Maine’s Tree Growth Tax Law: Considerations for Maine’s Timberland Owners

By: Rudman Winchell Attorney Daniel Burke

Maine is about 90% forested, which is one of the highest percentages of any state in the U.S. Of that, nearly 95% is privately owned. Maine law offers significant tax incentives for these timberland owners. Under Maine’s Tree Growth Tax law, codified in Title 36, Maine Revised Statutes, sections 571 through 584-A, private landowners can receive a lower tax rate on their forest land compared with the surrounding municipality or unorganized territory. This incentive is meant to provide the timber industry, a huge part of Maine’s natural resource based economy, with a sustainable supply of forest products. However, inclusion under the program requires long-term commitment and a landowner should give some serious thought to his or her goals for the timberland that they own.

Under the law, timberland is valued on the basis of forest productivity, not necessarily its highest and best use. Annually, the State Tax Assessor determines the 100% valuation per acre by region for each forest type in the state. Each municipality then adjusts that 100% valuation based on a certified tax ratio it receives from the State Tax Assessor. These valuations per acre are generally much lower than the valuations for non-forested, developed land.

To be able to include land under the tree growth tax program, landowners must own at least 10 acres of timberland which will be used primarily for commercial timber harvesting, including all manner of forestry practices that are designed to produce trees with commercial value. The landowner must also develop a forestry management and harvest plan, certified by a licensed forester. These plans must be updated every ten years and are reviewed by the Maine Forest Service. If these lands are sold or transferred to a new owner, that owner must indicate his or her intention of keeping the land in the tree growth program within one year of the transfer. Failure to do so may result in the assessment of penalties. Land can be withdrawn by the State Tax Assessor if the landowner does not have a management and harvest plan in place or if there is evidence that the landowner is not following the plan that is in place.

Landowners can also voluntarily withdraw lands from the program but will most likely incur the same penalties, with limited exceptions. For land that has been in the program less than ten years, the penalty is 30% of the difference between the 100% valuation for the forest type and the fair market value of the land on the date of withdrawal. There is a sliding scale for land in the program longer than 10 years but fewer than 20 years. The penalty for lands in the program 20 years or longer is 20% of the difference between the tree growth valuation and the fair market value. The Tree Growth Tax Law can greatly reduce property tax burdens on forested land. However, it represents a serious commitment on the part of the landowner to reap those rewards. If you are considering classifying your land under this program, it would be wise to consult an attorney familiar with tax and real estate issues in Maine and to create a long term plan for your property.