As the familiar adage states, one of the few things in life that cannot be avoided are taxes. While this is also true for timberland owners, there are steps that can be taken to minimize the burden of taxes. There are procedures that can be followed that take advantage of both federal income tax regulations and State property tax guidelines, which can reduce the amount of taxes owed by timberland owners. Through experience and training with timberland income tax matters and timberland property tax issues, and through licensing, including an on staff Registered Senior Property Tax Consultant in Texas, we at Day Forest Management & Appraisal, Inc. offer assistance to landowners, property managers, their Accountants and tax advisers, with such matters.

Though most timberland owners must pay property taxes, by proceeding with the proper application process and by following basic guidelines, timberland owners in the State of Texas and in other States, are eligible for reduced property tax assessments by managing their forested acreage. In most East Texas Counties, the productivity based assessment for "timber use" property is many times less than the "market value" assessment. Therefore, if a forest landowner does not make proper application or does not follow the procedures necessary for initial approval and maintenance of the special use assessment for timberland, the landowners ad valorem property taxes will typically be based upon the much higher "market value" assessment, and the property taxes for that forested acreage will almost always be significantly greater. The Texas Constitution permits timber productivity assessment only if the property and its owner meet specific requirements defining timber use. "LAND WILL NOT QUALIFY SIMPLY BECAUSE IT HAS SOME TREES STANDING ON IT". In addition, forested land that is used principally for aesthetic home-site or recreational purposes will not qualify. According to the "TEXAS PROPERTY TAX, MANUAL FOR THE APPRAISAL OF TIMBERLAND", as provided by the State Comptrollers Office, "Land qualifies for timber appraisal…if it is currently and actively devoted principally to production of timber or forest products to the degree of intensity generally accepted in the area with the intent to produce income." To meet these criteria, there are procedures that can be taken to provide clear indication that these guidelines are being followed. In most Counties, using the services of a qualified Consulting Forester, such as Day Forest Management & Appraisal, Inc., including active forest management procedures, providing timber activity records, maintaining a current timber inventory records and a written Forest Management Plan, implementation of forest management practices, participation in associations and other forestry related activities, can provide sufficient evidence of compliance. As professional Consulting Foresters and as a Registered Property Tax Consultant specializing in timberland, we at Day Forest Management & Appraisal, Inc. can advise and assist with each step necessary to fulfill and maintain the varying qualifying factors required by the County Appraisal District in which the land is situated. As a result of recent legislative changes, we can also assist agricultural landowners maintain their lower agricultural property tax assessments, while improving the productivity and profitability of their land through conversion from agricultural use to timber use, by implementing reforestation or afforestation practices.

Forest management practices, timber marketing and timber sale procedures, reforestation practices and timber stand improvement practices, can all be planned and implemented in order to take advantage of favorable income tax incentives. Capital Gains treatment of timber sale income, depletion allowances, capitalization of expenditures, reforestation tax credits and amortization, together with general timberland record keeping, are all matters that most timberland owners require assistance with. By taking advantage of professional forestry and timberland tax consulting assistance, many landowners, in cooperation with their Accountant and or tax adviser, can realize significant cost and tax saving benefits.

Managing your timberland not only makes good sense by being a good steward of the land, it also makes good economic and business sense and can result in tax savings. Contact us to learn more about the many tax advantages of owning and managing timberland.