Managed Forest Tax Incentive Program – November 2007 Update
New applications (including a copy of the approved managed plan) for the Managed Forest Tax Incentive Program (MFTIP) must be submitted by June 30th, 2008 to have your property tax classification changed to managed forest for the 2009 property tax year.
Your completed application can be submitted to:
Ontario Woodlot Association
275 County Road 44
Kemptville, ON
K0G 1J0
For more information about the MFTIP program call Rhonda toll free at 1-888-791-1103 ext. 221.
Changes to Aggregates Resources Act Help Woodlot Owners
Effective January 1, 2007, the Aggregate Resources Act has been extended to private land in southern Ontario and to parts of central Ontario and Northern Ontario not previously covered by the Act. The new areas include all of Muskoka and Parry Sound districts and Haliburton County. Also included are parts of Algoma, Nipissing, Sudbury, Manitoulin and Thunder Bay districts, and parts of Renfrew, Peterborough, Hastings, Frontenac, and Lennox and Addington counties. Most private land in other parts of southern Ontario and all Crown land are already regulated.
If you own a woodlot in an area recently designated under the Aggregate Resources Act, your property may now be eligible for the MFTIP program.
Section 9.5(ii) of Ontario Regulation 282/98 of the Assessment Act states that land is not eligible for the MFTIP program if it is licensed under the Aggregate Resources Act or zoned for aggregate extraction in areas where the Act does not apply. This meant that some owners of forested properties were ineligible for the MFTIP because their property had been zoned for aggregate extraction, even when they had no plans to extract aggregate now or in the future. Some of our members in Renfrew County were in this situation.
These changes could benefit you if your property is in a newly designated area under the Aggregate Resources Act or was previously zoned for extraction, but is not licensed (i.e., you are not extracting aggregate). Your property may now be eligible for the program, subject to other program eligibility requirements (e.g., ownership, minimum acreage, forest cover, etc.).
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Changes to the Managed Forest Tax Incentive Program Reward Woodlot Owners
The advocacy work undertaken by the Ontario Woodlot Association and the Ontario Forestry Association over the past four and half years, with the support of woodlot owners and our many partners, has paid dividends.
The provincial government’s enhancements to the Managed Forest Tax Incentive Program (MFTIP) have been well received within the woodlot community. “The program enhancements are an important step towards a better MFTIP,” says Chris Lincoln, President of the Ontario Woodlot Association. “They create an improved property tax environment and will reward Ontario’s woodlot owners for their stewardship initiatives.”
“The MFTIP will now recognize the true diversity of Ontario’s forest landscape,” says Lincoln. “And the value of privately owned forests and the ecological goods and services that they provide to communities across Ontario is also acknowledged.”
The Ontario Woodlot Association believes that the changes to the MFTIP program are good for woodlot owners. The changes in the assessment methodology and administration of the program will provide MFTIP participants with a number of enhanced benefits.
Read on to learn more about the enhanced benefits to the MFTIP program.
The approach to assessing managed forests
Managed forest (MF) properties will be assessed in a manner similar to the method used for farmland, which is based on land productivity rates.
The assessment approach is called the farm-forest proxy. The farm-forest proxy reflects sales data from wooded portions of farms within a geographic area, based on site productivity (e.g., soil quality, drainage, mineral composition, etc.). It includes an assessment cap to ensure that no MF property would be assessed at a greater value than it had prior to entering into the MFTIP.
For additional details on the assessment methodology for managed forest properties, you should read Ontario Regulation 282/98 (Sections 32.1 and 32.2). A copy of the regulation is available online at the provincial government's e-law web page at:
http://www.e-laws.gov.on.ca/navigation?file=home&lang=en
Enhanced Benefit – the change to a farm-forest proxy (assessment similar to farmland) will assist in creating a better tax property environment that will recognize the long-term nature of forest stewardship, encourage tree planting on marginal lands and will assist in reducing land conversion pressures.
Under the new assessment approach, it is estimated that more than 80% of the MFTIP properties will experience lower assessments when compared to the previous assessment procedure.
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Why is an assessment cap being used?
An assessment cap is needed because data analysis indicated that the farm-forest proxy assessment approach could result in an increase in property assessment for some properties (many of these properties are in Northern Ontario). Even though these MF properties would continue to be provided with a 75% reduction in property tax, it is recognized that there could be potential stewardship impacts if property assessments increased when a property was entered into the MFTIP. It is believed that with the implementation of a cap, the farm-forest proxy assessment approach would work in all areas of the province.
Enhanced Benefit – the cap ensures that a landowner will not be penalized with an increase in property assessment for the MFTIP eligible portion of their property entered into MFTIP (i.e., should the farm-forest proxy assessment values be higher then the current assessment classification).
Why is an assessment floor needed?
An assessment floor is also part of the new assessment approach. The floor would limit how much the assessment of an MF property could be reduced. The floor is set at 69%, meaning a MF property could not receive a reduction in assessment of more than 69%.
The assessment floor was introduced because in parts of the province some properties would see a significant lowering of their property assessment under the new assessment approach. At the local municipal level this could be viewed as a significant loss of municipal revenue. To address this concern, a mechanism (floor) was developed that would place a limit on how much a managed forest assessment could drop in relation to the property's assessment, if it was not in the MFTIP.
How do I obtain a copy of the farm-forest proxy values for my area?
The farm-forest proxy values ($ values per acre) by municipality and land band (refer to Ontario Regulation 282/98, Part IX.1 – Table 1) are available online by accessing the provincial government's e-law web page at http://www.e-laws.gov.on.ca/navigation?file=home&lang=en
Enhanced Benefit – in the past, the assessment methodology consisted of a series of polices and procedures that were not readily available to the public. The assessment procedures are now part of Ontario Regulation 282/98 (which requires legislative approval to change) and are accessible on the Internet. This should increase clarity and transparency for property owners on the valuation procedures for MF properties, help to alleviate future assessment issues and bring stability to the MFTIP program.
How are waterfront properties assessed?
Eligible waterfront properties in the MFTIP will be assessed using the same assessment approach used for all other properties in the program.
Enhanced Benefit – the use of the “band method” where the value of the first 208 feet along waterfronts was assessed a higher rate to reflect their higher market value has been discontinued. Eligible MF waterfront properties are assessed the same as all other MF properties, effectively reducing a landowner’s property assessment and increasing their tax savings.
Moving from a five-year planning period to a ten-year planning period
The MFTIP planning term has been increased from five years to ten years.
Enhanced Benefit – the longer planning term will reduce management costs for MFTIP participants.
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Expanding the definition of eligible open area
The definition of eligible open area has been expanded to include “natural areas that could not support tree growth through normal forest management activities” (e.g., swamps, rock outcrops, etc.). Under this new definition, landowners would be allowed to bring into the program a maximum of 25% of the total forested area (per municipal roll number).
This is in addition to the existing criteria that allow for open areas (a maximum of 10% of the total forested area per municipal roll number) that “do not support a sufficient number of trees to be deemed a forest” (e.g., abandoned farm fields).
Enhanced Benefit – the program now provides additional recognition of the true diversity of Ontario’s forest landscape and improves the promotion of stewardship planning. With the expanded definition of eligible open area, landowners will now be able to bring additional natural features (i.e., swamps, rock barrens, etc.) of their property into the program, effectively reducing a landowner’s property assessment and increasing their tax savings.
Tax Savings
The new assessment approach maintains the 75% tax rate discount that MF properties receive as part of the MFTIP program.
When did all the changes take effect?
The program enhancements took effect for the 2006 tax year.
MFTIP application date changes
New MFTIP participants must submit their applications (including a copy of the approved managed plan) by June 30 to have your property tax classification changed to managed forest for the following year.
Assessment of managed forest properties
For more information on how managed forest properties are assessed, refer to the fact sheet Backgrounders and Questions and Answers – Assessment of Managed Forest Properties posted on the Municipal Property Assessment Corporation website <http://www.mpac.ca/> or, call MPAC at 1-866-296-6722.
Need more information about the Managed Forest Tax Incentive Program?
The Ontario Woodlot Association can provide you with information about the MFTIP program, including a program guide and application, by calling us toll-free at 1-888-791-1103 ext. 221 or by contacting us by e-mail <info@ont-woodlot-assoc.org>.
A copy of the program guide Ontario Managed Forest Tax Incentive Program Guide (Updated January 2006) and application can also be downloaded from the Ontario Ministry of Natural Resources website <http://ontariosforests.mnr.gov.on.ca/spectrasites/internet/ontarioforests/mftip.cfm>.
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