REDUCE YOUR TAXES
Reduce Your Taxes
With a written stewardship plan you can qualify for either the 2c Managed Forest Land or Sustainable Forest Incentive Act (SFIA). Which is write for you?
In order to qualify for either of these programs you must first have a written Stewardship Plan. Get started here.
2C Tax Class vs. SFIA
2c Managed Forest Land allows you to have roughly a 35% reduction in your taxes. Owners of forest land who actively follow a qualifying forest management plan may receive a classification rate of 0.65% on any eligible land. For most forested land, the classification rate would otherwise be 1.00%.
SFIA is a great program for landowners with larger acreage or have lower taxes. There are 3 different minimum enrollment periods (8, 20, and 50 years), with higher payments for longer enrollment periods. In each, the state pays you per acre directly every year, with the amount paid based on how many acres of land you own and how long you sustain a covenant. A Stewardship Plan is required by the state before enrollment can take place.
Covenant:
A covenant is a document is signed by the landowners which abides by the SFIA restrictions. By singing the covenant you are following the restrictions to be in the program for the period you choose - 8, 20, or 50 years.
Click one of the following to read more:
What if I want to get out of the program?
The 8,20, and 50 year covenant lengths are the minimum amount of time you are enrolled. The covenant will never expire unless you request to get out of the program. There is a rolling half life on each of the covenant lengths which means you have to wait until at least half the enrollment period before you can request to get out (For example: You would have to wait at least 25 years until you can request to get out of the 50 year covenant).
Department of Revenue:
"If you’ve been enrolled in the program for at least one-half the duration of the covenant, you can request termination by writing to the Department of Revenue. Revenue will send a confirmation letter with the date your land will be released. There is a waiting period (half the duration of the covenant) to remove land from the program after the department receives your request. During the waiting period, the covenant is still binding and you continue to receive payments. Once you have withdrawn, you cannot re-enroll in SFIA for at least three years. If state law is changed to reduce the SFIA payment rate more than 10% than what you received in the prior year, you may withdraw from the program without a waiting period."
For more information regarding the SFIA program visit the Department of Revenue.
How much money will I save?
2c Managed Forest Land:
For example, a forestland parcel worth $200,000 would have a tax capacity of $1,300 instead of $2,000.
$200,000 x .65% = $1,300
$200,000 x 1.00% = $2,000
This is a simplified example. It does not take into account any additional tax costs or savings that may apply to your property. It also does not take into account the variation in local tax rates.
SFIA:
Payment amounts (Taxable Income) are correlated with what year the covenant is (8, 20, 50). The payment rates are adjusted each year based on statewide average market values and tax rates, but will not increase or decrease by more than 10 percent per year. The payment rates are as follows (as of 2021):
Note: If your land was enrolled in SFIA in 2017 and also has a conservation easement, the payment rate is $7.00 per acre and that land is limited to an 8-year covenant.
What are the qualifications?
2c Managed Forest Land:
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Woodland Stewardship Plan that is registered with the DNR
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Be current on property taxes
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Have at least 20 acres of wooded land (enrollment limited to 1,920 acres statewide)
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Acres enrolled does not receive any homestead benefits
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Acres enrolled cannot be used for agricultural purposes
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Cannot include property that is enrolled in the Sustainable Forest Incentive Act (SFIA) or any other financial incentive program (CRP, CREP, RIM, or the Green Acres program).
SFIA:
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Be current on property taxes
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Have 20 or more contiguous acres
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Be at least 50 percent forest land as defined in Minnesota Statute 88.01, subd. 7
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Woodland Stewardship Plan that is registered with the DNR
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Have an agreement (“covenant”) in place limiting the property’s use to forest management activities
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Not enrolled in RIM, CREP, CRP, Green Acres, Agriculture Preserves, Rural Preserves
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Not be used for residential or agriculture purposes.
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Not be improved with a structure, pavement, sewer, campsite, or road used for purposes that are not in the forest management plan
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Not be covered under a Lessard-Sams Outdoor Heritage Council easement or similar easement granted after May 30, 2013
What if I have a building or cabin on the property?
2c Managed Forest Land:
In general, no buildings can receive the classification. A structure and surrounding 10 acres would be classified with the use of the structure and not classified as 2c managed forest land.
The presence of a minor, smaller structure may be included with land receiving class 2c. However, these structures are defined as sheds or other primitive structures that add minimal value and are not designed for residential use, and are less than 300 square feet in size.
SFIA:
If you have a permanent building (greater than 300 square feet) on the property, then 3 acres around that structure will not qualify as SFIA acres. If you plan on building in a certain area you can delineate the 3-acre area on the map you end up submitting to the Department of Revenue when enrolling in the program.
Visit these links for the source of this information and more information:
https://www.revenue.state.mn.us/sustainable-forest-incentive-act
https://www.revenue.state.mn.us/class-2c-managed-forest-land
Let's Work Together
Let us help reduce your property taxes by starting a Stewardship Plan here!