Modifled Assessment Laws--All of the States now 
have modified assessment laws, and indeed one-- 
Virginia--has two laws of this type. These statutes 
differ greatly in terms of the eligibility criteria, appli- 
cation requirements, valuation procedures, and de- 
classification penalties they embody. [For a more 
thorough discussion of these laws, see Hickman 
(1983).] 
In terms of eligibility criteria, 3 of the existing 
laws are mandatory and 10 are optional. The States 
with mandatory programs are Arkansas, Mississip- 
pi, and Oklahoma. In these States, as well as in 
Alabama and South Carolina, essentially all forest 
lands qualify for special assessment. In the remain- 
ing States, participation is limited in some manner. 
Among the variables used to restrict enrollments are 
(1) tract size, (2) the proportion of annual income 
derived from forestry activities, (3) length of tenure, 
and (4) the type of owner--individual v. corporate or 
natural citizen v. foreign alien. 
In terms of application requirements, only the 10 
programs that are optional need be considered. Of 
these, five call for initial applications, two call for 
periodic applications, and one calls for annual appli- 
cations. The two remaining laws stipulate that inter- 
ested property owners must covenant to retain their 
land in timber growing for some specified length of 
time. This covenant period is 10 years in Georgia 
and varies from 4 to 8 years under Virginia's newest 
law.(4) 
In terms of valuation procedures, all of the exist- 
ing laws except one employ current use value as the 
relevant valuation standard. Furthermore, in almost 
all instances, forest use values are established us- 
ing an income capitalization approach. The only 
statute not predicated upon use value is Georgia's. 
In Georgia, participating and nonparticipating forest 
properties are assessed on the basis of fair market 
value, but the assessment ratio applicable to the 
former is 30 percent as opposed to the usual 40 
percent. 
(4) Virginia's newest law is known as the "Agricultural and 
Forestal Districting Act." Modified assessment is only one 
of several inducements which the State uses in an effort to 
encourage farm and forest owners to keep their lands in 
crop and timber production. Other advantages are (1) 
government's ability to take land by eminent domain is 
limited, (2) government's ability to regulate farm and/or 
forestry activities is constrained, and (30 government's 
ability to impose special taxes to support non- 
agriculturally-related improvements is restricted, as is its 
power to expend public funds for such purposes. 
114 
Finally, in regard to declassification penalties, 
eight ofthe existing optional laws contain provisions 
of this nature. In almost all instances, the penalty 
takes the form of a "rollback tax." This is a charge 
equaling, for some specified number of years, the 
difference between the taxes that were actually paid 
and those that would have been paid except for the 
benefits of special assessment. The lengths of the 
rollback periods vary from 3 years in Alabama, 
North Carolina, and Tennessee, to 5 years under 
Virginia's newest law. In addition, three States-- 
North Carolina, Texas, and Virginia--add interest 
charges to the amount of the rollback tax. 
Severance Taxes--At present, five States-- 
Alabama, Arkansas, North Carolina, South Carolina, 
and Virginia--have severance taxes. As is character- 
istic of this type of tax, all ofthe statutes are 
mandatory and all, save one, impose a fixed levy per 
unit volume or per unit of product. The one excep- 
tion is Arkansas. Arkansas' severance tax is based 
onthe weight of the timber to be processed. 
Arkansas' law also is unique in that it requires 
monthly payments whereas the others provide for 
quarterly collections. The various programs are sim- 
ilar in that they all exempt timber cut by individuals 
from their own lands for their own use. North Car- 
olina and South Carolina also exempt Christmas 
trees and fuelwood cut for personal use or use in 
individual homes. 
Impacts on Forest Management 
There is no quantitative evidence showing that 
the special property and related tax policies which 
have applied, and which continue to apply, to forest 
owners in the Southhave had a positive effect on 
timber management. However, there are at least 
two reasons for believing that such legislation has 
been beneficial. 
The first reason is traceable to the fact that an- 
nually recurring costs such as property taxes can 
have a profound effect on the profitability of forestry 
investments. Because of the long-term nature of 
such investments, annually recurring costs accu- 
mulate with interest and can easily extinguish op- 
portunities for profit. Except for the period of the 
Great Depression, this phenomenon hs not normal- 
ly been a problem in the South. Since the 1950's, 
however, a number of factors have been working 
together to change this situation. inflation has 
