Timber Manual Adopted
Comptroller Rule Amended for New Laws
The Comptroller has adopted amended Rule 9.4011, Appraisal of Timberlands. Both the amended rule and its manual received the required approval of the 5-member state committee composed of the Governor, the Comptroller, the Attorney General, the Commissioner of Agriculture and the Commissioner of the General Land Office.
The Web address for the adopted rule published in the April 30 issue of the Texas Register is www.sos.state.tx.us/texreg/archive/April302004/adopted/34.PUBLIC%20FI NANCE.html#372. The amended rule is effective May 3.
The revised Comptroller’s Manual for the Appraisal of Timberland is available on the Web at www.window.state.tx.us/taxinfo/proptax/timber04/index.html.
Highlights of new manual
During the 78th Texas Legislature, Regular Session, Senate Bill (S.B.) 1646 addressed several property tax issues for timberland, which became effective January 1, 2004. The bill specifically changed timber appraisal methodology and the capitalization rate used to determine timber productivity value.
Qualified timberland, like other agricultural land in Texas, receives two appraised values – an appraised market value and a productivity value. A “productivity value” is the land’s value based on its ability to produce timber products. The basic appraisal method is to determine potential growth of timber, determine the stumpage price of this potential growth, deduct typical timber production expenses and apply a capitalization rate determined by state law to the “net-to-land.”
The S.B. 1646 changes combined the two regions in the east Texas timber-growing region. It also updated the method of determining timberland values to conform to current practices by including gatewood sales and chip-n-saw as a forest product.
Gatewood sales are those that occur when a sale is negotiated and timber is delivered to the mill by the owner or his representative.
New technology has resulted in small pine timber being milled to produce several saw logs and the remainder being produced into pulp wood. The forest product produced from these small trees is called chip-n-saw.
This recent legislation also addressed many landowners concerns about drastically fluctuating capitalization rates. As the Federal Reserve reduced interest rates in the past several years, which is the basis for the legislatively mandated capitalization rate, timberland values were drastically increasing. A new method to determine the capitalization rate was adopted which, based on a 5-year average, will produce rates which are much more stable.
See the February 2004 STATEMENT for details about the timber capitalization rate. The article addressing both the timber and agricultural land cap rates is available on the Web at: www.window.state.tx.us/taxinfo/proptax/stmt/stmt0402/stmt0402_5.html.
In addition, S.B 977, adopted by the 1999 Texas Legislature, also allowed for restricted use timberland. Landowners of timberland on which harvest is restricted to protect critical wildlife habitats, provide roadway buffers, preserve special or unique sites and protect streams and other water bodies and owners of timberland that has been harvested and reforested were allowed to apply for a special appraisal which reduced their property tax burden.
The Comptroller’s amended timber manual includes the new provisions of both the 1999 and 2003 law changes in the methodology to be used by appraisal districts to determine timberland productivity values. The Comptroller’s Property Tax Division worked closely with a group of representatives from private timberland owners, timber industry representatives, chief appraisers, county judges and school superintendents to revise and adopt the manual.
For any questions about the timber manual or to obtain a copy, please contact Sharon Hersh of the Comptroller’s Property Tax Division by e-mail at email@example.com or by calling 1-800-252-9121, extension 5-9816. In Austin, call 305-9816.