News

Forestry Tax Credit Reform Picks Up Steam

In his 2017 State of the State book, Governor Cuomo proposed sweeping reforms for New York’s forestry tax law, also known as 480-a. This year, we are finally seeing such a proposal in writing: it was included in the Executive Budget. Environmental groups are hopeful that the proposal will help protect New York State’s significant privately held forests from development.

After 40 years, only 16% of private forest tract owners participate in the 480-a program. If things don’t change, 14.25 million acres of land used in the timber industry may not be managed sustainably, and the vitality of these plots could be lost in the long run. NYLCV supports Cuomo’s pledge to amend this law and cut the procedural red tape that has turned away these landowners from conservation and tax breaks. By re-working this law to make participation accessible for forest owners and providing grants to train landowners and timber workers in sustainable harvesting practice, widespread forest conservation can, for the first time in New York State history, be accessible and effective.

Governor Cuomo’s Empire Forests for the Future Initiative, if implemented, could lessen the labyrinthine nature of this law. Cuomo’s plan would make participation more bureaucratically accessible for more people, governments, and nonprofits. The Governor pledged to lessen the administrative burden of receiving tax benefits, which currently requires the tenant to do far more work than the Department of Environmental Conservation (DEC), reduce the minimum acreage to apply from 50 to 25, and expand the criteria of eligibility for benefits from forest owners to open-space owners. Cuomo would also provide support for both landowners and laborers, which up until now has been scarce. The tate will do this through grants that empower landowners, governments and nonprofits to implement ecological forest management practices. The State will also give preference to NY wood products when buying timber to keep wood in New York State, and provide $150,000 in grants for training to timber laborers across the state. These accessibility improvements would increase the current carbon emissions reduction of 800,000 tons by another million: a win for government transparency and  accessibility, a win for forest landowners’ access to tax breaks, and a win for the timber industry. This sounds like a good path out of the woods from the migraine that is 480-a.

NY state has 19 million acres of forest, 75% of which is privately owned. These private lands support the forest management and timber industry, which supplies 6,000 jobs and $14 billion to the economy annually. Just as well, the program provides $250 million in revenue to private forest landowners. The 1974 law 480-a, and its 1926 predecessor, Real Property Tax Law (RPTL), operates under the assumption of ad valorem: that land is used for its “best economic purpose” and should be valued accordingly. In consultation with a forester, who evaluates the land’s value and viability for participation, landowners sign a 10-year management plan for the land (it renews every year) and pay 6% of any timber fees to their respective municipality. In return, they receive a tax deduction equivalent to the following: Take your current value per acre and multiply it by 80%. Then, multiply the equalization rate for the town by $40 per acre. Subtract the lesser of the two amounts from the original, which gives you the new evaluation rate.

In most respects, the well-meaning law has been a missed opportunity for all parties involved. In theory, the law provides the basis for consistent jobs for foresters, sustainable plans for forest owners as well as long-term deals with timber contractors. In practice, the management plan and the penalties for withdrawing on the agreement give land owners every reason to never enter this agreement in the first place. First of all, the whole affair may not even be profitable. The forester—whose services are, in theory, separate from the deal and command a fee of their own—provides an assessment. Critics point out that the assessment may increase the value of the land, and the property taxes paid on it, before the reprieve comes into play. Secondly, the penalty for leaving the agreement is harsh: the landowner must pay a penalty of 2.5% per tax saving for removing whole tract; and 5% per tax saving for removing a portion of the tract. Since the landowner must also continue to obey the plan for 10 years after leaving it, the fee could average out to as much as 25% or 50% of the taxes supposedly saved in penalties. It is no wonder with the reward for participating not guaranteed and with the penalties for leaving so steep that only 5% of forest owners were participating in this program in 2014.

Law 480-a’s cost-benefit ratio is off, which has resulted in limited gains from a law that has the capacity to deliver a lot more emissions-reduction than it has thus far. Governor Cuomo’s plans for 480-b demonstrate the ineffectiveness of a law that has persisted for 40 years without facilitating any large-scale change in ecological land management on a scale it is capable of doing. The reforms in the Governor’s Empire Forests for the Future Initiative should elicit more participation, but the penalties for non-participation need to be altered in a way that does not intimidate potential participants from participating in the agreement.