AUGUSTA, Maine — A bill that would give participants in the state’s Tree Growth Tax Law program a one-year window to leave it without penalty encountered stiff opposition during a legislative hearing Monday, with some suggesting the Legislature should wait until next year to make changes to the program, which has been amended constantly throughout its 40-year history.
Rep. Paul Davis Sr., R-Sangerville, proposes a constitutional amendment to create a one-year window for landowners with property in the tree growth program to opt out. His bill, if supported by the Legislature, would require approval by statewide referendum.
The Tree Growth Tax Law, which was enacted in 1972, allows landowners to have their forested land assessed for taxes based on its value as timberland, as opposed to its highest use, which in most cases would be residential or commercial development. It means that property owners with land in the program pay lower property taxes. In exchange, the landowners are required to develop a forest management plan which spells out when trees on the property would be harvested and update it once every 10 years.
Scrutiny of the tree growth program came to a head last year amid complaints that some were using the program to achieve tax breaks while having no intention to ever harvest trees. The example cited by many was former State Treasurer Bruce Poliquin, who had land in coastal Georgetown in the program since 2004. Poliquin, who has since transferred his land from the tree growth program to the state’s Open Space program, paid about $30 a year on land that otherwise would have cost him some $30,000 a year in property taxes.
The intent of the program is to provide relief for property taxpayers and protect forestland from development pressure. According to Davis, people all over Maine want out of the program but don’t leave because a stringent penalty system requires them to pay back some or all of the tax breaks they’d enjoyed over the previous five years.
“I believe that there are many landowners in Maine that would withdraw their land if it were not for the five-year penalty,” Davis said Monday to the Legislature’s Taxation Committee. He cited one family from Sebec whose forest management plan update is due, but they can’t afford it or the penalty for pulling out of the program. There are others who ended up in the program because of an inheritance or because they purchased land already in the program.
“They’re kind of stuck between a rock and a hard place,” said Davis. He argued that while municipalities would lose revenue in the short term if the five-year penalties were waived, towns and cities would do better over time because they would be able to collect taxes based on the land’s highest value.
Maine Revenue Services told the Bangor Daily News last year that the state’s organized territories had about 3.6 million acres split among 22,700 parcels in tree growth in 2010. About 200 parcels were removed from the program that year, which led to penalties for the property owners of nearly $100,000. The tax agency said no one has ever tried to quantify how much property owners statewide are saving through the program because the formulas differ widely county by county and the program is administered at the local level.
Geoff Herman of the Maine Municipal Association said his organization opposes the change because doing so would violate a tradeoff that has been understood by participants since the law’s inception. In exchange for participants paying lower property taxes, which in essence shifts more burden to property owners not involved in the program, the benefit to the public is land kept undeveloped and available for the forest products industry.
“If landowners are allowed to get out of this program without that penalty system, which has served to incentivize them to stay in the program for an extended period of time, if that goes away then it’s just a tax break,” said Herman. “There is no two sides to it anymore.”
Sen. Doug Thomas, R-Ripley, said the time has come for major reforms to the tree growth program.
“Some land has been in this program from the beginning and changes take place,” he said. “Harvest plans were not very complicated 40 years ago and not very expensive. For a small landowner of 10 or 15 acres, they have become a real burden.”
Jennifer Burns Gray, a staff attorney for Maine Audubon, said the organization opposes the change for many of the same reasons the Maine Municipal Association does, but primarily because the tree growth program eases development pressure.
“[With this change] you could really reduce the benefit to the public,” said Gray. “You could turn this into an opportunity for people to basically park their land in the program until they’re ready to develop it.”
Eliza Donoghue, a policy advocate for the Natural Resources Council of Maine, agreed.
“Folks don’t travel here to see our malls,” she said. “They come to see the most heavily forested state in the nation. Landowners should not be allowed to benefit from lower taxes for years and then take them out of the pine tree growth program to develop them.”
Tom Doak, executive director of an organization called Small Woodlot Owners of Maine, told the Taxation Committee that every Legislature since 1972 has made changes to the tree growth program. That includes the most recent one, which ordered the Maine Forest Service to study the program and report back to the Legislature in 2014.
“Our strong preference is to not make any changes during this session and to wait until the 2014 forest service report,” said Doak.