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Lawmakers weigh taxing carbon credits on timberlands to keep towns whole
Summary
Representative Arnold Davis proposed amending RSA 79 (timber yield tax) to require a yield‑type tax on carbon sequestration payments, arguing existing timber tax rules let carbon projects avoid municipal revenue that historically came from timber harvests; supporters said the change protects rural budgets, opponents urged study and rulemaking.
The committee held an extended public hearing on House Bill 123, which would add carbon‑sequestration payments to RSA 79’s yield tax framework so municipalities receive a yield‑style tax on revenue generated by sales of forest carbon credits.
Representative Arnold Davis (Coös) framed the bill as a parity measure: historically New Hampshire taxed timber when it was harvested through a 10% yield tax rather than annually assessing standing timber. He said carbon projects — contracts that pay landowners for keeping trees standing and sequestering carbon — can effectively replace harvest income for long periods and shift municipal revenue away from towns that previously collected timber yield tax.
Proponents included Coös County officials who warned that large unincorporated places rely heavily on timber‑tax revenue and that major easements and carbon agreements (notably the Connecticut Lakes Headwaters property) have reduced harvest volumes and municipal receipts. County administrators and commissioners said timber tax once made up a meaningful share of unincorporated places’ budgets and that a shift to carbon without a local tax mechanism would create fiscal holes.
Opponents and cautious witnesses — including conservation partners, the Nature Conservancy and the Business & Industry Association — urged more study. The Nature Conservancy said it supported measures to protect small landowners and sustainable forestry, but asked the Legislature to review DRA’s scheduled study on tax impacts and assess administrative feasibility. Industry witnesses urged clear administrative rules: forest carbon contracts vary (voluntary 40‑year markets vs. California compliance 100‑year markets), payment timing can be “lumpy,” and many contracts are not recorded publicly.
Witnesses on both sides agreed on the need for DRA administrative rules to implement any statutory change and for a registry and transparency on which properties enroll. The committee heard offers to work on a legislative fix that mirrors timber yield tax mechanics rather than attempting to use an older, rarely invoked section of RSA 79 that assesses standing timber when a town shows it is “unreasonably deprived” of revenue.
Ending: The committee closed the public hearing after extensive testimony and requested DRA and DNCR input and the pending DRA tax‑impact report due this November before further action.
