Current Use Programs
In just a few months, landowners will start receiving property tax bills from their various towns or municipalities. Unfortunately, most towns assess land based on its potential use. This method of assessment places a significant financial burden on many landowners and indirectly encourages them to parcel and/or develop their land. In order to reduce this pressure, many states have developed specific programs that reduce the property tax burden on landowners willing to commit to keeping their lands undeveloped. Each state has a specific name for the program, however, most are generally known as “current use” programs.
The majority of the current use programs operate on the same premise. The assessed value of the property used to determine the property tax is lowered, which is then used in conjunction with the tax rate to determine the property tax. Due to this method, not all landowners within the same state will receive the same proportional reduction in taxes. However, in all likelihood, a significant savings will be realized. I know of some Vermont landowners who have had their property taxes reduced more than 80%.
Sounds great, right? For some landowners, current use programs are excellent ways of reducing the burden of land ownership. For other landowners, however, enrollment in these programs are the only way to avoid selling or developing their land. So, what’s the catch? All programs require a commitment from the landowner and, in some instances, this commitment may not be compatible with the long term goals of the landowner.
While most of the various state programs have the same ultimate goal, to encourage landowners to keep their lands undeveloped, the specifics of the programs vary significantly. Some states, New York and Massachusetts for example, require the landowner to pay a stumpage tax on the value of the timber harvested while the property is in the program. Almost all of the programs require that the forestland be managed using a forest management plan (FMP). New Hampshire does not require an FMP to enroll in the program, but if enrolled along with an FMP, the assessment will be lower than without an FMP.
The first question I ask landowners who inquire about the program is, “What are your long term plans for the land?” If there is a significant possibility that the land will be developed in the near future, then it is illogical to enroll in the program. Also, there are some programs which require the harvesting of timber if the management plan data supports a harvest. If a landowner falls into this category, but is adamantly opposed to harvesting timber, then it would not be prudent to enroll in the program.
Current use programs have the potential to save landowners a significant amount of money. However, they also have the potential to be very expensive propositions should the stipulations of the program be violated. The decision to enroll should not be rushed and should be well researched. I often encourage landowners to have a forest management plan written prior to making a decision about enrollment. The FMP affords the opportunity to evaluate the asset and to understand the obligations involved with enrollment. Each landowners’ case is specific and must be fully understood. Your particular situation may not be conducive for enrollment into a current use program. However, as part of the management of your asset, current use programs are a cost reduction option which should be explored.
Below is a list of the state programs and the general characteristics of each program. Landowners are encourage to contact their nearest NEFCo forester to discuss the programs in more detail.