The Current Use Programs of our state basically allow land owners to pay fewer taxes if the property qualifies for a use that is defined as agricultural or timber ground. In most cases the program does provide some relief to deserving land owners, but sometimes has unpleasant consequences which are tantamount to “paying the piper”. This metaphor comes from the fairy tale about the rats following the piper out of town, who then comes to collect what they agreed to pay. When they don’t pay he leads their children out of town which becomes an awesome and prohibitive price indeed.
In one recent case, a land owner had two contiguous parcels of timber ground, which totaled more than the required 20 acres to be classified as Designated Forest Land. Upon sale of one of the parcels, he was required to pay the compensating tax for both parcels since neither of the two parcels would continue to qualify for the 20 acre minimum. This meant that he was stuck with a deferred tax bill (approx. $5,000) which was due upon closing the sale of one parcel. The only way out of this dilemma was to apply for a reclassification into Current Use Timber Land (designed for 5 or more contiguous acres) , which required an application fee, a forest management plan and approval by the county commissioners who only rule on these cases in March of every year. This quandary caused the seller to regret his previous decision to sign on to this tax saving program, even though the eventual outcome for him will likely be satisfactory.
There is not room enough in this article to make a comprehensive explanation of this program, though the following offers a brief summary of the four categories that are defined in the Current Use Program: Designated Forest Land (devoted to the growth and commercial harvest of forest crops over 20 acres, Farm and Ag (devoted to the production of livestock or agricultural commodities or commercial purposes, Current Use Timber Land (devoted to the growth and commercial harvest of forest crops under 20 acres, Open Space (natural resources and scenic beauty preserved for the public good).
If your property is in one of these Current Use Programs and you are considering selling your property, it would be wise to contact the county assessor who can provide information that may help in the decision making process. Ask about strategies to avoid adverse tax liability, and for information that will help you calculate what your proceeds will be in the case that you cannot avoid the tax consequences. Most land owners don’t think about this until selling which usually causes grief because they are not prepared to pay the piper! Ask your Realtor® for a detailed explanation and advice regarding this topic!