Peter McPhail

Maine Tree Growth Tax Confusion

If you have been planning to purchase a parcel of land in Maine you have probably heard of tree growth tax status. These are a few common misconceptions about the program that we often hear from potential land buyers and land owners.

"I can't cut any trees if I have the property in tree growth". False

The tree growth tax law was enacted by the Maine legislature to allow land owners to maintain their property as productive woodland to supply Maine's wood industry. Cutting trees is what this tax law was designed for.

"It is too complicated." False

As a new owner you will have a few obligations to get the tax benefit from tree growth but it is a relatively simple process. You need to hire a consulting forester who will help you create a management plan, file some forms and then follow your plan.

"I don't want to give up control of my land." False

While you do need to follow some rules, the rules allow for the owner to make their own decisions in managing the lands as long as they use sound silvicultural practices.

"I can't build on the land if it is in tree growth." Somewhat True

Once a property is enrolled in tree growth tax status you will need to apply for a change of use that will be acceptable to the town but a penalty will be imposed for the change of use. Also, portions of a property can be left out of tree growth at the time of enrollment to allow for penalty free building sites.

For more information on Maine's Tree Growth Tax see:

http://www.maine.gov/revenue/forms/property/pubs/bull19text.htm

ATV Trails and Land Use in Maine

People purchase property in Maine for many reasons but at some level the recreational opportunities are always a factor.  It doesn't matter what time of year, if you enjoy the outdoors there are always activities available regardless of your age. Winter in Maine offers snowshoeing, ice fishing, cross country skiing, downhill skiing and snowmobiling.  The clear blue skies and fresh white snow draping the landscape is a sight to see. Spring in Maine, a welcome season after a long winter brings some of the best brook trout fishing in the Northeast.  Ice out on our lakes brings anglers a cure from the cabin fever and trolling for salmon can be very productive. With the spring thaw comes our mud season and once things dry out the ATV trails open up (usually mid May) over 6,000 miles of club trails across Maine.  As an outdoor enthusiast, I am very thankful for the private landowners that allow multiuse trail systems to be used across their lands. Between snowmobiles and ATV's, businesses across Maine realize a big economic boom from these types of recreational activities.  An economic study completed by the University of Maine in 2005 showed a net spending of $156 million for the 2003-2004 season. If you enjoy ATV riding, we have some of the most affordable properties in Maine for sale with easy access to the trails and you can see them at LandBrothers.com Some things you should know and prepare for to make your atv trip in Maine safe and enjoyable are as follows:

  1. Make sure your ATV is registered and properly marked front and back with the registration number.
  2. Children must be at least 10 years old, have passed a state ATV safety program, wear an approved helmet if under 18 years old and riders between 10-16 years of age must be under the direct visual and audio supervision of an adult (21 or older). Approved helmets must have a "DOT", "SNELL" or "ANSI" sticker.
  3. When riding, stay on market trails and for unmarked trails you need landowner permission.
  4. Plan your trip of where you will be riding in advance. Make sure you have trail maps and more importantly call the local club trail master to check on trail conditions and technical difficulty of each trail. Trail maps do not indicate the difficulty or skill level needed to traverse any given trail number so it is critical to your safety to contact the trail master and ask what trails will get you to where you want to go safely.
  5. Use the buddy system and never ride alone. Make sure you leave a map of your route and travel plans with someone outside your party in case of an emergency.
  6. Check the weather for the area you will be riding and bring the right clothing. Always bring a first aid kit, survival kit, and tool kit. The biggest killer of people recreating outdoors is hypothermia from spring to late fall. The nights in Maine do get cold so be prepared, especially if you are taking a long ATV trip on remote trails that are miles from services.
  7. The day of your trip make sure you have filled the gas tank and perform a pre-ride inspection of your ATV. The web site www.offroad-ed.com has some great videos on safety, pre-ride inspection and safe riding techniques.
  8. On multi-use trails be sure to respect the right of other non ATV riders to use the trail system. If you meet someone on horseback, please pull off to the side and shut your machine off. Wait until they have passed a clear distance or if they waive you on.
  9. Remember, using these trails is a privilege and not a right. You are enjoying these trails by the good graces of the land owner. If you see some trash on the land and can pick it up, please do. If it is a large amount of trash, call the Maine Warden Service, Landowner Relations Program and report the area.

Be safe and enjoy the great state of Maine!

Innovative Maine Company Provides Dependable Drinking Water

Are you looking to buy land in Maine to build an off grid, strategic location property?  Maine has some great properties for sale that will fit your needs.  There are a lot of criteria to consider but a few basics hit the top of the list.  Today, let's just look at the basic need of drinking water.

After listening to the news about the California water shortage, I realize how blessed we are in Maine.  Being born and raised here, I do not remember a time we ever had to ration water.  The quality of drinking water in Maine is excellent.  Once in a while you may run into some higher mineral contents but nothing a filtration system can't fix.

My home has a 160 foot deep drilled well with 20 feet of casing and produces 10 gallons per minute of some of the best drinking water you will find on earth.  Right out of the tap with no filtration!  The cost to drill is $12/foot for drilling and $12/foot of casing.  20' of casing is the minimum amount required by code.  Then factor in some excavation work and the well pump and that will add about another $1,300 to $2,000 depending on your location.

My home is connected to the grid but what happens when you lose power?  That's were Bison Pumps enters the scene.  Their slogan "The Premier Hand Pump" and after having one installed at my home, I have no doubt that my drinking water needs will be met during my lifetime with or without power.   The design, engineering and quality of the working components are second to none.  I was not looking to buy the cheapest hand pump on the market but I wanted to be confident that no matter the season (Maine can get some extreme cold winter weather), I would be able to get drinking water when the need arises.

Bison Pumps, www.bisonpumps.com was founded by David Harbison, Jr of Harbison Plumbing in Houlton Maine.  We've all heard the saying "necessity is the mother of invention", well (no pun intended), Bison Pumps is a true example of this old saying.  Maine's ice storm of 1998 left 1000's of people without power in the middle of winter, some for a few days and some for weeks.  After seeing so many people struggle to meet the need of basic drinking water, Bison Pumps was developed.

I had the pleasure of meeting David and his son Jonathan (3rd generation plumber) this summer as they installed my pump.  They are first class people and hard working Mainers.  It was very interesting talking with David and his vision of how Bison Pumps could help around the globe with the world water crisis.

Whether you are looking to build off grid or just looking to have a drinking water solution in case of power outages, Bison Pumps should be top of your list.

Rule of Thumb for Valuing Maine Land

One of the most common questions we receive at the Land Brothers regarding selling Maine land is "Do you have a rule of thumb for pricing Maine land?" Great question, but before answering we should look at factors that affect the value of land in Maine.

Factor 1: Access If the property is not on a state/county/town maintained road does it have legal deeded access? Is the access to the land title insurable? Is the access to your Maine land clearly defined on the face of the earth?

Factor 2: Waterfront Does the land have frontage on a brook, river, stream, pond or lake? Is the frontage easy to get to and does it have good building sites near the water? What are the building setbacks for your Maine property?

Factor 3: Deed Restrictions Are there deed or association covenants that restrict certain activities, building limits, Maine land divisions or other uses of the property?

Factor 4: Ownership Rights Do you own all rights to your Maine property above and below the surface? Otherwise known as the complete bundle of sticks. It is not uncommon on large tracts of land in Maine to have the mineral rights severed from ownership. There are different types of mineral easements and reservations in Maine and we will cover these in future articles.

Factor 5: Legal Description Does your deed contain a good metes and bounds property description? Do you have a survey map of your land? Are all corners marked with survey pins or posts? Are your property lines well defined with blazes? Are any of your boundary lines in dispute with your neighbor?

Factor 6: Neighborhood When you are driving to your property what condition are the neighboring properties in? Are there any environmental conditions nearby that may concern a potential buyer?

Factor 7: Soils Has the property been soil tested? What are the soil types?

Factor 8: Timber When was the last timber harvest? Is the property in tree growth tax status? What product class of Maine timberland do you have? Do you have a current timber cruise?

Factor 9: Location This is a broader factor then neighborhood and is based on what county in Maine or town in Maine your property is located.

Factor 10: Internal Roads Do you have access roads or trails throughout the property? Is it easy to take a walking tour of the property?

Factor 11: Points of Interest Does your Maine land have any unique and desirable features? The sound of a waterfall or babbling brook, cave, mountain views, and mature forest that's easy to walk through.

Factor 12: Utilities Are electricity, phone and high speed internet available at or near the property? Is there a utility line installment contract in place? Is 3 phase power available?

Factor 13: Demand Are there currently a lot of buyers in the market looking for property like yours? Does the property size, location and other features appeal to a large or small buyer pool?

Factor 14: Competition How many competing properties are for sale? A review of the asking prices of comparable competing land parcels will show you the approximate ceiling of market value.

So as you can see, there are too many variables to have an accurate Rule of Thumb for estimating land value. The factors above are not a complete list of issues to consider when valuing Maine land but are a good start. Every property is unique, so a thorough investigation of all factors is required to accurately estimate a value for your Maine property.

Deferring Capital Gains When Selling Maine Land

Death and taxes are unavoidable but they can be delayed. The former by eating right and exercise and the later by employing the right strategy when selling your land.  If you are considering selling your land in Maine and will realize a large capital gain you may want to consider a 1031 tax deferred exchange, aka. Starker exchange.   Always consult with your tax advisor but be aware, not all CPA's have a comprehensive knowledge of the exchange process and the tax code involved.

One of the most common misconceptions is the term "like kind property".   If I sell my undeveloped land, I will need to replace it with another piece of undeveloped land, keeping with the "like kind".   NOT TRUE!!  The term "like kind" means "investment property" for "investment property".   If John Doe owns a 4 unit apartment building in Florida that has been used 100% as investment, Mr. Doe may exchange that property for a timber investment in Maine.

As with any topic, you will find tons of information on the internet regarding 1031 exchanges. One company that has been around for years is Asset Preservation.  Their web site can be found at http://apiexchange.com and you will find a lot of useful information.  Once on their site, click on the button "1031 Repeal Issue".  This will allow you to send an email to your Representative asking them not to repeal section 1031 of the IRC.

Even if you never have any intention of using a 1031 exchange, the buyer for your property may be involved in an exchange. This type of buyer is motivated and must meet a stringent time table to comply with IRC.

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