultural properties are assigned by the county assessor land values based on eight (8) approved agricultural land use grades and values assigned to each by the Missouri General Assembly. Examples from CSR 30-4.010 Agriculture Land Productive Values, State Tax Commission, include:
  • Grade #5. Soils not suited to continuous cultivation – 2015 value of $205/acre
  • Grade #6. Soils are generally unsuited for cultivation and are limited largely to pasture and sparse woodland - 2015 value of $158/acre
  • Grade #7. Soils generally unsuited for cultivation and may have other severe limitations for grazing and forestry – 2015 value of $79/acre
•  CSR 30-4.010 Agriculture Land Productive Values, prescribes that forested land whose cover is predominantly trees and other woody vegetation and is greater than 2 acres in size, for the purposes of property taxation, be placed in land grade #6 if it would fall in land grades #1 - #5 if cleared of trees.  Similarly, forested land should be placed in land grade #7 if the land cleared of trees would fall into land grades #6 or #7
• The assessed value of land classified as agricultural is 12% of the above assigned productivity value
• Property tax levy rates vary by, and within, counties.   Most calculations in this document use a 5% levy that is applied to the assessed value to determine what the landowner pays in property taxes – unless noted otherwise
• Lands enrolled in Missouri Managed Woods have an assessed value set within the program of $3.00 per acre
• $1.00 per acre payments will be made in-lieu of taxes for all enrolled lands
• Counties with lands classified as “vacant and unused” will not be adversely impacted by Missouri Managed Woods since other provisions already exist for landowners to reclassify those lands under agriculture use
• The following formula applies to lands not enrolled in Missouri Managed Woods:

Estimated revenue to counties per acre = (soil grade value x 12%) x tax levy

• The following formula applies to lands enrolled in Missouri Managed Woods:

Estimated revenue to counties per acre = ($3.00 per acre assessed value x tax levy) + $1.00 payment in-lieu of taxes