Call Out for Oversight of New York State Forest Tax Programs Audit

Read the Interactive Audit Report (2020-S-51)

Objective

To determine if the Department of Environmental Conservation (Department) is adequately monitoring the 480 and 480a private forest programs to ensure forest land is appropriately enrolled and landowners are adhering to requirements to assist in the protection of the environmental benefits of the State’s forest resources. The audit covers properties that received tax exemptions under the 480 and 480a programs for the period January 2017 through December 2019 and observations and actions taken by the Department to monitor those properties through July 2021.

About the Program

New York State’s land area of 30.2 million acres comprises almost 19 million acres of forest, which provide many public benefits, including clean air and water, carbon storage, forest products (e.g., timber), jobs, scenic beauty, and outdoor recreation opportunities. Of the 19 million acres, about 14 million acres (74%) are privately owned. To encourage the long-term management of privately owned woodlands to sustainably produce forest crops and increase the likelihood of both healthy forests and a stable forest economy, in 1974 New York enacted Real Property Tax Law 480a – a tax incentive program (480a Program) for qualifying private forest landowners. Forest land enrolled in the 480a Program receives an annual property tax exemption of up to 80%, which can result in significantly less local taxes (school, county, and municipal) for the landowner. In return, the landowner commits the land to the production of forest crops for the next succeeding 10 years. The 480a Program has an annual recommitment; each year a landowner receives a tax break, they must submit an annual commitment form recommitting their land for the next succeeding 10 years. While the local assessors and landowners play a part in the 480a Program, the Department has general oversight responsibility. To enroll in the 480a Program, landowners must apply to certify their land through the Department. Forest land is eligible if the tract is at least 50 contiguous (adjoining) acres exclusively devoted to and suitable for forest crop production (e.g., timber) and stocked with a stand of forest trees sufficient to produce a merchantable forest crop within 30 years from when it is certified by the Department. In addition, the landowner must submit a forest management plan, prepared by a qualified forester, for the Department’s approval. The 480a Program is the second iteration of New York’s forest tax program. The 480 Program, also known as the Fisher Forest Act, dates back to 1926 – and the land management goals and requirements reflected the needs of the time. When the current 480a Program took effect, enrollment into the 480 Program ended, but there currently remains land committed (“grandfathered”) under the former program; these landowners have been benefiting from local tax reductions – and lesser qualifying standards – for over 45 years.

Key Findings

We identified weaknesses in several aspects of the Department’s oversight of the 480a Program – namely, monitoring and enforcement – that undermine its ability to ensure 480a Program forest land continues to be protected and enhanced as an economic and environmental resource of major importance and that only eligible properties are receiving local tax exemptions. For example:

• For a sample of 135 properties (of 6,858) enrolled in the 480a Program, we found 45 (33%) that were not in compliance with program requirements and/or may have been improperly benefiting from the local tax exemption. The landowners of these 45 properties paid approximately $525,745 less in local taxes for a 3-year period (2017–2019) because these properties received an annual reduction ($6,150,842) on their land value ($8,179,573). We also found weaknesses with monitoring and enforcement of the management plans and submission of annual commitments.
• Of the 45 properties we identified with issues, five belonged to a single landowner, who was also a developer. We found the Department failed to monitor this landowner’s compliance on multiple levels, which allowed the landowner to inappropriately take advantage of the 480a Program’s tax benefit for a period of years when the committed lands were being converted to a three-phase housing development.

Additionally, while there are gaps in the law regarding oversight responsibility under the 480 Program, there are 795 properties, spanning 260,669 acres, for which landowners have been benefiting from local tax reductions for over 45 years that go largely unmonitored by the Department or localities. In most cases, the Department is not aware which properties are enrolled in the program.

Key Recommendations

• Improve communication and partnerships with local assessors to ensure that properties are appropriately enrolled, eligible, and benefiting from the 480a and 480 Programs; and that management plans are followed, adequate records are maintained, enforcements are applied when violations occur, penalties are satisfied, and other administrative changes the Department deems necessary to improve the 480a and 480 Programs are made.
• Develop and maintain a centralized statewide database to improve oversight and administration of statewide forest tax programs, including compliance with management plans, work schedules, and annual commitments.