Previous PageTable Of ContentsNext Page

Taxes and laws: Do they change landowner behavior for the better?

Mike Jacobson

The Pennsylvania State University - College of Agricultural Sciences
School of Forest Resources, 7 Ferguson Building, University Park, PA 16802. USA.


Private forest landowners (PFLs) consistently cite taxes and related laws as major impediments to forest management1. Nevertheless, PFLs have enjoyed tax and financial incentive programs since the 1936 Agricultural Reserve Program. In the 1950s the Soil Bank Program was the first major federal tree planting initiative (Cubbage 1996). Today forest-related incentive programs include the Forest Stewardship Program, Forest Incentives Program, Conversation Reserve Program, Forest Legacy Program, and the Environmental Quality Incentive Program. The programs include payments for forest regeneration, soil and water conservation, wildlife enhancement, and agroforestry practices. Studies suggest that the most cost-share and rental payment programs have met their goals and proved both effective and efficient (Sampson and DeCoster 1997, Kurtz et al. 1994, Moulton et al. 1995). On the negative side, some studies indicate that wealthier landowners are taking more advantage of the incentive programs than lower-income landowners (Gaddis 1996). The rationale for continuing these financial incentive programs include: a) reductions in timber supply due to environmental and social constraints, and b) the need to meet environmental objectives such a reducing soil erosion and preserving endangered species. Tax incentives for PFLs include capital gains treatment from timber sales, reforestation tax credits, special rules for expensing forest activities, and preferential tax treatment for forest properties. Conservation easements, one of the fastest growing tools to protect land from development, also entice PFLs with tax incentives. These set of incentives are intended to minimize the tax burden on PFLs and encourage their protection and management of forestland.

PFLs are liable for three types of taxes: a) federal income taxes from the sale of timber; b) annual property taxes on the assessed value of their land; and c) estate taxes on the net assets of a deceased owner. Income and estate taxes only occur when landowners sell timber or transfer land. Property taxes are recurring annual cost of owning the land, regardless of the management decisions. Property taxes are an important source of revenue for schools, roads, and other local government services. Property taxation is generally based on the real estate’s fair market value (ad valorem) or “highest and best use.” However, most states provide special taxation for farm and forestland as an incentive for owners to keep the land in these uses and to protect open space. A variety of special forest taxes are used by the states, ranging from modified assessments based on productivity or current use values to yield taxes and exemptions (Chang 1996). This paper focuses forest property tax incentives and its influence on PFL behavior in Pennsylvania.

Pennsylvania’s Preferential Forest Property Tax Program

Pennsylvania’s Clean and Green program (also known as the Pennsylvania Farmland and Forest Land Assessment Act, Act 319) provides preferential tax treatment to PFLs with 10 acres or more. A key objective of the program, which has been in existence since 1974, is to maintain farmland and forestland as open space by allowing for taxation goes untaxed until the time of harvest. There are over 2 million acres of private forestland enrolled (17% of total private forestland) in the Forest Reserve category of Clean and Green (C&G) in 45 counties of 67 counties in Pennsylvania.

Giving PFLs a reduced property tax rate may also influence their decision to sell timber. Pennsylvania’s forest products industry depends on the continued supply of wood from PFLs. By reducing the profitability of forest ownership, forest property taxes increase the incentives to convert forestland to other uses. Similarly, landowners are less likely to manage their forestlands for timber when the returns to such management are less competitive with other investments. Perhaps most important, landowners who might be inclined to manage their forestland for timber − and also those who are most likely to sell their timber − will become discouraged by low returns, and they will be more likely to sell their forestland to owners who's objectives do not include timber management.

To better understand the C&G program, an analysis of the profitability of the forestland taxation was carried out and three stakeholder groups were surveyed: county tax assessors, county commissioners, and forest landowners. All three groups identified significant concerns with the C&G program. County commissioners and assessors (public officials) had very similar views on most questions. Private forest landowners’ (PFLs) opinions differed, but all three groups agreed that the program needed changes. This paper discusses one component of the study; how the C&G program influences PFL their behavior (for more details of the entire study please contact the author).

PFL Survey

Landowners from 21 Pennsylvania counties were surveyed to elicit their views regarding the C&G program. Lists of landowners were obtained from property tax records in each county. Fourteen of the 21 counties are classified as Metropolitan (or urban) areas (as defined by the Bureau of Census). Six of the 14 “urban” counties are over 50% forested. In 6 of the 21 counties more than 75% of the land is forested. The survey questionnaire asked PFLs about their forest property taxes, the C&G program, and their socioeconomic and management characteristics. A total of 2,473 surveys questionnaires were mailed. There were 1,398 usable surveys, resulting in a 56% response rate. A little over half the respondents (55%) have properties enrolled in the C&G program.

Socioeconomic characteristics

The socioeconomic characteristics are consistent with other surveys of PFLs (Birch 1996). As the data suggest, PFLs are a diverse group. It is difficult to single out specific trends, however, some characteristics warrant discussion. One may expect to find a higher percentage than what is shown of retirees and absentee owners (those not residing on their land), and those who inherited the land. This implies that there are many landowners out there purchasing both small and large tracts and using it as a residence, and not primarily to make income from it. Very little difference was found in the socioeconomic characteristics of those enrolled in C&G and those not except for two areas. Total household income and acreage owned was slightly higher for those enrolled in the C&G as compared to those not enrolled.

Management Characteristics

Only 10% of the respondents had an up-to-date written management plan. Forty-three percent had never harvested timber on their land, but 37% had done so in the last 10 years Most important reasons why they owned their land were “preserving natural beauty” and “living in a rural area”, followed by “using the land as a personal residence” and “passing it onto heirs. Most landowners prefer not to allow outside use of their land, but 26% say that that outsiders may use the land with permission. Only 11% allow access without permission. This suggests that most landowners are not as interested in harvesting timber or developing the land as they are in non-timber uses such as recreation, aesthetics or just having the forestland being part of their home. This is consistent with other studies. One may have expected those enrolled in C&G to more actively manage their land but likely management activities of C&G enrolled PFLs show very little difference between those not in the program.

Attitudes toward property taxes in general

Landowners were asked whether property taxes would affect their decisions to do any of the activities listed in Table 1. “Selling some timber,” enrolling in a conservation easement” and “posting the property” were the decisions most likely to be affected by property taxes. Fifteen percent of those who said they were unlikely to harvest timber in the next ten years said that property taxes would make their decision to harvest timber much more likely. Across all activities about 10% of the respondents who were unlikely to do any of them said the affect of property taxes would make it more likely they would carry out that activity in the next five to ten years.

Furthermore, about 50% of these who were somewhat likely to do activities such as timber harvesting, sell or develop the land would be much more likely to do it because of property taxes.

Table 1: Degree to which property taxes affect forest management decisions (1=not at all, 4=very much).


Mean (1-4)

Sell some of the timber


Sell all of the timber


Sell other forest products (e.g., firewood, ginseng, mushrooms)


Sell some of the land


Sell all of the land


Develop some of the property


Develop the entire property


Post the property


Lease property for hunting


Lease property for recreation (e.g., ATVs, hikers)


Convert the land to agriculture


Enroll in a conservation easement program


About half the landowners feel that their forest property taxes are too high. One-fifth are not sure about the whether their taxes are too high or low, and 29% say that their property taxes are about right. Many who said their taxes are too high believe that maintaining natural forest should be a benefit to the state and not a tax to the landowner. Many PFLs complained that they pay a disproportionate amount of taxes, compared to the services they receive: “We use no services except the roads to drive on.” Many said forest landowners should not have to pay school district taxes. Another common concern was paying annual taxes but only cutting maybe once in one's life: “the per-acre price may not seem high, but when you calculate cumulative property taxes over the 70 to 80 year cycle, they are very high. It doesn't pay to buy very young timber.” When asked why landowners were not enrolled in C&G the largest response was lack of knowledge about the program (30%), followed by concern about giving up property rights and control of the land (28%).

Attitudes toward Clean and Green

On a scale of 1-4 with 4 being most important, “tax savings” is the most important reason given for enrolling in C&G, while “keeping the land forested,” “being able to retain ownership,” and “preserving open space” were also identified as important reasons for enrolling (Table 2). This suggests that although tax savings may be necessary to help them retain ownership it is not sufficient alone. However, a number PFLs noted that C&G is a “savior,” enabling them to keep the land. Some went as far as calling it a “bargain.”

Table 2: Importance of reasons for enrolling in Clean and Green (1=not important, 4=very important).


Mean (1-4)

Tax savings


Preserve open space


Keep the land in forest


Retain ownership


Nearly one tenth of respondents said enrolling in C&G reduced their taxes by more than half; about one quarter of the respondents said enrolling in the program reduced their taxes by 26%-50%; and one-fifth said it reduces their taxes by 25% or less. A considerable number (41%) of the enrollees do not know how much C&G reduces their taxes.

Landowners enrolled in the C&G were asked how their decisions about different forest management activities would be affected if the program were eliminated. Results to this question were similar to the one on the likelihood of the effects of property taxes on their management decisions. “Sell some of the timber,” "sell some of the land," and “post the property” were the most likely activities to be affected if the program were eliminated (Table 3). Almost 30% of those who said they would not be likely to sell timber or develop land were more likely to do so if the C&G program was eliminated. Eliminating the program would also make over 50% of those who were somewhat likely to harvest timber or sell land more likely to do so. While respondents indicated that they would be more likely to "sell some of the land," they were much less likely to "sell all of the land" if the program were eliminated. Similarly, the respondents indicated that they would be more likely to "develop some of the property" if the program were eliminated, but they would not be any more likely to "develop the entire property" if the program were eliminated. Interestingly, the respondents also indicated that they would be less likely to "convert the land to agriculture" and "lease the property for recreation” if the program were eliminated.

Finally, all the landowners were asked about whether an alternative tax involving a flat annual payment with a yield tax at harvest should be considered. Thirty seven percent agreed that such an alternative should be considered, 22% were against considering this alternative, and 37% said they don’t know.

Table 3: Likelihood of doing certain activities if the Clean & Green program were eliminated (–2 = much less likely, +2 = much more likely).


Mean (-2 to 2)

Sell some of the timber


Sell all of the timber


Sell other forest products (e.g., firewood, ginseng, mushrooms)


Sell some of the land


Sell all of the land


Develop some of the property


Develop the entire property


Post the property


Lease property for hunting


Lease property for recreation (e.g., ATVs, hiking)


Convert the land to agriculture


Enroll in a conservation easement program



The PFL survey results suggest that taxes play an important role in landowner behavior. Over one-third who said they were unlikely to sell timber or land said they would be more likely to do so if the C&G program were eliminated. Other activities, especially posting the land or selling some land, would also be more likely if C&G was eliminated. PFLs indicated that they would be more likely to subdivide or sell part of their land without the C&G program, but they also indicated that they would try to hold on to at least some of their land even in the face of rising taxes. Most of the PFLs enrolled in C&G said their main reason for enrolling was tax savings. However, being able to retain ownership in the land was almost equally as important to them. This suggests that for a large number of PFLs tax programs such as C&G do provide an incentive to maintain ownership in land. On the other hand, the comments from the assessors’ and commissioners’ surveys strongly suggest that the penalties for getting out of the program are insufficient to discourage PFLs who want to sell or subdivide their land from doing so. Most of public officials surveyed said that C&G is preserving forest and farms to some extent, but that it does not prevent development.

Many PFLs were satisfied with their assessed values under C&G, expressing that without the program they would be unable to own the land. The most commonly raised concern specifically about the C&G program from PFLs was the disproportionate share of taxes they paid with respect to services received and the deferred income problem – i.e., only getting income from the land periodically while paying annual taxes. In many cases, even with the preferential assessment, the compounded value of the annual tax payments over an 80 to 100-year rotation is far greater than the revenues received from the harvest.

While most PFLs were satisfied with their assessed values under C&G, some thought the values were unfair. The C&G assessed values are current use values (i.e., "use values") based on forest type, stumpage prices, management costs, and discount rates. Use of a single, weighted-average value based on the forest type make-up of the county results in landowners with a high-value forest types paying the same tax per acre as landowners with low-value forest types. Similarly, owners of land with valuable mature timber pay the same tax as owners of low-value cutover land, due to the nature of the productivity tax formula. On the other hand, especially near the edges of price-reporting regions, landowners with similar forestland that happens to fall on different sides of a county boundary may have very different assessed values.

Public officials had different concerns. Although saying it is a good idea to provide tax incentives to working farms and forests, the penalties for withdrawing are too low, and there are unintended beneficiaries who should not be allowed to enroll in the program. The overall study suggests that program needs changes. The tax incentive is an important tool for landowners to retain ownership of their forestland. Taking away the program likely would increase the sale of land for development and other uses, increase the sale of timber, and other activities. This suggests that the tax is actually reducing the amount of timber harvested compared to the amount that would be harvested without the tax. It seems logical that the thrust of the program must be to preserve open space given that most landowners are not primarily concerned with selling timber. Preservation programs such as conservation easements cannot preserve all the open space. Tax incentives should be complementary tool to preserve open space. Other tax incentive programs may be needed to encourage timber harvesting. Demographic changes and the movement of people to the countryside suggest that development of forestlands will continue. Pennsylvania needs policies that will effectively address this problem. The Clean and Green program is a weak instrument to achieve this. Perhaps a new approach is needed that is fair to taxpayers and protects open space for future generations.


1. Birch, T. W. 1996. Private Forest Landowners of the Northern United States, 1994. USDA Forest Service Resource Bulletin NE-136. 293 p.

2. Chang, Sun Joseph. 1996. US Forest Property Taxation Systems and their Effects. Proceedings: Symposium on Nonindustrial Private Forests: Learning from the Past, Prospects for the Future, Baughman M. ed. St Paul. Minnesota Extension Service. Pg 318-325.

3. Cubbage, Frederick. 1996. Public and Private Forest Policies to increase Forest Area and Timber Growth: Programs, Accomplishments, and Efficiency. In Sampson R. et al. eds. Forest and Global Change, Volume two: Forest management Opportunities for Mitigating Carbon Emissions. Washington DC. American Forests. Pp 131-166.

4. Gaddis, Deborah. 1997. Accomplishments and Program Evaluations of Forestry Financial Assistance Programs. In Baughman M. ed. Proceedings: Symposium of Nonindustrial Private Forest: learning from the Past, Prospects for the future. St. Paul. Minnesota Extension Service. Pp 357-366.

5. Kurtz, William, T. Noweg, R. Moulton, and R. Alig. 1994. An Analysis of the Retention, Condition, and Land Use Implications of Tree Plantings Established Under the Soil Bank program, the Forestry Incentives Program, and the Agricultural Conservation Program. (SR 464) Columbia: Missouri Agricultural Experiment Station. 88 p.

6. Moulton, Robert, F. Lockhart, and J. Snellgrove. 1995. Tree Planting in the United States: 1995. Washington Dc: USDA Forest Service, Cooperative Forestry. 18 pp.

7. Sampson, Neil, and Lester DeCoster. 1997. Public Programs for Private Forestry: A Reader on Programs and Options Washington, D.C. American Forests. 100 p.

1 / Annual surveys carried out by the National Woodland Owners Association and other national groups such as the American Forest Foundation, rank tax issues as number 1 or 2 on their list of PFL concerns.

Previous PageTop Of PageNext Page