Legislators reject LePage attempt to trim tree growth tax break

Posted April 05, 2016, at 12:40 p.m.

AUGUSTA, Maine — Legislation designed to dramatically overhaul Maine’s tree growth property tax credit program fell largely on deaf ears Monday as lawmakers on the Taxation Committee unanimously rejected the proposal offered by Republican Gov. Paul LePage.

The governor introduced the bill to address what he perceives to be flaws in a program designed to encourage timber harvesting but has become a tax break abused by affluent southern Maine property owners.

To address that concern, LePage’s bill, LD 1632, proposes to exclude from the program any property within 10 miles of the Atlantic Ocean.

Another component of the bill would require landowners who seek to enter the program to have at least 25 acres of timberland. The current minimum is 10 acres.

In all, about 3.8 million acres of forest are in the program.

Those speaking against LePage’s bill said its intent was to increase pressure on landowners who benefit from a large tax break but never actually harvest timber.

“I take it for what it is at this late date, and given all the content of it I think it is designed to be a fairly provocative bill,” said Patrick Strauch, executive director of the Forest Products Council of Maine, an association of mostly large-forest landowners.

Also testifying against the bills was Tom Doak, executive director of the Small Woodland Owners Association of Maine. Doak, who also is a former director of the state’s forest service, said previous reviews of the program, including one in 2014, showed that 86 percent of landowners enrolled in the program were abiding by the rules.

Under the tree growth program, a landowner agrees to a specific 10-year forest management plan in return for deep discounts on property taxes. The amount of the discount can vary depending on the current market value of timber and other factors. One example given Monday was of a $1 million property being taxed as though it were worth only $400. The state reimburses part of that property tax loss to the local municipality.

In 2012, the tree growth tax program was in the political spotlight when then-state Treasurer Bruce Poliquin, who is now Maine’s 2nd District congressman, was questioned about a 10-acre property he owned in Georgetown that was enrolled in the program. The same property had deed restrictions that prohibited timber harvesting, so some questioned whether Poliquin was using the program as a tax shelter.

Poliquin broke no laws, but the issue became the topic of political campaign attack ads during his run for Congress in 2014 and could resurface this year as Poliquin seeks re-election in a rematch against Democratic challenger Emily Cain.

Under the law, a landowner does not have to disclose his or her timber management plan publicly, but the proposal by LePage would have required the plan be made available to the state’s forest service, which could determine whether a landowner were still eligible for the tax break.

Maine Forest Service director Doug Denico testified in favor of the change Monday and said his agency has no authority to ensure those who are benefiting from the tax break actually are meeting the program’s guidelines. That work is left largely to local tax assessors.

“I don’t have any statutory authority,” Denico said. “But we are writing letters as I speak to some of the coastal towns, saying, ‘Step it up a little bit, because you still aren’t where you are supposed to be.’”

Responses to those letters varied, Denico said.

“Sometimes I get letters back telling me where I ought to be other than Augusta,” he said.

Denico also provided the committee with a list of coastal towns that showed some had a number of properties that received the tree growth credit but did not harvest any timber. Other towns on the list, including Cape Elizabeth, had high compliance with the tree growth program by comparison.

He agreed the latest proposal by LePage seemed to take a broad brush to the problem but said he also believed a 2014 report by the forest service to the Legislature with recommendations for changing the program were “ignored.”

“I think you will find we were a lot less broad brush than we are today,” Denico said. “We sent something out. Nothing happened; it was ignored. So we sent something in a different direction out, and one thing this bill is supposed to do is create some discussion.”

LePage’s bill was sponsored by Rep. Stephen Stanley, D-Medway. Stanley voted with his colleagues on the committee against the measure, but he agreed the conversation should continue in 2017.

“I think the way the whole forest industry is going in this state, that somewhere down the line, this is something we need to take a good, hard look at,” Stanley said.

He said if the state were going to provide the tax break to just allow trees to grow and not be harvested, that wasn’t the intent of the program.

“It’s very important that we remember that forestry is a very important part of our economy, and we ought to maintain it,” Stanley said.

The committee’s recommendation against the measure will go before the full House of Representatives for consideration.

 

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