New 2c Managed Forest Land tax classification

The Minnesota legislature has created a new property tax classification for which many Minnesota woodland owners are eligible. This is big news–the new class rate is 0.65 percent, which is a 35 percent reduction.

This new Department of Revenue property tax classification is called 2c Managed Forest Land.

White pine photo by esagor

“In addition to leadership from the Minnesota Forestry Association and all the partners who helped, we need to especially thank Senator Tom Bakk and Representative Larry Hosch for sponsoring legislation that led to the 2c Managed Forest Law. The Departments of Revenue and Natural Resources were also very cooperative in drawing up the application and final rules to allow landowners easy access to the program” said Tom Kroll, Arboretum Director at Saint John’s University.

Who’s eligible for this new classification? Any landowner with at least 20 wooded acres (but not more than 1,920 acres) under a current forest stewardship management plan. The forest management plan must be registered with the Department of Natural Resources, Division of Forestry, and must be no more than ten years old. Landowners who don’t have a forest management plan can contact their local DNR Forestry office to request one.

Land already enrolled in a tax reducing program such as Sustainable Forest Incentive Act or Green Acres, to name a few, are not eligible for the 2c Managed Forest Land program. Landowners may also want to confirm that enrolling into 2c will benefit their tax situation. In some instances landowners might currently be taxed at 0.50% rate and enrolling into 2c would raise their tax rate.

Eligible landowners can apply for a change of classification through their county assessor. The assessors have the application form and can provide additional information. (The application form can also be downloaded here.) Landowners who wish to participate for the 2009 tax year need to submit their application by September 1, 2008 through their county assessor.

More detail on eligible acreage (from the application form):

(1) Unplatted real estate that is rural in character, is not used for agricultural purposes, and is not improved with a structure; may qualify for a reduced class rate of 0.65 percent if the property meets all existing requirements. The property must have a qualifying forest management plan (forest stewardship plan) in place, but the property cannot be enrolled in the Sustainable Forest Incentive Act (SFIA) program. A minor ancillary, non-residential structure (see instructions for description) does not disqualify a property from this classification. The commissioner of natural resources must confirm that a property qualifies for the classification.

A property that is improved with a structure that is not a minor ancillary non-residential structure will be split-classified, with 10 acres being assigned to the structure.

[Update: For much more information on eligible acreage, see this post.]

Change in highest and best use rules: According to Kroll, the law also changed the rules on “highest and best use” as regards classification. This means that someone with eligible forest land and a plan is entitled to be in the new 2c class (Even if it has lakeshore or is just down the road from a big development.) In the past such properties would have been classed to seasonal recreational or commercial based on their “highest and best use.”

To be clear, the valuation method of property will not change. Property values will continue to be estimated based on comparable sales of similar properties by willing sellers to willing buyers.

“This new tax class is a good thing for Minnesota woodland owners, and the Minnesota Forestry Association is proud to have helped move it forward” said MFA president John O’Reilly.

How to get a forest stewardship plan: Forest stewardship plans are prepared by Minnesota Department of Natural Resources (DNR) professionals and their private forest management (PFM) partners. PFM partners include private consulting foresters, Soil and Water Conservation Districts, and others. Landowners who do not already have a qualifying plan are unlikely to be able to obtain one in time to enroll in the 2c classification for the 2009 tax year (before September 1, 2008).

The DNR expects a major increase in requests for stewardship plans in the coming months, due largely to the availability of the new 2c classification. As a consequence, landowners may experience delays in processing their plan requests. More information on this process will be available from DNR, and through this site, in coming months.

To sign up for a stewardship plan, contact your local DNR Forestry office. You’ll be added to a list and your plan will be prepared either by a DNR forester or an approved contractor.

For more information: Contact your county tax assessor, DNR Forestry office, or the Department of Revenue. If you’re currently enrolled in the Green Acres program, you may want to read this thread on our discussion board about the relationship between Green Acres and the new 2c Managed Forest Land classification.

Questions: Feel free to add your questions either below or on the discussion board, and we’ll do our best to answer them.

Eli ‘s work addresses Minnesota forest ecology & management. He’s based in St Paul.

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11 Comments

  1. I am moving into a new house that is surrounded by managed forest. It is owned by the owner who lives behing us. I was just wondering the rules of a managed forest. Is it ok for the public to walk through there? Please e-mail me back if you can help me out.
    thank you
    shawna

  2. Can you compare and contrast the SFIA and the 2c Managed plans, in regards to tax classifications? And how much labor/cost is required from us to follow a Plan?
    We seek some relief for 200 acres of Lakeshore and Forest with one old cabin.. We currently pay 26,0000+/year for swamp and forest we inherited.

    1. Hi Kathy.

      Have you read Mel Baughman and Mike Reichenbach’s Property Tax Relief for Forest Landowners? It includes a comparison of 2c and SFIA for a hypothetical 40-acre parcel. If you’re looking for more detail on the comparison, your county’s tax assessor may be the best source.

      The amount of work required to follow the plan depends on what’s in it. When your forester prepares the plan, the first things they’ll ask are “What is your vision for the property? What do you hope to get out of it?, etc. So the plan will reflect your preferred balance between work, revenue generated from the property, and other values like aesthetics, recreational values, and so on.

      Finally, on the issue of inheritance and land transfer, there may be ways that you could change the form of ownership (e.g. trusts or a donation of the development rights) that would have important tax implications. You can learn a bit more about this on our Intergenerational Land Transfer page or in the comprehensive Estate Planning for Forest Landowners pub.

      I hope this is helpful. Thanks for the comment!

  3. I have land in Itasca county enrolled in 2cMFL program (many years) in my individual name. For estate planning purposes and or liability reasons I’m considering transferring title to a trust or LLC. Can a trust or LLC qualify as an owner for this program. Do I have to notify anyone of change if deed is filed? What is the specifics statute that create the 2c program? Thank you.