Managed Forest Law Revisited
In 2014, I wrote an article about the Managed Forest Law (MFL) program, and I continue to be amazed at the emails I get with inquiries. Because the law has changed several times since 2014, I am updating that 2014 primer with some of the more impactful changes. If you have not done so, review the prior article to get a basis for the changes I discuss here. In 2016, Wisconsin Act 358 made some major changes to the MFL program. Below are the highlights of those changes.
You can now close up to 320 acres of MFL lands per municipality (up from 160 acres); however, if you applied after 2017, you can no longer have any structures on MFL lands. There is a carve-out for structures necessary for the operation of the MFL lands, but there is no real guidance. My experience in the application process has been that the DNR is not going to allow any structures for new applications because the standard for allowing structures is high and not defined.
Due to some of the abuses to the MFL system, the legislature tweaked some of the rules for what is paid on MFL lands. You still need a Certified Management Plan (CMP) from a certified plan writer. That certification comes from the DNR, and the DNR\MFL website has links to a list of certified planners (Forestry Assistance Locator). The parcel being requested for MFL designation still must contain a minimum of 20 contiguous acres. At least 80 percent of the property must be forested. This is determined by you. As of 2017, you cannot enroll lands that have buildings or improvements on the land. Those areas need to be carved out. I encourage clients not to construct improvements on MFL designated lands. There is also a way to carve out building envelopes when you put lands into an MFL contract; however, it reduces the use of the property and does not allow continuing improvement to structures if they violate the eight rules. Therefore, I do not see the 2017 rule change to not allow structures as a detriment to enrolling property.
Open or Closed?
There are two considerations when deciding if you want lands open or closed to the public. One is the much lower tax rate. The other is whether or not exclusive recreational use of the parcel is a priority.
Currently, closed is 20 percent of current forest land taxable value or about $10.20 an acre. Open land is 5 percent or about $2.04 an acre. This will all change this year but has not yet been updated. The amounts are based on the current value of forested land and will increase this year. The current rates listed were from 2018 through 2022. This year they will reevaluate the average cost of 40 acres of forested land in Wisconsin, and the tax rate will go up accordingly. The pricing pressure on recreational land has become acute and $3,000 per acre is no longer the high end. A discount of 5 percent or 20 percent is still a bargain, and remember, it is tax-deductible. Closed acres may now be leased for recreational purposes. Prior to the 2016 change in the law, this was not possible.
Under the current tax law, MFL lands still allow the owner to file Schedule F and thus make deductions available against ordinary income.
There are now also ways to voluntarily remove MFL lands if the productivity of the land, through no fault of the landowner, falls below 80 percent. This was not possible under the old law and subjected landowners to withdrawal penalties for failure to follow the CMP through no fault of their own. The forester in charge of your parcel has a tremendous amount of leeway in making decisions on these issues. You should know your DNR forester and regularly (at least once per year) invite your forester to your land to keep a fresh relationship and to make sure the forester has a continuing familiarity with your MFL parcel.
It is now also possible to amend your MFL contract without reapplying by obtaining a CMP for lands contiguous to an existing MFL parcel and adding those lands under a new CMP. You can thereby bypass the new application process.
This is not an exhaustive list of all the Act’s changes to the law, but should be a good guide to those thinking of enrolling and those who are still under MFL contracts.