Michigan

Property Classification:

For property tax purposes real property is broken down into 6 classifications (MCL 211.34c):

Agricultural real property - includes parcels used partially or wholly as farm land, and parcels assessed to the Department of Natural Resources and valued by the State Tax Commission.

Commercial real property - includes platted and un-platted parcels used for commercial purposes, whether wholesale, retail, or service; parcels used by fraternal societies; and parcels used as golf courses, boat clubs, ski areas, or apartment buildings with more than four units.

Developmental real property - includes parcels containing more than five acres without buildings or more than 15 acres and whose sale value exceeds its present use value. It may include farm land or open space land adjacent to a population center or farm land subject to several competing valuation influences.

Industrial real property - includes platted and un-platted parcels used for manufacturing and processing; parcels used for utility sites for generating plants, pumping stations, switches, substations, compressing stations, warehouses, and right of way, flowage land and storage areas; and parcels used for removal or processing of gravel, stone, or mineral ores.

Residential real property - includes platted or un-platted parcels, and condominium apartments used or that will probably be used for residential purposes; and parcels in an area used predominantly for recreational purposes that are used or that will probably be used for recreational purposes, such as lake lots and hunting lands.

Timber cut-over real property - includes parcels stocked with merchantable forest products, cutover forest land with little or no merchantable products, and marsh lands or other barren land. When purchased for residential or recreational use, the land will be classified as residential.

Commercial Forest Program: (MCL. 324.51105)

Qualification - An eligible commercial forest is "forestland" capable of producing (1) not less than 20 cubic feet per acre per year of forest growth upon maturity, (2) economically valuable trees, and (3) a commercial stand of timber within a reasonable time.

Forestland - is defined as land that is an integral part of a managed forest and (1) that does not have material natural resources other than those suitable for forest growth, (2) that is not used for agricultural, grazing, industrial, developed recreational, residential, resort, commercial, developmental, or certain mineral extraction purposes, and (3) that the owner agrees to develop, maintain, and actively manage as a commercial forest in a prescribed manner.

Assessment - Lands approved as commercial forests are exempt from property taxation. In lieu of property taxation, these lands are subject to an annual specific tax. The specific tax is: (a) until December 31, 2006, $1.10 per acre; (b) 2007-2011, $1.20 per acre; (c) beginning 2012 and every 5 years after that, increase by 5 cents per acre. For example, tax years 2017-2021, $1.30 per acre per year. This specific tax is collected by the township treasurer at the same time and in the same manner as general property taxes are collected.

Renaissance Zones - Commercial forestland located in a Renaissance Zone (RZ) is exempt from the annual specific tax levied on lands approved as commercial forests (Sec. 324.51105, M.C.L.).

An application for commercial forestland must be accompanied by (1) a nonrefundable fee in the amount of $1 per acre or fraction thereof, not to exceed $1,000, (2) a legal description of the property, (3) a certified statement that the property is covered by a forest management plan, and (4) a certified statement that the owner of the forestland owns the timber rights to the property.

Generally, forest products may not be cut, harvested, or removed from commercial forests. However, under certain circumstances including the preparation, certification, and use of forest management plans, commercial forests may be harvested without affecting their status as commercial forests and without payment of fees or penalties..

Forest management plan - is a written plan prepared and signed by a registered forester or natural resources professional that prescribes measures to enhance production, use, and regeneration of forest resources. It must include schedules and timetables for the forestry practices to be used on the land, including timber harvesting and regeneration.

Penalties for withdraw - An owner may withdraw land, in whole or in part, from the commercial forest classification upon the filing of a proper application and the payment of certain penalties and fees. Generally, the withdrawal application fee is $1 per acre. However, there is a minimum fee of $200 and a maximum fee of $1,000 per application. In addition, a per acre penalty is imposed. The Michigan Department of Natural Resources provides a spreadsheet showing how to calculate the withdrawal penalty pursuant to MCL 324.51108.

Withdrawal application fees and penalties are waived when commercial forestland (1) is donated to a public body for public use before withdrawal of the classification, (2) is exchanged for property belonging to a public body if the property received is properly designated as commercial forestland, or (3) is condemned for public use.

Qualified Forest Program: (MCL 211.7jj[1])

The Qualified Forest Program (QFP) provides two property tax benefits for enrolled forest landowners: 1) exempt from school operating taxes (up to 18 mills) under the Qualified Forest School Tax Affidavit; and 2) exempt from the “uncapping” of the taxable value when an enrolled parcel changes ownership. In exchange for the property tax benefits, landowners must manage their forest according to the program’s requirements. Enrolled forest landowners pay an annual fee equivalent to 2 mills multiplied by the taxable value of the property.

Qualification - The property needs to meet the following requirements: 1) no less than 20 contiguous acres; For parcels less than 40 acres, not less than 80% shall be stocked with productive forest capable of producing forest products. For parcels 40 acres or more, not less than 50% shall be stocked with productive forest capable of producing forest products. These stocking density requirements apply on a per-parcel basis only and cannot be met on a basis that averages stocking density across multiple parcels. Contiguity is not broken by a road, a right-of-way, or property purchased or taken under condemnation proceedings by a public utility for power transmission lines if the 2 parcels separated by the purchased or condemned property were a single parcel prior to the sale or condemnation. 2) is subject to an approved forest management plan. The plan is a written plan prepared and signed by a qualified forester that prescribes measures to optimize production, utilization, regeneration, and harvest of timber. The forest management plan shall include a schedule and timetables for the various silvicultural practices used on forestlands, which shall be a maximum of 20 years in length. 3) If the parcel contains both productive forest and agricultural use property, the combined acreage must meet the requirements set by MCL 211.7jj[1](17)(k)(iii).

Application - Landowners are required to obtain a qualified forest management plan written by a qualified forester, and then file an application with the Michigan Department of Agriculture & Rural Development prior to the tax year that the exemption is requested. (iii).

Withdraw - If the owner of a Qualified Forest property wishes to withdraw land from the classification, or fails to comply with the rules established above, the landowner needs to file an application with MDARD and pays a recapture tax pursuant to MCL 211.1034. The recapture taxes will be deposited to the Private Forestland Enhancement Fund.

There is no yield tax in Michigan.

Potter-Witter, K. 2014. Michigan’s Qualified Forest Property Tax Program. MSU Department of Forestry.

Michigan Department of Natural Resources-Forest Resources Division. 2018. Commercial Forest Summary.

Michigan Department of Agriculture & Rural Development. Michigan’s Qualified Forest Program. Lansing, MI. https://www.michigan.gov/documents/mdard/Qualified__Forest_Program_Brochure_Post_Harlow_Edits_446758_7.pdf