Title of Rule and Other Identifying Information: WAC 458-40-530 Property tax, forest land -- Land grades -- Operability classes, 458-40-610 Timber excise tax -- Definitions, and 458-40-626 Timber excise tax -- Tax liability -- Private timber, tax due when timber harvested.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The department is proposing to amend these rules to correct the following citations:

     •     WAC 458-40-530 - subsection (1) has a citation to RCW 84.33.120, which no longer exists. This citation is being changed to RCW 84.33.130.

     •     WAC 458-40-610 - the citations to WAC 458-40-690 in subsection (1) are being changed to WAC 458-40-680.

     •     WAC 458-40-626 - the citation to RCW 84.33.073 in subsection (2) is being removed. This statute no longer exists.

     Statutory Authority for Adoption: RCW 82.32.300, 82.01.060(2), and 84.33.096.

     Statute Being Implemented: WAC 458-40-530 - RCW 84.33.130; WAC 458-40-610 - RCW 84.33.010 through 84.33.096; and WAC 458-40-626 - RCW 84.33.041 and 84.33.035.

     Rule is not necessitated by federal law, federal or state court decision.

     Name of Proponent: Department of revenue, governmental.

     Name of Agency Personnel Responsible for Drafting: Mark Bohe, 1025 Union Avenue S.E., Suite #544, Olympia, WA, (360) 570-6133; Implementation and Enforcement: Stuart Thronson, 1025 Union Avenue S.E., Suite #100, Olympia, WA, (360) 570-3230.

January 5, 2010

Alan R. Lynn

Rules Coordinator

OTS-2916.1

AMENDATORY SECTION(Amending WSR 00-24-068, filed 12/1/00, effective 1/1/01)

WAC 458-40-530   Property tax, forest land -- Land grades -- Operability classes.   (1) Introduction. RCW ((84.33.120)) 84.33.130 requires that the department of revenue annually adjust and certify forest land values to be used by county assessors in preparing assessment rolls. These values are based upon land grades and operability classes. The assessors use maps that provide the land grades and operability classes for forest land in Washington.

     This rule explains how the land grades and operability classes provided in the maps used by the assessors were established. The forest land values are annually updated in WAC 458-40-540. For the purposes of this rule and WAC 458-40-540, the term "forest land" is synonymous with timberland and means all land in any contiguous ownership of twenty or more acres which is primarily devoted to and used for growing and harvesting timber and means land only.

     (2) Land grades. The land grades are established based upon timber species and site index. "Site index (plural site indices)" is the productive quality of forest land, determined by the total height reached by the dominant and codominant trees on a particular site at a given age.

WASHINGTON STATE PRIVATE FOREST LAND GRADES

*2     Marginal forest productivity is land grade 7 operability class 3, in the following townships. All marginal forest productivity in other townships is land grade 8.

WESTERN WASHINGTON

     Whatcom County - all townships east of Range 6 East, inclusive.

     Skagit County - all townships east of Range 7 East, inclusive.

     Snohomish County - all townships east of Range 8 East, inclusive.

     King County - all townships east of Range 9 East, inclusive.

     Pierce County - T15N, R7E; T16N, R7E; T17N, R7E; T18N, R7E; T19N, R9E; T19N, R10E; T19N, R11E.

EASTERN WASHINGTON

     Chelan County - all townships west of Range 17 East, inclusive.

     Kittitas County - all townships west of Range 15 East, inclusive.

     Yakima County - all townships west of Range 14 East, inclusive.

     (3) Operability classes. Operability classes are established according to intrinsic characteristics of soils and geomorphic features. The criteria for each class apply statewide.

     (a) Class 1-Favorable. Stable soils that slope less than thirty percent. Forest operations do not significantly impact soil productivity and soil erosion. Forest operations, such as roading and logging, are carried out with minimal limitations.

     (b) Class 2-Average. Stable soils that slope less than thirty percent, but on which significant soil erosion, compaction, and displacement may occur as a result of forest operations.

     (c) Class 3-Difficult. Soils with one or both of the following characteristics:

     (i) Stable soils that slope between thirty and sixty-five percent; and

     (ii) Soils that slope between zero and sixty-five percent, but display evidence that rapid mass movement may occur as a direct result of forest operations.

     (d) Class 4-Extreme. All soils that slope more than sixty-five percent.

     (e) Variations. Unique conditions found in any one geographic area may impact forest operations to a greater degree than the above classes permit. With documented evidence, the department of revenue may place the soil in a more severe class.

[Statutory Authority: RCW 82.32.300 and 84.33.096. 00-24-068, § 458-40-530, filed 12/1/00, effective 1/1/01. Statutory Authority: Chapter 84.33 RCW. 87-02-023 (Order 86-4), § 458-40-530, filed 12/31/86.]

OTS-2917.1

AMENDATORY SECTION(Amending WSR 09-14-108, filed 6/30/09, effective 7/31/09)

WAC 458-40-610   Timber excise tax -- Definitions.   (1) Introduction. The purpose of WAC 458-40-610 through ((458-40-690)) 458-40-680 is to prescribe the policies and procedures for the taxation of timber harvested from public and private forest lands as required by RCW 84.33.010 through 84.33.096.

     Unless the context clearly requires otherwise, the definitions in this rule apply to WAC 458-40-610 through ((458-40-690)) 458-40-680. In addition to the definitions found in this rule, definitions of technical forestry terms may be found in The Dictionary of Forestry, 1998, edited by John A. Helms, and published by the Society of American Foresters.

     (2) Codominant trees. Trees whose crowns form the general level of the main canopy and receive full light from above, but comparatively little light from the sides.

     (3) Competitive sales. The offering for sale of timber which is advertised to the general public for sale at public auction under terms wherein all qualified potential buyers have an equal opportunity to bid on the sale, and the sale is awarded to the highest qualified bidder. The term "competitive sales" includes making available to the general public permits for the removal of forest products.

     (4) Cord measurement. A measure of wood with dimensions of 4 feet by 4 feet by 8 feet (128 cubic feet).

     (5) Damaged timber. Timber where the stumpage values have been materially reduced from the values shown in the applicable stumpage value tables due to damage resulting from fire, blow down, ice storm, flood, or other sudden unforeseen causes.

     (6) Dominant trees. Trees whose crowns are higher than the general level of the main canopy and which receive full light from the sides as well as from above.

     (7) Firewood. Commercially traded firewood is considered scaled utility log grade as defined in subsection (14) of this section.

     (8) Forest-derived biomass. Forest-derived biomass consists of tree limbs, tops, needles, leaves, and other woody debris that are residues from such activities as timber harvesting, forest thinning, fire suppression, or forest health. Forest-derived biomass does not include scalable timber products or firewood (defined in WAC 458-40-650).

     (9) Harvest unit. An area of timber harvest, defined and mapped by the harvester before harvest, having the same stumpage value area, hauling distance zone, harvest adjustments, harvester, and harvest identification. The harvest identification may be a department of natural resources forest practice application number, public agency harvesting permit number, public sale contract number, or other unique identifier assigned to the timber harvest area prior to harvest operations. A harvest unit may include more than one section, but harvest unit may not overlap a county boundary.

     (10) Harvester. Every person who from the person's own land or from the land of another under a right or license granted by lease or contract, either directly or by contracting with others for the necessary labor or mechanical services, fells, cuts, or takes timber for sale or for commercial or industrial use. The term "harvester" does not include persons performing under contract the necessary labor or mechanical services for a harvester. In cases where the identity of the harvester is in doubt, the department of revenue will consider the owner of the land from which the timber was harvested to be the harvester and the one liable for paying the tax.

     The definition above applies except when the United States or any instrumentality thereof, the state, including its departments and institutions and political subdivisions, or any municipal corporation therein so fells, cuts, or takes timber for sale or for commercial or industrial use. When a governmental entity described above fells, cuts, or takes timber, the harvester is the first person, other than another governmental entity as described above, acquiring title to or a possessory interest in such timber.

     (11) Harvesting and marketing costs. Only those costs directly and exclusively associated with harvesting merchantable timber from the land and delivering it to the buyer. The term includes the costs of piling logging residue on site, and costs to abate extreme fire hazard when required by the department of natural resources. Harvesting and marketing costs do not include the costs of other consideration (for example, reforestation, permanent road construction), treatment to timber or land that is not a necessary part of a commercial harvest (for example, precommercial thinning, brush clearing, land grading, stump removal), costs associated with maintaining the option of land conversion (for example, county fees, attorney fees, specialized site assessment or evaluation fees), or any other costs not directly and exclusively associated with the harvesting and marketing of merchantable timber. The actual harvesting and marketing costs must be used in all instances where documented records are available. When the taxpayer is unable to provide documented proof of such costs, or when harvesting and marketing costs can not be separated from other costs, the deduction for harvesting and marketing costs is thirty-five percent of the gross receipts from the sale of the logs.

     (12) Hauling distance zone. An area with specified boundaries as shown on the statewide stumpage value area and hauling distance zone maps contained in WAC 458-40-640, having similar accessibility to timber markets.

     (13) Legal description. A description of an area of land using government lots and standard general land office subdivision procedures. If the boundary of the area is irregular, the physical boundary must be described by metes and bounds or by other means that will clearly identify the property.

     (14) Log grade. Those grades listed in the "Official Log Scaling and Grading Rules" developed and authored by the Northwest Log Rules Advisory Group (Advisory Group). "Utility grade" means logs that do not meet the minimum requirements of peeler or sawmill grades as defined in the "Official Log Scaling and Grading Rules" published by the Advisory Group but are suitable for the production of firm useable chips to an amount of not less than fifty percent of the gross scale; and meeting the following minimum requirements:

     (a) Minimum gross diameter -- two inches.

     (b) Minimum gross length -- twelve feet.

     (c) Minimum volume -- ten board feet net scale.

     (d) Minimum recovery requirements -- one hundred percent of adjusted gross scale in firm useable chips.

     (15) Lump sum sale. Also known as a cash sale or an installment sale, it is a sale of timber where all the volume offered is sold to the highest bidder.

     (16) MBF. One thousand board feet measured in Scribner Decimal C Log Scale Rule.

     (17) Noncompetitive sales. Sales of timber in which the purchaser has a preferential right to purchase the timber or a right of first refusal.

     (18) Other consideration. Value given in lieu of cash as payment for stumpage, such as improvements to the land that are of a permanent nature. Some examples of permanent improvements are as follows: Construction of permanent roads; installation of permanent bridges; stockpiling of rock intended to be used for construction or reconstruction of permanent roads; installation of gates, cattle guards, or fencing; and clearing and reforestation of property.

     (19) Permanent road. A road built as part of the harvesting operation which is to have a useful life subsequent to the completion of the harvest.

     (20) Private timber. All timber harvested from privately owned lands.

     (21) Public timber. Timber harvested from federal, state, county, municipal, or other government owned lands.

     (22) Remote island. An area of land which is totally surrounded by water at normal high tide and which has no bridge or causeway connecting it to the mainland.

     (23) Scale sale. A sale of timber in which the amount paid for timber in cash and/or other consideration is the arithmetic product of the actual volume harvested and the unit price at the time of harvest.

     (24) Small harvester. A harvester who harvests timber from privately or publicly owned forest land in an amount not exceeding two million board feet in a calendar year.

     (25) Species. A grouping of timber based on biological or physical characteristics. In addition to the designations of species or subclassifications defined in Agriculture Handbook No. 451 Checklist of United States Trees (native and naturalized) found in the state of Washington, the following are considered separate species for the purpose of harvest classification used in the stumpage value tables:

     (a) Other conifer. All conifers not separately designated in the stumpage value tables. See WAC 458-40-660.

     (b) Other hardwood. All hardwoods not separately designated in the stumpage value tables. See WAC 458-40-660.

     (c) Special forest products. The following are considered to be separate species of special forest products: Christmas trees (various species), posts (various species), western redcedar flatsawn and shingle blocks, western redcedar shake blocks and boards.

     (d) Chipwood. All timber processed to produce chips or chip products delivered to an approved chipwood destination that has been approved in accordance with the provisions of WAC 458-40-670 or otherwise reportable in accordance with the provisions of WAC 458-40-670.

     (e) Small logs. All conifer logs harvested in stumpage value areas 6 or 7 generally measuring seven inches or less in scaling diameter, purchased by weight measure at designated small log destinations that have been approved in accordance with the provisions of WAC 458-40-670. Log diameter and length is measured in accordance with the Eastside Log Scaling Rules developed and authored by the Northwest Log Rules Advisory Group, with length not to exceed twenty feet.

     (f) Sawlog. For purposes of timber harvest in stumpage value areas 6 and 7, a sawlog is a log having a net scale of not less than 33 1/3% of gross scale, nor less than ten board feet and meeting the following minimum characteristics: Gross scaling diameter of five inches and a gross scaling length of eight feet.

     (g) Piles. All logs sold for use or processing as piles that meet the specifications described in the most recently published edition of the Standard Specification for Round Timber Piles (Designation: D 25) of the American Society for Testing and Materials.

     (h) Poles. All logs sold for use or processing as poles that meet the specifications described in the most recently published edition of the National Standard for Wood Poles -- Specifications and Dimensions (ANSI 05.1) of the American National Standards Institute.

     (26) Stumpage. Timber, having commercial value, as it exists before logging.

     (27) Stumpage value. The true and fair market value of stumpage for purposes of immediate harvest.

     (28) Stumpage value area (SVA). An area with specified boundaries which contains timber having similar growing, harvesting and marketing conditions.

     (29) Taxable stumpage value. The value of timber as defined in RCW 84.33.035(7), and this chapter. Except as provided below for small harvesters and public timber, the taxable stumpage value is the appropriate value for the species of timber harvested as set forth in the stumpage value tables adopted under this chapter.

     (a) Small harvester option. Small harvesters may elect to calculate the excise tax in the manner provided by RCW 84.33.073 and 84.33.074. The taxable stumpage value must be determined by one of the following methods as appropriate:

     (i) Sale of logs. Timber which has been severed from the stump, bucked into various lengths and sold in the form of logs has a taxable stumpage value equal to the actual gross receipts for the logs, less any costs associated with harvesting and marketing the timber.

     (ii) Sale of stumpage. When standing timber is sold and harvested within twenty-four months of the date of sale, its taxable stumpage value is the actual purchase price in cash and/or other consideration for the stumpage for the most recent sale prior to harvest. If a person purchases stumpage, harvests the timber more than twenty-four months after purchase of the stumpage, and chooses to report under the small harvester option, the taxable stumpage value is the actual gross receipts for the logs, less any costs associated with harvesting and marketing the timber. See WAC 458-40-626 for timing of tax liability.

     (b) Public timber. The taxable stumpage value for public timber sales is determined as follows:

     (i) Competitive sales. The taxable stumpage value is the actual purchase price in cash and/or other consideration. The value of other consideration is the fair market value of the other consideration; provided that if the other consideration is permanent roads, the value is the appraised value as appraised by the seller. If the seller does not provide an appraised value for roads, the value is the actual costs incurred by the purchaser for constructing or improving the roads. Other consideration includes additional services required from the stumpage purchaser for the benefit of the seller when these services are not necessary for the harvesting or marketing of the timber. For example, under a single stumpage sale's contract, when the seller requires road abandonment (as defined in WAC 222-24-052(3)) of constructed or reconstructed roads which are necessary for harvesting and marketing the timber, the construction and abandonment costs are not taxable. Abandonment activity on roads that exist prior to a stumpage sale is not necessary for harvesting and marketing the purchased timber and those costs are taxable.

     (ii) Noncompetitive sales. The taxable stumpage value is determined using the department of revenue's stumpage value tables as set forth in this chapter. Qualified harvesters may use the small harvester option.

     (iii) Sale of logs. The taxable stumpage value for public timber sold in the form of logs is the actual purchase price for the logs in cash and/or other consideration less appropriate deductions for harvesting and marketing costs. Refer above for a definition of "harvesting and marketing costs."

     (iv) Defaulted sales and uncompleted contracts. In the event of default on a public timber sale contract, wherein the taxpayer has made partial payment for the timber but has not removed any timber, no tax is due. If part of the sale is logged and the purchaser fails to complete the harvesting, taxes are due on the amount the purchaser has been billed by the seller for the volume removed to date. See WAC 458-40-628 for timing of tax liability.

     (30) Thinning. Timber removed from a harvest unit located in stumpage value area 1, 2, 3, 4, 5, or 10:

     (a) When the total volume removed is less than forty percent of the total merchantable volume of the harvest unit prior to harvest; and

     (b) The harvester leaves a minimum of one hundred undamaged, evenly spaced, dominant or codominant trees per acre of a commercial species or combination thereof.

[Statutory Authority: RCW 82.01.060(2), 82.32.300, 84.33.096, and 84.33.091. 09-14-108, § 458-40-610, filed 6/30/09, effective 7/31/09. Statutory Authority: RCW 82.32.300, 82.01.060(2), and 84.33.096. 06-17-186, § 458-40-610, filed 8/23/06, effective 9/23/06; 06-02-007, § 458-40-610, filed 12/22/05, effective 1/22/06; 05-08-070, § 458-40-610, filed 3/31/05, effective 5/1/05. Statutory Authority: RCW 82.32.300 and 84.33.096. 02-21-005, § 458-40-610, filed 10/3/02, effective 11/3/02; 00-24-068, § 458-40-610, filed 12/1/00, effective 1/1/01. Statutory Authority: RCW 82.32.330, 84.33.096 and 84.33.091. 96-02-054, § 458-40-610, filed 12/29/95, effective 1/1/96. Statutory Authority: RCW 82.32.330 and 84.33.096. 95-18-026, § 458-40-610, filed 8/25/95, effective 8/25/95. Statutory Authority: RCW 84.33.096 and 82.32.300. 90-14-033, § 458-40-610, filed 6/29/90, effective 7/30/90. Statutory Authority: Chapter 84.33 RCW. 87-02-023 (Order 86-4), § 458-40-610, filed 12/31/86.]

OTS-2918.1

AMENDATORY SECTION(Amending WSR 00-24-068, filed 12/1/00, effective 1/1/01)

WAC 458-40-626   Timber excise tax -- Tax liability -- Private timber, tax due when timber harvested.   (1) Introduction. For purposes of determining the proper calendar quarter in which the harvester is to pay tax on timber harvested from private land the tax is due and payable on the last day of the month following the end of the calendar quarter in which the timber was harvested.

     (2) Personal use of harvested timber by landowner. A landowner harvesting timber for commercial or industrial use is subject to the timber excise tax upon the value of harvested timber. See RCW 84.33.041((,)) and 84.33.035 ((and 84.33.073)). A landowner cutting timber for that landowner's own personal use is not subject to the timber excise tax.

     A landowner selling, bartering, or trading timber is making commercial use of that timber. A landowner providing that individual's own business with timber is making commercial or industrial use of that timber. For example, a logging contractor using timber by-products for hog fuel has made industrial use of that timber. An individual engaged in the construction industry using lumber from that landowner's timber to build a structure meant for sale by that individual or that individual's business has also made industrial use of the timber. On the other hand, a landowner makes personal use of timber when that individual uses the timber, a portion of the cut timber, or a by-product from the timber as:

     (a) Firewood in that individual's stove or fireplace;

     (b) Lumber for that individual's personal residence, garage or storage structure;

     (c) Lumber for a fence around that individual's personal residence or private property not used for commercial purposes; or

     (d) Sawdust or shavings for that individual's garden or yard.

[Statutory Authority: RCW 82.32.300 and 84.33.096. 00-24-068, § 458-40-626, filed 12/1/00, effective 1/1/01. Statutory Authority: Chapter 84.33 RCW. 87-02-023 (Order 86-4), § 458-40-626, filed 12/31/86.]

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