Alabama

Property Classification (Ala. Code § 40-8-1):

All taxable property is divided into the following classes:

Class I. All property of utilities used in the business of such utilities.

Class II. Real and personal property that does not classify as Class 1, Class III or Class IV property.

Class III. All agricultural, forest and residential property, and historic buildings and sites.

Class IV. All private passenger automobiles and motor trucks of the type commonly known as "pickups" or "pickup trucks" owned and operated by an individual for personal or private use and not for hire, rent or compensation.

Agricultural and Forest Property - All real property used for raising, harvesting and selling crops for the feeding, breeding, management, raising, sale of or the production of livestock, including beef cattle, sheep, swine, horses, ponies, mules, poultry, fur-bearing animals, honeybees and fish, or for dairying and the sale of dairy products, or for the growing and sale of timber and forest products, or any other agricultural or horticultural use or animal husbandry and any combination thereof. (Ala. Code § 40-8-1)

Class III Property: (Ala. Code § 40-7-25.1)

For ad valorem tax years beginning on or after October 1, 1978, with respect to taxable property defined in Ala Code Sec. 40-8-1, upon request by the owner the assessor shall base his appraisal of the value of such property on its "current use" on October 1 in any taxable year and not its fair and reasonable market value.

"current use value" - shall be deemed to be the value of eligible taxable property based on the use being made of that property on October 1 of any taxable year; provided, that no consideration shall be taken of the prospective value such property might have if it were put to some other possible use.

Failure of an owner of Class III property to request appraisal at current use value shall mean that the property will be valued on its fair and reasonable market value until such time that the owner requests valuation on the basis of current use value.

Determining "current use value" of forest property:

In determining the current use value of eligible taxable property the assessor shall utilize the "standard value" method of current use valuation. To utilize the standard value method the tax assessor must first determine the character of the property with respect to which current use valuation is elected as agricultural, forest, residential or historic building and site.

With respect to "agricultural and forest property," the tax assessor shall determine the productivity rating or ratings applicable to such property based on the following soil groups:

Soil Group #	Agricultural Productivity Rating	Forest Productivity Rating
1	Good	Good
2	Good	Good
3	Average	Average
4	Average	Average
5	Average	Average
6	Poor	Average
7	Nonproductive	Poor
8	Good	Good
9	Poor	Average
10	Nonproductive	Nonproductive

For a complete description of the soil groups please refer to Ala. Code § 40-7-25.1.

Standard Value - The owner of timberland desiring to elect "current use valuation" must submit to the assessor satisfactory evidence indicating the soil group or groups applicable to the property in question. The Alabama Department of Revenue shall utilize timber yields based on the different productivity classes to establish the annual yield per acre in cords.

Productivity Class
Good	1.38 cds/ac/yr
Average	1.05 cds/ac/yr
Poor	0.75 cds/ac/yr
Non-productive	0.6 cds/ac/yr

This yield per acre, for each rating, is then multiplied by the average pulpwood price per cord as provided by the Alabama Forestry Commission. The price used is the weighted average pulpwood stumpage price for Alabama for the previous calendar year. This is calculated by the Alabama Forestry Commission using Timber Mart South stumpage price reports (Hyman. From this product, 15 percent shall be subtracted for expenses of ownership and management, and the result of that subtraction shall equal the "imputed timberland net income per acre" for property of each productivity rating.

The "imputed net income per acre" figures for property of each productivity rating are then divided by the average of the annual effective interest rates charged on new Federal Land Bank loans by the New Orleans district federal land bank for the 10 most recent calendar years since 1973 for which figures are available as of October 1 of each tax year. Over the years, the Department of Revenue has encountered various problems obtaining the necessary data to make the current use calculations. For several years, a capitalization rate was unobtainable due to the Federal Land Bank of New Orleans going into receivership, then the Federal Land Bank of Jackson Mississippi went into receivership, but finally the Farm Credit Bank of Texas which handles Alabama agreed to furnish the required rates. This rate is first reduced by the lesser of 4 1/2% or the difference between such rate and 2%. The results obtained shall be the "current use standard values" for property of each of the timber productivity ratings.

The "current use standard values" for each productivity rating is then multiplied (by the tax assessor) by the number of acres of forest property of each productivity rating with respect to which a current use valuation is in effect. The result is the "appraised value." Once the appraised value is determined, a prescribed assessment percentage is applied to arrive at its "assessed value." The assessment percentage for Class III property is 10% of its appraised value.

The pertinent tax rate is then applied to determine the tax obligation of the property owner. The rate of taxation for state purposes is 0.65% annually on the assessed value of the taxable property in the state. (Ala. Code § 40-8-2). County, city and school district taxes are additional.

Current use value ($/acre) for timberland: 2020

SOIL GROUP	PRODUCTIVITY RATING	CURRENT USE VALUE
1	Good	$773
2	Good	$773
3	Average	$589
4	Average	$589
5	Average	$589
6	Average	$589
7	Poor	$419
8	Good	$773
9	Average	$589
10	Non-productive	$336

Source: Alabama Department of Revenue, https://revenue.alabama.gov/wp-content/uploads/2017/05/DivisionDirectiveCU2019.pdf

Making the "current use" election: (Ala. Code § 40-7-25.2)

Any owner of eligible taxable property described in Ala. Code § 40-7-25.1 may apply to have such property assessed for purposes of ad valorem taxation at the appropriate ratio of assessed value to the current use value of such property by filling a written application, as prescribed by the department of revenue, with the tax assessor of the county in which such property is located, on and after October 1 but not later than January 1 in any taxable year.

The application form for qualification of real property as forest property shall include a description of the real property, a general description of the uses to which it is being put, aerial photographs, if available, and such other information as the tax assessor may require to aid him in determining whether the land qualifies for assessment based on its current use value.

If any application for assessment of any taxable property based on its current use value is granted by the tax assessor, the owner of such property shall not be required to repeat the application for subsequent taxable years. However, following the sale or other disposition of such property, the new owner must apply for current use valuation for such property as provided in this section; otherwise such property shall be assessed at its fair and reasonable market value.

Conversion of Class III property:

If any property for which a current use valuation has been approved is converted to any use other than that for which the application was filed, the tax assessor shall revalue the property according to the current market value. The tax assessor shall then base his appraisal on the then current market value assessing such property accordingly for purposes of collecting any additional taxes due thereon. After conversion, taxes will be due based on the sales price or the fair and reasonable market value of such property at the time of its conversion, whichever is greater, for the preceding 3 ad valorem tax years.

For purposes of this discussion the following definitions apply (Ala. Code § 9-13-80):

Producer - Any person engaging or continuing to engage in this state in the business of severing timber or any other forest products from the soil, whether as owner, lessee, concessionaire or contractor. Such definition shall also include any person who assembles or causes to be assembled any forest product for shipment out of the state of Alabama in an unmanufactured condition.

Forest Products - Logs, pulpwood, poles, pilings, in-woods pulpwood chips, and stumpwood (tarwood).

Sever - To fell, cut or otherwise separate from the soil; provided that for the purposes of this article, any person who is the owner or lessee of timber and is also the processor thereof or a manufacturer of products derived therefrom shall be deemed the person engaged in severing such timber from the soil, notwithstanding the fact that the severance is made by an independent contractor or otherwise.

To provide for further conservation of the natural resources of the state by protection of the forest products and development of the forestry program, a severance tax is levied against any forest products producer (Ala. Code § 9-13-82).

Who is liable for the Forest Products Severance Tax:

• Manufacturers, concentration yards or processors receiving pulpwood
• Manufacturers and concentration yards receiving in-woods pulpwood chips
• Manufacturers receiving pulpwood chips or residual pulpwood chips.

Exemption certificates:

Manufacturers who purchase pulpwood, logs, or portions thereof and convert them into chips and wish to be exempt from the Forest Products Severance Tax on pulpwood chips or residual pulpwood chips purchased from a manufacturer, concentration yard, or processor must first obtain an exemption registration certificate from the seller stating that the seller is registered with the Department to remit the Forest Products Severance Tax. Manufacturers who fail to obtain a valid exemption registration certificate will be held liable for the Forest Products Severance Tax on pulpwood chips or residual pulpwood chips received. Since the Forest Products Severance Tax is on pulpwood logs and the whole logs that are utilized in the manufacturing process to produce lumber, the Forest Products Severance Tax does not apply to pulpwood chips produced from pulpwood or slabs from lumber converted into residual pulpwood chips (Ala. Admin. Code r. 810-8-5-.06).

The severance tax does not apply to individual owners of timber who occasionally sever or cut timber from their own premises to be utilized by them in the construction or repair of their own structures, buildings or improvements or for their home consumption or used by them in the processing of their farm products. (Ala. Code § 9-13-83)

For the most current rates please refer to the Alabama Department of Revenue, Sales, Use and Business Tax Division at: http://www.ador.state.al.us/severancetax/index.html

Forest Products Severance Tax (2019)

Kind of Products	Rate of Taxation
Pine Logs received by a concentration yard, manufacturer, or processor	$.10/ton
Pine Logs exported out-of-state	$.10/ton
Logs-All Other Species received by a concentration yard, manufacturer, or processor	$.065/ton
Logs-All Other Species exported out-of-state	$.065/ton
Pulpwood received by a concentration yard, manufacturer, or processor	$.10/ton
Pulpwood exported out-of-state	$.10/ton
Stumpwood received by a manufacturer	$.125/ton
Stumpwood exported out-of-state	$.125/ton
Poles/Pilings received by a concentration yard or manufacturer	$.205/ton
Poles/Pilings exported out-of-state	$.205/ton
Inwoods Pulpwood Chips received by a concentration yard or manufacturer	$.10/ton
Inwoods Pulpwood Chips exported out-of-state	$.10/ton

Source: Alabama Department of Revenue, 2019 (https://revenue.alabama.gov/business-license/forest-products-severance-tax/)

Forest Products Manufacturers Tax:

There is also levied a Forest Products Manufacturers Tax against the processor of the forest products or the manufacturer using the forest products in an amount equal to 50 percent of the Forest Products Severance Tax on the producer as set out above and is levied only on manufacturers located within Alabama.

Who is liable for the tax:

Manufacturers located in Alabama utilizing the pulpwood, pulpwood chips, in-woods pulpwood chips or residual pulpwood chips in the manufacturing process to make a finished product (i.e., paper). It is the legislative intent that this privilege tax is not to be levied in any manner upon the person owning the land from which the forest products are severed nor upon the person actually cutting the forest products but it is levied upon the processor processing the forest products or manufacturer using the forest products.

Round wood pulpwood on which the tax has been paid shall not be subject to an additional tax when converted into chips, but the additional tax levied by subsection (b) of section 9-13-82 shall be paid by the person, firm, or corporation utilizing the chips in a manufacturing process. The manufacturer who produces residual pulpwood chips from logs utilized in the manufacturing process under § 9-13-82(c), Code of Ala. 1975, may deduct from the Forest Products Manufacturers Tax the portion (tonnage) of the logs that are converted into residual pulpwood chips. A sawmill that utilizes logs in the manufacturing process to produce lumber must remit the Forest Products Severance Tax on the total weight of the logs that are delivered to sawmills. A sawmill that converts the slabs that are produced as a byproduct of lumber manufactured into residual pulpwood chips shall remit the Forest Products Manufacturers Tax based on the net tonnage of the logs delivered to the sawmill multiplied by 50 percent of the Forest Products Severance Tax rate.

Property Exempt from Taxation:

Standing timber and forest products:

Real property used to grow timber and forest products for sale is classified as Class III property for property tax assessment purposes. However, because timber and forest products are subject to a severance tax when they are harvested they are exempt from property taxes. (Chapter 5: Alabama Appraisal Manual, Alabama Department of Revenue)

Auxiliary state forests: (Ala. Code § 9-13-40)

Alabama state law precludes the assessment or taxation of:

(1) up to 160 acres of land designated by the State Forestry Commission as an auxiliary state forest, and

(2) growing timber on land designated as an auxiliary state forest

An 8% privilege tax on the appraised value of timber (as determined by the Department of Revenue and the State Forestry Commission) is assessed if an auxiliary state forest designation is withdrawn or the timber on designated land is harvested or otherwise used. (Ala. Code § 9-13-47)

Nix, S. 2001. Current use values reassessed for forestland. Alabama's Treasured Forests.