FINAL BILL REPORT

SB 5108

C 97 L 01

Synopsis as Enacted

Brief Description:  Modifying provisions relating to the growing of short‑rotation hardwood trees on agricultural land.

Sponsors:  Senators T. Sheldon, Benton, Snyder, Hargrove, Sheahan, Gardner, Rasmussen and Stevens.

Senate Committee on Agriculture & International Trade

House Committee on Natural Resources

Background:  Two systems of taxation have evolved over the years:  one specific to growing of agricultural products on agricultural land; the other specific to growing of timber products on forest land.  Agricultural land and forest land can be valued according to their current use with the value of cultivated agricultural land being generally higher than forest land values.  However, forest products grown on forest land are subject to the timber excise tax of 5 percent collected at the time of harvest, while the sale of agricultural products are generally exempt from excise taxes.

In the 1990s, there was increased interest in growing short-rotation hardwoods, such as hybrid poplars and cottonwoods, on agricultural land.  An accommodation was made to blend the two tax systems by providing that short-rotation hardwoods grown by agricultural methods are exempt from the timber excise tax if the growing cycle is shorter than ten years.

Current forest practice regulations provide an exemption for trees cultivated by agricultural methods in growing cycles shorter than ten years.

Currently, the Department of Revenue=s interpretation is that short-rotation hardwoods are considered an agricultural crop for business and occupation tax purposes if they are cultivated by agricultural methods.

Summary:  The maximum length of the growing cycle for short-rotation hardwoods is increased from the current ten-year period to 15 years for purposes of the timber excise tax and the Forest Practices Act.

Specific reference is included in the business and occupation tax statute that short-rotation hardwoods are included in the definition of an agricultural product.

Votes on Final Passage:

Senate460

House     89 0

Effective:  July 22, 2001