Chapter 454 Oregon Laws 2003

AN ACT

HB 2197

Relating to taxation; creating new provisions; amending ORS 215.203, 215.236, 215.800, 215.801, 215.808, 307.320, 308A.056, 308A.250, 308A.377, 308A.700, 308A.703, 308A.706, 308A.709, 308A.712, 308A.718, 308A.724, 308A.730, 308A.733, 308A.743, 310.165, 315.104, 316.045, 317.063, 321.005, 321.267, 321.274, 321.282, 321.307, 321.347, 321.353, 321.354, 321.356, 321.390, 321.415, 321.432, 321.485, 321.550, 321.560, 321.570, 321.580, 321.600, 321.609, 321.682, 321.684, 321.763, 321.811, 321.812, 321.814 and 321.991; repealing ORS 92.102, 308A.721, 321.705, 321.710, 321.715, 321.720, 321.725, 321.727, 321.730, 321.732, 321.737, 321.745, 321.747, 321.760, 321.763 and 321.765 and sections 4 and 37, chapter 1078, Oregon Laws 1999; appropriating money; prescribing an effective date; and providing for revenue raising that requires approval by a three-fifths majority.

Be It Enacted by the People of the State of Oregon:

SMALL TRACT FORESTLAND

TAX OPTION PROGRAM

SECTION 1. As used in sections 1 to 14 of this 2003 Act:

(1) “Common ownership” means direct ownership by one or more individuals or ownership by a corporation, partnership, association or other entity in which an individual owns a majority interest.

(2) “Contiguous” means having a common boundary that is greater than a single point.

(3) “Contiguous parcels”:

(a) Includes parcels separated by public or county roads, state highways, nonnavigable streams or nonnavigable rivers.

(b) Does not include parcels that are separated by an interstate highway, a navigable stream or a navigable river, unless there is an underpass, a bridge or another direct access between the separated parcels.

(4) “Department” means the Department of Revenue.

(5) “Eastern Oregon” means that portion of the State of Oregon lying east of a line beginning at the intersection of the northern boundary of the state and the western boundary of Wasco County, thence southerly along the western boundaries of the counties of Wasco, Jefferson, Deschutes and Klamath to the southern boundary of the state.

(6) “Forestland” means land that meets the definition of forestland under ORS 321.257 if the land is located in western Oregon or land that meets the definition of forestland in ORS 321.805 if located in eastern Oregon.

(7) “Harvest” means the point at which timber that has been cut, severed or removed for purposes of sale or use is first measured in the ordinary course of business as determined by reference to common practice in the timber industry.

(8) “Land class” means a forestland land class described in ORS 321.210 or eastern Oregon forestland.

(9) “Owner of timber” has the meaning given that term in ORS 321.005.

(10) “Parcel” means a quantity of land that is capable of being described in a single description by a closed traverse, as one or more subsections or sections of a township, as one or more lots, blocks or tracts in a subdivision or as one or more tax lots.

(11) “Small tract forestland” means forestland subject to assessment under sections 1 to 14 of this 2003 Act and from which the harvesting of timber is subject to severance taxation under sections 1 to 14 of this 2003 Act.

(12) “Taxpayer” means the owner of timber at time of harvest.

(13) “Timber” includes logs that are capable of being measured in board feet and that meet or exceed minimum sawmill grade and other forest products determined by the Department of Revenue by rule.

(14) “Unit of proper measurement” means any unit of measurement commonly used in the timber industry for measuring timber and harvested timber products.

(15) “Western Oregon” means that portion of the State of Oregon lying west of a line beginning at the intersection of the northern boundary of the state and the western boundary of Wasco County, thence southerly along the western boundaries of the counties of Wasco, Jefferson, Deschutes and Klamath to the southern boundary of the state.

SECTION 2. (1) The Legislative Assembly finds that:

(a) Oregon forests are dynamic ecosystems that make vital contributions to all Oregonians. Environmental benefits of forests include habitats for diverse life forms, clean and oxygenated air, clean, filtered and recycled water and stabilized productive soil. Economic benefits of forests include renewable raw material for paper and wood products used by everyone in daily living. Social benefits of forests include scenic landscapes and vistas, open space, solitude and outdoor recreation.

(b) Healthy productive forests provide a sustainable flow of goods, services, values and products.

(c) Private family and nonindustrial forestlands are important parts of the forest resource base of this state. Private family and nonindustrial forestlands make major contributions to the economy of this state and provide many other social and environmental benefits.

(d) Because of the wide array of management goals and objectives that apply to private family and nonindustrial forestlands, these forestlands provide a great range of valuable forest diversity across the landscape of this state.

(e) Many lower gradient streams, which are key components of numerous watersheds and are extremely important for some aquatic species, flow through private family and nonindustrial forestlands.

(f) The interests of this state, its citizens and future citizens are best served by sustainable forest practices and taxing policies that encourage maintaining and establishing diverse forest resources for watersheds, commerce, recreation and stabilized employment levels. These practices and policies prevent shifts in population and encourage the processing of forest products within Oregon.

(g) Timber on private land that is managed on a sustainable basis should be treated as a crop and not taxed as real property.

(h) A tax imposed at the time of harvest coincides with the cash flow of small timber operations and recognizes the hazards and uncertainties involved in growing a long-term timber crop on a sustainable basis.

(2) The Legislative Assembly declares the purposes of the small tract forestland tax option program established under sections 1 to 14 of this 2003 Act are to:

(a) Impose property taxes on forestland values that are annually determined and adjusted as described in ORS 321.201 to 321.222 and then specially assessed; and

(b) Impose a severance tax on the harvesting of timber from small tract forestland in order to:

(A) Recognize the long-term nature of the forest crop and foster the public policy of this state to encourage the growing and harvesting of timber;

(B) Protect the public welfare by ensuring that the citizens of this state and future generations will have the benefits to be derived from the continuous production of forest products from privately held small tract forestland;

(C) Promote the public policy of this state to encourage forestry and the restocking of forestlands in order to provide present and future benefits, including but not limited to water supply enhancement, erosion prevention, wildlife habitat, scenic and recreational opportunities and needed forest products;

(D) Produce revenues for local taxing districts;

(E) Match the incidence of taxation with the realization of the economic benefits of harvest; and

(F) Encourage the establishment of new forests on denuded, nonstocked or under producing forestland.

SECTION 3. (1) An owner of forestland seeking to have the forestland qualified under sections 1 to 14 of this 2003 Act shall apply to the county assessor of the county in which the forestland is located for qualification of the forestland as small tract forestland. If the forestland to be qualified is located in more than one county, the owner shall apply for qualification to the county assessor of each county in which the forestland is located.

(2) An application shall be made on a form prescribed by the Department of Revenue and supplied by the county assessor that contains:

(a) The name and address of the forestland owner;

(b) The taxpayer identification number of the forestland owner;

(c) A statement listing the county and containing a description sufficient to identify the location of all land for which small tract forestland qualification is sought;

(d) A statement describing the uses of the land for which qualification as small tract forestland is sought;

(e) A statement indicating the extent to which the land that has been the subject of the application has been platted under ORS chapter 92;

(f) The total acreage of Oregon forestland owned or held in common ownership by the owner;

(g) A statement that the applicant is aware of the potential tax liability that arises under ORS 308A.703 and section 31 of this 2003 Act upon disqualification of small tract forestland;

(h) An affirmation that the statements contained in the application are true; and

(i) Any other relevant information the department may prescribe.

(3) The applicant shall file the application with the county assessor on or before the later of:

(a) April 1 of the first assessment year for which the forestland is to be qualified as small tract forestland;

(b) In the case of land that is omitted property, within 30 days of the notice of assessment of the property as omitted property; or

(c) December 15 of the first assessment year for which the forestland is to be qualified as small tract forestland if:

(A) For the prior assessment year the land was highest and best use forestland; and

(B) For the current assessment year the land is being assessed at a value reflecting a use other than highest and best use forestland.

(4) The county assessor shall review an application and qualify the forestland under sections 1 to 14 of this 2003 Act if the land meets the qualifications for small tract forestland under section 4 of this 2003 Act.

(5) Land that qualifies as small tract forestland is also disqualified from any other special assessment program as of the tax year for which the land first qualifies as small tract forestland.

(6) An application shall be deemed approved unless, within three months of the date the application was made or before August 15 of the year in which the application was filed, whichever is later, the county assessor notifies the applicant in writing that the application has been wholly or partially denied.

(7) A taxpayer may appeal the decision of the county assessor to wholly or partially deny an application for small tract forestland qualification to the tax court in the time and manner prescribed under ORS 305.404 to 305.560.

(8) In the case of property that qualifies as small tract forestland, the county assessor shall send to the department a written notification of the qualification and a copy of the application.

SECTION 4. (1) To qualify for small tract forestland assessment under sections 1 to 14 of this 2003 Act for each tax year:

(a) The owner of the land that is the subject of an application filed under section 3 of this 2003 Act must own or hold common ownership interest in at least 10 acres of Oregon forestland but less than 5,000 acres of Oregon forestland;

(b) The land that is the subject of the application must constitute all forestland within a single tax lot and all forestland within contiguous parcels owned or held in common ownership by the owner; and

(c) The forestland that is the subject of the application must meet minimal stocking and species requirements applicable to forestland under rules adopted by the Department of Revenue.

(2)(a) Whether land qualifies for small tract forestland assessment shall be determined as of January 1 of each assessment year.

(b) If land qualified for small tract forestland assessment under this section as of January 1 of an assessment year but is disqualified from small tract forestland assessment prior to July 1 of the same assessment year, the land shall be assessed as provided under ORS 308.146 or as otherwise provided by law.

(c) If land qualified for small tract forestland assessment under this section as of January 1 of an assessment year but ceases to meet the qualifications for small tract forestland assessment on or after July 1, the land shall continue to be assessed as small tract forestland for the current tax year.

(d) The land that is the subject of the application must not have been disqualified from small tract forestland assessment under sections 1 to 14 of this 2003 Act for any of the five tax years preceding the year for which small tract forestland assessment is sought under this section.

(3) For each year that land qualifies for small tract forestland assessment, the county assessor shall enter the notation “potential additional tax liability” on the assessment and tax roll.

SECTION 5. (1) An owner of small tract forestland shall notify the county assessor:

(a) When the owner acquires, either directly or through common ownership, one or more tax lots that are contiguous to small tract forestland owned or held in common ownership by the owner;

(b) When the owner acquires, either directly or through common ownership, additional forestland that results in the owner’s owning or holding in common ownership more than 5,000 acres of Oregon forestland;

(c) When the owner sells, either directly or through common ownership, small tract forestland that results in the owner’s owning or holding in common ownership less than 10 acres of Oregon forestland; or

(d) When there is a change in use of any portion of small tract forestland to a use that is not a forestland use.

(2) The notification under subsection (1) of this section must be made in writing.

(3) The county assessor may disqualify small tract forestland if the assessor discovers an acquisition, sale or change in use described in subsection (1) of this section for which the owner did not give written notification as required under this section.

(4) The county assessor shall send a copy of any notification made under this section and received by the assessor to the Department of Revenue.

SECTION 6. (1) The county assessor shall disqualify land as small tract forestland upon:

(a) Sale or transfer of the small tract forestland;

(b) Discovery by the assessor that the land is no longer forestland;

(c) The owner’s owning or holding in common ownership more than 5,000 acres of Oregon forestland;

(d) The owner’s owning or holding in common ownership less than 10 acres of Oregon forestland;

(e) Written notice from the State Forestry Department that the land no longer meets the stocking and species requirements applicable to small tract forestland under rules adopted by the Department of Revenue;

(f) The land’s qualifying for another special assessment listed in ORS 308A.703 (1); or

(g) The recording of a subdivision plat under ORS chapter 92 that subdivides the land.

(2) If, pursuant to subsection (1)(g) of this section, the county assessor disqualifies small tract forestland upon the recording of a subdivision plat, the land may requalify for small tract forestland assessment upon:

(a) Payment of all additional tax and interest that remains due and owing as a result of the disqualification;

(b) Submission of an application for small tract forestland assessment under section 3 of this 2003 Act and approval of the application by the county assessor; and

(c) Compliance with any applicable local government zoning ordinances governing minimum lot or parcel acreage for forest use.

(3) Upon disqualification of land under subsection (1) of this section, additional taxes shall be determined as provided in ORS 308A.700 to 308A.733.

SECTION 7. (1) Small tract forestland shall have a specially assessed value per acre:

(a) Equal to 20 percent of the specially assessed value per acre determined under ORS 321.354, if located in western Oregon; or

(b) Equal to 20 percent of the specially assessed value per acre determined under ORS 321.812, if located in eastern Oregon.

(2) For each land class, the maximum assessed value per acre of small tract forestland shall equal 103 percent of the small tract forestland assessed value per acre for the preceding tax year or 100 percent of the small tract forestland maximum assessed value per acre for the preceding tax year, whichever is greater.

(3) The county assessor shall compute the assessed value of small tract forestland by multiplying the acreage of the small tract forestland in each land class by the lesser of:

(a) The specially assessed value per acre; or

(b) The maximum assessed value per acre.

(4) If the small tract forestland being assessed consists of different land classes, the assessed value of the small tract forestland shall be the sum of the assessed values computed for each land class under subsection (3) of this section.

SECTION 8. Notwithstanding section 7 (3) of this 2003 Act, for the tax year beginning on July 1, 2004, the assessed value per acre of small tract forestland subject to special assessment under section 7 of this 2003 Act may not exceed the lesser of the specially assessed value per acre determined under section 7 (1) of this 2003 Act for the tax year beginning on July 1, 2004, or the value per acre applicable to the land class of the forestland that is set out as follows:

____________________________________________________________________________

Land Class Value Per Acre

FA $92

FB $73

FC $61

FD $52

FE $34

FF $25

FG $10

FX $ 1

Eastern

Oregon $10

____________________________________________________________________________

SECTION 9. (1) A severance tax is imposed at the time of the harvest of timber from small tract forestland.

(2) The tax is imposed on the owner of timber at the time of harvest, and remains a liability of the owner of timber until paid.

(3) The tax is imposed at the rate of:

(a) $3.89 per thousand feet, board measure, of timber harvested in western Oregon; or

(b) $3.03 per thousand feet, board measure, of timber harvested in eastern Oregon.

(4) The tax shall be imposed on the net volume of timber harvested, determined by unit of proper measurement for the kind of timber, species, quality class, grade or product harvested.

(5) For calendar years beginning on or after January 1, 2005, the tax rates imposed under subsection (3) of this section shall be indexed as follows:

(a) For the rate that applies to the harvest of timber from small tract forestland in western Oregon, the tax rate applicable to the harvest of timber from small tract forestland in western Oregon for the previous calendar year shall be multiplied by the ratio of the average assessed value per acre of small tract forestland in western Oregon for the property tax year in which the current calendar year begins over the average assessed value per acre of small tract forestland in western Oregon for the previous property tax year. For purposes of this paragraph, the average assessed value per acre of small tract forestland in western Oregon is determined by adding the assessed values per acre of small tract forestland for each land class in western Oregon and dividing that number by the number of land classes in western Oregon.

(b) For the rate that applies to the harvest of timber from small tract forestland in eastern Oregon, the tax rate applicable to the harvest of timber from small tract forestland in eastern Oregon for the previous calendar year shall be multiplied by the ratio of the assessed value per acre of small tract forestland in eastern Oregon for the property tax year in which the current calendar year begins over the assessed value per acre of small tract forestland in eastern Oregon for the previous property tax year.

(6) The tax imposed under this section does not apply to an owner of forestland totaling 5,000 acres or more that, on or after July 1 of an assessment year, acquires ownership of small tract forestland and harvests timber from the acquired small tract forestland.

SECTION 10. (1) The severance tax imposed under section 9 of this 2003 Act is due and payable annually on or before the last day of January of each year with respect to all timber harvested during the previous calendar year.

(2) At the time at which the severance tax is paid and on or before the last day of January of each year, each taxpayer who has harvested any timber during the previous calendar year shall prepare a return on a form prescribed by the Department of Revenue showing the amounts and kinds of timber harvested for the previous calendar year, the amount of tax for which the taxpayer is liable for harvesting during the previous calendar year and any other information that the department considers necessary to correctly determine the tax due and shall mail or deliver the return, together with a remittance for the unpaid balance of the tax, to the department. The return shall be signed and certified by the taxpayer or a duly authorized agent of the taxpayer, as provided in ORS 305.810. The department may allow, upon written application made on or before the last day of January, further time not exceeding 30 days for filing a return. The tax shall be delinquent if not paid by the last day of January, regardless of any extension of time for filing the return.

(3) All severance tax payments received under sections 1 to 14 of this 2003 Act shall be credited first to penalty and then to interest accrued on the tax being paid and then to the tax.

(4) A taxpayer incurring less than $10 total severance tax liability under sections 1 to 14 of this 2003 Act in any calendar year is excused from the payment of the tax but is required to file a return.

SECTION 11. (1) The Department of Revenue shall mail a severance tax return form to an owner of timber harvested from lands assessed as small tract forestland, as shown on a State Forestry Department Notification of Operations permit issued during a calendar year.

(2) Any owner of timber receiving a severance tax return mailed by the Department of Revenue shall complete the return and submit the return to the department within the time prescribed in section 10 of this 2003 Act, even if the owner of timber has not incurred severance tax liability during the calendar year.

SECTION 12. (1) Revenue from the severance tax imposed in western Oregon under section 9 of this 2003 Act shall be paid over by the Department of Revenue to the State Treasurer and deposited in a suspense account established under ORS 293.445. After the payment of refunds, the balance of the suspense account shall be transferred to the Western Oregon Timber Severance Tax Fund established under section 13 of this 2003 Act.

(2) Revenue from the severance tax imposed in eastern Oregon under section 9 of this 2003 Act shall be paid over by the Department of Revenue to the State Treasurer and deposited in a suspense account established under ORS 293.445. After the payment of refunds, the balance of the suspense account shall be transferred to the Eastern Oregon Timber Severance Tax Fund established under section 14 of this 2003 Act.

SECTION 13. (1) The Western Oregon Timber Severance Tax Fund is established in the State Treasury, separate and distinct from the General Fund. Interest earned by the Western Oregon Timber Severance Tax Fund shall be retained by the Western Oregon Timber Severance Tax Fund.

(2) Moneys are continuously appropriated from the Western Oregon Timber Severance Tax Fund for use in reimbursing the General Fund for expenses incurred in the collection of taxes imposed under sections 1 to 14 of this 2003 Act.

(3) A working balance may be retained in the Western Oregon Timber Severance Tax Fund for the payment of expenses described in subsection (2) of this section. The balance of the Western Oregon Timber Severance Tax Fund, as of May 1 of each calendar year, shall be distributed as follows:

(a) 60.5 percent to the State School Fund established under ORS 327.008. A distribution made under this paragraph shall be made on or before May 15 of the year.

(b) 4.5 percent to the Community College Support Fund established under ORS 341.620. A distribution made under this paragraph shall be made on or before May 15 of the year.

(c) 35 percent to the Department of Revenue for further distribution to the counties of this state that are located in western Oregon. Moneys distributed to the department under this paragraph are continuously appropriated to the department for the purpose of making the payments to counties described in this paragraph. A distribution to the department made under this paragraph shall be made on or before August 15 of the year. Each county’s share of the distribution made under this paragraph shall equal the proportion of the assessed value of all small tract forestland in western Oregon that is located in that county. A distribution made by the department to a county under this paragraph shall be deposited in the county general fund.

SECTION 14. (1) The Eastern Oregon Timber Severance Tax Fund is established in the State Treasury, separate and distinct from the General Fund. Interest earned by the Eastern Oregon Timber Severance Tax Fund shall be retained by the Eastern Oregon Timber Severance Tax Fund.

(2) Moneys are continuously appropriated from the Eastern Oregon Timber Severance Tax Fund for use in reimbursing the General Fund for expenses incurred in the collection of taxes imposed under sections 1 to 14 of this 2003 Act.

(3) A working balance may be retained in the Eastern Oregon Timber Severance Tax Fund for the payment of expenses described in subsection (2) of this section. The balance of the Eastern Oregon Timber Severance Tax Fund, as of May 1 of each calendar year, shall be distributed as follows:

(a) 60.5 percent to the State School Fund established under ORS 327.008. A distribution made under this paragraph shall be made on or before May 15 of the year.

(b) 4.5 percent to the Community College Support Fund established under ORS 341.620. A distribution made under this paragraph shall be made on or before May 15 of the year.

(c) 35 percent to the Department of Revenue for further distribution to the counties of this state that are located in eastern Oregon. Moneys distributed to the department under this paragraph are continuously appropriated to the department for the purpose of making the payments to counties described in this paragraph. A distribution to the department made under this paragraph shall be made on or before August 15 of the year. Each county’s share of the distribution made under this paragraph shall equal the proportion of the assessed value of all small tract forestland in eastern Oregon that is located in that county. A distribution made by the department to a county under this paragraph shall be deposited in the county general fund.

SECTION 15. Sections 1 to 14 of this 2003 Act are added to and made a part of ORS chapter 321.

SECTION 16. Sections 1 to 14 of this 2003 Act apply to:

(1) Property tax years beginning on or after July 1, 2004; and

(2) Timber severance tax reporting periods beginning on or after January 1, 2004.

SECTION 17. (1) The Department of Revenue shall study the taxation of timber harvested from small tract forestland for the period January 1, 2004, through December 31, 2008, and the indexing of severance tax rates during that period to ensure that the indexed severance tax rates accurately reflect the proportion of each forestland land class that is qualified as small tract forestland.

(2) The department shall report the results of its study to those committees of the Seventy-fifth Legislative Assembly having jurisdiction over revenue and tax matters. The report must be made on or before February 1, 2009.

SECTION 18. (1) The Department of Revenue shall take appropriate action to inform owners of Oregon forestland of 5,000 acres or less of the availability and effects of qualification in the small tract forestland tax option program established under sections 1 to 14 of this 2003 Act.

(2) This section is repealed June 30, 2008.

DISQUALIFICATION

SECTION 19. ORS 308A.700 is amended to read:

308A.700. As used in ORS 308A.700 to 308A.733:

(1) “Disqualification” includes the removal of forestland designation under ORS 321.359 or 321.820 [or the declassification from Western Oregon Small Tract Optional Tax classification under ORS 321.760].

(2) “Urban growth boundary” means an urban growth boundary contained in a city or county comprehensive plan that has been acknowledged by the Land Conservation and Development Commission pursuant to ORS 197.251 or an urban growth boundary that has been adopted by a metropolitan service district under ORS 268.390 (3).

SECTION 20. The amendments to ORS 308A.700 by section 19 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 21. ORS 308A.700, as amended by section 19 of this 2003 Act, is amended to read:

308A.700. As used in ORS 308A.700 to 308A.733:

(1) “Disqualification” includes the removal of forestland designation under ORS 321.359 or 321.820 or section 5 or 6 of this 2003 Act.

SECTION 22. The amendments to ORS 308A.700 by section 21 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

SECTION 23. ORS 308A.703 is amended to read:

308A.703. (1) This section applies to land upon the land’s disqualification from special assessment under any of the following sections:

(a) Exclusive farm use zone farmland under ORS 308A.113;

(b) Nonexclusive farm use zone farmland under ORS 308A.116;

(d) Eastern Oregon designated forestland under ORS 321.820; or

[(e) Western Oregon Small Tract Optional Tax classification under ORS 321.760; or]

[(f)] (e) Wildlife habitat open space use assessment under ORS 215.808.

(2) Following a disqualification listed in subsection (1) of this section, an additional tax shall be added to the tax extended against the land on the next assessment and tax roll, to be collected and distributed in the same manner as other ad valorem property tax moneys. The additional tax shall be equal to the difference between the taxes assessed against the land and the taxes that would otherwise have been assessed against the land, for each of the number of years determined under subsection (3) of this section.

(3) The number of years for which additional taxes shall be calculated shall equal the lesser of the number of consecutive years the land had qualified for the special assessment program for which disqualification has occurred or:

(a) Ten years, in the case of exclusive farm use zone farmland, but only if the land, immediately following disqualification, remains outside an urban growth boundary;

(b) Ten years, in the case of wildlife habitat open space use assessment land within an exclusive farm use zone, but only if the land, immediately following disqualification, remains outside an urban growth boundary; or

(A) Nonexclusive farm use zone farmland;

(B) Western Oregon designated forestland;

[(D) Western Oregon Small Tract Optional Tax classified forestland;]

[(E)] (D) Exclusive farm use zone farmland that is not described in paragraph (a) of this subsection; or

[(F)] (E) Wildlife habitat open space use special assessment land that is not described in paragraph (b) of this subsection.

(4) The additional taxes described in this section shall be deemed assessed and imposed in the year to which the additional taxes relate.

(5) If the disqualification of the land is the result of the sale or transfer of the land to an ownership making the land exempt from ad valorem property taxation, the lien for additional taxes shall attach as of the day preceding the sale or transfer.

(6) The amount determined to be due under this section may be paid to the tax collector prior to the time of the next general property tax roll, pursuant to the provisions of ORS 311.370.

[(7) If additional taxes are imposed under this section as a result of the declassification of Western Oregon Small Tract Optional Tax classified forestland, the following amounts shall be added to and considered a part of the additional taxes otherwise due under this section, to be collected in the same manner in which additional taxes are collected:]

[(a) The amount of privilege taxes that would have been payable under ORS 321.257 to 321.322, during the five years immediately preceding the extension of additional taxes on the tax roll; and]

[(b) Interest on the amounts of taxes added pursuant to paragraph (a) of this subsection at the rate of six percent a year from the date at which such increased taxes would have been payable if the forestland had been valued without regard to ORS 321.720.]

[(8) The Department of Revenue shall provide the amounts described in subsection (7) of this section to the county assessor.]

SECTION 24. The amendments to ORS 308A.703 by section 23 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 25. ORS 308A.703, as amended by section 23 of this 2003 Act, is amended to read:

308A.703. (1) This section applies to land upon the land’s disqualification from special assessment under any of the following sections:

(a) Exclusive farm use zone farmland under ORS 308A.113;

(b) Nonexclusive farm use zone farmland under ORS 308A.116;

(d) Eastern Oregon designated forestland under ORS 321.820; [or]

(e) Small tract forestland under section 5 or 6 of this 2003 Act; or

[(e)] (f) Wildlife habitat open space use assessment under ORS 215.808.

(a) Ten years, in the case of exclusive farm use zone farmland, but only if the land, immediately following disqualification, remains outside an urban growth boundary;

(A) Nonexclusive farm use zone farmland;

(B) Western Oregon designated forestland;

(D) Small tract forestland;

[(D)] (E) Exclusive farm use zone farmland that is not described in paragraph (a) of this subsection; or

[(E)] (F) Wildlife habitat open space use special assessment land that is not described in paragraph (b) of this subsection.

(4) The additional taxes described in this section shall be deemed assessed and imposed in the year to which the additional taxes relate.

(6) The amount determined to be due under this section may be paid to the tax collector prior to the time of the next general property tax roll, pursuant to the provisions of ORS 311.370.

SECTION 26. The amendments to ORS 308A.703 by section 25 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

SECTION 27. ORS 308A.706 is amended to read:

308A.706. (1) Notwithstanding that land may have been disqualified from special assessment, the additional taxes described under ORS 308A.703 shall not be imposed and shall remain a potential tax liability if, as of the date the disqualification is taken into account on the assessment and tax roll, the land is any of the following:

(a) Disqualified exclusive farm use zone farmland or nonexclusive farm use zone farmland that:

(A) Is not being used as farmland; and

(B) Is not being used for industrial, commercial, residential or other use that is incompatible with a purpose to return the land to farm use.

(b) Acquired by a governmental agency or body as a result of an exchange of the land for land of approximately equal value held by the governmental agency or body.

(A) The land is registered under ORS 273.581 as a natural heritage conservation area;

(B) The land is acquired by a private nonprofit corporation;

(C) The land is retained by the corporation, or transferred to the state by the corporation, for the purpose of educational, scientific and passive recreational use consistent with conservation of the ecological values and natural heritage elements of the area;

(D) If the land is retained by the corporation, it remains open to the public without charge for the uses described in subparagraph (C) of this paragraph; and

(E) The land is managed pursuant to a voluntary management agreement under ORS 273.581 (5).

(d) Qualified for special assessment under:

(A) ORS 308A.062, relating to farm use special assessment of land in an exclusive farm use zone;

(B) ORS 308A.068, relating to farm use special assessment of nonexclusive farm use zone farmland;

[(D) ORS 321.730, relating to classification as Western Oregon Small Tract Optional Tax forestland;]

[(E)] (D) ORS 321.815, relating to classification as designated forestland in eastern Oregon; or

[(F)] (E) ORS 215.808, relating to wildlife habitat open space use assessment.

[(e) Declassified Western Oregon Small Tract Optional Tax forestland that is considered to be western Oregon designated forestland under ORS 321.347 (4).]

[(f)] (e) Disqualified nonexclusive farm use zone farmland, to the extent the additional taxes are deferred or abated as provided in ORS 308A.119.

(2) In any case where the additional tax is deferred under the provisions of this section but may subsequently be imposed under ORS 308A.712, the county assessor shall continue to enter the notation “potential additional tax liability” on the assessment and tax roll.

SECTION 28. The amendments to ORS 308A.706 by section 27 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 29. ORS 308A.706, as amended by section 27 of this 2003 Act, is amended to read:

(a) Disqualified exclusive farm use zone farmland or nonexclusive farm use zone farmland that:

(A) Is not being used as farmland; and

(B) Is not being used for industrial, commercial, residential or other use that is incompatible with a purpose to return the land to farm use.

(b) Acquired by a governmental agency or body as a result of an exchange of the land for land of approximately equal value held by the governmental agency or body.

(A) The land is registered under ORS 273.581 as a natural heritage conservation area;

(B) The land is acquired by a private nonprofit corporation;

(D) If the land is retained by the corporation, it remains open to the public without charge for the uses described in subparagraph (C) of this paragraph; and

(E) The land is managed pursuant to a voluntary management agreement under ORS 273.581 (5).

(d) Qualified for special assessment under:

(A) ORS 308A.062, relating to farm use special assessment of land in an exclusive farm use zone;

(B) ORS 308A.068, relating to farm use special assessment of nonexclusive farm use zone farmland;

(D) ORS 321.815, relating to classification as designated forestland in eastern Oregon; [or]

(E) Section 4 of this 2003 Act, relating to qualification as small tract forestland; or

[(E)] (F) ORS 215.808, relating to wildlife habitat open space use assessment.

(e) Disqualified nonexclusive farm use zone farmland, to the extent the additional taxes are deferred or abated as provided in ORS 308A.119.

SECTION 30. The amendments to ORS 308A.706 by section 29 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

SECTION 31. (1) Notwithstanding ORS 308A.706 and in addition to and not in lieu of any additional tax imposed under ORS 308A.703, additional taxes determined as prescribed under subsection (2) of this section shall be imposed on land that is disqualified from small tract forestland assessment under section 5 or 6 of this 2003 Act.

(2)(a) The additional taxes shall be equal to the difference between the taxes assessed against the land under sections 1 to 14 of this 2003 Act and the taxes that would have been assessed against the land:

(A) Under ORS 321.257 to 321.390, if the land is located in western Oregon; or

(B) Under ORS 321.805 to 321.825, if the land is located in eastern Oregon.

(b) The number of years for which additional taxes shall be calculated shall equal the lesser of 10 years or the number of consecutive years the land has been assessed as small tract forestland.

(3) The additional taxes described in this section shall be imposed and collected at the same time and in the same manner as additional taxes described in ORS 308A.703 are imposed and collected.

(4) The additional taxes described in this section shall be deemed assessed and imposed in the year to which the additional taxes relate.

(5) As used in this section, “western Oregon” and “eastern Oregon” have the meanings given those terms in section 1 of this 2003 Act.

SECTION 32. Section 31 of this 2003 Act applies to tax years beginning on or after July 1, 2004.

SECTION 33. Section 31 of this 2003 Act is added to and made a part of ORS 308A.700 to 308A.733.

SECTION 34. ORS 308A.709 is amended to read:

308A.709. Notwithstanding that land may have been disqualified from special assessment, no additional taxes may be imposed under ORS 308A.703 if, as of the date the disqualification is taken into account on the assessment and tax roll, the land is any of the following:

(1) Acquired by a governmental agency as a result of the lawful exercise of the power of eminent domain or the threat or imminence thereof.

(2) Acquired by purchase, agreement or donation under ORS 390.121 (relating to State Parks and Recreation Commission acquisitions).

(3) Acquired by a city, county, metropolitan service district created under ORS chapter 268 or park and recreation district organized under ORS chapter 266 for public recreational purposes or for the preservation of scenic or historic places.

(4) Acquired for wildlife management purposes under ORS 496.146.

(5) Public property that was leased or rented to a taxable owner as described in ORS 307.110 at the time of disqualification, and the reason for the disqualification was the termination of the lease under which the land was assessed.

(6) Land that ceases to be located within the boundaries of an exclusive farm use zone as the result of a change in the boundaries of the zone or removal of the zone following an action by the governing body of the county or city that:

(a) Was not requested or initiated by the owner of the land; or

(b) Was requested by:

(A) The State Parks and Recreation Department for public park purposes under ORS 390.121; or

(B) The State Fish and Wildlife Commission for wildlife management purposes under ORS 496.146.

[(7) Declassified as Western Oregon Small Tract Optional Tax forestland under ORS 321.760 (1)(c) and (d) because:]

[(a) The State Forester has determined that the predominant use of the land is for the production of cultured Christmas trees; or]

[(b) Notwithstanding ORS 321.727, the land is transferred to an owner who, upon completion of the transfer, has a total ownership of forestland in western Oregon of less than 10 acres.]

[(8)] (7) Forestland acquired by a federal, state or local governmental agency. In the case of an acquisition described in this subsection, a lien for additional taxes and interest may not attach on the day preceding the day of transfer of the forestland to the governmental agency.

SECTION 35. The amendments to ORS 308A.709 by section 34 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 36. ORS 308A.712 is amended to read:

308A.712. (1) If the disqualification of land from special assessment results in the deferral of additional taxes under ORS 308A.706:

(a) The amount of deferred additional taxes shall be determined as provided for in this section in lieu of ORS 308A.703; and

(b) The deferred additional taxes shall be added to the assessment and tax roll for the year in which the event described in subsections (2) to (6) of this section is first taken into account for property tax purposes, to be collected and distributed in the same manner as other ad valorem property taxes.

(2) If additional taxes are deferred under ORS 308A.706 (1)(a) (relating to compatible nonuse of farmland) and subsequently the land is changed to an industrial, commercial, residential or other use incompatible with a return of the land to farm use, then:

(a) The amount of additional tax due for each year to which the additional tax applies shall be the difference between the taxes assessed against the land and the taxes that would have been assessed against the land in that year had the land not been in special assessment; and

(b) The number of years for which the additional tax shall be collected shall be the total number of years (whether or not continuous) that the farm use special assessment was in effect for the land, not to exceed:

(A) In the case of disqualified exclusive farm use zone farmland located outside an urban growth boundary, 10 tax years, or such lesser number of years, corresponding to the number of years of farm use zoning applicable to the property; or

(B) In the case of all other farmland disqualified from farm use special assessment, five tax years.

(3)(a) If additional taxes are deferred under ORS 308A.706 (1)(b) (relating to government exchange of land), additional taxes shall be collected when the land acquired as a result of the exchange is disqualified from special assessment. The additional taxes shall equal the total amount of additional taxes under ORS 308A.703 (2) attributable to the number of years the land transferred to the governmental agency or body received the special assessment before the exchange plus the number of years, if any, the land acquired from the governmental agency or body received a special assessment after the exchange.

(b) The total number of years taken into account shall not exceed the maximum number of years for which additional taxes may be collected under the provision of law applicable to either the exchanged land (immediately before the exchange) or the acquired land, whichever is greater.

(4) If additional taxes are deferred under ORS 308A.706 (1)(c) (relating to natural heritage), the additional taxes that would have been imposed under ORS 308A.703 at the time of disqualification shall be collected when the land is no longer used as described in ORS 308A.706 (1)(c).

(5) If additional taxes are deferred under ORS 308A.706 (1)(d) (relating to change in special assessment), the additional taxes that would have been collected at the time of disqualification shall be collected at the time the land is disqualified from any other special assessment law listed in ORS 308A.706 (1)(d). The total amount of additional tax shall be calculated as follows:

(a) The amount of the additional tax due for each year to which the additional tax applies shall be the difference between the taxes assessed against the land and the taxes that would have been assessed against the land in that year had the land not been in special assessment; and

(b) The number of years for which the additional tax shall be collected shall be the total number of continuous tax years that a special assessment listed in ORS 308A.706 (1)(d) was in effect for the land, not to exceed:

(A) Five tax years; or

(B) If the property had, within the past 10 tax years, been disqualified from a special assessment program described in ORS 308A.703 (3)(a) or (b) and had been continuously subject to special assessment, then 10 tax years. However, the number of continuous preceding years of special assessment under the special assessment programs listed in ORS 308A.703 (3)(c) that may be taken into consideration for purposes of computing the additional tax may not exceed five years.

(6) In determining the additional tax under subsection (5) of this section,[:]

[(a)] the number of continuous preceding years of special assessment counted shall not include those years in which the land was specially assessed under any of the special assessment laws listed in ORS 308A.706 (1)(d) prior to a disqualification of the land for special assessment as exclusive farm use zone farmland under the conditions described in ORS 308A.709 (6).

[(b) The number of continuous preceding years of special assessment counted shall not include those years of special assessment under ORS 321.705 to 321.765 if the land was disqualified under the conditions described in ORS 308A.709 (7).]

SECTION 37. The amendments to ORS 308A.712 by section 36 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 38. ORS 308A.718 is amended to read:

308A.718. (1) The county assessor shall send notice as provided in this section if land is disqualified under any of the following special assessment programs:

(a) Farm use special assessment under ORS 308A.050 to 308A.128.

(b) Farm or forest homesite special assessment under ORS 308A.250 to 308A.259.

(d) Eastern Oregon designated forestland special assessment under ORS 321.805 to 321.825.

(e) Small tract forestland special assessment under sections 1 to 14 of this 2003 Act.

(2) Notwithstanding that a change in use described in this section is not a disqualification, the assessor shall send notice as provided in this section when the highest and best use of land changes from forestland to a different highest and best use.

(3) Within 30 days after the date that land is disqualified from special assessment, the assessor shall notify the taxpayer in writing of the disqualification and shall state the reason for the disqualification.

(4) Following receipt of the notification, the taxpayer may appeal the assessor’s determination to the Oregon Tax Court within the time and in the manner provided in ORS 305.404 to 305.560.

(5)(a) When any land has been granted special assessment under any of the special assessment laws listed in subsection (1) of this section and the land is disqualified from such special assessment, the county assessor shall furnish the owner with a written explanation summarizing:

(A) ORS 308A.706 (1)(d) (relating to change in special assessment);

(B) ORS 308A.727 (relating to change in use to open space use special assessment for certain golf courses);

(C) The administrative act necessary under ORS 308A.724 to change the property to another classification described in this paragraph; and

(D) The imposition of any penalties that would result from the disqualification if no requalification or reclassification is made under one of the other special assessment laws listed in this paragraph.

(b) The written explanation required by this subsection shall be given in conjunction either with the notice of disqualification required under this section or with an order or notice of disqualification otherwise provided by law.

(c)(A) If no notice of disqualification is required to be made by this section or other provision of law, the written explanation required by this subsection shall be made by the county assessor.

(B) A written explanation made under this paragraph shall be made by the assessor within 30 days of the effective date of the disqualification.

(6) Subsections (1) to (5) of this section do not apply if the reason for the disqualification is:

(a) The result of a request for disqualification by the property owner; or

(b) Because the property is being acquired by a government or tax-exempt entity.

SECTION 39. The amendments to ORS 308A.718 by section 38 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

SECTION 40. ORS 308A.724 is amended to read:

308A.724. (1)(a) In order for additional taxes imposed under ORS 308A.703 to be deferred under ORS 308A.706 (1)(d) (relating to change in special assessment), the owner must file an application or claim for classification under another special assessment law.

(b) If the disqualification is effective prior to July 1 in any year, the owner shall file the required claim or application on or before August 1 of that year.

(c) If the disqualification is effective on or after July 1 in any year, the county taxing authorities shall continue the classification on the current assessment and tax rolls, and the owner shall file the required claim or application in the next calendar year in accordance with the laws governing the particular special assessment program.

(2) If an owner of land disqualified under one of the special assessment laws listed in ORS 308A.706 (1)(d) seeks to qualify for farm use special assessment of nonexclusive farm use zone farmland under ORS 308A.068, the owner shall have five years, beginning with the first year in which application is made under this section, to qualify for the two-year farm use requirement of ORS 308A.068 and the income requirement under ORS 308A.071.

(3) Notwithstanding subsection (1) of this section, an owner may make application under this section at any time within 30 days of the date notice of disqualification is sent by the assessor under ORS 308A.718 [or declassification certification is made by the State Forester under ORS 321.760].

SECTION 41. The amendments to ORS 308A.724 by section 40 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 42. ORS 308A.730 is amended to read:

308A.730. (1) If land specially valued under ORS 308A.062, 308A.068, 321.257 to 321.390[, 321.720] or 321.805 to 321.825 is acquired by a governmental agency or body as a result of an exchange of the land for land of approximately equal value held by the governmental agency or body and the land acquired from the governmental agency or body is not farm use land located within an exclusive farm use zone or is not land, the highest and best use of which is the growing and harvesting of trees of a marketable species, the owner shall make application for special valuation as farm or forest land in the manner provided under ORS 308A.077, 321.358[, 321.730] or 321.815, whichever is applicable, as follows:

(a) If the exchange takes place prior to July 1, the owner shall file the application on or before August 1.

(b) If the exchange takes place on or after July 1, the owner shall file the application on or before April 1 of the following year.

(2) Failure to file an application as required under this section, or failure to otherwise meet the qualification for special valuation under the special assessment law for which application is made shall disqualify the land under ORS 308A.703. However, the amount of additional taxes imposed upon the disqualification under this subsection shall be equal to those that would have been imposed against the land transferred to the governmental agency or body on account of the exchange were it not for ORS 308A.706 (1)(b).

(3) If an application filed under this section is for classification for farm use special assessment under ORS 308A.068, the owner shall have five years beginning with the first year of classification to meet the income requirements under ORS 308.372 and need not meet the two-year farm use requirements of ORS 308A.068.

(4) This section [shall] does not apply to an exchange of forestland to which ORS 308A.706 (1)(b) (relating to governmental exchange) applies.

SECTION 43. The amendments to ORS 308A.730 by section 42 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 44. ORS 308A.730, as amended by section 42 of this 2003 Act, is amended to read:

308A.730. (1) If land specially valued under ORS 308A.062, 308A.068, 321.257 to 321.390 or 321.805 to 321.825 or sections 1 to 14 of this 2003 Act is acquired by a governmental agency or body as a result of an exchange of the land for land of approximately equal value held by the governmental agency or body and the land acquired from the governmental agency or body is not farm use land located within an exclusive farm use zone or is not land, the highest and best use of which is the growing and harvesting of trees of a marketable species, the owner shall make application for special valuation as farm or forest land in the manner provided under ORS 308A.077, 321.358 or 321.815 or section 3 of this 2003 Act, whichever is applicable, as follows:

(a) If the exchange takes place prior to July 1, the owner shall file the application on or before August 1.

(b) If the exchange takes place on or after July 1, the owner shall file the application on or before April 1 of the following year.

(4) This section does not apply to an exchange of forestland to which ORS 308A.706 (1)(b) (relating to governmental exchange) applies.

SECTION 45. The amendments to ORS 308A.730 by section 44 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

SECTION 46. ORS 308A.733 is amended to read:

308A.733. (1) Where any property has been granted special assessment for the purposes of property taxation under any of the special assessment laws listed in subsection (2) of this section, and the owner or other qualified person applies for a change in the classification under another special assessment law, the applicant shall have 30 days thereafter within which to withdraw the application, by giving written notice to the public official or agency to whom the applicant applied for the change in classification. If no notice of withdrawal is given by the applicant, the application shall be acted upon and the change in classification made, as otherwise provided by law.

(2) This section applies to the following special assessment laws:

(a) ORS 308A.050 to 308A.128 (relating to special assessment at value for farm use).

(b) ORS 321.347, 321.348, 321.353, 321.358 and 321.359 (relating to special assessment as designated forestland in western Oregon).

[(d) ORS 321.705 to 321.765 (relating to classification as Western Oregon Small Tract Optional Tax forestland).]

[(e)] (d) ORS 308A.300 to 308A.330 (relating to classification as open space land).

[(f)] (e) ORS 308A.350 to 308A.383 (relating to designation as riparian land).

SECTION 47. The amendments to ORS 308A.733 by section 46 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 48. ORS 308A.733, as amended by section 46 of this 2003 Act, is amended to read:

(2) This section applies to the following special assessment laws:

(a) ORS 308A.050 to 308A.128 (relating to special assessment at value for farm use).

(b) ORS 321.347, 321.348, 321.353, 321.358 and 321.359 (relating to special assessment as designated forestland in western Oregon).

(d) Sections 1 to 14 of this 2003 Act (relating to special assessment as small tract forestland).

[(d)] (e) ORS 308A.300 to 308A.330 (relating to classification as open space land).

[(e)] (f) ORS 308A.350 to 308A.383 (relating to designation as riparian land).

SECTION 49. The amendments to ORS 308A.733 by section 48 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

SECTION 50. ORS 308A.743 is amended to read:

308A.743. (1) Land that is specially assessed under ORS 215.800 to 215.808, 308A.050 to 308A.128, 308A.300 to 308A.330, 321.257 to 321.390[, 321.705 to 321.765] or 321.805 to 321.825, or land that is exempt from property tax under ORS 308A.350 to 308A.383, may not be disqualified from the special assessment or exemption, and may not be subject to additional taxes under ORS 308A.700 to 308A.733, if the property owner has:

(a) Entered into a wildlife habitat conservation and management plan, as described in ORS 215.800 to 215.808, approved by the State Department of Fish and Wildlife; or

(b) Executed a conservation easement, as defined in ORS 271.715, or a deed restriction and the land:

(A) Is managed in compliance with the conservation easement or deed restriction; and

(B) Continues to meet the requirements for special assessment or exemption. The existence of the conservation easement or deed restriction may not cause the disqualification of the land from special assessment or exemption or preclude the disqualification of the land from special assessment or exemption for some other reason.

(2) A property owner who executes a conservation easement may convey the easement to a land trust or other qualified entity without a loss of benefits under this section.

(3) In order for land to be subject to this section:

(a) The conservation easement, deed restriction or wildlife habitat conservation and management plan must be recorded in the records of the clerk of the county in which the land is located; and

(b) A copy of the conservation easement, deed restriction or wildlife habitat conservation and management plan, along with the property tax account number for the land, must be sent to the county assessor.

SECTION 51. The amendments to ORS 308A.743 by section 50 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 52. ORS 308A.743, as amended by section 50 of this 2003 Act, is amended to read:

308A.743. (1) Land that is specially assessed under ORS 215.800 to 215.808, 308A.050 to 308A.128, 308A.300 to 308A.330, 321.257 to 321.390 or 321.805 to 321.825 or sections 1 to 14 of this 2003 Act, or land that is exempt from property tax under ORS 308A.350 to 308A.383, may not be disqualified from the special assessment or exemption, and may not be subject to additional taxes under ORS 308A.700 to 308A.733, if the property owner has:

(a) Entered into a wildlife habitat conservation and management plan, as described in ORS 215.800 to 215.808, approved by the State Department of Fish and Wildlife; or

(b) Executed a conservation easement, as defined in ORS 271.715, or a deed restriction and the land:

(A) Is managed in compliance with the conservation easement or deed restriction; and

(2) A property owner who executes a conservation easement may convey the easement to a land trust or other qualified entity without a loss of benefits under this section.

(3) In order for land to be subject to this section:

(a) The conservation easement, deed restriction or wildlife habitat conservation and management plan must be recorded in the records of the clerk of the county in which the land is located; and

SECTION 53. The amendments to ORS 308A.743 by section 52 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

ADMINISTRATION OF

SMALL TRACT FORESTLAND

TIMBER SEVERANCE TAX

SECTION 54. ORS 321.550 is amended to read:

321.550. (1) No person shall harvest or cause to be harvested any timber from land in Oregon without first having notified the State Forester in writing with a copy to the Department of Revenue on forms prepared by the State Forester and the department of intent to harvest pursuant to ORS 321.005 to 321.185, 321.257 to 321.390, 321.405 to 321.487 and 321.560 to 321.600 and sections 1 to 14 of this 2003 Act.

(2) The notification shall specify where and when the harvest will take place and the nature of the harvest and shall include maps and other data as required by the State Forester and the department. The department shall establish by rule procedures to assure the receipt of the tax returns sent out or a report of nonharvest from the person. The department shall conduct field and office audits to ascertain the correctness of any timber tax return.

(3)(a) If[, on or after October 3, 1989,] a person fails to file a written notice as required in subsection (1) of this section with respect to any harvest over 5,000 board feet, the department shall notify the person. If, after the person has been notified, the person fails to file a written notice as required in subsection (1) of this section with respect to any subsequent harvest[,] over 5,000 board feet, there shall be added to the amount of the timber tax required to be shown on the return as a result of the subsequent harvest a delinquency penalty of $250 for each violation occurring within a calendar year. The department shall collect the penalty in the same manner as taxes are collected.

(b) No penalty shall be imposed under this subsection if a penalty for failure to file the notice with the State Forester has been imposed under ORS 527.992.

(c) The delinquency penalty shall first be added to [either] the western Oregon forestland and privilege tax imposed under ORS 321.257 to 321.390, [or] the eastern Oregon privilege tax imposed under ORS 321.405 to 321.487 or the small tract forestland timber severance tax imposed under sections 1 to 14 of this 2003 Act, if [either tax] any of these taxes is applicable to the harvest. If [neither tax is] none of the listed taxes are applicable, the delinquency penalty shall be added to the forest products harvest tax imposed under ORS 321.005 to 321.185.

SECTION 55. ORS 321.560 is amended to read:

321.560. (1)(a) The provisions of ORS chapters 305 and 314 as to the audit and examination of reports and returns, determination of deficiencies, liens, assessments, claims for refund, conferences and appeals to the Oregon Tax Court, and the procedures relating thereto, [shall] apply to the determination of taxes, penalties and interest imposed under ORS 321.005 to 321.185, 321.257 to 321.390, 321.405 to 321.487 or 321.560 to 321.600 or sections 1 to 14 of this 2003 Act, except where the context requires otherwise.

(b) In addition, on or before March 1 of the year of determination, any taxpayer may appeal to the Oregon Tax Court for the revision of a harvest value for an area determined pursuant to ORS 321.430.

(2) If a taxpayer fails to file a return required by ORS 321.045, 321.257 to 321.390 or 321.405 to 321.487 or sections 1 to 14 of this 2003 Act, or fails to pay a tax at the time the tax becomes due, there shall be added to the amount of tax required to be shown on the return a delinquency penalty of five percent of the amount of such tax.

(3) If the failure to file a return continues for a period in excess of three months after the due date, there shall be added to the amount of tax required to be shown on the return a failure to file penalty of 20 percent of the amount of such tax. This penalty is in addition to the delinquency penalty imposed by subsection (2) of this section.

(4) If all or any part of the delinquency or deficiency for which a determination is made is due to fraud or an intent to evade the provisions of ORS 321.005 to 321.185, 321.257 to 321.390, 321.405 to 321.487 or 321.560 to 321.600 or sections 1 to 14 of this 2003 Act or the rules adopted thereunder, a penalty of 100 percent of such delinquency or deficiency shall be added, plus interest at the rate established under ORS 305.220 for each month, or any fraction thereof, computed on the full amount of the delinquency or deficiency plus penalty, from the time the return was due.

(5) For purposes of this section, the amount of tax required to be shown on the return shall be reduced by the amount of any part of the tax [which] that is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax [which] that may be lawfully claimed upon the return.

(6) A delinquent tax or a deficiency shall bear interest at the rate established under ORS 305.220 for each month, or any fraction thereof, from the time the return was due.

SECTION 56. ORS 321.570 is amended to read:

321.570. (1) If any tax imposed by ORS 321.005 to 321.185, 321.257 to 321.390, 321.405 to 321.487 or 321.560 to 321.600 or sections 1 to 14 of this 2003 Act, or any portion of such tax, is not paid within 30 days after the date that the written notice and demand for payment required under ORS 305.895 is mailed, the Department of Revenue may issue a warrant, directed to the sheriff of any county of the state, commanding the sheriff to levy upon and sell the real and personal property of the taxpayer owning the same, found within that county, for the payment of the amount of the tax, with the added penalties, interest and cost of executing the warrant, and to return the warrant to the department and to pay to it the money collected from the sale, within 60 days after receipt of the warrant. A copy of the warrant shall be mailed or delivered to the taxpayer by the department at the taxpayer’s last-known address.

(2) The sheriff shall, within five days after the receipt of the warrant, record a copy with the county clerk, and the clerk shall immediately enter in the County Clerk Lien Record the name of the taxpayer mentioned in the warrant, and the amount of the tax or portion of the tax and penalties for which the warrant is issued and the date when the copy is recorded. The amount of the warrant so recorded shall become a lien upon the title to and interest in real property of the taxpayer against which it is issued, in the same manner as a judgment duly docketed. The sheriff immediately shall proceed upon the warrant in all respects, with like effect, and in the same manner prescribed by law in respect to executions issued against property upon judgments of a court of record, and shall be entitled to the same fees for services in executing the warrant, to be added to and collected as a part of the warrant liability.

(3) In the discretion of the department a warrant of like terms, force and effect may be issued and directed to any agent authorized to collect this tax. In the execution of the warrant, such agent has the powers conferred by law upon sheriffs, but is entitled to no fee or compensation in excess of actual expenses paid in the performance of such duty.

(4) If a warrant is returned not satisfied in full, the department shall have the same remedies to enforce the claim for taxes against the taxpayer as if the state had a recorded judgment against the taxpayer for the amount of the tax.

SECTION 57. ORS 321.580 is amended to read:

321.580. If any taxpayer neglects or refuses to make a return required to be made by ORS 321.005 to 321.185, 321.257 to 321.390, 321.405 to 321.487 or 321.560 to 321.600 or sections 1 to 14 of this 2003 Act, the Department of Revenue is authorized to determine the tax due, based upon any information in its possession or that may come into its possession. The department shall give the taxpayer written notice of the tax and delinquency charges and the tax and delinquency charges shall be a lien from the time of severance. If the tax and delinquency charges are not paid within 30 days from the mailing of the notice, the department shall proceed to collect the tax in the manner provided in ORS 321.570.

SECTION 58. ORS 321.600 is amended to read:

321.600. All taxes, interest and penalties due and unpaid under ORS 321.005 to 321.185, 321.257 to 321.390, 321.405 to 321.487 or 321.560 to 321.600 or sections 1 to 14 of this 2003 Act [shall] constitute a debt due the State of Oregon and may be collected, together with interest, penalty and costs, by appropriate judicial proceeding, which remedy is in addition to all other existing remedies. However, no proceeding for the collection of taxes under ORS 321.005 to 321.185, 321.257 to 321.390, 321.405 to 321.487 or 321.560 to 321.600 or sections 1 to 14 of this 2003 Act shall be instituted after the expiration of six years from the date such taxes were due.

SECTION 59. ORS 321.609 is amended to read:

321.609. (1) ORS 321.005 to 321.185, 321.257 to 321.390, 321.405 to 321.487 and 321.560 to 321.600 and sections 1 to 14 of this 2003 Act shall be enforced and the taxes imposed by ORS 321.005 to 321.185, 321.257 to 321.390, 321.405 to 321.487 and 321.560 to 321.600 and sections 1 to 14 of this 2003 Act shall be collected by the Department of Revenue, which shall have the power to prescribe forms and to adopt rules for the ascertainment, assessment and collection of the taxes imposed by ORS 321.005 to 321.185, 321.257 to 321.390, 321.405 to 321.487 or 321.560 to 321.600 or sections 1 to 14 of this 2003 Act.

(2) For the purpose of determining the taxes imposed by ORS 321.005 to 321.185, 321.257 to 321.390, 321.405 to 321.487 or 321.560 to 321.600 or sections 1 to 14 of this 2003 Act, the department may:

(a) Require any person to furnish any information deemed necessary.

(b) Examine the books, records and files of such person.

(d) Enter upon and inspect the land of any owner of the land from which any timber has been harvested.

SECTION 60. ORS 321.682 is amended to read:

321.682. Except as otherwise specifically provided by law, it shall be unlawful for the Department of Revenue or any officer or employee of the department to divulge or make known in any manner the amount of the tax or any particulars set forth or disclosed in any report or return required to be filed under ORS 321.045, 321.322, 321.435 [and] or 321.950 or section 10 of this 2003 Actor any appraisal data collected to make determinations of specially assessed value of forestland pursuant to ORS 321.201 to 321.222. It shall be unlawful for any person or entity to whom information is disclosed or given by the department pursuant to ORS 321.684 (2) or any other provision of state law to divulge or use such information for any purpose other than that specified in the provisions of law authorizing the use or disclosure. No subpoena or judicial order shall be issued compelling the department or any of its officers or employees, or any person who has acquired information pursuant to ORS 321.684 (2) or any other provision of state law, to divulge or make known the amount of tax or any particulars set forth or disclosed in any report or return except where the taxpayer’s liability for timber tax is to be adjudicated by the court from which such process issues. As used in this section, “officer,” “employee” or “person” includes an authorized representative of the officer, employee or person, or any former officer, employee or person, or an authorized representative of such former officer, employee or person.

SECTION 61. ORS 321.684 is amended to read:

321.684. (1) The Department of Revenue may:

(a) Furnish to any taxpayer or authorized representative, upon request of the taxpayer or authorized representative, a copy of the taxpayer’s [timber] tax report or return required by ORS 321.045, 321.322, 321.435 or 321.950 or section 10 of this 2003 Act that is filed with the department for any year, or a copy of any report filed by the taxpayer in connection with the return.

(b) Publish a list of taxpayers who are entitled to unclaimed tax refunds.

(c) Publish statistics classified so as to prevent the identification of taxable value or any particulars contained in any report or return.

(d) Disclose a taxpayer’s name, address and social security number or employer identification number to the extent necessary in connection with the processing and mailing of forms for any report or return required in the administration of ORS 321.045, 321.322, 321.435 and 321.950 and section 10 of this 2003 Act.

(e) Disclose names and addresses of taxpayers filing under ORS 321.282 (4) and 321.432 to Oregon State University pursuant to surveys and programs related to forest management.

(f) Disclose to the State Forester, upon request of the forester, for the purpose of soliciting nominations and conducting elections referred to in ORS 526.610, the names of producers meeting producer class qualifications established under ORS 526.610 who filed forest products harvest tax returns.

(g) Disclose appraisal data collected to make determinations of specially assessed value of forestland under ORS 321.201 to 321.222 to any member of a forestland value advisory committee the department has convened under ORS 321.213.

(2) The department also may disclose and give access to information described in ORS 321.682 to:

(a) The Commissioner of Internal Revenue or authorized representative, for tax purposes only.

(b) The United States Forest Service, Bureau of Land Management and the State Forestry Department pursuant to their regulatory programs and for investigative purposes related to timber theft.

(c) The Attorney General, assistants and employees in the Department of Justice or other legal representative of the State of Oregon, to the extent the department considers disclosure or access necessary for the performance of the duties of advising or representing the department pursuant to ORS 321.045, 321.322, 321.435 and 321.950 and section 10 of this 2003 Act.

(d) Employees of the State of Oregon, other than the Department of Revenue or Department of Justice, to the extent the department considers disclosure or access necessary for such employees to perform their duties under contracts or agreements between the department and any other department, agency or subdivision of the State of Oregon in the department’s administration of the tax laws.

(e) The Legislative Revenue Officer or the authorized representative upon compliance with ORS 173.850. Such officer or representative shall not remove from the premises of the department any materials that would reveal the identity of any taxpayer or any other person or the volume of harvest and value reported on individual returns and reports.

(f) Any agency of the State of Oregon, or any person, or any officer or employee of such agency or person to whom disclosure or access is given by state law and not otherwise referred to in this section, including but not limited to the Secretary of State as Auditor of Public Accounts under section 2, Article VI of the Constitution of the State of Oregon.

(3) Each officer or employee of the department and each person described or referred to in subsection (2)(b) to (f) of this section to whom disclosure or access to the tax information is given under subsection (2) of this section or any other provision of state law, prior to beginning employment or the performance of duties involving such disclosure or access, shall be advised in writing of the provisions of ORS 321.682 and 321.686 relating to penalties for the violation of ORS 321.682, and shall, as a condition of employment or performance of duties, execute a certificate for the department, in a form prescribed by the department, stating in substance that the person has read these provisions of law, that the person has had them explained and that the person is aware of the penalties for the violation of ORS 321.682.

SECTION 62. The amendments to ORS 321.550, 321.560, 321.570, 321.580, 321.600, 321.609, 321.682 and 321.684 by sections 54 to 61 of this 2003 Act apply to timber harvest, privilege and severance tax reporting periods beginning on or after January 1, 2004, and to property tax years beginning on or after July 1, 2004.

CURRENT FOREST TAXATION PROGRAMS

CONFORMING AMENDMENTS

SECTION 62a. ORS 321.282 is amended to read:

321.282. (1) The Department of Revenue shall determine on or before February 1 of each year the immediate harvest values as of January 1 of the calendar year for which the immediate harvest values are to be used in computing the privilege tax imposed by ORS 321.273. The values shall be determined for each species or subclassification, as provided in subsection (2) of this section, and shall be expressed in terms of a dollar amount per thousand board foot or other unit measure. The total listing of values shall be combined into a convenient set of tables issued by the department. A copy of the tables shall be retained on file in the office of the department.

(2) The department shall select various areas in western Oregon to be treated as units for the application of the immediate harvest values determined under this section. The department shall determine unit values for immediate harvest for each species in each area. The department may make further value classifications based on age, size and other relevant factors. The areas shall be selected, within the discretion of the department based on administrative feasibility, to include timber having similar growing and marketing conditions. The determination of the size and location of appropriate areas shall not be subject to review by the courts.

(3) Public hearings shall be held at least 45 days prior to the adoption of timber valuation schedules or changes in the boundaries of valuation areas developed in accordance with subsections (1) and (2) of this section. Notice of the hearings shall be published in a newspaper of general circulation throughout the state at least 14 days prior to the hearings date. In addition, the department may cause notice to be broadcast pursuant to ORS 193.310 to 193.360.

(4)(a) A taxpayer who [harvests less than 500,000 board feet of timber in the calendar year or who has less than 1,000] owns or holds in common ownership less than 5,000 acres of forestland in western Oregon, and who, during the calendar year immediately preceding the due date of the privilege tax return, is not engaged in and does not have an ownership interest of more than 10 percent in a business engaged in the processing of timber into wood products, may elect to calculate and pay a tax on the basis of net stumpage recovery from such forestland rather than by use of the tables prepared in accordance with subsections (1) and (2) of this section.

(b) For purposes of this subsection, “net stumpage recovery” means the selling price of the logs at a conversion center in an arm’s length transaction, less the costs described in one of the following subparagraphs:

(A) The logging costs reflected by a written agreement entered into in connection with the logging operation. The department may analyze the agreement and adjust the contract price to eliminate costs paid by the taxpayer for work or material not connected with logging, log hauling costs and marketing the timber.

(B) Administration, logging and log hauling costs typical for the type of harvest as determined by the department.

(c) The department may require such proof from the taxpayer as it deems necessary to determine the amount of stumpage recovery and eligibility for the alternate calculation of the tax provided in this subsection.

SECTION 62b. The amendments to ORS 321.282 by section 62a of this 2003 Act apply to timber privilege tax reporting periods beginning on or after January 1, 2003.

SECTION 63. ORS 321.307, as amended by section 11a, chapter 860, Oregon Laws 2001, is amended to read:

321.307. (1) The revenue from the taxes imposed by ORS 321.273 shall be remitted by the Department of Revenue to the State Treasurer, who shall deposit it in a suspense account, separate and distinct from the General Fund, established under the provisions of ORS 293.445 [which] that shall be known as the Western Oregon Timber Tax Account. Interest earned on cash balances invested by the State Treasurer shall be credited to this account. Moneys are appropriated continuously from the Western Oregon Timber Tax Account for use in reimbursing the General Fund for expenses incurred in the collection of taxes imposed by ORS 321.273 and other expenses associated with forest taxation, and for costs incurred by the State Forestry Department in carrying out ORS 315.104 and [321.705 to 321.765 for the period beginning July 1, 2001, and ending July 1, 2003] 321.367.

(2) Notwithstanding the provisions of ORS 291.238, the amount of moneys necessary to pay refunds of the taxes imposed by ORS 321.273 is appropriated continuously to the department and shall be used by the department for the payment of all refunds of taxes imposed by ORS 321.273 which have been audited and approved by the department. This appropriation shall be from the Western Oregon Timber Tax Account. Any penalties, interest and taxes due from the taxpayer on account of taxes imposed by ORS 321.273 shall be applied in that order in computing any refund, and only the balance due the taxpayer, if any, shall be refunded.

(3) Moneys remaining in the Western Oregon Timber Tax Account following the appropriations described in subsections (1) and (2) of this section shall be distributed as follows:

(a) Sixty-five percent of moneys that are derived from the harvest of timber on land subject to assessment under ORS 321.353 (6) to (10) shall be distributed as follows:

(A) Ninety-three percent of the amount distributed under this paragraph shall be transferred to and is continuously appropriated to the State School Fund for the purposes for which State School Fund moneys may be spent.

(B) Seven percent of the amount distributed under this paragraph shall be transferred to and is continuously appropriated to the Community College Support Fund established under ORS 341.620.

(b) Thirty-five percent of moneys that are derived from the harvest of timber on land subject to assessment under ORS 321.353 (6) to (10) shall be distributed to county general funds of western Oregon counties.

(B) Seven percent of the amount distributed under this paragraph shall be transferred to and is continuously appropriated to the Community College Support Fund established under ORS 341.620.

(4)(a) Moneys that are to be distributed to western Oregon counties under subsection (3)(b) of this section shall be distributed to each western Oregon county in the proportion that the assessed value of forestland in the county for the preceding fiscal year bears to the total assessed value of forestland for the preceding fiscal year.

(b) The Department of Revenue may adopt rules to further implement the distribution calculation described in this subsection.

(5) All moneys distributed to counties pursuant to subsection (4) of this section are continuously appropriated to the counties to which the moneys are distributed. On or before August [31] 15 of each fiscal year, the department shall determine the amount distributable to counties from the Western Oregon Timber Tax Account as of May [15] 1 of the preceding fiscal year, and shall remit to the counties the amounts so determined. The department shall certify to the county assessor the amount remitted to the county under this subsection.

(6) The amount of Western Oregon Timber Tax Account moneys to be transferred for a fiscal year under subsection (3)(a) and (c) of this section shall be determined as of May [15] 1 of the fiscal year and transferred on or before May [31] 15 of the fiscal year in which the distribution is being made.

(7) A working balance may be retained in the Western Oregon Timber Tax Account for the payment of administrative expenses described in subsection (1) of this section.

SECTION 64. The amendments to ORS 321.307 by section 63 of this 2003 Act apply to Western Oregon Timber Tax Account distributions occurring on or after July 1, 2003.

SECTION 65. ORS 321.353, as amended by section 1, chapter 860, Oregon Laws 2001, is amended to read:

321.353. (1) The assessed value of forestland in western Oregon that is not subject to special assessment under ORS 321.354 [or 321.720] shall be determined as provided in subsection (8) of this section.

(2) Notwithstanding ORS 308.205, 308.232 or 321.352 or other law and subject to subsection (3) of this section, forestland in western Oregon that is assessed under this section shall be considered to have a base value per acre in accordance with the following schedule:

______________________________________________________________________________

Land Class Value Per Acre

FA $720

FB $619

FC $396

FD $299

FE $171

FF $42

FG $7

FX $1

______________________________________________________________________________

(3)(a)(A) For tax years beginning on or after July 1, 1995, and before July 1, 2001, the base values per acre as determined under subsection (2) of this section shall be adjusted according to the change calculated under this paragraph.

(B) The Department of Revenue shall determine the adjusted base values per acre by multiplying the adjusted base values per acre for the previous year by the value index calculated by the department and certified to the appropriate county assessors under subsection (4) of this section. For the tax year beginning July 1, 1995, the “adjusted base values per acre for the previous year” means the base values set forth in subsection (2) of this section.

(C) As used in this paragraph, “value index” means the number 1.0 plus the decimal equivalent of 50 percent of the change, whether positive or negative, in the Average Western Oregon Log Value, as defined in ORS 321.257 (1997 Edition) for:

(i) The current and seven preceding six-month periods when compared with a similar calculation made one year previously for the tax year beginning July 1, 1995;

(ii) The current and nine preceding six-month periods when compared with a similar calculation made one year previously for the tax year beginning July 1, 1996;

(iii) The current and 11 preceding six-month periods when compared with a similar calculation made one year previously for the tax year beginning July 1, 1997; and

(iv) The current and 13 preceding six-month periods when compared with a similar calculation made one year previously for all tax years beginning on or after July 1, 1998.

(D) As used in this paragraph, “current” means the six-month period last ending before the calculation is made.

(E) For purposes of determining forestland values under this paragraph, forestland in western Oregon shall be divided into those land market areas as the department shall establish by rule.

(b)(A) For the tax year beginning July 1, 2001, and for each tax year thereafter, the adjusted base values per acre assessed under this section shall be determined by the department by multiplying the adjusted base values per acre for the previous tax year by the value index calculated by the department and certified to the appropriate county assessors under subsection (4) of this section.

(B) As used in this paragraph, “value index” means the number 1.0 plus the decimal equivalent of one-half of the percentage change, whether positive or negative, in the average of the Average Pacific Northwest Coast Lumber Price Index values over the seven preceding one-year (calendar) periods when compared with the corresponding average calculated with respect to the previous year.

(4) On or before July 1 of each tax year, the department shall determine and certify to the appropriate county assessors the adjusted base values per acre in western Oregon that are assessed under this section. Except as provided in ORS 321.352 (6), the county assessor shall use the values so certified in the preparation of the assessment and tax rolls of the county each tax year.

(5) ORS 321.352 (5) to (7) apply to the adjusted base values determined under this section.

(6) For the tax year beginning July 1, 1995, and for each tax year thereafter that begins before July 1, [2003] 2004, forestland in western Oregon that is not assessed under ORS 321.354 [or 321.720] shall be subject to ad valorem taxation at the same rates as nonforestland similarly situated. However, the specially assessed value for taxation of such forestland shall not exceed 20 percent of its value determined under this section.

(7) For each land class described in subsection (2) of this section, the forestland maximum assessed value per acre of forestland assessed under this section shall equal 103 percent of the forestland assessed value per acre for the preceding tax year or 100 percent of the forestland maximum assessed value per acre for the preceding tax year, whichever is greater.

(8) The assessor shall compute the assessed value of forestland by taking the lesser of the value established under subsection (6) of this section or subsection (7) of this section and multiplying the value by the acreage of the forestland.

(9) If the forestland being assessed consists of different land classes, the assessed value of the forestland shall be the sum of the assessed values computed for each land class under subsection (8) of this section.

(10) For the first assessment year for which property is designated as forestland, the forestland’s assessed value shall be determined as provided in subsection (8) of this section.

SECTION 66. The amendments to ORS 321.353 by section 65 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 67. ORS 321.354, as amended by section 7, chapter 1078, Oregon Laws 1999, and section 2, chapter 860, Oregon Laws 2001, is amended to read:

321.354. (1)(a) The Department of Revenue shall identify the forestland that is held in common ownership of 5,000 acres or more as of [January 1, 2000] the assessment date for each tax year.

(b) Forestland that the department has [so] identified under paragraph (a) of this subsection that, for the previous tax year, was subject to small tract forestland assessment shall be disqualified from small tract forestland assessment and shall be subject to special assessment as provided in this section [for] as of the first tax year [beginning July 1, 2000,] the forestland is held in common ownership of 5,000 acres or more [and for subsequent tax years, without regard to whether the forestland continues to be held in common ownership of 5,000 acres or more].

(c) For purposes of this subsection, “forestland” includes land that meets the definition of forestland under ORS 321.805.

(2) Forestland assessed under this section shall[:]

[(a) Be disqualified from special assessment at a value per acre equal to 75 percent of the value per acre determined under ORS 321.353 (2) to (5) for the applicable land class of the forestland; and]

[(b) qualify for special assessment at a] have a specially assessed value per acre equal to the [specially assessed] value certified to the county assessor for the tax year under ORS 321.216 for the applicable land class of the forestland.

(3) For each land class described in ORS 321.210, the forestland maximum assessed value per acre shall equal 103 percent of the forestland assessed value per acre for the preceding tax year or 100 percent of the forestland maximum assessed value per acre for the preceding tax year, whichever is greater.

(4)(a) The assessor shall compute the assessed value of forestland by multiplying the acreage of the forestland in each land class by the lesser of:

(A) The specially assessed value per acre; or

(B) The maximum assessed value per acre.

(b) If the forestland being assessed consists of different land classes, the assessed value of the forestland shall be the sum of the assessed values computed for each land class under paragraph (a) of this subsection.

(5) Notwithstanding subsection (4) of this section, the forestland shall be assessed as provided in ORS 308.232 if the real market value of the forestland is less than the value established under subsection (4) of this section.

(6) For purposes of this section:

(a) The department shall certify to the county assessor of a county in which forestland identified in subsection (1) of this section is located a list of the property tax accounts containing forestland so identified.

(b) Forestland shall be considered to be in common ownership if the forestland is owned by the person directly or is owned by a corporation, partnership, association or other entity in which the person owns a majority interest.

(c) Additional taxes may not be imposed as a result of a disqualification under subsection [(2)(a)] (1) of this section.

(d) The notification requirements and other procedures that the county assessor must follow in disqualifying forestland do not apply to a disqualification occurring under subsection [(2)(a)] (1) of this section.

(e) The department shall notify the county assessor of forestland identified under subsection (1)(a) of this section that is located in that county.

SECTION 68. The amendments to ORS 321.354 by section 67 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

SECTION 69. Section 4, chapter 1078, Oregon Laws 1999, is repealed on July 1, 2004.

SECTION 70. The repeal of section 4, chapter 1078, Oregon Laws 1999, by section 69 of this 2003 Act does not affect the disqualification of forestland under section 4, chapter 1078, Oregon Laws 1999, that occurred prior to the repeal of section 4, chapter 1078, Oregon Laws 1999.

SECTION 71. ORS 321.356 is amended to read:

321.356. (1) For the tax year beginning July 1, [2003] 2004, forestland subject to special assessment under ORS 321.353 for the previous tax year shall be disqualified from such special assessment. For the tax year beginning July 1, [2003] 2004, and for each tax year thereafter, the forestland described in this section shall be assessed as provided in ORS 321.354.

(2) Additional taxes may not be imposed as a result of a disqualification under this section.

(3) The notification requirements and other procedures that the county assessor must follow in disqualifying forestland do not apply to a disqualification under this section.

SECTION 71a. ORS 321.432 is amended to read:

321.432. (1) A taxpayer who [harvests less than 500,000 board feet of timber in the calendar year] owns or holds in common ownership less than 5,000 acres of forestland in eastern Oregon and who, during the 12-month period immediately preceding the due date of the privilege tax return, is not engaged in and does not have an ownership interest of more than 10 percent in a business engaged in the processing of timber into wood products, may elect to calculate and pay a tax on the basis of net stumpage recovery from such forestland rather than by use of the tables prepared in accordance with ORS 321.430.

(2) For purposes of this section, “net stumpage recovery” means the selling price of the logs at a conversion center in an arm’s length transaction, less the costs described in one of the following paragraphs:

(a) The logging costs reflected by a written agreement entered into in connection with the logging operation. The Department of Revenue may analyze the agreement and adjust the contract price to eliminate costs paid by the taxpayer for work or material not connected with logging, log hauling costs and marketing the timber.

(b) Administration, logging and log hauling costs typical for the type of harvest as determined by the department.

(3) The department may require such proof from the taxpayer as it deems necessary to determine the amount of stumpage recovery and eligibility for the alternate calculation of the tax provided in this section.

SECTION 71b. The amendments to ORS 321.432 by section 71a of this 2003 Act apply to timber privilege tax reporting periods beginning on or after January 1, 2003.

SECTION 72. ORS 321.485 is amended to read:

321.485. (1) The revenue from the taxes imposed by ORS 321.405 to 321.487 shall be remitted by the Department of Revenue to the State Treasurer, who shall deposit it in a suspense account, separate and distinct from the General Fund, established under the provisions of ORS 293.445 [which] that shall be known as the Eastern Oregon Timber Tax Account. Interest earned on cash balances invested by the State Treasurer shall be credited to this account. Moneys are appropriated continuously from the Eastern Oregon Timber Tax Account for use in reimbursing the General Fund for expenses incurred in the collection of taxes imposed by ORS 321.405 to 321.487 and other expenses associated with administering forest taxes and for costs incurred by the State Forestry Department in carrying out the provisions of ORS 526.425 by providing assistance to nonindustrial private forest landowners in eastern Oregon.

(2) Notwithstanding the provisions of ORS 291.238, the amount of moneys necessary to pay refunds of the taxes imposed under ORS 321.405 to 321.487 is appropriated continuously to the department from the suspense account referred to in subsection (1) of this section, and shall be used by the department for the payment of all refunds of taxes imposed under ORS 321.405 to 321.487 which have been audited and approved by the department. Any penalties, interest and taxes then due from the taxpayer shall be applied in that order in computing any refund, and only the balance due the taxpayer, if any, shall be refunded.

(3) Moneys remaining in the Eastern Oregon Timber Tax Account following the appropriations described in subsections (1) and (2) of this section shall be distributed as follows:

(a) Sixty-five percent of moneys that are derived from the harvest of timber on land subject to assessment under ORS 321.811 (8) to (11) shall be distributed as follows:

(B) Seven percent of the amount distributed under this paragraph shall be transferred to and is continuously appropriated to the Community College Support Fund established under ORS 341.620.

(b) Thirty-five percent of moneys that are derived from the harvest of timber on land subject to assessment under ORS 321.811 (8) to (11) shall be distributed to county general funds of eastern Oregon counties.

(B) Seven percent of the amount distributed under this paragraph shall be transferred to and is continuously appropriated to the Community College Support Fund established under ORS 341.620.

(4)(a) Moneys that are to be distributed to eastern Oregon counties under subsection (3)(b) of this section shall be distributed to each eastern Oregon county in the proportion that the assessed value of forestland in the county in the preceding fiscal year bears to the total assessed value of forestland for the preceding fiscal year.

(b) The Department of Revenue may adopt rules to further implement the distribution calculation described in this subsection.

(5) All moneys distributed to counties pursuant to subsection (4) of this section are continuously appropriated to the counties to which the moneys are distributed. On or before August [31] 15 of each fiscal year, the department shall determine the amount distributable to counties from the Eastern Oregon Timber Tax Account as of May [15] 1 of the preceding fiscal year, and shall remit to the counties the amounts so determined. The department shall certify to the county assessor the amount remitted to the county under this subsection.

(6) The amount of Eastern Oregon Timber Tax Account moneys to be transferred for a fiscal year under subsection (3)(a) and (c) of this section shall be determined as of May [15] 1 of the fiscal year and transferred on or before May [31] 15 of the fiscal year in which the distribution is being made.

(7) A working balance may be retained in the Eastern Oregon Timber Tax Account for the payment of administrative expenses described in subsection (1) of this section.

SECTION 73. The amendments to ORS 321.485 by section 72 of this 2003 Act apply to Eastern Oregon Timber Tax Account distributions occurring on or after July 1, 2003.

SECTION 74. ORS 321.811, as amended by section 7, chapter 860, Oregon Laws 2001, is amended to read:

321.811. (1) The assessed value of forestland in eastern Oregon that is not subject to special assessment under ORS 321.812 shall be determined as provided in subsection (10) of this section.

(2) Notwithstanding ORS 308.205 and 308.235, and for purposes of ORS 308.232, the adjusted base value per acre that is assessed under this section shall be determined under subsections (2) to (7) of this section. Land that has been designated as forestland under ORS 321.805 to 321.825 shall be valued as forestland under subsections (2) to (7) of this section and shall be noted on the assessment and tax roll as being forestland potentially subject to additional taxes under ORS 308A.700 to 308A.733.

(3) Subject to subsection (4) of this section, for tax years beginning on or after July 1, 1995, forestland shall be considered, for purposes of ORS 321.805 to 321.825, to have a base value of $42 per acre.

(4) Each tax year beginning on or after July 1, 1995, the value of forestland shall be determined by multiplying the adjusted base value per acre for the previous tax year by the value index calculated by the Department of Revenue and certified to the appropriate county assessors under subsection (5) of this section.

(5) The Department of Revenue shall calculate and certify to each county assessor on or before July 1 of each tax year the adjusted base value per acre to be used in determining the assessed value of forestland that is assessed under this section. Except as provided in ORS 321.810 (6), the county assessor shall use the adjusted base value so certified in the preparation of the assessment and tax roll.

(6) As used in subsections (2) to (7) of this section, “ value index” means the number 1.0 plus the decimal equivalent of one-half of the percentage change, whether positive or negative, in the average of the Average Pacific Northwest Inland Lumber Price Index values over the five preceding one-year (calendar) periods when compared with the corresponding average calculated with respect to the previous year.

(7) ORS 321.810 (5) to (7) apply to the adjusted base values determined under subsections (2) to (7) of this section.

(8) For the tax year beginning July 1, 1995, and for each tax year thereafter that begins before July 1, [2003] 2004, forestland that is not assessed under ORS 321.812 shall be subject to ad valorem property taxation at the same rates as nonforestland similarly situated. However, the specially assessed value for taxation of such forestland shall not exceed 20 percent of the adjusted base value per acre determined under subsections (2) to (7) of this section.

(9) Forestland assessed under this section shall have a maximum assessed value per acre equal to 103 percent of the forestland assessed value per acre for the preceding tax year or 100 percent of the forestland maximum assessed value per acre for the preceding tax year, whichever is greater.

(10) The assessor shall compute the assessed value of forestland by taking the lesser of the value established under subsection (8) of this section or subsection (9) of this section and multiplying the value by the acreage of the forestland.

(11) For the first assessment year for which property is designated as forestland, the forestland’s assessed value shall be determined as provided in subsection (10) of this section.

SECTION 75. ORS 321.812, as amended by section 40, chapter 1078, Oregon Laws 1999, and section 8, chapter 860, Oregon Laws 2001, is amended to read:

321.812. (1)(a) The Department of Revenue shall identify the forestland that is held in common ownership of 5,000 acres or more as of [January 1, 2000] the assessment date for each tax year.

(b) Forestland that the department has [so] identified under paragraph (a) of this subsection that, for the previous tax year, was subject to small tract forestland assessment shall be disqualified from any small tract forestland assessment and shall be subject to special assessment as provided in this section [for] as of the first tax year [beginning July 1, 2000,] the forestland is held in common ownership of 5,000 acres or more [and for subsequent tax years, without regard to whether the forestland continues to be held in common ownership of 5,000 acres or more].

(c) For purposes of this subsection, “forestland” includes land that meets the definition of forestland under ORS 321.257.

(2) Forestland assessed under this section shall[:]

[(a) Be disqualified from special assessment at a value per acre equal to 75 percent of the value per acre determined under ORS 321.811 (2) to (7); and]

[(b) qualify for special assessment at a] have a specially assessed value per acre equal to the [specially assessed] value certified to the county assessor for the tax year under ORS 321.216.

(3) Forestland assessed under this section shall have a maximum assessed value per acre equal to 103 percent of the forestland assessed value per acre for the preceding tax year or 100 percent of the forestland maximum assessed value per acre for the preceding tax year, whichever is greater.

(4)(a) The assessor shall compute the assessed value of forestland by multiplying the acreage of the forestland by the lesser of:

(A) The specially assessed value per acre; or

(B) The maximum assessed value per acre.

(b) Notwithstanding paragraph (a) of this subsection, the forestland shall be assessed as provided in ORS 308.232 if the real market value of the forestland is less than the value established under paragraph (a) of this subsection.

(5) For purposes of this section:

(c) Additional taxes may not be imposed as a result of a disqualification under subsection [(2)(a)] (1) of this section.

(e) The department shall notify the county assessor of forestland identified under subsection (1)(a) of this section that is located in that county.

SECTION 76. The amendments to ORS 321.812 by section 75 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

SECTION 77. Section 37, chapter 1078, Oregon Laws 1999, is repealed on July 1, 2004.

SECTION 78. The repeal of section 37, chapter 1078, Oregon Laws 1999, by section 77 of this 2003 Act does not affect the disqualification of forestland under section 37, chapter 1078, Oregon Laws 1999, that occurred prior to the repeal of section 37, chapter 1078, Oregon Laws 1999.

SECTION 79. ORS 321.814 is amended to read:

321.814. (1) For the tax year beginning July 1, [2003] 2004, forestland subject to special assessment under ORS 321.811 for the previous tax year shall be disqualified from such special assessment, and shall be assessed as provided in ORS 321.812.

(2) Additional taxes may not be imposed as a result of a disqualification under this section.

(3) The notification requirements and other procedures that the county assessor must follow in disqualifying forestland do not apply to a disqualification under this section.

REPEAL OF WESTERN OREGON

SMALL TRACT OPTIONAL TAX

SECTION 80. ORS 321.763 is amended to read:

321.763. (1) For the tax year beginning July 1, 2003, forestland classified under ORS 321.705 to 321.765 (repealed) shall be declassified from such classification. For the tax year beginning July 1, 2003, and for each tax year thereafter, the forestland described in this section shall be assessed as provided in ORS 321.354.

(2) Additional taxes may not be imposed as a result of a declassification under this section.

(3) The notification requirements and other procedures that the State Forester and county assessor must follow in declassifying forestland do not apply to a declassification under this section.

(4) A declassification of forestland classified under ORS 321.705 to 321.765 (repealed) constitutes a disqualification for purposes of section 11, Article XI of the Oregon Constitution.

SECTION 81. ORS 92.102, 308A.721, 321.705, 321.710, 321.715, 321.720, 321.725, 321.727, 321.730, 321.732, 321.737, 321.745, 321.747, 321.760 and 321.765 are repealed.

SECTION 82. The repeal of ORS 321.705, 321.710, 321.715, 321.720, 321.725, 321.727, 321.730, 321.732, 321.737, 321.745, 321.747, 321.760 and 321.765 by section 81 of this 2003 Act does not affect the classification or declassification of land under ORS 321.705 to 321.765 or the imposition, collection or administration of ad valorem property taxes imposed on land classified under ORS 321.705 to 321.765 in property tax years ending before July 1, 2003.

SECTION 83. ORS 321.763 is repealed July 1, 2004.

SECTION 84. The repeal of ORS 321.763 by section 83 of this 2003 Act does not affect the declassification of western Oregon small tract optional tax forestland under ORS 321.763 that occurred prior to the repeal of ORS 321.763.

SECTION 85. ORS 215.236 is amended to read:

215.236. (1) As used in this section, “dwelling” means a single-family residential dwelling not provided in conjunction with farm use.

(2) The governing body or its designee may not grant final approval of an application made under ORS 215.213 (3) or 215.284 (1), (2), (3), (4) or (7) for the establishment of a dwelling on a lot or parcel in an exclusive farm use zone that is, or has been, receiving special assessment without evidence that the lot or parcel upon which the dwelling is proposed has been disqualified for special assessment at value for farm use under ORS 308A.050 to 308A.128 or other special assessment under ORS 308A.315, 321.257 to 321.390[, 321.730 or 321.815] or 321.805 to 321.825 or sections 1 to 14 of this 2003 Act and any additional tax imposed as the result of disqualification has been paid.

(3) The governing body or its designee may grant tentative approval of an application made under ORS 215.213 (3) or 215.284 (1), (2), (3), (4) or (7) for the establishment of a dwelling on a lot or parcel in an exclusive farm use zone that is specially assessed at value for farm use under ORS 308A.050 to 308A.128 upon making the findings required by ORS 215.213 (3) or 215.284 (1), (2), (3), (4) or (7). An application for the establishment of a dwelling that has been tentatively approved shall be given final approval by the governing body or its designee upon receipt of evidence that the lot or parcel upon which establishment of the dwelling is proposed has been disqualified for special assessment at value for farm use under ORS 308A.050 to 308A.128 and any additional tax imposed as the result of disqualification has been paid.

(4) The owner of a lot or parcel upon which the establishment of a dwelling has been tentatively approved as provided by subsection (3) of this section shall, before final approval, simultaneously:

(a) Notify the county assessor that the lot or parcel is no longer being used as farmland;

(b) Request that the county assessor disqualify the lot or parcel [for] from special assessment under ORS 308A.050 to 308A.128, 308A.315, 321.257 to 321.390[, 321.730 or 321.815] or 321.805 to 321.825 or sections 1 to 14 of this 2003 Act; and

(5) A lot or parcel that has been disqualified pursuant to subsection (4) of this section may not requalify for special assessment unless, when combined with another contiguous lot or parcel, it constitutes a qualifying parcel.

(6) When the owner of a lot or parcel upon which the establishment of a dwelling has been tentatively approved notifies the county assessor that the lot or parcel is no longer being used as farmland and requests disqualification of the lot or parcel for special assessment at value for farm use, the county assessor shall:

(a) Disqualify the lot or parcel for special assessment at value for farm use under ORS 308A.050 to 308A.128 or other special assessment by removing the special assessment;

(b) Provide the owner of the lot or parcel with written notice of the disqualification; and

(7) The Department of Consumer and Business Services, a building official, as defined in ORS 455.715 (1), or any other agency or official responsible for the administration and enforcement of the state building code, as defined in ORS 455.010, may not issue a building permit for the construction of a dwelling on a lot or parcel in an exclusive farm use zone without evidence that the owner of the lot or parcel upon which the dwelling is proposed to be constructed has paid the additional tax, if any, imposed by the county assessor under subsection (6)(c) of this section.

SECTION 86. ORS 215.800 is amended to read:

215.800. (1) The Legislative Assembly declares that the protection and preservation of the wildlife resources of this state ought to be encouraged by recognizing wildlife habitat conservation and enhancement as an allowed land use in areas:

(a) Zoned for exclusive farm use, mixed farm and forest use or highest and best use forestland; or

(b) Assessed as designated forestland [or under the Western Oregon Small Tract Optional Tax].

(2) The Legislative Assembly further declares that ORS 215.800 to 215.808 are intended to allow for the conservation and enhancement of wildlife habitat.

(3) The Legislative Assembly further recognizes that the integration of wildlife habitat conservation and management plans with generally accepted agricultural and forestry practices in farm and forest zones is an important element in exercising good stewardship over these lands.

SECTION 87. The amendments to ORS 215.800 by section 86 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 88. ORS 215.800, as amended by section 86 of this 2003 Act, is amended to read:

(a) Zoned for exclusive farm use[,] or mixed farm and forest use [or highest and best use forestland]; or

(b) Assessed as [designated] forestland or as small tract forestland.

(2) The Legislative Assembly further declares that ORS 215.800 to 215.808 are intended to allow for the conservation and enhancement of wildlife habitat.

SECTION 89. The amendments to ORS 215.800 by section 88 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

SECTION 90. ORS 215.801 is amended to read:

215.801. As used in ORS 215.800 to 215.808:

(1) “Cooperating agency” means the State Department of Fish and Wildlife, the United States Fish and Wildlife Service, the United States Natural Resources Conservation Service, the Oregon State University Extension Service or other persons with wildlife habitat conservation and management training considered appropriate for the preparation of a conservation and management plan, as established by rules of the State Department of Fish and Wildlife.

(2) “Department” means the State Department of Fish and Wildlife.

(3) “Forestland” means forestland as defined in ORS 321.257[, 321.705] or 321.805.

(4) “Lot” has the meaning given that term in ORS 92.010.

(5) “Parcel” has the meaning given that term in ORS 215.010 (1).

(6) “Wildlife habitat conservation and management plan” or “plan” means a plan developed by a cooperating agency and landowner that specifies the conservation and management practices, including farm and forest uses consistent with the overall intent of the plan, that will be conducted to preserve, enhance and improve wildlife habitat on an affected lot or parcel.

SECTION 91. The amendments to ORS 215.801 by section 90 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 92. ORS 215.808 is amended to read:

215.808. (1) The State Department of Fish and Wildlife shall review and approve plans submitted under ORS 215.802 (1) for compliance with the standards set forth in the rules adopted under ORS 215.806.

(2) The State Fish and Wildlife Commission may establish by rule a limit on the number of plans that may be approved for each tax year. An application that is not approved because the maximum number of plans for a tax year have already been approved shall be held for consideration for approval for the next tax year.

(3) When a plan is approved by the department and is implemented, the owner of the land subject to the plan may make application to the county assessor for open space use assessment under ORS 308A.300 to 308A.330 for that land, except that, if approved, the land shall be assessed:

(a) At its value for farm use under ORS 308A.050 to 308A.128 if the land is in an exclusive farm use zone or a farm and forest zone and has historically been in farm use; or

(b) At its forestland value if, but for application under this section, the land is zoned as highest and best use forestland[,] or is assessed as designated forestland [or assessed under the Western Oregon Small Tract Optional Tax].

(4) If the land that is the subject of the application includes a farm or forest homesite, upon approval the homesite shall be assessed as provided in ORS 308A.250 to 308A.259.

(5) Application shall be made as provided in ORS 308A.300 to 308A.330 except that:

(a) The granting authority shall be the State Department of Fish and Wildlife. The department shall approve the plan relating to the land of the applicant and determine compliance with the plan in accordance with rules adopted under ORS 215.806.

(b) The owner, in lieu of designating the paragraph of ORS 308A.300 (1) under which the open space use falls, shall designate the open space use as wildlife habitat conservation and management under ORS 215.800 to 215.808.

(c) Applications for open space use assessment under this section shall be made to the county assessor not later than April 1 immediately preceding the first tax year for which such assessment is requested.

(d) The application shall include a certified copy of the department’s declaration that the land described in the application is subject to a wildlife habitat conservation and management plan approved by the department and that the plan is being implemented.

(e) When the application for open space use assessment includes a certified copy of the declaration described in paragraph (d) of this subsection, the county assessor may not refer the application to the planning commission or to the county governing body under ORS 308A.309 (1), but shall assess the land described in the application at its assessed value under the appropriate special assessment program listed under subsection (3) or (4) of this section. In each year in which the land is assessed under the provisions of this section, the county assessor shall also enter on the assessment roll, as a notation, the assessed value of the land were it not so assessed.

(6) An approved wildlife habitat conservation and management plan shall be reviewed by the department periodically to ensure that the land is managed in accordance with the plan. If the plan is not being implemented as approved, the department shall notify the owner and require compliance measures to be taken within six months. If the plan is still not being implemented as required by the department at the end of the six-month period, the department shall notify the county assessor of the county in which the affected land is situated. The county assessor shall withdraw the land from open space use classification as provided in ORS 308A.321 (1), except that notice of the withdrawal shall be given to the governing body of the county in which the land is situated.

(7) Notwithstanding ORS 215.236 and 308A.700 to 308A.733, land that is assessed as provided in this section may not be subject to any additional taxes when the land is changed to open space use assessment based on wildlife habitat conservation and management as provided in ORS 215.800 to 215.808 and shall be allowed to return unrestricted to assessment under the appropriate special assessment program listed in subsection (3) or (4) of this section, if otherwise qualified, without payment of any additional taxes. However, the land may be subject to additional taxes as provided in ORS 308A.700 to 308A.733.

SECTION 93. The amendments to ORS 215.808 by section 92 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 94. ORS 215.808, as amended by section 92 of this 2003 Act, is amended to read:

(a) At its value for farm use under ORS 308A.050 to 308A.128 if the land is in an exclusive farm use zone or a farm and forest zone and has historically been in farm use; or

(b) At its forestland value if, but for application under this section, the land is zoned as highest and best use forestland or is assessed as designated forestland or as small tract forestland.

(4) If the land that is the subject of the application includes a farm or forest homesite, upon approval the homesite shall be assessed as provided in ORS 308A.250 to 308A.259.

(5) Application shall be made as provided in ORS 308A.300 to 308A.330 except that:

SECTION 95. The amendments to ORS 215.808 by section 94 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

SECTION 96. ORS 308A.250 is amended to read:

308A.250. As used in ORS 308A.250 to 308A.259:

(1) “Exclusive farm use zone” has the meaning given that term in ORS 308A.053.

(2) “Forestland” means forestland that is a parcel of land of more than 10 acres that has been zoned in the comprehensive plan for exclusive farm use, forest use or farm and forest use and that is, as of the assessment date for which value for the forest homesite is being determined:

(a) Land that has as its highest and best use the growing and harvesting of trees of a marketable species; or

(b) Land that has been designated as forestland under ORS 321.257 to 321.390 or 321.805 to 321.825[; or]

[(c) Land that has been classified under ORS 321.705 to 321.765].

(3) “Homesite” means land described in ORS 308A.253, including all tangible improvements to the land under and adjacent to a dwelling and other structures, if any, that are customarily provided in conjunction with the dwelling.

(4) “Nonexclusive farm use zone farmland” has the meaning given that term in ORS 308A.053.

(5) “Owner” or “owners” means:

(a) The person who holds an estate in the homesite in fee simple or for life.

(b) Any one of tenants in common or tenants by the entirety, holding an estate in the homesite in fee simple or for life.

(c) Any person of legal age, duly authorized in writing to act on behalf of any person described in paragraph (a) or (b) of this subsection in filing an application for special assessment of nonexclusive farm use zone farmland.

(d) The guardian or conservator of an owner, or the executor or administrator of an owner’s estate.

(e) The purchaser of the fee simple or life estate of an owner under a contract of sale.

SECTION 97. The amendments to ORS 308A.250 by section 96 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 98. ORS 308A.250, as amended by section 96 of this 2003 Act, is amended to read:

308A.250. As used in ORS 308A.250 to 308A.259:

(1) “Exclusive farm use zone” has the meaning given that term in ORS 308A.053.

(a) Land that has as its highest and best use the growing and harvesting of trees of a marketable species; [or]

(b) Land that has been designated as forestland under ORS 321.257 to 321.390 or 321.805 to 321.825; or

(c) Land that is assessed as small tract forestland under sections 1 to 14 of this 2003 Act.

(4) “Nonexclusive farm use zone farmland” has the meaning given that term in ORS 308A.053.

(5) “Owner” or “owners” means:

(a) The person who holds an estate in the homesite in fee simple or for life.

(b) Any one of tenants in common or tenants by the entirety, holding an estate in the homesite in fee simple or for life.

(d) The guardian or conservator of an owner, or the executor or administrator of an owner’s estate.

(e) The purchaser of the fee simple or life estate of an owner under a contract of sale.

SECTION 99. The amendments to ORS 308A.250 by section 98 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

SECTION 100. ORS 308A.377 is amended to read:

308A.377. (1) Land may be designated as riparian upon application and approval of the application under ORS 308A.356 and 308A.359 if the land is being assessed under any of the following special assessment programs:

(a) ORS 308A.050 to 308A.128 (relating to farm use special assessment).

(b) ORS 321.347, 321.348, 321.353, 321.358 and 321.359 (relating to special assessment as designated forestland in western Oregon).

[(d) ORS 321.705 to 321.765 (relating to classification as Western Oregon Small Tract Optional Tax forestland).]

[(e)] (d) ORS 308A.300 to 308A.330 (relating to classification as open space land).

(2) Notwithstanding the provisions of any of the special assessment laws listed in subsection (1) of this section, the additional taxes, penalties and interest that would be due as a result of a change of designation to riparian shall be abated and shall not be collected.

SECTION 101. The amendments to ORS 308A.377 by section 100 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 102. ORS 308A.377, as amended by section 100 of this 2003 Act, is amended to read:

(a) ORS 308A.050 to 308A.128 (relating to farm use special assessment).

(b) ORS 321.347, 321.348, 321.353, 321.358 and 321.359 (relating to special assessment as designated forestland in western Oregon).

(d) Sections 1 to 14 of this 2003 Act (relating to special assessment as small tract forestland).

[(d)] (e) ORS 308A.300 to 308A.330 (relating to classification as open space land).

SECTION 103. The amendments to ORS 308A.377 by section 102 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

SECTION 104. ORS 310.165 is amended to read:

310.165. (1) For any unit of property partially exempt from tax under ORS 307.250, 307.370, 308.459 or 358.480 to 358.545 or any other law, the assessor shall determine the maximum amount of taxes on property to be imposed on such property under ORS 310.150, by using the lesser of the real market value or the taxable value of the property after the exemption has been applied.

(2) For any land that is specially assessed for ad valorem tax purposes under ORS 308A.050 to 308A.128, 308A.250 to 308A.259, 308A.315, 321.257 to 321.390[, 321.705 to 321.765] or 321.805 to 321.825, the assessor shall determine the maximum amount of taxes on property to be imposed on such property under ORS 310.150 by using the lesser of the real market value or the specially assessed value of the property.

(3) In the case of any unit of property of which a part of the unit is exempt from taxation, and that part may be identified both as to value and physical description, the real market value of the unit shall not include the value of the exempt part of the unit.

(4) If any unit of property described in subsection (1) or (2) of this section for which the maximum amount of taxes imposed has been determined under this section is subject to imposition of additional taxes due to disqualification from special assessment or partial exemption, the determination of the maximum amount of additional taxes that may be imposed due to disqualification shall be made on the basis of the real market value of the property for the year to which the additional taxes relate.

SECTION 105. The amendments to ORS 310.165 by section 104 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 106. ORS 310.165, as amended by section 104 of this 2003 Act, is amended to read:

(2) For any land that is specially assessed for ad valorem tax purposes under ORS 308A.050 to 308A.128, 308A.250 to 308A.259, 308A.315, 321.257 to 321.390 or 321.805 to 321.825 or sections 1 to 14 of this 2003 Act, the assessor shall determine the maximum amount of taxes on property to be imposed on such property under ORS 310.150 by using the lesser of the real market value or the specially assessed value of the property.

SECTION 107. The amendments to ORS 310.165 by section 106 of this 2003 Act apply to tax years beginning on or after July 1, 2004.

SECTION 108. ORS 321.267 is amended to read:

321.267. (1) The following timber and forestland are not subject to ORS 321.257 to 321.390:

(a) Timber and forestland assessed by the Department of Revenue pursuant to ORS 308.505 to 308.665, 308.805 to 308.820 and 308.990.

[(b) Except as provided in ORS 321.347, timber and land classified under ORS 321.705 to 321.765.]

[(c)] (b) Timber on land that is exempt from ad valorem taxation.

[(d)] (c) Except as provided in ORS 321.347, land and Christmas trees [which] that are grown or growing on that land [which] that has been prepared by intensive cultivation and tilling and on which all unwanted plant growth is controlled continuously for the exclusive purpose of growing such Christmas trees.

[(e)] (d) Except as provided in ORS 321.274, land and hardwood timber, including but not limited to hybrid cottonwood, [which] that are:

(A) Grown or growing on land [which] that has been prepared by intensive cultivation methods and [which] that is cleared of competing vegetation for at least three years after tree planting;

(B) Of a species marketable as fiber for inclusion in the “furnish” for manufacturing paper products;

(D) Subject to intensive agricultural practices such as fertilization, insect and disease control, cultivation and irrigation.

[(f)(A)] (e)(A) Timber on land that, at the time of harvest, is assessed under ORS 308.146 (1) to (3) or specially assessed under ORS 308A.050 to 308A.128 or 308A.300 to 308A.330, if the land was assessed under ORS 308.146 (1) to (3) or 308.232 or was specially assessed under ORS 308A.050 to 308A.128 or 308A.300 to 308A.330 for at least five property tax years preceding the date the timber was harvested from the land.

(B) For purposes of this paragraph and ORS 321.273 (3) and (4), land that has been forestland assessed under ORS 321.354 for any of the five property tax years preceding the date the timber was harvested from the land shall be considered to be forestland assessed under ORS 321.354.

(2) The tax imposed by ORS 321.273 shall be in addition to that levied by ORS 321.005 to 321.185 and 321.560 to 321.600.

(3) Nothing contained in ORS 321.257 to 321.390 shall prevent:

(a) The collection of ad valorem property taxes [which] that became a lien prior to January 1, 1978.

(b) The collection of taxes levied by ORS 321.005 to 321.185 and 321.560 to 321.600.

[(c) Except as provided in section 45, chapter 892, Oregon Laws 1977, the collection of amounts payable upon declassification described under ORS 321.705 to 321.765.]

SECTION 109. The amendments to ORS 321.267 by section 108 of this 2003 Act apply to privilege tax reporting periods beginning on or after January 1, 2003, and to property tax years beginning on or after July 1, 2003.

SECTION 110. ORS 321.267, as amended by section 108 of this 2003 Act, is amended to read:

321.267. (1) The following timber and forestland are not subject to ORS 321.257 to 321.390:

(a) Timber and forestland assessed by the Department of Revenue pursuant to ORS 308.505 to 308.665, 308.805 to 308.820 and 308.990.

(b) Timber on land that is exempt from ad valorem taxation.

(c) Except as provided in ORS 321.347, land and Christmas trees that are grown or growing on that land that has been prepared by intensive cultivation and tilling and on which all unwanted plant growth is controlled continuously for the exclusive purpose of growing such Christmas trees.

(d) Except as provided in ORS 321.274, land and hardwood timber, including but not limited to hybrid cottonwood, that are:

(A) Grown or growing on land that has been prepared by intensive cultivation methods and that is cleared of competing vegetation for at least three years after tree planting;

(B) Of a species marketable as fiber for inclusion in the “furnish” for manufacturing paper products;

(D) Subject to intensive agricultural practices such as fertilization, insect and disease control, cultivation and irrigation.

(e)(A) Timber on land that, at the time of harvest, is assessed under ORS 308.146 (1) to (3) or specially assessed under ORS 308A.050 to 308A.128 or 308A.300 to 308A.330, if the land was assessed under ORS 308.146 (1) to (3) or 308.232 or was specially assessed under ORS 308A.050 to 308A.128 or 308A.300 to 308A.330 for at least five property tax years preceding the date the timber was harvested from the land.

(f) Small tract forestland qualified under sections 1 to 14 of this 2003 Act and timber harvested from small tract forestland qualified under sections 1 to 14 of this 2003 Act.

(2) The tax imposed by ORS 321.273 shall be in addition to that levied by ORS 321.005 to 321.185 and 321.560 to 321.600.

(3) Nothing contained in ORS 321.257 to 321.390 shall prevent:

(a) The collection of ad valorem property taxes that became a lien prior to January 1, 1978.

(b) The collection of taxes levied by ORS 321.005 to 321.185 and 321.560 to 321.600.

SECTION 111. The amendments to ORS 321.267 by section 110 of this 2003 Act apply to privilege tax reporting periods beginning on or after January 1, 2004, and to property tax years beginning on or after July 1, 2004.

SECTION 112. ORS 321.415 is amended to read:

321.415. (1) Lands assessed by the Department of Revenue pursuant to ORS 308.505 to 308.665 or 308.805 to 308.820 and the timber thereon shall not be subject to the provisions of ORS 321.405 to 321.487.

(2) The tax imposed under the provisions of ORS 321.405 to 321.487 shall be additional to that levied under the provisions of ORS 321.005 to 321.185 and 321.560 to 321.600.

(3) Timber on timberland which is exempt from the ad valorem real property tax shall be exempt from the privilege tax imposed by ORS 321.405 to 321.487.

(4) Land used exclusively for growing cultured Christmas trees, and the cultured Christmas trees growing thereon, as defined in ORS 215.203, shall not be subject to the provisions of ORS 321.405 to 321.487 and 321.805 to 321.825.

(5) Except as provided in ORS 321.426, land and hardwood timber, including but not limited to hybrid cottonwood, shall not be subject to the provisions of ORS 321.405 to 321.487 and 321.805 to 321.825 if the land and timber are:

(a) Grown or growing on land which has been prepared by intensive cultivation methods and which is cleared of competing vegetation for at least three years after tree planting;

(b) Of a species marketable as fiber for inclusion in the “furnish” for manufacturing paper products;

(d) Subject to intensive agricultural practices such as fertilization, insect and disease control, cultivation and irrigation.

(6)(a) Timber on land that, at the time of harvest, is assessed under ORS 308.146 (1) to (3) or specially assessed under ORS 308A.050 to 308A.128 or 308A.300 to 308A.330, if the land was assessed under ORS 308.146 (1) to (3) or 308.232 or was specially assessed under ORS 308A.050 to 308A.128 or 308A.300 to 308A.330 for at least five property tax years preceding the date the timber was harvested from the land, shall not be subject to the provisions of ORS 321.405 to 321.487.

(b) For purposes of this subsection and ORS 321.421 (4), land that has been forestland assessed under ORS 321.812 for any of the five property tax years preceding the date the timber was harvested from the land shall be considered to be forestland assessed under ORS 321.812.

(7) Timber harvested from small tract forestland qualified under sections 1 to 14 of this 2003 Act is not subject to ORS 321.405 to 321.487.

[(7)] (8) Nothing contained in ORS 321.405 to 321.487 shall prevent:

(a) The collection of ad valorem property taxes which became a lien against timber prior to July 1, 1962.

(b) The collection of taxes, charges or assessments made pursuant to law for protection.

SECTION 113. The amendments to ORS 321.415 by section 112 of this 2003 Act apply to privilege tax reporting periods beginning on or after January 1, 2004, and to property tax years beginning on or after July 1, 2004.

SECTION 114. ORS 321.274 is amended to read:

321.274. (1) Notwithstanding ORS 321.267 [(1)(e)] (1)(d), and upon the election of a taxpayer made as provided under subsection (2) of this section, the taxes imposed under ORS 321.257 to 321.390 on the harvest of timber from other privately owned land in western Oregon are imposed on the harvest of hardwood timber from land in western Oregon described in ORS 321.267 [(1)(e)] (1)(d) that is privately owned.

(2) A taxpayer having total ownership of forestland in western Oregon in excess of five acres but not in excess of 2,000 acres who elects to claim a credit allowed under ORS 315.104 for reforestation project costs paid or incurred in connection with a reforestation project as described under ORS 321.267 [(1)(e)] (1)(d) on the forestland and for which a preliminary certificate is issued for a tax year beginning on or after January 1, 1990, shall be considered to have made the election to pay the privilege tax imposed under subsection (1) of this section upon the harvest, on and after the date the preliminary certificate is issued, of all such hardwood timber harvested from all forestland owned by the taxpayer on the date the preliminary certificate is issued. For purposes of this section, “ownership or total ownership” shall be determined in the same manner as [“ownership or total ownership”] ownership or common ownership is determined for purposes of ORS [321.705 to 321.765] 321.354 or 321.812 or section 4 of this 2003 Act. If, after the date the preliminary certificate is issued, the forestland planted in hardwood timber as described in ORS 321.267 [(1)(e)] (1)(d) is sold or otherwise transferred, the election shall be binding upon the purchaser or transferee and all subsequent purchasers and transferees, as to that particular land, until such time as all of the hardwood timber on that land has been harvested, the land is changed in use or the timber is exempt under other provision of ORS 321.257 to 321.390, all to be determined subject to rules adopted by the Department of Revenue.

SECTION 115. ORS 321.347 is amended to read:

321.347. For the purposes of ORS 321.257 to 321.390:

(1) All land in western Oregon valued as forestland for ad valorem tax purposes on January 1, 1977, shall retain that classification for the purposes of ORS 321.257 to 321.390 unless it is specifically excluded from the provisions thereof or unless it is removed from that classification as provided in ORS 321.359 or is no longer land the highest and best use of which is forestland.

(2) Land designated as forestland pursuant to ORS 321.605 to 321.680 (1975 Replacement Part) shall retain the original date of such designation.

(3) Lands classified as reforestation lands as of July 1, 1977, pursuant to ORS 321.255 to 321.360 (1975 Replacement Part) shall be considered to have been designated as forestland from the date of original classification as reforestation lands. Any lands so classified prior to February 1, 1972, shall be presumed to have been designated not earlier than February 1, 1972.

(4) Pursuant to the election of the owner, as provided in section 45, chapter 892, Oregon Laws 1977, land which, as of January 1, 1977, was designated under the provisions of ORS 321.705 to 321.765 (repealed) shall be considered to have been designated as forestland for the purposes of ORS 321.257 to 321.390 from the date of the original designation under those provisions. Any lands so designated prior to January 1, 1972, shall be presumed to have been designated not earlier than January 1, 1972, for the purposes of additional taxes imposed by ORS 308A.700 to 308A.733.

SECTION 116. ORS 321.991 is amended to read:

321.991. [(1)] Violation of any provision of ORS 321.005 to 321.185 and 321.560 to 321.600 is punishable, upon conviction, by a fine not exceeding $1,000 or by imprisonment in the county jail for not exceeding one year, or by both.

[(2) Violation of ORS 321.730 (7) is punishable, upon conviction, by a fine of not more than $500 or by imprisonment in the county jail for not more than three months, or both. Justice courts shall have concurrent jurisdiction with the circuit court of all prosecutions for violations of ORS 321.730 (7).]

MISCELLANEOUS

SECTION 117. ORS 215.203 is amended to read:

215.203. (1) Zoning ordinances may be adopted to zone designated areas of land within the county as exclusive farm use zones. Land within such zones shall be used exclusively for farm use except as otherwise provided in ORS 215.213, 215.283 or 215.284. Farm use zones shall be established only when such zoning is consistent with the comprehensive plan.

(2)(a) As used in this section, “farm use” means the current employment of land for the primary purpose of obtaining a profit in money by raising, harvesting and selling crops or the feeding, breeding, management and sale of, or the produce of, livestock, poultry, fur-bearing animals or honeybees or for dairying and the sale of dairy products or any other agricultural or horticultural use or animal husbandry or any combination thereof. “Farm use” includes the preparation, storage and disposal by marketing or otherwise of the products or by-products raised on such land for human or animal use. “Farm use” also includes the current employment of land for the primary purpose of obtaining a profit in money by stabling or training equines including but not limited to providing riding lessons, training clinics and schooling shows. “Farm use” also includes the propagation, cultivation, maintenance and harvesting of aquatic species and bird and animal species to the extent allowed by the rules adopted by the State Fish and Wildlife Commission. “Farm use” includes the on-site construction and maintenance of equipment and facilities used for the activities described in this subsection. “Farm use” does not include the use of land subject to the provisions of ORS chapter 321, except land used exclusively for growing cultured Christmas trees as defined in subsection (3) of this section or land described in ORS 321.267 [(1)(e)] (1)(d) or 321.415 (5).

(b) “Current employment” of land for farm use includes:

(A) Farmland, the operation or use of which is subject to any farm-related government program;

(B) Land lying fallow for one year as a normal and regular requirement of good agricultural husbandry;

(C) Land planted in orchards or other perennials, other than land specified in subparagraph (D) of this paragraph, prior to maturity;

(D) Land not in an exclusive farm use zone which has not been eligible for assessment at special farm use value in the year prior to planting the current crop and has been planted in orchards, cultured Christmas trees or vineyards for at least three years;

(E) Wasteland, in an exclusive farm use zone, dry or covered with water, neither economically tillable nor grazeable, lying in or adjacent to and in common ownership with a farm use land and which is not currently being used for any economic farm use;

(F) Except for land under a single family dwelling, land under buildings supporting accepted farm practices, including the processing facilities allowed by ORS 215.213 (1)(x) and 215.283 (1)(u);

(G) Water impoundments lying in or adjacent to and in common ownership with farm use land;

(H) Any land constituting a woodlot, not to exceed 20 acres, contiguous to and owned by the owner of land specially valued for farm use even if the land constituting the woodlot is not utilized in conjunction with farm use;

(I) Land lying idle for no more than one year where the absence of farming activity is due to the illness of the farmer or member of the farmer’s immediate family. For purposes of this paragraph, illness includes injury or infirmity whether or not such illness results in death;

(J) Any land described under ORS 321.267 [(1)(e)] (1)(d) or 321.415 (5); and

(K) Land used for the primary purpose of obtaining a profit in money by breeding, raising, kenneling or training of greyhounds for racing.

(c) As used in this subsection, “accepted farming practice” means a mode of operation that is common to farms of a similar nature, necessary for the operation of such farms to obtain a profit in money, and customarily utilized in conjunction with farm use.

(3) “Cultured Christmas trees” means trees:

(a) Grown on lands used exclusively for that purpose, capable of preparation by intensive cultivation methods such as plowing or turning over the soil;

(b) Of a marketable species;

(c) Managed to produce trees meeting U.S. No. 2 or better standards for Christmas trees as specified by the Agriculture Marketing Services of the United States Department of Agriculture; and

(d) Evidencing periodic maintenance practices of shearing for Douglas fir and pine species, weed and brush control and one or more of the following practices: Basal pruning, fertilizing, insect and disease control, stump culture, soil cultivation, irrigation.

SECTION 118. ORS 307.320 is amended to read:

307.320. The value of any deciduous trees, shrubs, plants or crops, whether annual or perennial, and any cultured Christmas trees, as defined in ORS 215.203, or timber described under ORS 321.267 [(1)(e)] (1)(d) or 321.415 (5), growing upon agricultural land devoted to agricultural purposes, shall be exempt from assessment and taxation and shall not be deemed real property under the provisions of ORS 307.010.

SECTION 119. The amendments to ORS 307.320 by section 118 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 120. ORS 308A.056 is amended to read:

308A.056. (1) As used in ORS 308A.050 to 308A.128, “farm use” means the current employment of land for the primary purpose of obtaining a profit in money by:

(a) Raising, harvesting and selling crops;

(b) Feeding, breeding, managing or selling livestock, poultry, fur-bearing animals or honeybees or the produce thereof;

(d) Stabling or training equines, including but not limited to providing riding lessons, training clinics and schooling shows;

(e) Propagating, cultivating, maintaining or harvesting aquatic species and bird and animal species to the extent allowed by the rules adopted by the State Fish and Wildlife Commission;

(f) On-site constructing and maintaining equipment and facilities used for the activities described in this subsection;

(g) Preparing, storing or disposing of, by marketing or otherwise, the products or by-products raised for human or animal use on land described in this section; or

(h) Using land described in this section for any other agricultural or horticultural use or animal husbandry or any combination thereof.

(2) “Farm use” does not include the use of land subject to timber and forestland taxation under ORS chapter 321, except land used exclusively for growing cultured Christmas trees or land described in ORS 321.267 [(1)(e)] (1)(d) or 321.415 (5) (relating to land used to grow certain hardwood timber, including hybrid cottonwood).

(3) For purposes of this section, land is currently employed for farm use if the land is:

(a) Farmland, the operation or use of which is subject to any farm-related government program;

(b) Land lying fallow for one year as a normal and regular requirement of good agricultural husbandry;

(c) Land planted in orchards or other perennials, other than land specified in paragraph (d) of this subsection, prior to maturity;

(d) Land not in an exclusive farm use zone that has not been eligible for assessment at special farm use value in the year prior to planting the current crop and has been planted in orchards, cultured Christmas trees or vineyards for at least three years;

(e) Wasteland, in an exclusive farm use zone, dry or covered with water, neither economically tillable nor grazeable, lying in or adjacent to and in common ownership with farm use land and that is not currently being used for any economic farm use;

(f) Except for land under a single family dwelling, land under buildings supporting accepted farming practices, including the processing facilities allowed by ORS 215.213 (1)(x) and 215.283 (1)(u);

(g) Water impoundments lying in or adjacent to and in common ownership with farm use land;

(h) Any land constituting a woodlot, not to exceed 20 acres, contiguous to and owned by the owner of land specially valued for farm use even if the land constituting the woodlot is not utilized in conjunction with farm use;

(i) Land lying idle for no more than one year when the absence of farming activity is the result of the illness of the farmer or a member of the farmer’s immediate family, including injury or infirmity, regardless of whether the illness results in death;

(j) Land described under ORS 321.267 [(1)(e)] (1)(d) or 321.415 (5) (relating to land used to grow certain hardwood timber, including hybrid cottonwood); or

(k) Land used for the primary purpose of obtaining a profit in money by breeding, raising, kenneling or training greyhounds for racing.

(4) As used in this section:

(a) “Accepted farming practice” means a mode of operation that is common to farms of a similar nature, necessary for the operation of these similar farms to obtain a profit in money and customarily utilized in conjunction with farm use.

(b) “Cultured Christmas trees” means trees:

(A) Grown on lands used exclusively for that purpose, capable of preparation by intensive cultivation methods such as plowing or turning over the soil;

(B) Of a marketable species;

(C) Managed to produce trees meeting U.S. No. 2 or better standards for Christmas trees as specified by the Agricultural Marketing Service of the United States Department of Agriculture; and

(D) Evidencing periodic maintenance practices of shearing for Douglas fir and pine species, weed and brush control and one or more of the following practices:

(i) Basal pruning;

(ii) Fertilizing;

(iii) Insect and disease control;

(iv) Stump culture;

(v) Soil cultivation; or

(vi) Irrigation.

SECTION 121. The amendments to ORS 308A.056 by section 120 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

SECTION 122. ORS 315.104 is amended to read:

315.104. (1) A credit against the taxes otherwise due under ORS chapter 316 (or if the taxpayer is a corporation, under ORS chapter 317 or 318) shall be allowed in an amount equal to 50 percent of reforestation project costs actually paid or incurred to reforest underproductive Oregon forestlands. Such costs include, but are not limited to site preparation, tree planting and other silviculture treatments considered necessary by the State Forester to establish commercial, hardwood or softwood stands on appropriate sites. Subject to subsection (5) of this section:

(a) One-half of the credit shall be taken in the tax year for which the State Forester, after physical inspection of the forestland, issues a preliminary certificate under ORS 315.106 certifying that the land qualifies as underproductive Oregon forestland and that the reforestation project undertaken meets the requirements of this section and the specifications established by the State Forester and the costs appear to be reasonable; and

(b) One-half of the credit shall be taken in the tax year for which the State Forester, after further physical inspection of the land and project, certifies that the new forest is established in accordance with the specifications of the State Forester.

(2) No credit shall be allowed under either subsection (1)(a) or (b) of this section unless written certification containing the following statements accompanies the claim for the credit or is otherwise filed with the Department of Revenue:

(a) A preliminary certificate issued by the State Forester under ORS 315.106 that the land and project meet the preliminary specifications established by the State Forester or that the new forest is established, whichever is applicable at the time.

(b) A statement by the landowner or person in possession of the land that the land within the project area will be used for the primary purpose of growing and harvesting trees of an acceptable species.

(c) A statement that the landowner or person in possession of the land is aware that maintenance practices, including release, may be needed to insure that a new forest is established and will remain established.

(3) For purposes of this section, reforestation project costs shall not include:

(a) Costs paid or incurred to reforest any forestland that has been commercially logged to the extent that reforestation is required under the Oregon Forest Practices Act, except costs paid or incurred to reforest forestland following a hardwood harvest, conducted for the purposes of converting underproductive forestlands, as determined by administrative rule.

(b) That portion of costs or expenses paid through a federal or state cost share, financial assistance or other incentive program.

(c) Those costs paid or incurred to grow Christmas trees, ornamental trees, shrubs or plants, or, except as provided under ORS 321.274 or 321.426, those costs paid or incurred to grow hardwood timber described under ORS 321.267 [(1)(e)] (1)(d) or 321.415 (5).

(d) Any costs paid or incurred to purchase or otherwise acquire the land.

(e) The cost of purchase or other acquisition of tools and equipment with a useful life of more than one year.

(4) To qualify for the credit:

(a) The project must be completed to specifications approved by the State Forester.

(b) The taxpayer’s portion of the project costs must be $500 or more.

(c) The taxpayer must be a private individual, corporation, group, Indian tribe or other native group, association or other nonpublic legal entity owning, purchasing under recorded contract of sale or leasing at least five acres of Oregon commercial forestland.

(5) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer’s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise, any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, but may not be carried forward for any tax year thereafter. In all cases the taxpayer must be the person who made the investment into the project.

(6) The credit provided by this section shall be in addition to and not in lieu of any depreciation or amortization deduction to which the taxpayer otherwise may be entitled with respect to the reforestation project and the credit shall not affect the computation of basis for the property.

(7) In compliance with ORS 183.310 to 183.550, the Department of Revenue and the State Forestry Department may adopt rules consistent with law for carrying out the provisions of this section.

(8) As used in this section, “underproductive Oregon forestlands” means Oregon commercial forestlands not meeting the minimum stocking standards of the Oregon Forest Practices Act.

(9) If, for any reason other than those specified in subsection (10) of this section, a new forest is not established by the last day of the second taxable year following the taxable year for which the preliminary certificate was issued, the State Forester shall so report to the Department of Revenue. The report filed under this subsection shall be the basis for the department to recover any credit granted under subsection (1)(a) of this section. If, however, the new forest is not established within the time required by this subsection on account of the reasons specified in subsection (10) of this section, any credit allowed under subsections (1)(a) and (5) of this section shall not be recovered but no further credit as provided under subsections (1)(b) and (5) of this section shall be allowed.

(10) Subject to requalification under this section in the manner applicable for the original claim, including obtaining a new preliminary certificate, a taxpayer may claim an additional credit or credits for reestablishing a new planting in the event that the new forest is destroyed by a natural disaster or is not established for reasons beyond the control of the taxpayer, if the measures taken in completing the original or earlier project would normally have resulted in establishing the minimum number of trees per acre anticipated by the project.

(11) Any owner affected by a determination, regarding the reforestation tax credit made by:

(a) The State Forester, except for a denial of a request for a preliminary certificate due to the annual reforestation credit cost limitation calculated under ORS 315.108, may appeal that determination in the manner provided for in ORS 526.475 (1).

(b) The Department of Revenue, may appeal that determination in the manner provided for in ORS 526.475 (2).

SECTION 123. ORS 316.045 is amended to read:

316.045. (1) As used in this section:

(a) “Farming” means:

(A) Raising, harvesting and selling crops;

(B) Feeding, breeding, managing or selling livestock, poultry, fur-bearing animals or honeybees or the produce thereof;

(D) Stabling or training equines, including but not limited to providing riding lessons, training clinics and schooling shows;

(E) Propagating, cultivating, maintaining or harvesting aquatic species and bird and animal species to the extent allowed by the rules adopted by the State Fish and Wildlife Commission;

(F) On-site constructing and maintaining equipment and facilities used for the activities described in this subsection;

(G) Preparing, storing or disposing of, by marketing or otherwise, the products or by-products raised for human or animal use on land employed in activities described in this subsection; or

(H) Any other agricultural or horticultural activity or animal husbandry, or any combination of these activities, except that “farming” does not include growing and harvesting trees of a marketable species other than growing and harvesting cultured Christmas trees or certain hardwood timber described in ORS 321.267 [(1)(e)] (1)(d) or 321.415 (5).

(b) “Section 1231 gain” has the meaning given that term in section 1231 of the Internal Revenue Code.

(2) Notwithstanding ORS 316.037, taxable income that consists of net long-term capital gain shall be subject to tax under this chapter at a rate of five percent if all of the following conditions apply:

(a) The gain is:

(A) Derived from the sale or exchange of capital assets consisting of ownership interests in a corporation, partnership or other entity in which, prior to the sale or exchange, the taxpayer owned at least a 10 percent ownership interest; or

(B) Section 1231 gain.

(b) The property that was sold or exchanged consisted of:

(A) Ownership interests in a corporation, partnership or other entity that is engaged in the trade or business of farming; or

(B) Property that is predominantly used in the trade or business of farming.

(c) The sale or exchange is to a person who is not related to the taxpayer under section 267 of the Internal Revenue Code.

(d) The sale or exchange constitutes a substantially complete termination of all of the taxpayer’s ownership interests in a trade or business that is engaged in farming or a substantially complete termination of all of the taxpayer’s ownership interests in property that is employed in the trade or business of farming. Ownership of a farm dwelling or farm homesite does not constitute ownership of property employed in the trade or business of farming.

(3) If the taxpayer has net long-term capital gain derived in part from the sale or exchange of property described in subsection (2)(b) of this section and in part from the sale or exchange of all other property, the net long-term capital gain that is subject to tax under this section shall be determined as follows:

(a) Compute the net long-term capital gain derived from all property described in subsection (2)(b) of this section that was sold or exchanged during the tax year.

(b) Compute the net capital gain or loss from the sale or exchange of all other property during the tax year.

(c) If the amount determined under paragraph (b) of this subsection is a net capital gain, the gain that is subject to tax under subsection (2) of this section shall be the amount determined under paragraph (a) of this subsection.

(d) If the amount determined under paragraph (b) of this subsection is a net capital loss, the gain that is subject to tax under subsection (2) of this section shall be the amount determined under paragraph (a) of this subsection minus the amount determined under paragraph (b) of this subsection.

SECTION 124. ORS 317.063 is amended to read:

317.063. (1) As used in this section:

(a) “Farming” means:

(A) Raising, harvesting and selling crops;

(B) Feeding, breeding, managing or selling livestock, poultry, fur-bearing animals or honeybees or the produce thereof;

(D) Stabling or training equines, including but not limited to providing riding lessons, training clinics and schooling shows;

(E) Propagating, cultivating, maintaining or harvesting aquatic species and bird and animal species to the extent allowed by the rules adopted by the State Fish and Wildlife Commission;

(F) On-site constructing and maintaining equipment and facilities used for the activities described in this subsection;

(G) Preparing, storing or disposing of, by marketing or otherwise, the products or by-products raised for human or animal use on land employed in activities described in this subsection; or

(b) “Section 1231 gain” has the meaning given that term in section 1231 of the Internal Revenue Code.

(2) Notwithstanding ORS 317.061, taxable income that consists of net long-term capital gain shall be subject to tax under this chapter at a rate of five percent if all of the following conditions apply:

(a) The gain is:

(B) Section 1231 gain.

(b) The property that was sold or exchanged consisted of:

(A) Ownership interests in a corporation, partnership or other entity that is engaged in the trade or business of farming; or

(B) Property that is predominantly used in the trade or business of farming.

(c) The sale or exchange is to a person who is not related to the taxpayer under section 267 of the Internal Revenue Code.

(a) Compute the net long-term capital gain derived from all property described in subsection (2)(b) of this section that was sold or exchanged during the tax year.

(b) Compute the net capital gain or loss from the sale or exchange of all other property during the tax year.

SECTION 125. ORS 321.005 is amended to read:

321.005. As used in ORS 321.005 to 321.185, 321.560 to 321.600 and 477.440 to 477.460, unless the context requires otherwise:

(1) “Board” means the State Board of Forestry.

(2) “Protected forestlands” means those lands which are protected from the starting or spread of fire thereon or therefrom by:

(a) The State Forester, with the approval of the board;

(b) The United States of America through contract with the State Forester;

(d) Any forest protective agency, described in paragraph (c) of this subsection, under an agreement with the United States of America wherein such agency agrees to protect specific federal forestlands and, in return, the United States of America agrees to protect specific lands of such agency.

(3) “Department” means the Department of Revenue.

(4) “Committee” means the Emergency Fire Cost Committee.

(5) “Forestland” means any land producing forest products.

(6) “Forest products” means products from harvested timber, but does not include products from short rotation fiber grown under agricultural conditions as described in ORS 321.267 [(1)(e)] (1)(d) or 321.415 (5), western juniper or products from harvested western juniper.

(7) “Harvest” means the point at which timber that has been cut, severed, or removed for purposes of sale or use is first measured in the ordinary course of business as determined by reference to common practice in the timber industry.

(8) “Merchantable stand of timber” means any stand on forestlands containing living or dead timber which is being or can be harvested.

(9) “Taxpayer” means the owner of timber at time of harvest.

(10) “Taxes” means the taxes provided for in ORS 321.015.

(11) “Owner of timber” means any individual or combination of individuals, partnership, firm, corporation or association of whatever nature holding title to harvested timber by virtue of:

(a) An instrument of conveyance;

(b) The harvesting of the timber; or

(12) “Timber” means all logs which can be measured in board feet and other forest products as determined by department rule.

SECTION 126. ORS 321.390 is amended to read:

321.390. (1) Land described in ORS 321.267 [(1)(e)] (1)(d)(relating to hardwood timberland, including hybrid cottonwood timberland) shall be assessed as farm use land under ORS 308A.050 to 308A.128, unless the owner of the land makes the election under ORS 321.274.

(2)(a) If land is or becomes land described under ORS 321.267 [(1)(e)] (1)(d) and the land is not located within an exclusive farm use zone, the owner shall make application for special valuation as farm use land in the manner provided under ORS 308A.077, as follows:

(A) If the change in use takes place on or after July 1, the owner shall file the application on or before April 1 of the following year.

(B) If the change in use takes place prior to July 1, the owner shall file the application on or before August 1 of the same year.

(b) If an application is filed as provided under this subsection, the owner shall have seven years beginning with the first year of classification to meet the income requirements of ORS 308A.071 and need not meet the two-year farm use requirements of ORS 308A.068.

SECTION 127. The amendments to ORS 321.390 by section 126 of this 2003 Act apply to tax years beginning on or after July 1, 2003.

CAPTIONS

SECTION 128. The unit captions used in this 2003 Act are provided only for the convenience of the reader and do not become a part of the statutory law of this state or express any legislative intent in the enactment of this 2003 Act.

EFFECTIVE DATE

SECTION 129. This 2003 Act takes effect on the 91st day after the date on which the regular session of the Seventy-second Legislative Assembly adjourns sine die.

Approved by the Governor June 24, 2003

Filed in the office of Secretary of State June 24, 2003

Effective date November 26, 2003

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