Thursday, 16 July 2015 15:48

Understanding the Managed Forest Tax Law Program

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As an independent certified plan writer (ICPW) for the DNR, I work with a wide variety of landowners and forest types. While everyone knows you get a tax break by enrolling in the program, there is a lot of misunderstanding on the part of landowners who are either in the program or contemplating signing up. This article is not intended to make anyone an expert on the law and the program, rather I hope to make some basic clarifications.

The biggest misconception is that the Managed Forest Law (MFL) program is a contract between the landowner and the DNR. Itʼs not. A contract is a legally binding agreement between two parties and specifies the rights and responsibilities of the parties. Typically a contract may be amended if it is agreed to by both parties. The MFL program uses a legal instrument referred to as an “Order of Decision.” While very similar to a contract, the Order of Decision is legally binding on only one party. What it means is that you, as the landowner, are required to fulfill the terms of the order. However, the DNR reserves the right to modify the rules, and have done so periodically over the years. The recent change to the law which prohibits the leasing of property is one example.

Not too many years ago, your local DNR forester would conduct the physical inventory and create your plan. Often times, it was a two page document, a stand map and a sheet which stated, “thin stand 2 in 2013” or “clear-cut stand 3 in 2020.” That is no longer the case. Today, only under special circumstances can DNR foresters write a plan (at a cost predetermined by market value). Otherwise, only an ICPW may create the plan.

Itʼs worth noting that the character and requirements of the plan have changed dramatically over the years. Today, all MFL properties are considered to be “certified” by the Forest Stewardship Council (FSC), unless the landowner opts out and are subject to their certification and planning requirements. A small simple plan is now a six page document and quite expensive. The average cost to the landowner is $500 to $600 per 40 acres.

At this point, owning certified woodlands has little to no economic benefit to the landowner. There are only a few specialized niche markets that are willing to pay a premium for certified products. Over time, this may change. The real benefit of having a large certified land base is to secure markets for many of the stateʼs paper mills. Part of being certified is voluntarily adhering to the FSC requirements for such things as den trees, wildlife trees and maintaining cull trees in the stand for the future accumulation of coarse woody debris. While these practices are deemed important by the FSC, they may be contrary to the landowner whose primary objective is the growth and production of high quality forest products. At this time, these practices are voluntary on private lands, but are required on most governmental properties. This too may change over time.

Depending on the forest types, ages and other factors, landowners may be required to conduct management operations according to their management plan. I am continually amazed at the number of participants in the program who are either unaware or adverse to required harvesting their timber. In addition to mandatory timber harvesting, landowners may be required to harvest in a manner which is contrary to their desires. Practices such as clear-cutting aspen or strip clear-cutting swamp conifer types is sometimes frowned upon by landowners. In some cases, DNR foresters will be willing to modify harvest techniques, based on changes in silviculture and technology, while others may be reluctant to make modifications.

One of the changes to the program which was implemented several years ago is a variable property tax rate. Initially, the law stipulated your tax rate, per acre, at the time you enrolled in the program and that remained constant. Today, the property tax rates are revisited every five years with the next re-adjustment period coming in 2018. When a harvest is complete, the landowner must pay a severance tax according to the calculation of value by the DNR. Each year the DNR gathers information, in 13 regions of the state, regarding average stumpage rates paid to landowners. This information is then used to determine the value of a cord of hardwood pulp in the Antigo area, a cord of red pine pulp in Hayward or a 100 board feet of sugar maple in Wausau. Your severance taxes are then calculated on those values and the actual volume of harvested products. In general, the DNR does a pretty good job of tracking those values. However, during

times of volatile markets such as those we have endured over the last several years, there can be some discrepancies between their stated value and what your stumpage values might be. Other factors, such as job size, logging chance and amount of road cost will also affect your stumpage values.

According to the Realtorʼs Association, properties in Wisconsin change hands an average of every seven years. What if I own MFL property and want to sell or gift the property to another party? Within 30 days of transfer of title, you must file a form with the DNR along with a $100 fee. The new owner may adopt the MFL plan as it exists or modify it subject to their objectives. In some cases the new owner may wish to withdraw the property from the program. The new owner must file a withdrawal notice, along with a $300 fee to the DNR. In addition to this, a withdrawal tax will also be calculated and must be paid to the state. These calculations are made according to a number of different formulas and scenarios and can be quite costly. Landowners should see their local DNR forester for a cost estimate prior to filing for withdrawal.

More Information concerning the MFL program is available on the DNR website at www.dnr.wi.gov. For many landowners, this is a good program and it enables them to own property they might not otherwise be able to afford. However, I always advise my clients that 25 years is a long time. If you are uncertain about your future or the future ownership of the property, gather all the information you can and give it serious consideration.


Do you have questions you’d like to ask a forester? Send them to us at This email address is being protected from spambots. You need JavaScript enabled to view it.. And for more information about Kretz Lumber Forestry Services, visit www.kretzlumber.com/services/forestry

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