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Business Taxes Law Guide – Revision 2021
 

Timber Yield Tax Regulations

Title 18 of the California Code of Regulations


Article 1. Valuation of Timberland and Timber

Article 2. Timber Yield Tax - Administration


Timber Yield Tax Regulations

California Code of Regulations Title 18

Chapter 11. California Department of Tax and Fee Administration - Timber Yield Tax

Article 1. Valuation of Timberland and Timber


Regulation 1020. Timber Value Areas.

Authority cited: Sections 38204 and 38701, Revenue and Taxation Code. Reference: Sections 38109 and 38204, Revenue and Taxation Code.

The following nine designated areas contain timber having similar growing, harvesting and marketing conditions and shall be used as timber value areas in the preparation and application of immediate harvest values:

Area 1

Del Norte County

Humboldt County

Area 2

Marin County

Mendocino County

Napa County

Sonoma County

Area 3

Alameda County

Contra Costa County

Monterey County

San Francisco City and County

San Mateo County

Santa Clara County

Santa Cruz County

Area 4

Colusa County

Glenn County

Lake County

Shasta County west of Interstate Highway No. 5

Solano County

Siskiyou County west of Interstate Highway No. 5

Tehama County east of Interstate Highway No. 5

Trinity County

Yolo County

Area 5

Shasta County east of Interstate Highway No. 5

Siskiyou County east of Interstate Highway No. 5

Area 6

Lassen County

Modoc County

Area 7

Butte County

Nevada County

Placer County

Plumas County

Sierra County

Sutter County

Tehama County east of Interstate Highway No. 5

Yuba County

Area 8

Alpine County

Amador County

Calaveras County

El Dorado County

Sacramento County

San Joaquin County

Stanislaus County

Tuolumne County

Area 9

Fresno County

Imperial County

Inyo County

Kern County

Kings County

Los Angeles County

Madera County

Mariposa County

Merced County

Mono County

Orange County

Riverside County

San Benito County

San Bernardino County

San Diego County

San Luis Obispo County

Santa Barbara County

Tulare County

Ventura County

Note: Authority cited: Sections 38204 and 38701, Revenue and Taxation Code. Reference: Sections 38109 and 38204, Revenue and Taxation Code.

History: Adopted November 4, 1976, effective January 1, 1977.

Amended January 31, 1977, effective February 1, 1977.

Amended October 18, 2010, effective November 17, 2010.


Regulation 1021. Timberland Grading Rule.

Note: Authority cited: Section 15606, Government Code; Section 38701, Revenue and Taxation Code. Reference: Sections 434.1 and 38204, Revenue and Taxation Code.

(a) General. Beginning with the 1977-78 fiscal year, privately owned land and land acquired for state forest purposes which is primarily devoted to and used for growing and harvesting timber and is zoned for a minimum 10-year period as timberland production zone (TPZ) will be valued for property taxation on the basis of its use for growing and harvesting timber, plus the value, if any, attributable to existing, compatible, nonexclusive uses of the land.

(b) Site Quality. Timberland is rated for productivity based upon its ability to produce wood growth on trees. Five general site classes are established wherein Site I denotes areas of highest productivity, Site II and Site III denote areas of intermediate productivity, and Site IV and Site V denote areas of lowest productivity. The five site quality classes are set forth within each of three general forest types: redwood, Douglas fir, and mixed conifers.

Land zoned as timberland production zone (TPZ) shall be graded by the assessor using the following site classification table as a measure of land productivity.

Timberland Production Zone Site Classification Table
Timberland Production Zone Site Classification Table
 
 
Productivity
Potential
 
Young-Growth
Redwood
[FN1]
 
 
Douglas Fir
[FN2]
Ponderosa Pine
Jeffrey Pine, Mixed
Conifer & True Fir
[FN3]
Site Class
 
 
Site Index
Feet @
100 yrs.
Site Class
 
 
Site Index
Feet @
100 yrs.
Site Class
 
 
Site Index
Feet @
100 yrs.
Site Index
Feet @
300 yrs.
Highest 
I
180 or
more
 
I
194 or
more
 
I
114 or
more
163 or
more
IntermediateII155-179II164-193II93-113138-162
III130-154III134-163III75-92113-137
LowestIV105-129IV103-133IV60-7488-112
 
V
Less Than
105
 
V
Less Than
103
 
V
Less Than
60
Less Than
80

[FN1]

Lindquist, Ja,es L., and Marshall N. Palley. Empirical yield tables for young-growth redwood, Calif. Agr. Exp. Stn. Bull 796, 47 pp., 1963.

[FN2]

McArdie, Richard., and Walter H. Meyer. The yield of Douglas fir in the Pacific Northwest, USDA Tech. Bull. 201, 74 pp., Rev. 1961. Adjusted to average height of dominant trees after Forest Research Note No. 44, Pacific Northwest Forest and Range Experiment Station, by Forest Survey, Calif. Forest and Range Exp. Stn., 1948.

[FN3]

Dunning, Duncan. A site classification for the mixed conifer selection forests of the Sierra Nevada. USDA Forest Serv. Calif. Forest and Range Exp. Stn. For. Res. Note 28, 21 pp., 1942.

YOUNG-GROWTH REDWOOD

Site index based on average height of dominant trees at breast height age of 100 years. Use in young-growth redwood stands in which more than 20 percent of the stand by basal area is redwood and when sufficient dominant redwood trees are available to determine site index.

DOUGLAS FIR

Site index based on average height of dominant trees at age 100 years. Use in young-growth redwood stands in which 20 percent or less of the stand by basal area is redwood or when sufficient dominant redwood trees are not available to determine site index. Use also in old-growth redwood stands. In such cases, measure Douglas fir trees for determining site index. Also use for Sitka spruce, grand fir, hemlock, bishop's pine, and Monterey pine stands.

PONDEROSA PINE, JEFFREY PINE, MIXED CONIFER, AND TRUE FIR

Site index based on average height of dominant trees at age 100 and 300 years. Use also for lodgepole pine stands. For old-growth stands, use height of dominants at age 300 years.

(c) Operability. Timberland shall be rated for operability based upon such factors as accessibility, topography, and legislative or administrative restraints. On or before December 31, 1979, two classes of operability shall be used by the assessor and designated as operable or inoperable. Areas of inoperable land must be identified by the assessor. For the purpose of land site classification, inoperable means that any of the following circumstances are applicable:

(1) Extreme physical barriers prevent access.

(2) Legal or administrative restraints prevent access or harvest.

(3) Rocky ground, steep slopes, or sterile soil prevent growing or harvesting merchantable timber.

History: Adopted January 6, 1977, effective March 3, 1977.

Amended June 21, 1983, effective October 7, 1983.


Regulation 1022. Standard Unit of Measure.

Authority cited: Section 15606, Government Code; Sections 38109, 38204, and 38701, Revenue and Taxation Code. Reference: Sections 38109 and 38204, Revenue and Taxation Code.

(a) General. In determining quantities of timber for purposes of the timber yield tax the Scribner Decimal C Log Rule based on a maximum scaling length of 20 (Scribner Decimal C (short log) Scale) feet shall be used as the standard board foot log rule for timber that is measurable by the net board foot method. This standard board foot log rule for such timber is to be used in all instances, except that in those rare instances when circumstances preclude the use of this standard board foot log rule for such timber, conversion factors as specified herein shall be employed for reporting harvested timber originally scaled using other than the standard board foot log rule.

Timber that is not normally scaled by the net board foot method shall be measured using the unit commonly employed by those dealing the wood products to which the timber is to be converted, e.g.

Standard Unit of Measure
Intended wood productMeasurement Unit
Fuel WoodCord
Christmas trees, polesLineal foot and pilings
Chip woodGross scale of usable wood

(b) Definitions. When used in this section the terms board foot and board foot log rule shall have the following meaning:

(1) Board foot-a solid piece of wood, 12 inches wide, 12 inches long and 1 inch thick.

(2) Board foot log rule-a method for estimating the volume in board feet of a log with a known diameter and length.

(c) Conversion Factors. When board foot volumes are not scaled using the standard board foot log rule the following factors shall be used to convert the scale employed to the standard scale.

(1) The Humboldt Log Scale shall be converted to gross Scribner Decimal C (Short Log) Scale by the application of a multiplier factor of 1.45. The actual defect in board feet as determined by the difference between that scale and the mill tally records shall be deducted from the gross Scribner scale. Until January 1, 1978, the Humboldt Log Scale when applied to old growth redwood shall be converted to net Scribner Decimal C (Short Log) Scale by the application of a multiplier factor of 1.15.

(2) The Spaulding Log Scale (Short Log) shall be converted to Scribner Decimal C (Short Log) Scale by the application of a multiplier factor of 1.02.

(3) When logs harvested in California are scaled outside California, and only when circumstances preclude the use of the Scribner Decimal C Log Rule based on a maximum scaling length of 20 feet (Scribner Decimal C (Short Log) Scale), the Scribner Decimal C Log Rule volumes attributable to long log scaling shall be converted to Scribner Decimal C (Short Log) Scale by the application of a multiplier factor of 1.20.

History: Adopted November 4, 1976, effective January 1, 1977.

Amended August 19, 1980, effective December 31, 1980.


Regulation 1023. Immediate Harvest Value.

Authority cited: Section 15606, Government Code; Sections 38109, 38204, and 38701, Revenue and Taxation Code. Reference: Sections 38109 and 38204, Revenue and Taxation Code.

(a) Definitions.

Immediate harvest value is the amount that each species or subclassification of timber would sell for on the stump at a voluntary sale made in the ordinary course of business for purposes of immediate harvest. Such value shall be expressed to the nearest dollar per standard unit of measure applicable pursuant to Rule No. 1022, except that the immediate harvest value of Christmas trees shall be the sale price of such trees in quantities of 100 or more in the market area nearest to the place where the trees are cut and adjusted to reflect the value of the trees immediately prior to severance. Timber value areas are those areas containing timber having similar growing, harvesting, and marketing conditions.

Harvest value is the immediate harvest value in a timber value area as of the first day of the period specified by the applicable harvest value schedule.

"Timber at similar locations" means timber in an area of comparable elevation and topography, and subject to comparable logging conditions and accessibility to the point of conversion.

(b) Harvest Value Schedules. The timber owner shall determine the taxable value of the timber harvested for each harvest operation by the use of the Board harvest value schedule applicable to the tax reporting period.

The harvest value schedules adopted by the Board provide estimates of harvest values by considering gross proceeds from sales on the stump of similar timber of like quality and character at similar locations, or gross proceeds from sales of logs, or of finished products, adjusted to reflect only the portion of such proceeds attributable to value on the stump immediately prior to harvest, or a combination of both. Allowance is made for differences in age, size, quality, cost of removal, accessibility to point of conversion, market conditions, and other relevant factors.

Each value schedule provides harvest values for a timber value area taking into account species and average tree or log size. Appropriate allowances for costs of removal have been calculated by consideration of the most common logging systems used within the area, the actual methods of harvesting the timber, the volume per acre, the total volume removed per harvest operation, the typical haul range distances to a conversion point and any excessive required costs of removal.

(c) Damaged Timber. The Board, either on its own motion after consultation with the Timber Advisory Committee or in response to an application from a timber owner may specify a modification of immediate harvest value to reflect material changes in timber values that result from fire, blowdown, ice storm, flood, disease, insect damage, or other cause, for any area in which damaged timber is located. Whenever a timber owner uses such modified immediate harvest values for reporting damaged timber, he shall maintain appropriate accounting records as specified by the Board.

History: Adopted January 6, 1977, effective March 3, 1977.

Amended and effective June 24, 1997.


Regulation 1024. Exempt Timber.

Authority cited: Section 15606(c), Government Code. Reference: Section 38116, Revenue and Taxation Code.

(a) General. There is exempt from timber yield tax timber whose immediate harvest value is so low that, if not exempt, the tax on the timber would amount to less than the cost of administering and collecting the tax.

(b) Exempt Harvest. Timber, removed from a timber harvest operation whose immediate harvest value does not exceed $3,000 within a quarter, is exempt from timber yield tax pursuant to the authority granted by section 38116 of the Revenue and Taxation Code. For the purpose of this rule, immediate harvest value shall be that value described in sections 38109 and 38204 of the Revenue and Taxation Code, and in Rule 1023. The Board harvest value schedule applicable to the tax reporting period at the time of harvest shall define the timber harvest operation, and shall be the basis for determining the immediate harvest value thereof.

(c) Nothing in this rule shall authorize the exemption of timber whose immediate harvest value exceeds $3,000.

History: Adopted December 9, 1998, effective April 8, 1999.


Regulation 1025. Regulation 1025. Value of Timberland.

[Repealed]


Regulation 1026. Timber Owner.

Authority cited: Section 15606, Government Code; and Section 38701, Revenue and Taxation Code. Reference: Sections 38104, 38106 and 38115, Revenue and Taxation Code; Hoopa Valley Tribe v. Nevins, et al. (1989) 881 F.2d 657.

Exempt person or agency. The timber yield tax is imposed not only on every timber owner who harvests his or her timber or causes it to be harvested but also on every timber owner of felled or downed timber who acquires title to such felled or downed timber in the state from a person or agency exempt from property taxation under the Constitution or laws of the United States or under the Constitution or laws of the State of California. In some instances, such timber owners may acquire title to felled or downed timber directly from the exempt person or agency. In other instances, however, such timber owners may acquire title to felled or downed timber from an exempt person or agency which itself has previously acquired title to the timber from another exempt person or agency.

Where timber owners of felled or downed timber have acquired title to the timber in the state from an exempt person or agency, "first person who acquires either the legal title or beneficial title to timber after it has been felled" means the first non-exempt person who acquires such title from an exempt person or agency, and such a person is a timber owner liable for applicable timber yield tax (e.g., where the person initially felling timber is exempt from property taxation and the person acquiring the felled timber is also exempt from property taxation, the first non-exempt person who thereafter acquires title to the felled timber is liable for applicable timber yield tax).

As used in Sections 38104 and 38115 of the Revenue and Taxation Code, “timber owner” does not include, however, any person who harvests timber, causes it to be harvested, or acquires title to felled or downed timber derived from Indian lands held in trust by the United States for an Indian Tribe or Band or for any Individual Indian member thereof; and no timber yield tax shall be imposed with respect to that timber upon any person who thereafter acquires title to the timber.

History: Adopted August 19, 1980, effective December 31, 1980.

Amended August 5, 1983, Section 38301 repealed effective January 1, 1983.

Amended April 22, 1992, effective September 12, 1992.


Regulation 1027. U.S. Forest Service Timber Volumes.

Authority cited: Section 15606, Government Code; Sections 38108 and 38701, Revenue and Taxation Code. Reference: Sections 38108 and 38115, Revenue and Taxation Code.

(a) General. U.S. Forest Service timber sale contract holders shall report timber volumes harvested as hereinafter provided.

(b) Scaled Volume Billings. The Timber Sale Statement of Account (TSSA) is the basis for most U.S. Forest Service billing statements. Timber volumes shall be reported for the quarters reflected by the Timber Sale Statements of Account (e.g., April, May, and June, 1980 TSSA volumes shall be reported for the second quarter of 1980).

(c) Lump-Sum Billings. Timber volumes actually harvested, regardless of the volume purchased from, and billed for by the U.S. Forest Service, shall be reported for the quarters in which scaled. Timber sale contract holders must get and retain scaling data for such volumes.

(d) Other Methods of Reporting. Timber harvested pursuant to U.S. Forest Service timber sale contracts may be reported on a basis other than (b) or (c), above, only if a written description of the reporting basis to be used is submitted to and is authorized by the Timber Tax Section prior to the due date of the return and prior to reporting.

History: Adopted August 19, 1980, effective November 16, 1980.

Amended August 5, 1983, Section 38301 repealed effective January 1, 1983.

Amended September 16, 2015, effective November 10, 2015.


Regulation 1031. Records.

Authority cited: Section 15606, Government Code. Reference: Sections 434.1, 38701, and 38204, Revenue and Taxation Code.

(a) General. Every timber owner, timberland owner, timber operator, and person harvesting timber for forest products purposes, shall keep adequate and complete records showing:

(1) Contractual or financial agreements relative to the ownership and harvest of timber for forest products.

(2) Harvest locations for logged timber.

(3) The basis for adjustments to harvest values. These records shall include the books of account ordinarily maintained by the average prudent businessman engaged in the activity, together with all bills, receipts, invoices, scaling records, tapes, or other documents of original entry supporting the entries in the books of account as well as all schedules or working papers used in connection with the preparation of tax returns.

(b) Microfilm Records. Microfilm reproductions of general books of account, such as cash books, journals, voucher registers, ledgers, etc., are acceptable in lieu of original records, and microfilm reproductions of supporting data such as sales invoices, purchase invoices, credit memoranda, scale tickets, trip tickets, etc., are acceptable providing the following conditions are met:

(1) Appropriate facilities are provided for the preservation of the films for periods required under subparagraph (d).

(2) Microfilm rolls are indexed, cross-referenced, labeled to show beginning and ending numbers or beginning and ending alphabetical listing of documents included, and are systematically filed.

(3) The taxpayer agrees to provide transcriptions of any information contained on microfilm which may be required for purposes of verification of tax liability.

(4) Proper facilities are provided for the ready inspection and location of the particular records, including modern projectors for viewing and copying the records.

A posting reference must be on each invoice. Credit memoranda must carry a reference to the document evidencing the original transaction. Documents necessary to support a claimed adjustment for immediate harvest value, such as scaling tickets and trip records, must be maintained in an order by which they can be readily related to the harvesting for which the value adjustment is sought.

(c) Records Prepared by Automated Data Processing Systems. An ADP tax accounting system shall include a method of producing visible and legible records that will provide the necessary information for verification of the taxpayer's tax liability.

(1) Recorded or Reconstructible Data. ADP shall make possible the tracing of any transaction back to the original source or forward to a final total. If detail printouts are not made of transactions at the time they are processed, then the system must have the ability to reconstruct these transactions.

(2) General and Subsidiary Books of Account. A general ledger, with source references, shall be maintained to coincide with financial reports for tax reporting periods. Subsidiary ledgers used to support the general ledger accounts shall also be in printout form, or the system be capable of producing a printout for any appropriate calendar or fiscal period.

(3) Supporting Documents and Audit Trail. Records shall be kept in such a manner as to provide an audit trail that allows for ready identification of details underlying the summary accounting data. The system should be so designed that supporting documents, such as sales invoices, purchase invoices, scaling tickets, credit memoranda, etc., are readily available.

(4) Program Documentation. A description of the ADP portion of the accounting system shall be available. The statements and illustrations of the scope of operations should be sufficiently detailed to indicate, (a) the application being performed, (b) the procedures employed in each application (supported by flow charts, block diagrams or other satisfactory description of the input or output procedures), and (c) the controls used to insure accurate and reliable processing. Important changes, together with their effective dates, should be noted in order to preserve an accurate chronological record.

(d) Records Retention. All records pertaining to transactions subject to the timber yield tax must be preserved for a period of not less than four years unless the State Board of Equalization authorizes in writing their destruction within a lesser period.

(e) Examination of Records. All of the above-described records shall be made available for examination on request by the Board or its authorized representatives.

(f) Failure to Maintain Records. Failure to maintain and keep complete accurate records shall be considered evidence of negligence or intent to evade the tax and may result in penalties or other appropriate administrative action.

History: Adopted January 6, 1977, effective March 3, 1977.


Regulation 1032. Innocent Spouse or Registered Domestic Partner Relief from Liability.

Authority cited: Section 38701, Revenue and Taxation Code. Reference: Section 38454.5, Revenue and Taxation Code; and Sections 297, 397.5 and 308, Family Code.

A spouse or registered domestic partner claiming relief from liability for the timber yield tax, interest, penalties, and other amounts shall be relieved from such liability where all the requirements set forth in California Code of Regulations, title 18, section 35055 are met.

History: Adopted May 18, 2010; effective June 17, 2010.

Amendments filed March 19, 2018, as an emergency; effective and operative March 19, 2018. Amendments refiled September 17, 2018, as an emergency; effective and operative September 17, 2018. Amendments refiled December 17, 2018, as an emergency; effective and operative December 17, 2018. Certificate of Compliance transmitted to OAL on February 20, 2019, and filed March 19, 2019. The amendments replaced the reference to Regulation "4903" with a reference to Regulation "35055" in the regulation’s text and replaced the reference to "Sections 38454.5 and 38601-38607" with a reference to "Section 38454.5" in the regulation's reference note.