Many landowners in Maine, particularly those near the coast and lakes, have witnessed dramatic increases in property taxes. Rising demand for waterfront land drives up selling prices, which in turn leads to increased property valuations and shifts the tax burden to shorefront owners. Some families and long-time owners, confronted with tax bills based on the land’s speculative value for development, are forced to sell. Consequently many treasured open lands are getting developed, transforming the character of some of Maine’s most treasured scenic and natural landscapes.
Standard Taxation of Easement Land
In Maine, property taxes are based on the property’s just value (defined as fair market value: the price a willing buyer would pay to acquire the land for its highest legal economic use). This value is adjusted downward by the town’s assessment ratio (the state-determined percentage below market value at which the town assesses all lands) which generally falls between 70 and 100 percent. If a conservation easement reduces the land’s resale value, the town assessor is legally required to recognize that reduction in assessing property tax. However, that determination can be difficult. To assist your assessor, provide a copy of your easement document and other information that may affect valuation before April 1 of the tax year (when valuations are set). It may help to provide the assessor with the “after value” from the qualified appraisal made for IRS purposes or with written opinions of estimated market price from realtors (although the assessor is not bound by these figures). It’s important for both the landowner and the assessor to recognize that each easement affects land values differently, depending on its economic highest and best use and on how the land is restricted.
Open Space Tax Rates
The regular assessed value of a parcel is reduced as follows:
|A.||Ordinary open space||20% reduction|
|B.||Permanently protected open space (an easement or preserve that allows forestry, farming)||50% reduction|
|C.||Forever wild open space (protected by easement or preserve)||70% reduction|
|D.||Public access land qualifies for an additional||25% reduction over A, B, or C|
Two limitations apply to these percent reductions:
- the resulting valuation cannot be higher than just value; and
- the value of forested open space cannot be reduced to less than the tree growth per-acre rate.
Current Use Tax Programs
Maine has several programs that reduce taxes for undeveloped lands based on their current use classification. The Tree Growth Tax Law and the Farm and Open Space Tax Law were established in the early 1970s to prevent property taxes from forcing productive farms, woodlands and significant open space into tax delinquency or conversion to development. These programs make it easier for owners of easement-restricted properties to achieve a more predictable tax assessment. Under the tree growth and farmland programs, land is assessed depending on its productive value, without regard to shorefrontage or development potential. Taxes are imposed based on very low land values, ranging from about $35 per acre for hardwood forest to about $500 per acre for productive cropland. The open space program, on the other hand, applies percent reductions to the assessed value, reducing the tax but accounting for shoreland and other development value. Tax reductions range from 20 percent for land not under conservation easement to 95 percent for land under a forever wild easement that guarantees public access for traditional recreation.
Each program has specific eligibility guidelines and only tracts that are undeveloped qualify (portions containing buildings or docks are taxed at the standard level). Some landowners use these programs as a “trial form” of permanent protection, knowing that land can be withdrawn from the program, subject to a penalty, or transferred into another current use program (if eligible) without penalty.
For further information or application materials, contact your assessor or Maine Revenue Services, 24 State House Station, Augusta, ME 04333-0024 (207-287-2011). Additional information on Tree Growth is available from the Maine Forest Service (1-800-367-0223) or from MCHT (request Technical Bulletin #104, “Property Taxation of Conservation Land”).
Short-Term Property Tax Relief for Landowners
There are several other short-term tax relief programs available in Maine. You may be eligible for the Elderly Property Tax Deferral Program, the Circuit Breaker Program, a veterans tax program, the homestead exemption, or a municipal poverty abatement. For further information, contact your local assessor or Maine Revenue Services.
The Next Step
By this point, you may have more questions than answers. In the early stages of conservation planning, the range of choices can seem daunting. Don’t be deterred, you have begun an important process and there are plenty of experienced people who can help answer your questions (see Appendices A and E).
Before contacting a paid professional such as an attorney or appraiser, take time to consider what you want to protect. Thorough planning will minimize costs, ensure that your project is completed in a timely manner, and provide the results that you want. Most conservation plans can be drafted at minimal cost by working with a land trust, either a local group or a statewide organization such as Maine Coast Heritage Trust.
If you are committed to conserving your land, begin the process today. Do not jeopardize your land through inaction. By investing time now, you will gain the security of knowing that the land you treasure is protected forever.