Maine land owner

Maine Current Use Tax Programs

Maine has four current use programs to reduce taxes on land that is used primarily for a specific purpose. The four programs are tree growth, open space, farmland, and working waterfront. The following is a brief explanation of each program with links to guide you to more detailed information.


Tree Growth Tax Law 
The most commonly used current use tax program in Maine is the Tree Growth tax program. It may also be one of the most misunderstood. The basis of the program is to assess land of 10 or more acres based on its productive use as commercial timberland. Growing and harvesting must be the primary use.
During 2017, Maine’s Tree Growth tax program came under the scrutiny of the governor’s office as did most 
property tax reductions. It is believed, and probably rightly so, that a significant percentage of the properties enrolled in this program may not be in compliance with the law. In order to be in compliance, your forest management plan needs to be up to date and implemented. If you have purchased forestland in Maine and you have never talked with a licensed forester you may already be out of compliance. Bulletin 19 on the state website provides information for those already in the program and those considering enrolling. The link below is bulletin 19 
Bulletin 19 

Farmland Tax Law
This tax law requires the land to be used for agricultural or horticultural purposes and must be of 5 or more contiguous acres. The land must earn at least $2,000 gross income per year to 
qualify. The owner must file an income statement with the assessor by April 1 of each fifth year, after qualification, for the previous 5 years income of the owner or lessee.
The assessor can use a number of factors to determine farmland values for current use 
including farmer to farmer sales, soil types, land rents, and others. For additional information on this tax law see Bulletin 20 link

Bulletin 20                                                        

Open Space Tax Law
This program provides for a reduced assessed value based on the property being preserved or 
restricted for a public benefit. Qualifying public benefits include recreation, scenic resources, game management and wildlife habitat. The open space program does not have a minimum 
acreage requirement. In open space the tax assessor will reduce the value by either researching sale data of parcels all or partially in conservation or preservation and computing a fair value, or by applying a percentage reduction based on the public benefit or benefits being applied. The reduction, depending on the benefit, can be as high as 95% of the assessed value. See Bulletin 21 at this link. 

Bulletin 21

Working Waterfront
Land that qualifies for this current use tax treatment is for land on tidal waters or in the 
intertidal zone used at least 50% for access or support of commercial fishing activities.
The assessed value reduction varies from 10%, 20% or 30% depending on the percentage of use and potential deed restrictions for use. See all the details on the state site for Working Waterfront Q&A at: https://www.maine.gov/revenue/forms/property/pubs/workingwaterq&a.htm

Moving Sideways 
If you desire to change the use of your property under any of the first three laws above you can avoid any penalty for that change of use. Property changed from farmland to open space, farmland to tree growth, open space to farmland, or open space to tree growth will not be 
penalized if a parcel also meets eligibility requirements of the new classification. 
 

         

Maine Subdivision Rules - Should You Develop Your land?

Maine Subdivision Rules - Should You Develop Your land?

In Maine, there is a difference between a division of land and a subdivision of land. In most municipalities dividing your property into two separate lots requires little or no permitting. However, dividing a property into 3 separate lots within a 5-year period does require approval in most cases, and is the definition of “subdivision” in our state.

Increased Property Value

Why would you want to do a subdivision? Most property investors look at the subdivision process as a way to increase the per acre value of their property. At first the thought of a smaller lot being worth more does not make sense, but consider that by reducing the size of the acreage you bring the gross selling price lower and within the purchasing power of more people. More people competing for a property usually translates to more demand and a higher price.

Higher prices may or may not translate into more profits. Before jumping headfirst into a subdivision some research and planning should be undertaken. Market conditions should be the first consideration. Data such as recent comparable lot sales, how many sales have occurred, lot sizes of successful sales, what is the current supply of lots, absorption rates, and financing availability to name a few. Next what will be the costs of surveying, wetland delineation, engineering, road construction, soil testing and other requirements of permitting? After thorough analysis and due diligence a property owner can decide if the risk is worth the reward to subdivide.

Requirements

Every organized town in Maine may have a slightly different subdivision ordinance. The unorganized territories in Maine have a uniform ordinance with little variation in requirements. Typically, a local planning board will review a proposed subdivision to see if it conforms with the ordinance. The process will consist of several meetings starting with a presentation of a preliminary sketch of the proposal. This is followed up with notifications to the public and nearby property owners of the proposed subdivision and the date of the public meeting to review it.

This next hearing consists of a more formal presentation of a preliminary survey plan of the layout of the proposed lots, roads, easements, slopes, soils etc. Public comment is permitted and heard by the board. After this meeting any changes required by the board need to be addressed and another hearing with a final plan will be scheduled. Assuming no other issues are outstanding, the board will sign the final plan that will be recorded in the county registry of deeds.

Exceptions

There are a number of exceptions to the rule to sell property without the process of subdivision. Gifts to relatives (see definition in statute) may be exempt if the donor has owned the property for at least 5 years and the consideration is less than ½ the current assessed value. Sales to abutting property owners may be exempt from subdivision rules. In unorganized territories, 3 lots can be created in a 5-year period as long as the 3rd lot is retained for forest management purposes. This is often referred to as the ‘2 in 5 Rule.’ There are other exceptions listed in the statute linked above.

Summary

This post is intended to encourage a thoughtful process in land investing and should not be viewed as an endorsement to subdivide your property. In many cases I would advise clients not to.  The above descriptions are a simplification of the process, not a complete outline of all potential requirements of every planning board. You are well advised to consult with experienced professionals like real estate attorneys, surveyors, soil scientist, and land brokers before undertaking the subdivision process.