Chapter 61 Savings

Tax Comparison Between Massachusetts
Chapter 59 and Chapter 61 Tax Classifications

Chapter 59 of the Massachusetts General Laws covers land and buildings that are not subject to any special, use-value assessment.  Chapter 59 lands are assessed at their full market value.  Chapter 61 covers forest land which is given a lower, use-value assessment in order to encourage the preservation of open space and to provide an incentive for forest landowners to manage their lands for the continuous production of forest products.  The sales of these products benef
it local economies.  The hypothetical examples below compare Chapter 59 and Chapter 61 classifications for the same property.

Chapter 59 Tax Classification
land area: 100 forest acres
assessed value: $600 per acre
tax rate: $15 per $1,000 of valuation

total annual tax: $15 x ($600/$1,000) = $9 per acre per year
     on 100 acres = $900 per year

Chapter 61 Tax Classification
land area: 100 forest acres
assessed value (5% of Chapter 59 valuation): $30 per acre
tax rate: $15 per $1,000 of valuation plus
     8% of stumpage value of products sold

annual land tax:  $15 x ($30/$1,000) = $.45 per acre per year
periodic stumpage tax: .08 x $350 per 10 years1
    
$2.80 per acre per year

total annual tax: $.45 + $2.80 = $3.25 per acre per year
     on 100 acres = $325 per year

Thus, the tax difference between Chapter 59 and Chapter 61 classification for this hypothetical case would be $900 - $325 = $575 per year.2   If the property had any building lots assessed as such which were put under Chapter 61, there would be an additional tax savings of nearly $450 per building lot per year (assuming $30,000 assessed valuation per building lot at $15 per $1,000 tax rate).  This savings occurs as long as the land is managed and remains under Chapter 61 classification, even through a change of ownership.  But if for any reason the land is declassified, the difference between Chapter 59 and Chapter 61 taxes are due, plus interest, for the years the land has been under Chapter 61, up to a maximum of 10 years.

Karl Davies
April, 1992

1  The assumption is made here that the average well-managed forest will have a residual value after the first improvement harvest or commercial thinning of $300 per acre, and that this value will increase by about $350 in 10 years, at which time it will be cut again to realize the value increase.

2  Assessed values and tax rates will vary among towns, and residual values and growth reates will vary among forest properties.  Each situation should be considered individuallly to determine the Chapter 61 tax advantage (or disadvantage).