Managed forests are assessed based on regulated rates per acre that are determined through an assessment approach similar to farms. These regulated rates are prescribed by the Minister of Finance and are developed from an analysis of the assessed values of woodlots on farms within a similar geographic area (farm neighbourhood). Farm neighbourhoods are areas where farms with similar soil characteristics sell for similar prices. This assessment approach, known as the farmland proxy, was developed in consultation with the managed forest stakeholders including:
- Ontario Forestry Association
- Ontario Woodlot Association
- Conservation Ontario
- Association of Municipalities of Ontario
If the farmland proxy results in a value that is higher as a managed forest than the value of the property based on its current value if it was not a managed forest, the property’s assessment is capped at the current value. This ensures that no managed forest property owner is disadvantaged by the valuation of the lands in the managed forest program.
The farmland proxy is also modified where the proxy value results in an assessment that is significantly lower than the current value of the property. In these circumstances, a minimum or floor value is applied. If the value determined using the farmland proxy is less than 31% of the current value, a floor value which represents 31% of the current value is used.
The Managed Forest Tax Incentive Program
The Managed Forest Tax Incentive Program (MFTIP) is a voluntary program administered by the Ministry of Natural Resources and Forestry (MNRF). To be eligible, property owners must be a Canadian citizen(s) or permanent resident(s); a Canadian corporation, partnership or 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 municipal roll number. The property owner must prepare and follow a Managed Forest Plan for their forest.
MFTIP was introduced to encourage the stewardship of forests by offering a substantial reduction in property taxes to eligible property owners. There are two benefits for property owners who meet the eligibility requirements set out by the Ministry of Natural Resources and Forestry (MNRF):
- property tax rate for the managed forest portion of a property is 75 per cent lower than the residential tax rate
- the assessed values of managed forest properties are similar to the values of woodlots on farms in the area
This assessment approach ensures that the valuation takes into account the value of the property as a woodlot only and does not consider future potential uses.
Many managed forests are part of larger properties that are also used for residential, recreational, farm or commercial purposes. In these situations, only the managed forest portion of the property is eligible for the lower taxation rate and the farmland proxy assessment approach. The Minister of Finance has prescribed the way in which MPAC is to apportion the value of mixed-use properties. The regulation ensures that, as a result of applying the farmland proxy, there is no shift in the value of the overall property to the other portion (i.e. residential, commercial, farm) of the property.
Contact us for more information.
If you have any questions about eligibility for the Managed Forest Tax Incentive Program, email: MFTIP@ontario.ca