PERMANENT RULES
Date of Adoption: April 5, 2000.
Purpose: This revised text of WAC 458-12-320, updates and consolidates information currently found in WAC 458-12-315 and 458-12-320. Property Tax Bulletin 97-1 reflects the current valuation and assessment practices related to public timber sales. The rule being adopted incorporates information from the bulletin and supplants the two existing rules on this subject. It establishes uniform procedures to be used in determining the taxable value of timber sold by agencies of state and local government separately from publicly owned land. It also describes the origin and use of the State Timber Sales Adjustment Table, the effect road construction costs have on the true and fair value of the timber, and the method used to determine the amount and value of timber remaining from a public timber sale on each January 1st assessment date. WAC 458-12-315 is being repealed.
Citation of Existing Rules Affected by this Order: Repealing WAC 458-12-315 Timber and forest products -- Valuation;
and amending WAC 458-12-320 Timber ((and forest
products)) -- Ownership -- Valuation -- Roads -- Easements over public
lands.
Statutory Authority for Adoption: RCW 84.04.080 and 84.33.074.
Other Authority: RCW 84.33.040 and 84.33.074.
Adopted under notice filed as WSR 00-05-033 on February 9, 2000.
Changes Other than Editing from Proposed to Adopted Version: A mathematical error in the example regarding lump sum sales was corrected.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 1, Amended 0, Repealed 1.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 1, Amended 0, Repealed 1.
Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 1, Amended 0, Repealed 1. Effective Date of Rule: Thirty-one days after filing.
April 5, 2000
Russell W. Brubaker
Assistant Director
Legislation and Policy Division
OTS-3669.3
AMENDATORY SECTION(Amending Order PT 68-6, filed 4/29/68)
WAC 458-12-320
Timber ((and forest
products)) -- Ownership -- Valuation--Roads--Easements over public
lands.
((Federal timber itself is not taxable until title passes
to the taxable party under the terms of the purchase agreement.
Contract interest of private parties in such exempt timber is
taxable. Such contracts must have value in themselves in order
to be taxable. (Skate Creek Logging Company Case v. Fletcher 46
Wn.2d 160 (1955); AGO 1923-24, p. 33; AGO 12-2-52; AGO 5-5-53;
AGO 53-55 No. 29, 4-30-53) The principles for assessing
leasehold interests as contained in WAC 458-12-325 shall be
followed. Where a private owner has a right-of-way easement over
land where title is in the United States appurtenant to owner's
adjoining lands, such easement and land to which it is
appurtenant shall be assessed and taxed together. (Hammond
Lumber Company v. Cowlitz County, 84 Wash. 462 (1915); Ozette
Railway Company v. Grays Harbor County, 16 Wn.2d 459 (1943); AGO
4-2-1942.))) (1) Introduction. The purpose of this rule is to
establish uniform procedures to be used in determining the
taxable value of timber sold by agencies of state and local
government separate from publicly owned land. This rule examines
the different types of timber sales and outlines the factors used
to determine the true and fair value of timber sold at each type
of sale. It also describes the origin and use of the State
Timber Sales Adjustment Table ("adjustment table" or "table"),
the affect road construction costs have on the true and fair
value of the timber, and the method used to determine the amount
of timber remaining from a sale on each January 1st assessment
date.
(2) General provisions. Any standing timber sold by the state department of natural resources ("DNR") or any state or local governmental agency separate from the land, except federally owned land, which is then held or owned separately from the land, is subject to personal property tax (see RCW 84.04.080). As used in this section, "timber" has the same meaning as the term is defined in RCW 84.33.035 and WAC 458-40-610.
(a) Under the provisions of RCW 84.33.078, the notice of sale or prospectus prepared by the governmental entity selling the timber must state that the timber is subject to personal property tax. Any property tax paid on the timber may be used as a credit against any tax imposed under RCW 84.33.041 on timber harvested from publicly owned land.
(b) The amount of personal property tax owed is determined by the true and fair value of the timber, which was sold as part of a public timber sale, remaining on the public land on each January 1st assessment date. The true and fair value is the original sales price ("sales price") of the timber, in cash and other consideration, adjusted by the table that is contained in subsection (3) of this section. "Other consideration" includes, but is not limited to, any permanent improvements to the land such as roads (see WAC 458-40-610).
(3) Adjustment table. The department's property tax division issues an adjustment table on or before the last day of February each year. This table is used, in combination with the sales price, to calculate the true and fair value of timber remaining on public land each January 1st assessment date. The sales price of the timber sold must be adjusted to reflect the true and fair value of the remaining timber as of the January 1st assessment date. The adjustment table is based on the average quarterly stumpage price of DNR timber sales throughout the state. The table is based on a multiple regression analysis model that reflects variations in the average quarterly timber sales' values during the pertinent time interval; that is, the time between the quarter in which the sale takes place and the assessment date.1
(a) The true and fair value of timber remaining on each January 1st assessment date is calculated by adjusting the sales price by an amount listed on the adjustment table. The amount of adjustment is determined by the date of the timber sale as follows:
DATE OF SALE |
FIGURE TO BE USED FROM ADJUSTMENT TABLE |
| 1/1 through 2/15 | 1st Quarter |
| 2/16 through 5/15 | 2nd Quarter |
| 5/16 through 8/15 | 3rd Quarter |
| 8/16 through 11/15 | 4th Quarter |
(c) Example. The following example should be used only as a general guide and cannot be relied upon for any other purpose.2 The table below illustrates the form of the adjustment table:
1998 STATE TIMBER SALE ADJUSTMENTS
| SALE DATE | QUARTER | ADJUSTMENT $ PER MBF |
|
| 1994 | Q1 | -347.33 | |
| Q2 | -274.50 | ||
| Q3 | -207.97 | ||
| Q4 | -174.22 | ||
| 1995 | Q1 | -202.97 | |
| Q2 | -189.86 | ||
| Q3 | -157.75 | ||
| Q4 | -172.65 | ||
| 1996 | Q1 | -142.12 | |
| Q2 | -123.07 | ||
| Q3 | -113.49 | ||
| Q4 | -168.55 | ||
| 1997 | Q1 | -161.06 | |
| Q2 | -134.70 | ||
| Q3 | -133.77 | ||
| Q4 | -54.92 | ||
| 1998 | Q1 | -70.39 | |
| Q2 | -41.47 | ||
| Q3 | -5.80 | ||
| Q4 | 19.06 | ||
(4) Determining volume remaining on assessment date. One of the crucial factors in establishing the true and fair value of timber is determining the volume of timber remaining on the public land on each January 1st assessment date. The most accurate way to determine this volume is to hire a professional forester to cruise the remaining timber. However, if a professional forester is not hired, the type of timber sale will dictate the manner in which the volume remaining will be determined.
(a) Lump sum sales. A "lump sum sale" is a sale of timber wherein the total sales price is dependent upon an estimate of the total volume of timber (usually termed "cruise volume") in the sale, as opposed to the actual volume of timber harvested; for example: A sale for $1,200,000 for all species of timber purchased (see WAC 458-40-610). This type of sale is also known as a "cash" or "installment" sale.
(i) If public timber is sold as a lump sum sale, the assessor may contact the purchaser and request information about the total volume of timber in MBF (thousand board feet) included in the sale, total purchase price of the sale, total volume of timber harvested, total volume of timber remaining on January 1st, and other facts pertinent to the sale. This information may be obtained by an audit of the purchaser's records or by a site visit to ascertain the volume of timber remaining on the land.
(ii) Calculating the true and fair value of a lump sum sale is a three step process. First, the total sales price must be converted into an average price per thousand board feet ($/MBF) by dividing the sales price by the original cruise volume, as established by the public owner. Second, calculate an adjusted sales price by adjusting the average price/MBF using the adjustment table. And third, calculate the true and fair value by multiplying the adjusted sales price by the volume of timber remaining on January 1st of the assessment year. The following example is provided for illustrative purposes only and cannot be relied upon for any other purpose:
| Date of Lump Sum Sale: | 3/18/98 | ||
| Original Sales Price (All Species): | $2,050,000 | ||
| Original Cruise Volume (All Species): | 3,709 MBF | ||
| Volume remaining on 1/1/99: | 1,235 MBF | ||
| Actual cost of roads: | $55,000 | ||
1st step: |
Calculate average price per MBF (sales price ÷ cruise volume) |
||
| Average Price Per MBF: | $2,050,000 ÷ 3,709 MBF = $553 per MBF | ||
2nd step: |
Calculate adjusted sales price: Add or subtract the appropriate adjustment from the average price per MBF. In this case, the sale occurred after 2/16 so the 2nd Quarter adjustment is used. |
||
| Adjusted Sales Price: | $553 - $41= $512/MBF | ||
3rd step: |
Calculate true and fair value: Multiply volume of timber remaining on 1/1 assessment date by adjusted sales price. |
||
| True & Fair Value without consideration for roads: | 1,235 MBF x $512 = $632,320 | ||
(i) If public timber is sold as a scale sale, the assessor uses the "cut and sold report" compiled by DNR to calculate the volume of timber remaining on the land on each January 1st assessment date.
(ii) Calculating the true and fair value of timber remaining from a scale sale is a two step process. First, determine an adjusted price per MBF by adjusting the sales price for each timber species using the adjustment table. Second, calculate the true and fair value by multiplying the adjusted sales price per MBF by the volume of timber, by species, remaining on January 1st of the assessment year. The following example is provided for illustrative purposes only and cannot be relied upon for any other purpose:
| Date of Scale Sale: | 1/21/98 | ||||
| Original Sales Price: | Doug Fir | -- | $425/MBF | ||
| W. Hemlock | -- | $300/MBF | |||
| Volume remaining on 1/1/99: | Doug Fir | -- | 750 MBF | ||
| W. Hemlock | -- | 250 MBF | |||
1st step: |
Calculate adjusted sales price per MBF: Add or subtract from the sales price for each species the appropriate adjustment listed on the adjustment table. In this example the adjustment listed for 1st Quarter 1998 should be used because the sale occurred between 1/1 and 2/15. |
||||
| Adjusted Sales Price: | |||||
| Doug Fir | -- | $425/MBF - $70 | = | $355/MBF | |
| W. Hemlock | -- | $300/MBF - $70 | = | $230/MBF | |
2nd step: |
Calculate true and fair value: Multiply the volume of timber, by species, remaining on 1/1 assessment date by the adjusted sales price. |
||||
| Doug Fir | -- | 750 x $355 | = | $266,250 | |
| W. Hemlock | -- | 250 x $230 | = | $ 57,500 | |
| True & Fair Value without consideration for roads: | $323,750 | ||||
(a) Road construction costs are established by using one of the following methods:
(i) Actual road construction costs; or
(ii) Average road values ascertained by determining the number of stations (a "station" = 100 feet) listed on the "timber notice of sale." The number of stations is then multiplied by the dollar amounts listed below to calculate a total average road value.
AVERAGE ROAD VALUES
| Western Washington: | |||
| New Construction | $ | 1149 per station | |
| Reconstruction/Betterment | $ | 249 per station |
|
| Eastern Washington: | |||
| New Construction | $ | 118 per station | |
| Reconstruction/Betterment | $ | 31 per station | |
(c) Calculating the true and fair value of a public timber sale including road construction is a four step process. First, road construction costs must be determined using one of the methods contained in subsection (5)(a) of this section. Second, calculate an average value of roads per MBF by dividing the road construction costs by the volume of timber on the public land on the date of sale. The volume will either be the cruise volume, if the sale was a lump sum sale, or the volume of timber per species, if the sale was a scale sale. Third, add the average value of roads per MBF to the adjusted sales price per MBF to arrive at a final adjusted sales price including road costs. And fourth, calculate the true and fair value by multiplying the final adjusted sales price by the total volume of timber remaining for all species (on lump sum sales) or by the volume of timber remaining for each species (on scale sales) on the January 1st assessment date.
(d) Example. The following is a continuation of the example regarding lump sum sales in subsection (4)(a)(ii) of this section. The example is provided for illustrative purposes only and cannot be relied upon for any other purpose:
| Facts from Lump Sum Sale: | ||||
| Cruise volume of timber: | 3,709 MBF | |||
| Actual costs of roads: | $55,000 | |||
| Adjusted sales price: | $512/MBF | |||
| Volume remaining on 1/1/99: | 1,235 MBF | |||
| Procedure to calculate the true & fair value of a public timber sale including road construction: | ||||
1st Step: Determine road construction costs (actual costs or average road value) |
||||
| Actual Cost of Roads: | $55,000 | |||
2nd Step: Calculate average road cost per MBF (road construction costs ÷ volume of timber sold) |
||||
| Average Road Cost per MBF: | $55,000 ÷ 3,709 = $15/MBF | |||
3rd Step: Calculate final adjusted sales price (adjusted sales price + average road cost/MBF) |
||||
| Final adjusted sales price including road costs: | $512 + 15 = $527 | |||
4th Step: Calculate True & Fair value on assessment date (final adjusted sales price x volume remaining) |
||||
| True & Fair Value including road costs on 1/1/99 assessment date: | $527 x 1,235 = $650,845 | |||
| 1 | A copy of this table may be obtained from Property Tax at P.O. Box 47471, Olympia, Washington 98504-7471, (360) 753-1382, FAX (360) 586-7602. |
| 2 | The examples contained in this rule identify a number of facts and then state a conclusion. These examples should be used only as a general guide. The status of each situation must be determined after a review of all the facts and circumstances. |
[Order PT 68-6, § 458-12-320, filed 4/29/68.]