Posted: Thursday, August 05, 2010 9:00 AM
RAVENSDALE, Wash. -- There are several taxes on forestry-related income and assets in Washington state, but woodland owners can be eligible for favorable tax rates.
Chris Westwood, a forester with the state Department of Revenue, explained aspects of taxation to family forestland owners attending a daylong series of workshops July 31.
Current-use taxation, he said, allows for certain land to be taxed on the basis of current use rather than "highest and best use." Land that is being used primarily for the growth and harvest of timber can be taxed as Designated Forest Land or Current Use Timberland.
The primary difference in the two is the required acreage: Greater than 5 acres would be considered Current Use Timberland; greater than 20 acres, Designated Forest Land.
The first step to apply for classification is to prepare a timber management or forest stewardship plan, Westwood said.
"This can be prepared with a trained forester, or as part of coached planning course offered by (Washington State University) Extension," he said. "That's a great program, and we're going to put it online."
Developing a stewardship plan helps the landowner clarify short-term and long-term goals for the property and develops an organized sequence of activities to accomplish those objectives.
In exchange for the reduced tax rates on the land, the state collects a 5 percent forest excise tax when timber is harvested. The state receives 20 percent of that distribution; the county gets 80 percent.
"This is a severance tax," Westwood said. "For a small harvester, it's transaction-based. Gross sales minus the costs of harvesting and marketing yields the taxable stumpage value. If you do the harvesting and marketing, you reduce the gross sales by 35 percent to get the taxable value.
"As a small harvester, you only have to keep track of the money."
Keeping documentation is the key, he said. Any forester or auditor will be looking for that.
That 5 percent tax can be reduced to 4.2 percent by an Enhanced Aquatic Resource Requirement credit. This credit is based on management of riparian and wetland zones, steep and unstable slopes, habitats, watersheds and road maintenance and abandonment plans.
Timber extractors may also be liable for Business and Occupation taxes. Small harvesters have a $100,000 threshold (gross in a calendar year). "Anything over that qualifies as a small business," he said.
Another thing woodland owners should know, Westwood said, is that if they apply for Designated Forest Land classification, if no decision is given by May 1 following application, it is considered approved. "I encourage people to apply late in the year to get it approved."
-- Steve Brown