VALUATION OF STANDING TIMBER FOR AD VALOREM TAX ASSESSMENT WHEN HARVESTING IS TO BE DELAYED FOR A NUMBER OF YEARS

VALUATION OF STANDING TIMBER FOR AD VALOREM TAX ASSESSMENT WHEN HARVESTING IS TO BE DELAYED FOR A NUMBER OF YEARS.

1. There is no legal basis for the valuation of timber for property tax assessment at less than fifty percent of its present true and fair market value where the timber is or can be made accessible for harvesting in the year of assessment merely by reason of the fact that the owner stipulates that the timber will not be harvested for a certain number of years in the future.

2. Where mature timber is so situated that it is physically impossible to harvest the same in the year of the assessment due to its inaccessibility, such factor should be considered by the assessor in determining its assessed valuation, the timber being of less value than similar timber which is accessible and is possible of harvesting in the year of assessment.

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                                                                  March 12, 1952

Honorable E. C. Huntley,Chairman
Washington State Tax Commission
Insurance Building
Olympia, Washington                                                                                               Cite as:  AGO 51-53 No. 257

Dear Sir:

            We have your request for our opinion on the following question:

            In establishing the value of standing timber for the purpose of making assessments for ad valorem property taxation, is the value of mature timber affected by the fact that the owner does not intend to harvest the timber for a given number of years in the future?  Would the result differ where the delay in cutting is caused by the physical impossibility of immediate harvesting due to the inaccessibility of the timber, as distinguished from the situation where accessible timber is not cut merely by the choice of the owner?

             [[Orig. Op. Page 2]]

            Our conclusions may be summarized as follows:

            (1) There is no legal basis for the valuation of timber for property tax assessment at less than fifty percent of its present true and fair market value where the timber is or can be made accessible for harvesting in the year of assessment merely by reason of the fact that the owner stipulates that the timber will not be harvested for a certain number of years in the future.

            (2) Where mature timber is so situated that it is physically impossible to harvest the same in the year of the assessment due to its inaccessibility, such factor should be considered by the assessor in determining its assessed valuation, the timber being of less value than similar timber which is accessible and is possible of harvesting in the year of assessment.

                                                                     ANALYSIS

            In your letter you state that it appears to be a desirable public policy to encourage timber owners not to harvest timber as soon as it matures, but rather to protract the period of harvesting over a number of years.  You mention that if the assessed value of such timber could be reduced by reason of the fact that it will not be immediately harvested, and thus would be worth less than similar mature timber which would be harvested in the year of assessment, the tax relief would be an inducement for the delay of the cutting.  You further state that such a delay in cutting could occur in either of two ways:  (1) by the choice of the owner of timber which is accessible and susceptible to cutting in the year of the assessment; and (2) where the timber is not possible of immediate cutting due to its inaccessibility.

            The standard of valuation for property tax purposes has been laid down in Amendment 17 to the Washington Constitution as

            "fifty per centum of the true and fair value of such property in money * * *."

            The legislature has carried this forward without implementation or guide as to standing timber, at RCW 84.40.030 (section 15, chapter 206, Laws of 1939; Rem. Rev. Stat. Supp. 11135):

            "All property shall be assessed at fifty per cent of its true and fair value in money.  In determining the true and fair value of property, the assessor shall not adopt a lower or different standard of value  [[Orig. Op. Page 3]] because it is to serve as a basis of taxation; nor shall he adopt as a criterion of value the price for which the property would sell at auction, or at a forced sale, or in the aggregate with all the property in the taxing district; but he shall value each article or description of property by itself, and at such price as he believes it to be fairly worth in money at the time the assessment is made.  The true cash value of property shall be that value at which it would be taken in payment of a just debt from a solvent debtor."

            We are restricted, therefore, to determining the "true and fair value" by the ordinary means of determining its fair worth, or market value, in the year of assessment.  While we have not found any cases on this specific problem, the general rules are well established in Washington by statute and court decision, and we see no reason why they would not be applicable here.  SeeNorthwest Chemurgy Securities Co. v. Chelan County, 38 Wn. (2d) 87, 228 P. (2d) 129; Ozette R. Co. v. Grays Harbor County, 16 Wn. (2d) 459, 133 P. (2d) 983.

            It is our opinion that where timber cannot be cut in the year of assessment, it is not worth as much as similar timber which is so situated that it may be so cut.  In consequence, the true and fair value of such inaccessible mature timber is less than that of accessible timber of similar type.  Surely, a buyer would be inclined to pay less for such inaccessible timber if for no other reason than that he must wait a certain period of time in order to realize upon his investment.  In consequence, its assessed valuation for property tax purposes would be less, depending on the number of years until such timber would be available for cutting.

            On the other hand, for the purpose of determining the true and fair market value of timber as required by Amendment 17 to the Washington Constitution, and assessing the timber at fifty per cent thereof, timber which is so situated that it is possible of immediate harvesting is worth no less by reason of the fact that the owner has elected not to harvest the same in the year of assessment, or even that he has elected to wait as long as ten, twenty, or thirty years before cutting.

            Like you, we are not unmindful of the public policy considerations in encouraging timber owners to delay the harvesting of mature timber.  Furthermore, we can see the incentive toward such protraction of harvesting which a reduction in property taxes through reduced valuations based upon delayed cuttings would  [[Orig. Op. Page 4]] cause.  However, assessments for property taxes must be based upon fifty per cent of the "true and fair value" of the property.  At the very least, it is a question for the legislature.  Should the policy be found desirable by the legislature, we could conceive of the establishment of a standard for the determination of what is a "true and fair value," using as a factor in such determination with respect to mature timber the date upon which the timber is to be harvested.  If such a standard were established, the legislature might deem it necessary to provide some protection against an owner who harvested the timber in advance of the date he had represented as the time for harvesting.

            The legislature has taken no such action.  In fact, the legislature has taken some action on this question of deferred cutting by the enactment of chapter 120, Laws of 1941, now chapter 84.32 RCW, providing for deferred payment of taxes upon timber, but for no alteration in the manner of determining the assessed value of the timber which will not be cut until some future year.

            In view of our comments above, we must conclude that while timber which is inaccessible should be assessed for property taxation at a lesser value than similar timber which is accessible for immediate harvesting, the mere fact, standing alone, that the owner of accessible mature timber elects not to harvest the same until some future date is no basis for valuing such timber for property tax purposes at less than the valuation of similar timber as to which no such representation has been made.

Very truly yours,

SMITH TROY
Attorney General

C. JOHN NEWLANDS
Assistant Attorney General