Assessment Procedures for Managed Forest Properties in Ontario

Goal

To provide direction and information on the valuation of properties participating in the Managed Forest Tax Incentive Program (MFTIP).

Background

The Ministry of Natural Resources and Forestry (MNRF) is responsible for landowner eligibility under the MFTIP.

Sections 19 (5.2) and (5.2.1) of the Assessment Act and sections 8.2 to 9.7 of Part II, Parts V.1 and IX.1 of O. Reg. 282/98 outline the process for valuing managed forest lands.

Landowners who apply and qualify for the MFTIP have the eligible portion of their property classified and assessed as managed forest under the managed forest property class. The eligible land is taxed at 25 percent of the residential tax rate.

To qualify for the program:

  • the property must be owned by a Canadian citizen or permanent resident, a Canadian corporation, partnership, trust or a conservation authority;
  • the forest must cover at least four hectares (9.88 Acres) excluding residences and is on one property with one assessment roll number; and
  • the land cannot be subject to a registered plan of subdivision or be licensed under the Aggregate Resources Act.

To participate in the MFTIP:

  • the owner must prepare an application package that includes a managed forest plan; and
  • a managed forest plan must be approved by an approver - an independent contractor who will charge for their services.  More information on approvers, deadlines and the process, is available online at Ontario.ca/MFTIP

Changes to the MFTIP eligibility:

Properties that are sold are removed from the MFTIP. A new landowner wishing to remain in the program must apply within 90 days of the sale.

Properties that are severed are also removed from the program. Each property must qualify for the MFTIP on its own merit. The owner may reapply to return to the program once his/her managed forest plan has been amended.

The Process

Approved applications are forwarded to the Municipal Property Assessment Corporation (MPAC) for the determination of the assessed value. In cases where only a portion of the property is in the program, MPAC must assess each portion based on its current use.

The sales comparison approach is used to establish the value of managed forest properties in accordance with section 19 (5.2) of the Assessment Act.

Beginning with the 2006 tax year, under section 19(5.2.1) of the Assessment Act, managed forest lands are assessed similar to woodlots on farms in the same area. These proxy farmland rates are based on the value of wooded parcels on farm properties.

The following two Regulated Rate Tables were prescribed by the Ministry of Finance:

  • Regulated Rate Table 1 - the rates represent, on a per acre basis, the weighted average value of wooded farmland within each County/Municipality throughout the province.
  • Regulated Rate Table 2  - the rates are based on an overall provincial weighted average to accommodate areas where no wooded farmland band acreages/rates exist. Farmland bands are geographic areas where farm properties sell for similar prices.

In applying these regulated rates, an upper and lower limit of value must be determined to ensure that the total assessed value of a property entering the program does not exceed the total assessed value prior to being in the program. Also, the value of the managed forest portion should not be below 31 percent of the original value. See “Determination of final values.”
 

The determination of value for a managed forest property is a three-stage process.

1.  An upper limit of value is calculated using the sales comparison approach.
2.  The value of the land is determined using the regulated rates outlined in the Regulated Rate Table 1.  If a rate is not found in this table, then the appropriate rate indicated in the Regulated Rate Table 2 must be used.
3.  A lower limit of value is calculated using 31 percent of the current use value of the managed forest portion.

Determination of Final Values

Example 1

Where the regulated rate results in a value lower than the current value assessment (CVA) and above the lower limit of value, the regulated rate value is applied to the managed forest.

50-acre property - all managed forest

Upper limit CVA  = $60,000
Regulated rate/acre assessment using regulated rate:     
$552 per acre x 50 acres =  $27,600
Lower limit:    
$60,000 x 0.31 = $18,600
Total assessment = $27,600

Example 2

When the regulated rate results in a value higher than the CVA, the CVA value is applied to the managed forest.

50-acre property - all managed forest

Upper limit CVA  = $10,000
Regulated rate/acre assessment using regulated rate:     
$226/acre x 50 acres =  $11,300
Lower limit:    
$10,000 x 0.31 = $3,100
Total assessment applied to the managed forest = $10,000

Example 3

If the regulated rate results in a value below the lower limit (31 percent of the CVA), the managed forest is assessed at the lower limit.

50-acre property - all managed forest.

Upper limit CVA  = $50,000
Regulated rate/acre assessment using regulated rate:     
$224/acre x 50 acres =  $11,200
Lower limit:    
$50,000 x 0.31 = $15,500
Total assessment applied to the managed forest = $15,500

Example 4

A property with both a managed forest portion and a residential (non-managed forest) portion with a house on it. The regulated rate results in a value that is less than 31 percent of the lower limit. The managed forest portion is valued at the lower limit and is then added to the CVA of the residential portion, to come up with the total CVA.

100-acre property
50-acre managed forest
50-acres associated with the residential land plus residence

CVA (if the property was not in MFTIP):

Building value = $120,000
Land value = $300,000
Land value per acre  = $300,000/100 acres = $3,000
Total CVA = $420,000
Residential land value = $3000 x 50 acres = $150,000
Residential portion ($150,000 land value + $120,000 building value) = $270,000
Managed forest portion:    
CVA = $3000 x 50 acres (upper limit) = $150,000
Regulated rate per acre assessment using regulated rate:    
$500 per acre x 50 acres = $25,000
Lower limit (managed forest portion only):    
$150,000 x 0.31 = $46,000
Total assessment applied to the managed forest: = $46,000
Total property assessment:    
$46,000 + $270,000 = $316,000
Partitioning:    
Managed forest portion = $46,000
Residential portion = $270,000
Total assessment = $316,000

For more information on the Managed Forest Tax Incentive Program, please contact:

Administrator
Managed Forest Tax Incentive Program
Ministry of Natural Resources and Forestry
5th Floor S
300 Water St
PO Box 7000
Peterborough ON K9J 8M5
For more information, contact: MFTIP@ontario.ca
Tel: 1-855-86-MFTIP (1-855-866-3847)

Ontario Managed Forest Tax Incentive Program (MFTIP) Guide

Related Information

Assessment Act
Ontario Regulation 282/98

Note: This procedure has been developed to provide the public with a general understanding of the assessment procedures for managed forest properties. The applicable law prevails to the extent there is any conflict between the procedure and the relevant law.

Information on this page may not be fully accessible. Please contact us at 1 866 296-6722 or 1 877 889-6722 TTY to determine how we can best accommodate you.

Note: The applicable law prevails to the extent there is any conflict between this information and the current law. This information is not intended to provide legal advice and should not be relied upon as such.

Information on this page may not be fully accessible. Please contact us at 1 866 296-6722 or TTY 1 877 889-6722 to determine how we can best accommodate you.