MFTIP: Avoid a Tax Hike When a Forest Changes Hands
Posted: September 30, 2019
By Stephanie Prince
If you’ve recently bought or acquired a forested property in Ontario, you may not be aware of whether or not the forest has been participating in the Managed Forest Tax Incentive Program (MFTIP). MFTIP is a voluntary program designed to help landowners with the sustainable stewardship of their forests on private land by reducing the property tax burden assigned to those lands. Property tax savings on Managed Forest lands are generally at least a 75% savings but can be even greater than that due to a reassessment of the land’s value.
When there is a change in ownership on the forest though, the rule is “new owner = new objectives = new Plan required”. If this rule isn’t followed, the taxes on the forested portion of your land could abruptly quadruple.
The province has designed the MFTIP program to encourage landowners to sustainably manage forests on their land. In order for a property to be eligible, a Plan approved (and often prepared by) a Managed Forest Plan Approver must be submitted and accepted. The plan gives the landowner guidance on how best to manage their forest, and tailors the management objectives to the wishes and desires of the landowner. However, when there is a change in ownership, the new owner has 90 days from the date of purchase to prepare and submit a new plan for the property or be dropped from the program and begin paying the default Residential tax rate on the entire property.
How does a landowner qualify for MTFIP? They must follow a few guidelines to have a successful application. Criteria include:
- Property located in Ontario
- Property owned by: Canadian citizen(s) or permanent resident(s); a Canadian corporation, partnership or trust; or a conservation authority
- The forest must cover at least 9.88 hectares excluding residences (a minimum of 1 acre is removed from Managed Forest to account for a residence), must be on one property with one municipal roll number (multiple roll numbers and properties are permitted so long as there is common ownership)
- must include at least a stocking level of 1000 trees per hectare.
Landowners who meet these criteria can then move forward with the planning process. They must agree to prepare and manage a forest plan for their forest. A Managed Forest Plan Approver needs to approve the plan before it’s submitted to MFTIP. For a list of approvers, visit ontario.ca/MFTIP. There is a fee involved but in most cases, within a few years the tax savings pay off the fees incurred during the application process. .
A landowner selling their forest property is encouraged to inform their realtor and the buyer of their MFTIP status so that new owners are aware that there is a plan in place on their property. This will give the new owners the opportunity to discuss the plan with the previous owners and could influence their plans for the property for their new application. The new owner only has 90 days to complete the new application before the MFTIP is revoked.
How can you stay in the program:
To remain eligible in the MFTIP, landowners must have a plan that was set up by the Plan Approver. It is required to keep records of pertinent activities on the property for future reports that are submitted to MFTIP program administrators. Once in the program, it is required that the landowner submit a progress report at the five-year mark. This report simply states what activities have taken place and serves as a reminder to the landowner that they have a plan in place that they should be following. Renewals for the program are required after 10 years. This includes having a new plan prepared, approved and submitted to MFTIP by July 31st in year 10 of the program. If you choose not to renew your MFTIP or wish to remove yourself from the program before the 10 years are up, you must submit a Landowner Report to the MFTIP program. It is also advised that you inform MFTIP of any changes to the property, ownership and contact info.
Can I be removed from the program?
The key criteria for MFTIP is that activities be in keeping with Good Forestry Practices as defined under the Forestry Act. Essentially, this means activities that help rather than hinder the forest. It can include commercial harvesting (if warranted in the planning period), recreation, nature appreciation, or any number of activities likely already pursued by the landowner. Removals from the program are generally only for those cases where destructive practices such a diameter limit harvesting or land clearing take place. Otherwise, filing the paperwork by the assigned deadline is all that is required.
If a landowner is unaware of the MFTIP status on their property, they can reach out to the Municipal Property Assessment Corporation (MPAC) for more information. MPAC can answer questions in regard to your property and how a MFTIP will impact the property assessment.
MFTIP is a great way for a landowner to not only save money on their property but also to encourage the management of private forests across Ontario.