In many states, money intended to preserve farmland is instead going to development firms.
PORTLAND (AP) – With an economy that relies heavily on a vast forest to remain intact, Maine’s tax system levies stiff fines on landowners who decide to build after enjoying reduced taxes for leaving their property undeveloped.

Intended to preserve environmental jewels that are considered Maine’s biggest economic and environmental assets, such a policy has historically worked to prevent tax breaks from going to developers trying to work the system.

“On one hand people would like to reduce those penalties because it would encourage more people to put their land in undeveloped status. But the fact is the penalties protect the system from being abused,” said Alan Carrion, president of GrowSmart Maine, an organization working to prevent urban sprawl in Maine.

An Associated Press investigation this month found that states around the nation are losing millions of dollars in programs intended to preserve farmland, but instead going to companies bulldozing land to build subdivisions and malls.

In most states, the tax breaks date back to the 1950s and ’60s, when lawmakers became alarmed at the rate at which farmland was disappearing under concrete and asphalt. But loopholes in the laws are producing unintended, though perfectly legal, consequences.

Every state offers some tax incentive program to protect land from development. Working farms are eligible for reduced tax rates in some states. Others reduce taxes on timberland and areas left as open spaces.

In Maine, there are current-use programs for tree growth, farmland and open space that landowners can use to cut taxes. But there are significant penalties for developing land once in the program. Often taxes are levied retroactively.

The policy dates to a 1970 referendum in which voters approved exceptions to the state constitutional requirement of assessing land equitably. The policy allows land to be re-valued at its current use, which results in subsequent and considerable tax breaks.

The tax breaks for each program vary widely across the state because the land values vary widely across the state.

In the tree growth program, landowners must have at least 10 forested acres and forest management and harvest plans. With 11 million acres enrolled, it is the state’s largest and accounts for significant tax breaks, particularly in coastal properties.

The farm land program requires a minimum enrollment of five acres and a commitment that landowners will use at least some of it to generate at least $2,000 in annual income annually. The tax break the farm land program allows is not as great as the tree growth program, but land value can be reduced by as much as 80 percent once in the program.

The third program, the open space program, is used principally for land conservation. To enroll, landowners must promise to leave the land undeveloped. They in turn receive an immediate 10 to 95 percent reduction in land value.

“It’s a commitment and if people are willing to commit their property to it, they will receive a tax deduction,” said David Ledew, supervisor of municipal services for the state Department of Revenue. “But if you decide to get out of the program, the penalty is much stiffer.”

AP-ES-04-09-04 1647EDT