Small Woodland Owners Association of Maine. management plan; Committee on Taxation, my name is Tom Doak, Executive Director of

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1 Small Woodland Owners Association of Maine Stewards of Maine's Family Forests" ;Z Board of Directors Richard Nass President Jessica Leahy 1 st Vice-President Testimony of the Small Woodland Owners Association of Maine (SWOAM) before the Joint Standing Committee on Appropriations and Financial Affairs and the Committee on Taxation Regarding LD 1691 An Act to Improve the Maine Tree Growth Tax Law Program" Paul Sampson 2nd Vice-President Douglas Baston Secretary Rich Merk Treasurer Tom Abello Gary Bahlkow John Bozak Patty Cormier Dan Crocker Senator McCormick, Representative Goode, members of the Committee on Taxation, my name is Tom Doak, Executive Director of the Small Woodland Owners Association of Maine (SWOAM) testifying in opposition to LD 1691 "An Act to Improve the Maine Tree Growth Tax Law Program. This legislation proposes a complete rewrite of the Tree Growth Tax Law. It would affect every woodland owner enrolled in the program, large or small. I do not know the exact number of people impacted, but it would be well in excess of 10,000 individuals, families and companies. Mike Dann Kenneth Smith William Towle William Weary Jeffrey Williams Chapter Leaders Si Balch Larry Beauregard Patty Cormier Michael Heath David Lynch Rich Merk Laurence Park Peter Robinson Facts about the Tree Growth Tax Law program A. To qualify for the Tree Growth Tax Law Program a landowner must: 1. Have at least ten forested acres; 2. Agree not to develop the property; 3. Pay a licensed professional forester to prepare a management plan; 4. Have that plan updated every ten years; 5. Hire a forester to certify that the landowner is following the plan and submit that certification to the tax assessor every ten years; 6. Sign an attestation on initial enrollment in the program, and every ten years thereafter, that the primary use of the land is to grow trees to be harvested for commercial use. Paul Sampson Jeffrey Williams 153 HospitalStreet PO Box 836 Augusta, ME * Telephone: info@sw0am.org * Website: A Nonprofit Corporation - IRC 501(c)(3

2 - ~ B. In return, land is taxed on its value to grow trees, not its development» value. C. The program runs with the land. Upon sale or transfer of the property, the land remains covered by the program unless the new landowner removes the property and pays the penalties. D. The landowner knows the terms when he or she enrolls, but once in the program, the terms can change and there is no "out clause" without substantial penalty. E. When the program was created in the early 1970s, all landowners with 500 acres or more were required to enroll. F. The penalties are purposely high to keep people in the program. The penalties to remove land from the program are almost always substantially higher than the total of any tax savings to the landowner. In 2012, this Committee undertook a complete review of the Tree Growth Tax Law program. This Committee reviewed the entire law and all the principal stakeholders had an opportunity to be involved. l believe there were eight work sessions. The result of that review was a significant rewrite of the law designed to address the concerns all parties raised and to bring stability to the program. Up to that time, the Tree Growth Tax Law had been amended every biennial session of the legislature since it was enacted in the early 1970s. The last biennium was the first one in which the law was not amended. This Committee unanimously rejected many of the provisions in this bill last year Conservation and Forestry Committee. -o twice - as did the Agriculture, Not only did the major rewrite of the law occur, but the Maine Forest Service was directed to do a field assessment of the program. A report released in February 2014 by that agency found, "The Tree Growth Tax Law has stood the test of time and is one of the best examples in the nation of forest policy stability. The MFS did not find - and has not found in the past - large-scale problems that require an overhaul of the law."

3 Interestingly, one of the most persistent criticisms of the Tree Growth program is that landowners are not managing their land, i.e. harvesting trees, at an appropriate rate. Stated another way, small woodland owners should be harvesting more trees. The 2014 report stated MFS found that landowners enrolled in the Tree Growth Tax program in the organized municipalities were responsible for an average of 53% of reported harvest acres. Considering the fact that Tree Growth Tax properties comprise 44% of the total forestland acreage in organized municipalities, MFS finds that there is a consistent level of harvest activity on enrolled properties, with a harvest size larger than the average for all properties. In short, landowners enrolled in the Tree Growth Tax program appear to be doing more than their fair share of harvesting and keeping up their end of the bargain." We oppose this bill for several reasons: Section 2 would disqualify landowners who's primarily forest crop is maple syrup, Christmas Trees or material for Christmas wreaths from the Tree Growth Tax Law program. Maine is the third largest maple syrup producer in the country, we sell nearly 200,000 Christmas trees each year and Maine is famous for its wreaths. These uses are a critical part of the rural Maine economy. Why we would remove these uses from the program and force the owners to pay significant penalties is a mystery. Section 3 disallows any parcel of land from the Tree Growth Tax Law program if any portion of it is within 10 miles of the Atlantic Ocean. Combined with Section 10, the bill removes all land owners, large or small, from the program and assesses them penalties for having forestland within 10 miles of the ocean. lf you use the traditional definition of ocean to include tidal areas and rivers, this could include huge areas of Maine including large blocks of industrial forest. Section 5 adds confusing language defining a forest management and harvest plan but there is already a definition earlier in the statute that is more comprehensive. 573 paragraph 3-A states, "Forest management and harvest plan" means a written document that outlines activities to regenerate, improve and harvest a standing crop of timber. The plan must include the location of water bodies and wildlife habitat identified by the Department of Inland Fisheries and Wildlife. A plan may include, but is not limited to, schedules and recommendations

4 for timber stand improvement, harvesting plans and recommendations for regeneration activities. The plan must be prepared by a licensed professional forester or a landowner and be reviewed and certified by a licensed professional forester as consistent with this subsection and with sound silvicultural practices. It makes no sense to have two different definitions of a forest management and harvest plan. Section 6. As a former Director of the Maine Forest Service, I understand the agency, and the authority granted the Maine Forest Service in this bill is way too broad. Municipalities have the responsibility for administrating the program in organized areas of the state and the State Tax Assessor in unorganized areas. A landowner must meet all the requirements which l stated earlier (including landowner attestation, licensed forester certification, review by the assessor at any time, a new or updated management plan every ten years), and has the right to appeal any decision made by the assessor through well-established channels. Additionally, by existing statute, the Maine Forest Service is already required, when requested by the assessor, to assist in determining compliance. However, Section 6 grants the Maine Forest Service authority, at its discretion, to enforce the law. This sets up a scenario where a landowner has to satisfy two different government entities. This is a huge overreach and completely unnecessary. Section 9 disallows lands of less than 25 acres from being in the program, even those already enrolled. If you get out of the program in the first year there is a reduced penalty. However, if you stay in and don't pay the penalty, Section 11 states that when the land changes hands (sold or the landowner dies), the maximum penalty must be assessed. These landowners have fully complied with all the rules. There is no justification for treating woodland owners in this fashion. Section 12 provides a tax credit against the gain from the sale of timber by owners of between 25 acres and 100 acres of forestland. While this may have some merit, it has nothing to do with the Tree Growth Tax Law program. This legislation is a perfect example of what woodland owners in the Tree Growth Tax Law program, or those considering putting their land in the program, fear. They make a substantial commitment to manage their land and not develop it

5 under a set of rules known at the time they enroll. However, the law can be changed at any time, including provisions to remove large numbers of owners already enrolled. Despite complying with all requirements and the landowner cannot get out without paying substantial penalties. ln all my time in dealing with the Tree Growth Tax Law program, I have never seen a proposal as hostile to woodland owners, and the program in general, as this one. I urge you to reject this legislation.