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Property Taxes: Timber Taxes

Common Questions
1. I hear that property taxes are changing for forestland in Oregon. What´s happening?
In addition to the existing Forestland Program, which is available to all forestland owners, the 2003 Legislature passed Oregon House Bill 2197. This bill created a new Small Tract Forestland (STF) tax option for small woodland owners who own at least 10, but less than 5,000 acres of forestland. The new STF option takes effect in 2004. To obtain STF Option benefits, eligible owners must apply with their county assessor. The new STF Option will allow small woodland owners to continue to pay the majority of their forestland taxes at the time of timber harvest.
2. Why did we need this new tax program?
Current small forestry property tax programs were set to expire in 2003. In 1999 small owners, county assessors, forestry consultants, the departments of Revenue and Forestry, and other groups began meeting to develop a new property tax system for Oregon’s small woodland owners.
3. What is the impact of the new law for forestland owners in 2003?
The law extended the current small forestland tax program for 2003. If you are a small woodland owner with land currently in “20/80 special assessment” (forest deferral), you will pay privilege tax on harvests in 2003. Large owners (5,000 or more acres), previous WOSTOT program (Western Oregon Small Tract Optional Tax) owners, and those small owners who previously opted into the large owner program will pay no privilege tax on harvests from their own lands in 2003. All harvests continue to be subject to the Forest Products Harvest Tax.
4. What happens if my land was in the WOSTOT program?
County assessors have transferred all forestland in the WOSTOT Program to the Forestland Program. If owners with land previously in WOSTOT want to be in the new STF Option, they must apply. Owners with land in Christmas trees previously taxed under WOSTOT will be taxed on the real market value of the property unless they apply for the Farm Use Special Assessment Program.
5. Do I need to sign up for the new tax programs?
Effective in 2004, everyone will be in the Forestland Program. There is no automatic “rollover” into the STF Option. Owners wanting their land included in the STF Option must apply.
6. What should I be doing now?
Talk to your local county assessor´s office to determine in what tax program(s) and productivity class(es) your land is currently classified. You will need this information to determine the most advantageous tax program for you. In early December, the Department of Revenue will mail you an explanation of the forestland tax changes. Besides learning about the new STF Option, there is no action that you must take in 2003. To have your land included in the new STF Option beginning in the 2004 tax year, you must apply to your county assessor between January 1, 2004, and April 1, 2004.
7. I own land classified in the Forestland Program. In 2003 I purchased and harvested timber from someone in the current “20/80 special assessment” (forest deferral) program. What taxes do I pay?
When timber is harvested, the Privilege Tax liability depends on the forestland property tax program. Because the land is taxed under the “20/80 special assessment” program, the land tax would be paid by the landowner, and the timber purchaser owes the Privilege Tax and the Forest Products Harvest Tax.
8. I own land classified in the Forestland Program. In 2003 I purchased land and timber from someone in the current “20/80 special assessment” (forest deferral) program. What taxes do I pay if I harvest timber?
If the property was purchased from January 1, 2003, through June 30, 2003, the county assessor automatically would move the purchased property into the Forestland Program. The property tax would be based on 100 percent of the forestland value. No Privilege Tax would be owed at harvest, regardless of when the harvest occurs.
 
If the property was purchased and the timber harvested from July 1, 2003, through December 31, 2003, then the property remains in the “20/80 special assessment program” and Privilege Tax is owed at harvest.
 
If the property was purchased from July 1, 2003, through December 31, 2003, but the timber was not harvested until 2004 or later, no Privilege Tax will be owed at harvest.
 
In each of these three situations (as in harvests from all lands), the Forest Products Harvest Tax is owed.
9. What’s happening to help me learn about the new forestland tax situation and to take the necessary action?
  • September – November 2003
    • The Forestland Tax Education Project (FLTEP) Steering Committee prepared and distributed initial information and publicity about the changes.
    • The FLTEP Steering Committee is preparing and delivering training to staff of the departments of Revenue and Forestry, OSU Forestry Extension, and county assessors’ offices.
  • December 2003 – March 2004
    • The Department of Revenue will send mass informational mailings to landowners.
    • Landowner training and individual consultations will be done by the Oregon departments of Revenue and Forestry, OSU Forestry Extension, and county assessors’ offices.
    • STF Option applications will be available.
  • April 1, 2004 - Signup deadline for new STF program for 2004 tax year.
10. Where can I get help?
OSU Forestry Extension, assisted by the Oregon departments of Revenue and Forestry and the county assessors’ offices, will hold information sessions in December 2003 and January 2004. These sessions will provide detailed descriptions of the two tax programs and some tools that can be used to help you decide which program might best fit your plans. We will post a schedule of the known sessions on the department Web site. Additionally, these sessions will be advertised through local news sources.
 
You can get individual assistance by telephone. The Oregon Department of Revenue Timber Tax staff, Oregon Department of Forestry Stewardship Foresters, OSU Extension Foresters, county assessor staff, and Oregon Small Woodlands Association staff are all trained to answer questions about the new forestland tax programs. Please consult your local telephone directory for telephone numbers.
 
The Department of Revenue has developed a Web site devoted to information about the current tax programs and the programs that will be in place for 2004. The Web site address is www.oregon.gov/DOR/TIMBER/
11. What happens if I acquire a tract of Forestland that is in the STF Option?
If you want it to remain in STF, you must apply to the assessor in the county where the property is located within 30 days of acquiring the property. Failure to make such application will transfer the property into the Forestland Program. You may be subject to rollback taxes not to exceed 10 years of the difference between property tax at 100 percent of the forestland value and property tax at 20 percent of the forestland value.
12. Who needs to sign the STF application?
All individuals with an interest in the property must sign the application.
13. A county line divides contiguous forestland tax lots. May they be placed in different tax programs?
No, they must be placed in the same tax program, either the Forestland Program or the STF Option.
14. Two or more individuals own a parcel of designated forestland. One of them also owns a contiguous parcel of forestland. If the first parcel is put under the STF Option, must the second parcel also be under STF?
Yes. All contiguous forestland parcels owned by any of the individuals must be included in the application for the STF Option.
15. We own two contiguous parcels. One is designated forestland and one is farmland. If we place the forestland in the STF Option, must we do the same with the farmland?
No, forestland and farmland have different tax status. The Forestland Program and STF Option created by the new tax laws apply to forestland only. If contiguous parcels both contain forestland, both must either be in the Forestland Program or the STF Option.
16. If my property is placed in the STF Option for the 2004-2005 tax year, must I pay Severance Tax on my harvests from January 1 - June 30, 2004?
Yes. If your application is received by the April 1 deadline and accepted, you will owe Severance Tax on all harvests from your property in the entire 2004 calendar year. Severance taxes are handled on a calendar year basis.
17. Are logs graded "4-sawmill and better" subject to the Severance Tax? How about hardwood logs?
Yes, all logs (including hardwood logs) graded "4-sawmill and better" are subject to the Severance Tax, regardless of species.
18. Are logs chipped in the woods subject to the Severance Tax?
If the chips come from logs graded "4-sawmill and better," then yes they are subject to the Severance Tax. If the chips come from logs below "4-sawmill" grade, then no the Severance Tax does not apply.
19. Company Y purchases standing timber from Joe. Later, Joe puts the property in the STF Option. Company Y then harvests the timber. Is a Severance Tax owed?
Yes, a Severance Tax is owed. Company Y (the timber owner) is responsible for paying it.
20. If a property in the STF Option less than 10 years is disqualified, will the rollback tax be calculated for the full 10 years?
No, the rollback tax only would apply to the length of time the property was in STF, up to a maximum of 10 years.
21. Do any Severance Taxes paid while my property is under the STF Option in any way reduce my rollback tax owed when the property is disqualified from STF?
No they do not. The Severance and property taxes are calculated separately. Rollback taxes are levied only on property taxes.
22. Who is responsible for paying the rollback tax after a property has been disqualified from the STF Option because the property was sold and the new owner did not apply to keep the property in the STF Option?
Rollback taxes are due in the tax statement in the year following disqualification. At that time, the current owner of the property is responsible for paying the rollback tax.
23. Does a conservation easement "transfer" property ownership, thus affecting forest taxation?
A conservation easement (CE) does not transfer ownership. Thus, there is usually no effect on forest taxation. However, as specified in writing in the CE, rights to conduct various activities on the property are transferred. For example, if the CE prohibits the property owner from harvesting timber, then there would be a change in the property’s use, and that would remove it from forest use. This would affect the property’s forest taxation status.

 
Page updated: June 21, 2007

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