New Mexico

Property Classification:

The New Mexico property tax provisions offer no incentives that are specifically directed to forest lands. However, using land to produce forest products or in a manner that qualifies for compensation under a federal soil conservation program is considered an agricultural use that may entitle the land to be valued on the basis of its capacity to produce agricultural products (NM Stat Ann Sec. 7-36-20).

Agricultural Products means plants, crops, trees, forest products, orchard crops, livestock, poultry, captive deer or elk, or fish.

Agricultural use means:

(a) use of land for the production of agricultural products;

(b) use of land that meets the requirements for payment or other compensation pursuant to a soil conservation program under an agreement with an agency of the federal government;

(c) resting of land to maintain its capacity to produce agricultural products; or

(d) resting of land as the direct result of at least moderate drought conditions as designated by the United States department of agriculture, if the drought conditions occurred in the county within which the land is located for at least eight consecutive weeks during the previous tax year; provided that the land was used in the tax year immediately preceding the previous tax year primarily for a purpose identified pursuant to this paragraph.

The value of land used primarily for agricultural purposes shall be determined on the basis of the land's capacity to produce agricultural products. Evidence of bona fide primary agricultural use of land for the tax year preceding the year for which determination is made of eligibility for the land to be valued under this section creates a presumption that the land is used primarily for agricultural purposes during the tax year in which the determination is made. If the land was valued under this section in one or more of the two tax years preceding the year in which the determination is made and the use of the land has not changed since the most recent valuation under this section, a presumption is created that the land continues to be entitled to that valuation.

Limits: Tracts or parcels of land of less than one (1) acre, other than tracts or parcels used for the production of orchard crops, poultry or fish, are not used primarily for agricultural purposes.

Application - To take advantage of the special valuation method for agricultural land, a property owner must apply to the county assessor. The application must be filed by the last day of February for the first tax year in which the owner believes the method applies or in any tax year following a year in which the land was not specially valued. Once land is specially valued, new applications need not be filed in subsequent years as long as the owner's usage of the land does not change.

Valuation and Assessment: (3 NMAC 6.5.27)

The production capacity of agricultural land shall be determined by the income method of valuation based on the income derived or capable of being derived from the use of the land for agricultural purposes. If information about income amounts from the use of land for agricultural purposes is unavailable, then income shall be imputed to the land being valued on the basis of income amounts from the use of comparable agricultural lands for agricultural purposes.

A determination of income from agricultural land is not required to be restricted to income from actual production of agricultural products on the agricultural land, since the basis for determination of value is on the land's capacity to produce agricultural products.

Income -as that term is used in this regulation is generally the average for the preceding five tax years of:

1. the amount reported for federal income tax purposes on Schedule F of the individual federal income tax return as net farm profit, excluding income and expenses not attributable to the agricultural land being valued; plus

2. fees for rental of land or machinery less expenses relating thereto; plus

3. the reasonable value of unpaid labor of the operator or the farm family; less

4. the expense of depreciation on farm buildings and machinery.

In lieu of calculating income in the manner described above, income may be determined by either of the following methods.

1. Income may be determined from reference services such as the New Mexico crop and livestock reporting service, the cooperative extension service, and the agriculture departments of state universities. If a source other than the reported federal farm income, referred to in the preceding paragraph, is used, adjustments should be made to allow for costs allowable on the federal farm income tax return if such costs are not allowed in the income figure provided. Also, income from sources other than the federal farm income return are to be closely matched to the class of agricultural land being valued so that the income properly reflects income from the class of agricultural land being valued.

2. The Division by order may determine annual income from various classes of agricultural land based on the land's capacity to produce agricultural products. This order, if made, shall consider determinations of other governmental agencies concerning the capacity of a particular class of agricultural land to produce agricultural products. Such an order is for the purpose of implementing the valuation method prescribed by Section 7-36-20 and assuring that land classes determined to have the same or similar production capacity are valued uniformly throughout the state. This order, if issued, would be issued before the last day of the tax year preceding the year in which the annual income amounts are to be used.

Capitalization rate -In setting the capitalization rate to be used in valuing land used primarily for agricultural purposes, consideration is given to the current interest rates for government loans, Federal Land Bank loans and Production Credit Association loans.

Property tax calculation -The capitalization rate is divided into the annual "income" per acre, except for grazing land, to arrive at the value per acre for property taxation purposes of the agricultural land being valued.

Affected property -The special valuation method applies only to the land. Improvements, other than structures and equipment used for irrigation or stock-watering purposes and private roads, must be valued separately. For example, a home site is not to be valued as agricultural land. For this purpose, a "home site" is that portion of the land used primarily as a residence, together with any appurtenant lands used for purposes related to residing on the land.

Changes in use -Once land has been specially valued, the property owner must report any change in use that causes the land to no longer be eligible for the special valuation. The report must be filed with the assessor by the last day of February of the tax year immediately following the year in which the change in use occurs. Failure to make the required report may result in the assessment of a civil penalty equal to the greater of $25 or 25% of the difference between the property taxes ultimately determined to be due and the property taxes originally paid for the year the report was required.

For the privilege of severing natural resources, there is imposed on any severer of "natural resources" in New Mexico an excise tax on the taxable value or the quantity of natural resources severed and saved by or for him as determined under, and at the rates provided in the Severance Tax Act. (Sec 7-26-3)

"Severer" means any person engaging in the business of severing natural resources that the person owns or any person who is the owner of natural resources and has another person perform the severing of such natural resources.

"Severing" means mining, quarrying, extracting, felling or producing any natural resources in New Mexico.

"Owner", when used in connection with the severing of any of the natural resources covered by the Severance Tax Act under any lease or contract with the state or United States, includes any person having the right to sever those resources.

The taxable value of all severed natural resources is the gross value of the severed resource less rental or royalty payments belonging to the United States or New Mexico (Sec. 7-26-4, NMSA 1978;).

Trees felled for timber are a natural resource. The word "timber" means trees that are cut down for use as poles, masts, lumber or wood products or derivatives. Trees gathered, transplanted or felled for other purposes are not a natural resource for purposes of the Resource Excise Tax Act and the Severance Tax Act. (NMAC 19.4.10.)

Exception -Trees cut for use as Christmas trees or firewood and trees transplanted for use as landscaping are not timber. The severance tax does not apply to these uses of trees.

The processing of timber ends when the timber has been sawn into rough green lumber. The processing tax due is measured by the value of the rough green lumber. (3 NMAC 19.4.13)

If rough green lumber is brought into New Mexico, the processing tax is not due with respect to such lumber. If logs are sawed in New Mexico, the processing tax is due regardless of whether the logs were severed in New Mexico or elsewhere.

The severance tax on timber is 1/8% (0.125%) of the gross value of the severed material.