(1) Noncommercial forest land and nonforest land shall not be eligible for valuation as forest land. Standing and down timber on forest land shall not be separately valued and assessed.

(2) The valuation of forest land shall be as provided in 15-44-101 through 15-44-105 , MCA.

(3) The valuation of forest land shall be based on a five-year average of income, expense, and capitalization rate for the most recent five-year period ending in the calendar year immediately preceding the year published by the department in ARM 42.18.124.

(4) The department shall determine the forest productivity value for each forest valuation zone using the formula V=I/R, where:

(a) V is the per-acre forest productivity value of the forest land;

(b) I is the per-acre net income of forest lands in each valuation zone and is determined by the department using the formula, I = (M x SV) + NAI - C, where:

(i) I is the per-acre net income;

(ii) M is the per-acre mean annual net wood production;

(iii) SV is the per-acre stumpage value;

(iv) NAI is the per-acre agricultural related income; and

(v) C is the per-unit cost of the forest product and agricultural product produced, if any; and

(c) R is the capitalization rate.

(5) Net income (I) shall include stumpage value derived from the harvest of timber on state timber sales.

(6) The mean annual net wood production (M) shall be determined by using the following formula M=RA x MAI where:

(a) RA is the cubic foot to board foot ratio which converts cubic feet to board feet; one cubic foot will equal 4.1 board feet; and

(b) MAI is the arithmetic midpoint of each forest productivity site class in each forest valuation zone.

(7) Agricultural related income is the average net income for grazing livestock on forest lands in each forest valuation zone. Agricultural related income shall be determined by using the formula AI = GF x AUM x GC where:

(a) AI is the per-acre agricultural related income;

(b) GF is the average per-acre grazing fee on private land;

(c) AUM is the average per-acre animal unit months on forest land; and

(d) GC is the percentage reflecting grazing costs used by the department to value agricultural grazing land.

(8) The capitalization rate is the 15-year annual average interest rate on agricultural loans as reported by the northwest farm credit services, agricultural credit association of Spokane, Washington, or its successor, plus the effective tax rate.

(9) The effective tax rate shall be calculated by dividing the total estimated tax due on private forest lands by the total forest value of those lands.