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Forestland Classification and Appraisal Manual
2003 Forestland Reappraisal Report
1997-2003 Full Reappraisal Values

The Montana Legislature passed the Forestlands Tax Act in 1991. This law requires the Department of Revenue to value forestland based on land productivity. The legislature defined the productivity formula and each component of that formula. It also provided for specific forest valuation zones, with each zone designated to recognize the uniqueness of marketing areas, timber types, growth rates, access, operability, and other factors important to the valuation of the forest land in that geographic area.

The potential productivity system was supported by the forest products industry, the Montana Tree Farmer's Association and other forestry landowners.

Productivity Classification System

Forested land must be at least 15 contiguous acres or larger in size and in the same ownership to be classified as commercial forest land. Forested land less than 15 contiguous acres in size is classified as non-forest land. Potential forest growth is estimated for each acre of forested land, including "clear-cuts." That growth is measured in cubic feet per acre per year. The estimated potential forest growth is placed in one of four productivity classes. Forested land that does not meet the minimum growth requirement is classified as noncommercial forestland. This minimum growth requirement is 25 cubic feet per acre per year at the peak biological age of a stand (the technical forestry term for peak biological age is "culmination of mean annual increment"). Noncommercial forest land is not valued as forest land for property tax purposes. Non-forest and noncommercial forest land may be valued as tract land, agricultural land or "Non-qualifying" agricultural land.

Standing timber is exempt from property taxation. Only the land, not the standing timber, is eligible for property taxation. If a landowner deeds his timber to another party, the landowner, not the timber owner is responsible for the forest land property tax.

On any given commercial forestland site, a clear-cut would receive the same value as an old growth stand (standing timber is not taxed). Forest management practices will not influence the forest assessment. Knowledgeable forest landowners will realize that they can practice intensive forest management to optimize wood production and enhance other non-timber elements, without the penalty of higher forest land property taxes.

Agricultural and forestlands are often intertwined. Both types of land are valued under the "productivity" concept.

Productivity Formula

The formula for forestland productivity can be described as:

Appraised Value = Net Forest Income = Net Grazing Income
Capitalization Rate Net Forest Income = Gross Forest Income - Forest Costs
Net Grazing Income = Gross Grazing Income - Grazing Costs
Capitalization Rate = This rate is used to convert a net income stream into an estimate of present value.

Many people are instrumental in compiling the valuation information. The Montana Department of Revenue hires a nationally recognized forest economist at the University of Montana, School of Forestry, to develop the forest land valuation zones and the average stumpage value in each valuation zone. The Department of Revenue compiles the forest costs and the capitalization rate. Representatives from the forest products industry and Montana Tree Farmer's Association review the data and provide their input.< /div >

How the Valuation System Works

The forest and agricultural land appraisal system uses valuation schedules to apply a single value to each productivity grade. Agricultural land appraisal uses a single, statewide valuation schedule. Forest land appraisal uses five valuation schedules in the state. The forest land classification system contains four productivity grades. Therefore, there are 20 different per acre forestland values in the state. Each value in a schedule represents a range of productivity, income, costs, and interest rates. Income and expense data represent averages for a base period of time. The forest land schedules which were implemented in 1997, use data compiled from 1991-1995. The values associated with the new schedules were phased-in in accordance with SB184. The next appraisal cycle will be implemented in 2003.

The legislature assigns all taxable property to individual tax classes. There are currently 12 property tax classes. Forestland is in Property Tax Class 10. The legislature specifies the tax class percentages that are applied against the value of the property within each tax class to calculate the taxable value. A parcel of land may have several classes of property. The most common property classes for rural land are forestland, agricultural land, "non-qualifying" agricultural land, and a one-acre home site. Each property class has a different tax class percentage. The tax class percentages for 2001 and 2002 are listed below.

Agricultural Land Property Type and Tax Rate

	Tax Rate
Type of Land Parcel	Tax Year 2001	Tax Year 2002
Agricultural Land	3.543%	3.460%
Forest Land	0.460%	0.350%
Nonqualifying Agricultural Land	24.801%	24.220%
1 Acre Home Site	3.543%	3.460%

The forest land taxable value is 0.46% in 2001. It requires $10,000 in forest land appraised value to produce $46 in taxable value. In contrast, $10,000 in agricultural appraised value will produce $354 in taxable value.

Calculating the Tax on Forest Land

Here is an example of how the tax on forestland would be calculated:

Assume that in 2001 you own a 130-acre parcel of land in Missoula County. This county is located in forest valuation zone two. The parcel has 30 acres of forest land and 100 acres of nonforest land . The forest land has 20 acres of fair productivity and 10 acres of poor productivity. The 100 acres of non-forest land does not meet agricultural eligibility requirements and is classified as nonqualified agricultural land. The 2001 fair forestland value (grade III) is $559.25 per acre. The poor forest land productivity (grade IV) is $339.48. The statewide 2001 nonqualified agricultural value is $38.19 per acre. For this tax calculation example, we assume the mill levy for 2001 is 390 mills.

2001 Forest Land Tax Calculation

20 acres x $559.25/acre = $11,185 (appraised value - forest land)
10 acres x $339.48/acre = $3,395 (appraised value - forest land)
100 acres x $38.19/acre = $3,819 (appraised value - nonqualified agricultural land)

Total Forest Land Appraised Value = $14,580
Total Nonqualified Agricultural Land Appraised Value = $3,819

$14,580 x 0.46% (Class 10 tax rate) = $67 (taxable value)
$3,819 x 24.801% (Class 3 tax rate) = $947 (taxable value)

$67 + $947 = $1,014 (total taxable value)
$1,014 x .390 (mill levy) = $395.46 (tax)

Note: The decimal point in a mill levy is moved three places to the left to calculate the tax, so 390 mills equals .390.

Frequently Asked Questions

What is the average forestland tax in Montana?
The weighted average forestland tax in 1996 was $0.61 per acre. As a result of SB184, the 1999 weighted average of forestland tax is $.83 per acre. The weighted average taxable value in 1996 was $1.79 per acre. The weighted average taxable value in 1999 is $2.16 per acre.

How do I know what my new forestland values are?
When there is a change in valuation or ownership, the Department of Revenue mails property assessment notices, to the owner of record, that reflect the value of the property as of January 1 of that year. All forest land owners received a new assessment notice in the spring of 1997 showing the change in appraised and taxable values that resulted from implementation of the new forest land valuation schedules. For those taxpayers who can not locate their assessment notice, the local Department of Revenue office in the county where the forestland property is located will have the valuation information.

Where can I go to see how my forestland values were determined?
The forest land valuation schedules and a state map depicting the forestland valuation zones may be obtained from your local Department of Revenue office. The maps depicting the productivity classifications can be viewed in the Department of Revenue office of the county where the property is located.

Can I appeal my forestland property value?
Yes. Your property appeal rights and appeal dates are identified on your assessment notice. However, prior to filing an appeal, we would like the opportunity to answer any questions or concerns you might have with the value we have placed on your property. For this reason, we provide an informal review process. The process allows you to make a written request for valuation review. Begin the valuation review process by completing the request form, known as an AB-26. By submitting this completed form, you have the opportunity to explain why you believe the value on your assessment notice is incorrect. Submitted forms require that local staff review your written concerns and recommendations and that they give you a written response.

If we can not resolve your concerns to your satisfaction through the informal appeal process, there are Appeal Boards available in your county to hear your concerns. Please do not wait until you receive a tax bill to voice your concerns. Your tax bill includes items, other than value, such as special improvement district assessments, rural district charges, and various fees. Again, if you have waited until after you have received your tax bill to express a concern about your forest land value, the deadline for appeal will have expired. For specific time frames, please refer to your assessment notice.

We are pleased to visit with you about your forestland property assessment.

Everyone who is involved in the taxation process wants to help you understand how your property taxes are determined and what services your property tax dollar provides. For more information about your assessment, please contact the Department of Revenue office located in your county.