Don’t miss out on drastically reducing your property taxes!
On June 6th of 2013, Michigan Legislature signed into law some significant changes to the Qualified Forest Program (QFP) – http//www.michigan.gov/qfp . Once entered into this program, the landowner’s property will remain as forestland, and they would receive substantial tax benefits. These changes have made QFP much more appealing, in our opinion, to landowners owning forested property, and they would benefit from enrolling it into this program. We have spent the last few months helping landowners enroll their properties into this program. This letter is to inform you about the pros and cons of the new QFP law so that you can decide if QFP is right for you. Below we have described the basics of the program:
- The QFP reduces your property taxes by eliminating the local school tax which is typically18 mils. There is an administration cost for the program of 2 mils, so your net savings is 16 mils. For the typical landowner this is roughly a 40% reduction in property taxes. This savings would not be applied to homesteaded properties; it can be in place of homesteading.
- Structures are allowed. The structure and the land beneath it will be taxed separately from the forestland.
- Your property remains private, it can be posted ‘No Trespassing’ and not open to the public.
- The QFP can cap your property taxes at the lowered rate once your property changes ownership, so they won’t increase when sold or inherited. Even if your property taxes are already low, they will stay that low for your children or the new owner.
- To enroll your property in the QFP, you must have a forest management plan written by a Qualified Forester. The cost of our management plans typically pay for themselves in tax savings within 1 or 2 years. The management plan is approved by. and reflects the goals of the landowner. All management plans promote sustainable forestry and contain an element of timber harvesting.
- The landowner must agree to follow the management plan. All timber harvests must occur within 3 years of the scheduled date. Management plans can be changed as long as the changes match with the landowners stated goals and that the revised plan is filed with the Michigan Department of Agriculture and Rural Development (MDARD). Landowners not following their plan will have their properties revoked from the program.
- The cost to withdraw property from the QFP is prohibitively expensive.
- There is a $50 application fee payable to Michigan Department of Agriculture to enroll in QFP.
- The property must be at least 20 acres in size. The maximum acreage a landowner can enroll is no more than 640 acres per township.
- Properties between 20 and 39.9 acres must be at least 80% forested. Properties 40 acres or greater must be at least 50% forested.
- The definition of “forested” is that it is capable of growing 20 cubic feet per acre per year of wood fiber. This is 1/6th of a cord per acre per year which is a very small amount.
In our opinion, this program is beneficial for most forest owners in Michigan. It may not be of much benefit to landowners whose taxes are already low and do not anticipate changing ownership in the near future, but can be useful in estate planning for those inheriting the property, and could also be a good selling point to a new owner. This program is of no use if the landowner is planning on subdividing their property or developing their property in a manner that would greatly deplete the amount of forest. The QFP does enable the state government to have a greater influence on the management of private lands which may be an issue for some landowners. However we feel that the state’s influence will enhance, not inhibit, the management of private forests by requiring that the landowner consult with a forester and agree to follow a management plan. We are in the process of enrolling our own land which will make the property much more affordable.
We believe that the QFP could positively affect the real estate value of your property. It may be enhanced because potential buyers will be able to more easily afford the taxes.
Please feel free to call us with any questions about the QFP and the timber management on your property.