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Timber tax overhaul clears Senate By PETER WONG SALEM -- Timber will be taxed like any other crop, and forest land will be taxed at reduced values, under an overhaul of timber taxation that has cleared both houses of the Oregon Legislature. The Senate voted 24-3 Monday to send House Bill 3575 to Gov. John Kitzhaber, who has agreed to sign it. The House passed it without dissent earlier this month. The legislation, which phases in over three years, phases down the privilege tax that landowners now pay on the value of timber when it is cut on private forest lands. The Western Oregon rate, now 3.2 percent, will drop to 1.9 percent in 2000 and 2001, and 1.4 percent in 2002. But the property tax will be the only tax that will apply to most forest land. The maximum assessed value of forest land will be the 1995 indexed statutory value, reduced by 10 percent, with increases of 3 percent annually after 1997. This change mimics how the taxable value of most other property is calculated under property tax limits that Oregon voters approved in 1996 and 1997. "Once fully implemented in three years, forest land will be taxed like all other land in Oregon," said Sen. Tom Hartung, R-Portland, the bill's floor manager. "It will be taxed on its value for its intended purpose. No longer will the property tax system be applied, directly or indirectly, on taxing trees. Forest land will be taxed like farmland, where crops are not taxed." Questions of how forest land and timber should be taxed have vexed legislative sessions since voters approved the first of a series of property tax limits in 1990. The 1991 Legislature redefined severance taxes as privilege taxes and reduced the rates when timber is cut. The 1993 Legislature exempted the value of standing timber from property taxes, adopted statutory values for forest land, and required landowners to pay property taxes on 20 percent of those values. The 1997 Legislature gave forest landowners a further break in accordance with a 1996 property tax limit, but Kitzhaber vetoed it. Kitzhaber also vetoed a bill earlier this session to exempt timber cut on non-forest land from the privilege tax. "This is phased in so it has less effect on the state budget and local governments," said Sen. Lee Beyer, D-Springfield. The legislation will enable the timber industry to save about $1.7 million in the next two years, and $17 million in 2001-03, according to estimates of the Legislative Revenue Office. About $6 million will be shifted onto other taxpayers in the next two years, and $17.5 million in 2001-03. Most local governments would gain under the new system, but school districts stand to lose $8 million in 2001-03 and $23 million in 2003-05. Timber privilege taxes are used to offset property taxes of local governments other than school districts. They offset state aid to school districts. Small-woodland owners of 5,000 forested acres or less are allowed to continue under the current system, paying most of their taxes if they cut their trees. They can choose to go to a land-only system of taxation if they do so before April 1, 2002. Mail Tribune Copyright � The Mail Tribune 1999, Medford, Oregon USA