Would Maine's proposed commercial forestry excise tax have been constitutional after the forest fire tax ruling?

Plain-English summary

After the Maine Law Court struck down a forest fire suppression tax as a property tax that was not assessed by land value, Governor Brennan asked whether a proposed commercial forestry excise tax would survive the same constitutional objection. The 1985 Attorney General thought it would. The bill expressly taxed the privilege of using land in a commercial forestry business. Its definition pointed to the Tree Growth Tax Law's commercial use test, and it excluded some land that could not legally be used for forest products and a small parcel harvested only for an owner's personal use.

The opinion acknowledged that the proposed tax was measured by taxable acreage and that its revenue was not dedicated to fire suppression. It found neither feature decisive. Acreage was used as a rough measure of the commercial business, and earmarking was not a legal requirement for an excise tax. The proposed income tax style collection method also differed from a direct real estate lien. The conclusion was prospective: the AG predicted that the bill, if enacted, would be upheld as an excise on commercial activity.

Currency note

This opinion was issued in 1985. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Why did the AG distinguish the proposed tax from the earlier forest fire tax? A: The earlier tax had been treated as a property tax and failed the constitutional valuation rule. The proposed bill expressly targeted the commercial use of forest land, which the AG regarded as an excise tax subject to a different analysis.

Q: Did measuring the tax by acres turn it into a property tax? A: The AG said no. In this proposal, acreage approximated the size of the taxpayer's forestry business; the taxed subject was the commercial activity rather than ownership itself.

Q: Did the tax proceeds have to be dedicated to forest fire protection? A: The opinion said dedication was not legally required for an otherwise valid excise tax.

Q: Did the opinion establish that this tax became law? A: No. It assessed the constitutionality of a proposed bill and expressly framed its conclusion as applying if the bill were enacted.

Background and statutory framework

The proposed § 2720 described the taxable privilege. Its commercial land definition drew on the Tree Growth Tax Law, including the commercial use condition discussed under § 574(1). The AG compared these features with the Law Court's earlier property tax ruling and with constitutional limits on property taxation. The analysis concerned the proposed bill as written in 1985.

Citations and references

• 36 M.R.S.A. § 2720: proposed provision defining the taxable privilege.
• 36 M.R.S.A. § 574(1): Tree Growth Tax Law commercial use condition discussed in the opinion.

Source

• Landing page: https://www.maine.gov/legis/lawlib/lldl/agops/agops.htm
• Original PDF: https://lldc.mainelegislature.org/Open/AG/Opinions/1985/ag_19851109.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

85-23
JAMES E. TIER'[)
ATTORNEY GENERAL

STATE or M,.r,.,E
DEPARTME'\T OF THE A TIOR'\E) GP.:ERH

STATE HOlSE STATJO\ 6
AlGlSTA, MAJ\'E 04333

November 9, 1985

Governor Joseph E. Brennan
Executive Department
State House Station #1
Augusta, ME 04333

Dear Governor Brennan:

You have requested an opinion of this Office concerning the constitutionality of L.D. 1661 (112th Leg. 1985) entitled "AN ACT Establishing a Commercial Forestry Excise Tax and Providing an Appropriation for Refunding Maine Forest Fire Suppression Taxes Paid" (the "Act"). In particular, you have sought an opinion whether the proposed statute which creates an excise tax would likely be sustained by the Law Court in light of its recent opinion in Eastler v. State Tax Assessor, No. 3844 (Me. Oct. 16, 1985). For reasons to be set forth below, it is the opinion of this office that the proposed statute imposes a constitutionally valid excise tax on commercial forestry enterprise and would likely be sustained as an appropriate tax if it were challenged.
~

In Eastler the Law Court held that the Forest Fire Suppression Tax was a property tax rather than an excise tax; because that tax was not apportioned or assessed according to the value of the land, the tax violated Art. IX, section 8 of the Maine Constitution. Id. Thus, the issue to be addressed in this opinion is whetherthe proposed tax is a property tax or an excise tax.

In the Act, the proposed tax is denominated an excise tax to be levied on the privilege of utilizing forest land in the business of producing commercial forest products. L.D. 1661, Section 2; and Statement of Fact (112th Legis. 1985). The owners of such commercially utilized forest land are liable for - 2 -

11 this tax. Commercial forest land 11 is defined to be land classified or which would be eligible for classification as forest land pursuant to the Tree Growth Tax Law, 36 M.R.S.A.
§§ 571-583 (1978 and Supp. 1985-86). Such a oef inition would exclude those types of land unsuitable for growing commercially valuable forest products. Further, the Act specifically excludes from its definition forest lands which would be commercially valuable sources of forest products but for the existence of legally enforceable restrictions upon their commercial utilization. Finally, single parcels of up to 100 acres of commercially valuable forest land harvested by their owners for personal, noncommercial use are excludea from the definition whether or not classified urider the Tree Growth Tax Law. There is, in addition, a general 500 acre exemption for each owner of commercial forest land based upon holdings throughout the State.

The tax is apportioned among forest land owners based upon taxable acreage of commercial forest land. The amount of tax to be assessed and collected for the first year is $9.77 million; in subsequent years the amount to be assessed and collected will be one-half the General Fund appropriation for forest fire suppression with various adjustments not relevant to this opinion. The enforcement of this tax is accomplished by the lien and collection procedures currently available for collection of State income taxes. 36 M.R.S.A. §§ 5311-5322 (1978 and Supp. 1985-86). Such procedures closely resemble similar procedures under the State's sales and use tax law.

Generally speaking, the Maine Constitution contains no limitation on the legislative imposition of taxes on business, State v. Stinson Canning Co., 161 Me. 320, 325, 211 A.2d 553, 556 (1965), if the tax is for a public purpose and is assessed uniformly upon all business of a like kind. State v. Western Union Telegraph Company, 73 Me. 518, 526-27, 531 (1982). The present statute clearly serves a p~blic purpose--the State's need for revenue to meet State obligations as well as to fund, in part, forest fire protection for Maine's most important economic resource, its forests. The tax does not seem susceptible of challenge on the basis that it is not uniformly imposed. All persons owning land utilized for harvesting or production of commercial forest products are subject to this tax.

An excise tax may be levied only upon a use of a property or an exercise of a particular power over property incidental to its ownership. Bromley v. McCaughn, 280 U.S. 124, 136 (1929); State v. Western Union Telegraph Company, 73 Me. at
526. An excise tax may, for example, be levied on the
 - 3 - r

privilege of conducting a business or franchise, the right to
inherit property, or the right to make a gift of property.   A
property tax is levied on the mere ownership of property.
Dawson v. Kentucky Distilleries & Warehouse Co., 255 U.S. 288,
294 (1921).   In order to determine the proper legal
characterization of a tax, it is necessary to determine what
is, in fact, the subject of the tax.   As an aid to this
determination, the method of taxation (e.g. the manner of the
tax calculation or its method of enforcement) may provide    ·
significant but not conclusive evidence of the character of the
tax. Eastler, Slip Op. at 8-9.

    In the present case, there is no doubt that the subject
matter of the tax is the use of land for commercial forest
enterprises. The proposed statute explicitly provides that it
is a tax imposed "upon the privilege of using one's land in
commercial forestry enterprise in this State." Proposed
36 M.R.S.A. § 2720, L.D. 1661 (112th Leg. 1985). The
commercial focus of the proposed tax is made clear by the
definition of "commercial forest land" which provides, in
pertinent part, as follows:

              "Commercial forest land" means land
         which is classified or which would be

( eligible for classification as forest land
pursuant to the Tree Growth Tax Law, chapter
105, subchapter II-A. • . • Proposed
36 M.R.S.A. § 2723(2).

A specific statutory precondition to classification of forest
land under the Tree Growth Tax Law is sworn statement from the
landowner that the landowner is engaged in the business of
selling or processing forest products and that the land is
being used in this business.   36 M.R.S.A. § 574(1) (1978 and
Supp. 1985-86). The definition in the Act, of course,
encompasses all such forest land whether or not classified
under the Tree Growth Tax Law.      k



    The commercial focus is made all the clearer by virtue of
the exclusions of specific types of nonforest land as well as
any forest land which may be the subject of legally enforceable
restrictions on its use for production of forest products even
though such land is or might be classified as forest land under
the Tree Growth Tax Law.  Further, the use by the owner of a
single parcel of 100 acres or less for personal needs further
limits the present tax to truly commercial enterprises.

,· - 4 -

     It is significant that a cross-reference to the definition
 of "forest landtt under the Tree Growth Tax Law contained in the
 Spruce Budworm Tax, 36 M.R.S.A. §§ 2701-2706 (1978) had the
 legal effect of assisting in identifying the subject matter of
 that tax as corr~,ercial forestry.  Opinion of the Justices, 335
 A.2d 904, 912 (Me. 1975).    It is noteworthy that the Spruce
 Budworm Tax, unlike the proposed tax, failed to identify
 expressly the privilege upon which an excise tax was being
 imposed. Nevertheless, the cross-reference to the Tree Growth
 Tax Law contained in the earlier Spruce Budworm Tax was perhaps
 the most significant factor in aid of the court's determination
 that the subject matter of that tax was commercial·forestry
 appropriate to the imposition of an excise tax.

     The proposed tax has two attributes which, it may be
 argued, are suggestive of a property tax: (1) the tax is
 measured by the amount of property owned by a taxpayer, and (2)
 the proposed legislation does not provide for a dedication of
 the tax revenues raised by this tax.  This Office does not
 believe that these attributes taken separately or together
 alter the conclusion that the focus of the present tax is the
 commercial use of forest land and not mere ownership of land.
 An excise tax levied on commercial business enterprise is often
 measured by the amount of property in taxpayer's hands.

( Eastler, Slip. Op. at 10; and see Western Union, 73 Me. at
531. Here, the amount of commercially used land is treated by
the Legislature as a rough approximation of the value of an
owner's business; it is that business which is being taxed.
See id.

     The fact that the Legislature has chosen not to dedicate
 the revenue to be assessed and collected under this tax is not
 very significant in view of the fact that the amount of the tax
 to be collected after the first year is based upon one-half the
 projected cost of forest fire protection for the State.
 Dedication of tax revenues from som~ excise taxes may be
 explained by the fact that unlike the proposed excise tax,
 specific revenue goals are not set for such taxes. S e e , ~ ,
 36 M.R.S.A. § 4571 (1978 and Supp. 1985-86) (Potato Tax);
 36 M.R.S.A. § 4699 (1978 and Supp. 1985-86) (Sardine Tax);
 36 M.R.S.A. § 4311-A (1978 and Supp. 1985-86) (Blueberry Tax).
 The possibility that the State's projected cost for forest fire
 suppression services may exceed expenditures in one year is
 tempered by the likelihood that actual costs in another year
 will exceed such a projection and must be defrayed by other
 sources of general fund revenues.  Importantly, dedication of
 revenues from otherwise legal excise taxes has not been held to

- 5 -

be a legal requirement for such a tax. S e e , ~ 36 M.R.S.A.
§ 2683 (Telephone & Telelegraph Companies); 36 M.R.S.A. § 2623
(Railroad Companies); and cf. Eastler, Slip Op. at 14.
    It should also be noted that the proposed tax, unlike the
tax held to be unconstitutional in the Eastler case, is not
enforced through a direct lien upon real estate as is the case
with property taxes in this State. Enforcement of the proposed
tax is accomplished through the same lien and collection    ·
procedures as are used under the State's income tax laws.
    On balance, it is the opinion of this Office tfiat the
Commercial Forestry Excise Tax, if enacted, would constitute an     )
excise tax upon commercial forestry enterprise and would
therefore be found constitutional if challenged.
    I hope the foregoing answers your request. Please feel
free to reinquire if further clarification is necessary.
                                         rely,

                                                 z-. T-=-'-------
                                             TIERNEY

( General
JET:sw

cc:   Senator Donald R. Twitchell
      Representative John A. Cashman
      Representative John E. Masterman