Changes Made to PA Clean and Green Program: Tax Burden for Landowners with Active Leases is Clarified
Landowners in Pennsylvania got some much needed tax relief as the result of the passage of legislation recently. The new law affects the so-called Clean and Green program which was itself enacted to encourage landowners to preserve land for farming and forestry. Once approved as a part of the program, landowners enjoyed a reduced property value for purposes of determining real property taxes. As originally enacted, the Clean and Green program required a penalty or roll back tax if property qualified for the program ceased to be used for approved purposes. These roll back taxes were due with interest and computed by returning the value of the property to its prequalified fair market value. In some counties tax assessors collected the roll back tax for the entire parcel regardless of how much of it ceased to be used in a qualified manner. In other counties, roll back taxes were collected only for the portion of the property which was not used in a qualified manner. The same program, created statewide, was administered in two completely different ways across the state. The ability to maintain the benefits of the program depended entirely upon in which county the property was located.
With natural gas exploration in the Marcellus Shale formation affecting farmers who had previously qualified for Clean and Green, the inconsistencies in application of the same law affected farmers disproportionately. Promises for the introduction of some sanity into the system were often made and until now were never delivered. As a result of the new legislation, roll back taxes are due only for the portion of the property which is used in a non-qualified manner. So if 8 acres of a 200 acre parcel are used for the development of a drilling pad and gas exploration, then only 4% (8/200 = 4%) of the tax benefits from participation in the Clean and Green program will be subject to roll back. Technically, the exclusion is accomplished by severing the portion of the property not used in a qualified manner from the portion of the property which continues to be used in a qualified manner and requires roll back for the non-qualified portion only.
There are a few other benefits to the new law. The portion of land disturbed to place underground gathering or transmission pipelines are exempt from the roll back. The development of pipelines, if buried, will neither affect long term use of the property for agricultural purposes, nor will it create a roll back liability. Additionally, property can be disturbed for the generation of alternative energy if more than half of the energy generated is used for agricultural purposes. For this purpose, alternative energy includes solar, wind, low impact hydropower, fuel cells and geothermal energy to name a few.
With this new law landowners across the state will be treated in the same manner. This is a welcome change especially in those counties where the tax assessor had determined that disturbance of a relatively small portion of eligible property resulted in a roll back of the entire benefit. By its terms the law notes that the change applies 60 days after enactment. Taken literally, this change may not help landowners who have had to pay roll back taxes prior to enactment. Hopefully the new legislature will be equally motivated to change other laws which either hamper gas exploration or do not protect landowner rights.