NH hearing on HB 123: sponsors seek to apply timber yield tax to forest carbon credits

House Bill 123 would require local assessors to treat income from forest carbon-offset contracts as yields under RSA 79 — the state's longstanding timber (yield) tax — and supporters told the Senate Energy and Natural Resources Committee on May 20 that the change is needed to protect timber-dependent towns from lost revenue.

Representative Arnold Davis, the bill's prime sponsor, told the committee that HB 123 "will align carbon sequestration with RSA 79, making all yields equal," and that the change is meant to preserve municipal revenues that historically came from timber. Davis said standing timber has been taxed in New Hampshire since 1949 and described the measure as "not a new tax" but a new application of the existing yield tax to carbon projects that generate tradable credits. He argued carbon deals can defer or replace cutting, which he said shifts tax burdens to towns and property owners.

Why it matters: Sponsors and county officials said the issue affects heavily timbered towns and Coos County in particular. Multiple witnesses said lost timber tax receipts reduce municipalities' ability to pay for services such as ambulances, dispatch and school budgets. Several speakers said large parcels converted to long-term carbon contracts (some contracts described in testimony as lasting decades, up to 100 years) have already reduced local harvesting and related economic activity in parts of northern New Hampshire.

What supporters told the committee - Senator David Roche, supporting the bill, said timber tax rules were adopted to discourage premature clearcutting and that the carbon credit market now gives owners an incentive to avoid cutting. Roche said the bill would "close a loophole" and help towns "buy a fire truck" and otherwise avoid shifting costs to property taxpayers. He identified timber and wood-products jobs and local public services as at risk if revenue declines continue. - County and municipal officials from Coos County (including Raymond Gorman and Commissioner Robert Thibos) and the Coos County administrator urged action to preserve a longstanding tax base and described practical effects in small towns: dispatch centers' cost overruns, reduced mill operations, difficulties obtaining firewood locally and budget pressure in towns with small populations. - Several witnesses urged parity between timber cutting and carbon contracts. Executive Councilor Joe Kenney described HB 123 as "not a new tax" but a return to taxing yields that once supported local budgets, and he recommended requiring registries and annual reporting to local assessors.

What opponents and technical witnesses said - Jennifer Ramsey, tax policy administrator at the Department of Revenue Administration (DRA), said the apparent vehicle in statute (RSA 79:5) "would ostensibly allow for the local property assessors to assess a tax against carbon credit offset landowners," but added that the language in RSA 79:5 has not been used and "is not susceptible of interpretation" in its current form. She highlighted four implementation problems in the House-passed text: (1) which registry or enrollment would trigger assessment, (2) how assessors would identify and verify enrolled credits, (3) how to define the taxable event (issued credit vs. sold credit), and (4) how to value and net costs to arrive at a taxable estimate of a credit's value. Ramsey said DRA and local assessors currently lack the data and the clear statutory mechanics needed to implement the version of HB 123 that passed the House. - Industry groups and many private landowners opposed the House-passed bill. Jason Stock, executive director of the New Hampshire Timberland Owners Association, and representatives from Weyerhaeuser, Wagner Forest Management and several independent foresters called the proposal premature and argued it would function like an income or sales tax on forest owners rather than a traditional timber yield (stumpage) tax. They urged a study commission or further drafting to resolve valuation and enforcement issues and warned of potential double taxation because many entities already pay business tax on carbon-credit revenue. - Several landowners who have enrolled properties in voluntary carbon programs said the programs are costly to enter and that many projects have not yet produced cash flow. One witness said his operation had invested six figures in inventories and verification and had only recently received limited credits; others described the registration and verification process as multiyear and resource-intensive.

Committee next steps and legislative mechanics No formal votes were taken at the hearing. DRA staff and several stakeholders said an amended bill (discussed informally during the hearing) could address many technical concerns; Senator Pearl indicated he planned an amendment that would create a study commission and tie any moratorium to the commission's timetable. Multiple witnesses urged either a carefully redrafted implementing amendment or a study commission with participation by DRA, assessors, timberland owners, conservation groups and municipal officials.

Discussion vs. action This hearing was advisory and evidentiary: the committee heard extensive testimony and technical analysis but took no formal action or vote on HB 123 on the day recorded. Several witnesses said municipalities need interim protections; one large landowner (Aurora Sustainable Lands) told the committee it had provided a voluntary stabilization payment to affected North Country towns while the broader policy debate proceeds.

Ending note Committee members repeatedly framed the issue as a balance between: (a) preserving long-term local revenue streams that historically came from harvest yields, and (b) recognizing private property rights and the diverse, voluntary carbon markets and contracts that landowners may enter. Several witnesses asked for more time and a formal, technical study before altering the statutory yield-tax framework.