Michigan Qualified Forest Program tax benefits for vacant land

Last updated 2026-07-24

What is Michigan's Qualified Forest Program and who qualifies?

The Qualified Forest Program (PA 94 of 1925, as amended) caps property tax at $1.25 per acre for wooded land that meets size, stocking, and management requirements ^[1]. You qualify if your parcel is 20 to 640 acres, at least 50% forested, not zoned residential or commercial, and you commit to a state-approved forest management plan for 10 years ^[1][2]. The program treats your woodland as working forest, not developable real estate. The assessor ignores market value and applies a fixed specific tax rate set in statute ^[1]. Most enrollees own vacant wooded tracts or recreational hunting land taxed at high residential rates before enrollment. You need a management plan prepared and certified by a consulting forester ^[2]. The Michigan Department of Natural Resources maintains a list of approved foresters who write plans for the program, and the plan must describe stand conditions, silvicultural prescriptions, and a 10-year harvest schedule ^[2]. The forester submits the plan to DNR; approval usually takes 30 to 90 days ^[2]. Land already enrolled in Michigan's Commercial Forest (CF) or Farmland Preservation programs is not eligible ^[1]. If your parcel carries a farmland development rights agreement or conservation easement, confirm with your county assessor that the covenant doesn't bar timber harvest, since Qualified Forest requires the right to manage and harvest stands ^[2].

How much does the Qualified Forest Program save on property taxes?

The specific tax is $1.25 per acre each year ^[1]. A 40-acre enrolled parcel pays $50 in state-specific tax, period. Compare that to the same 40 acres at a taxable value of $3,000 per acre and a 30-mill total rate: you'd pay roughly $3,600 annually at full residential assessment ^[3]. Savings depend on your county's millage and your parcel's pre-enrollment assessed value. In high-demand lake counties, wooded vacant land may carry assessed values of $4,000 to $8,000 per acre, yielding tax bills of $80 to $160 per acre at typical millage rates ^[3]. Enrollment cuts that to $1.25, saving $78 to $159 per acre each year. In rural counties where forestland assesses at $800 to $1,500 per acre and millage runs 25 to 35 mills, you pay $20 to $52 per acre before enrollment ^[3]. Savings are smaller, $19 to $51 per acre, but still meaningful over 10 years. One caution: the $1.25 rate is state-specific tax only ^[1]. Local school and county operating millages do not apply to Qualified Forest land, but any voted millages for roads, fire, or library may still appear on your bill as a separate line. Confirm the exact structure with your county equalization department before you project savings.

What are the rollback penalties if I withdraw land early?

Withdrawing land before the 10-year commitment ends triggers a four-year rollback ^[1]. The county recalculates what your tax would have been at full assessed value for the prior four years, subtracts what you actually paid under the program, and bills you the difference plus 6% simple annual interest ^[1]. Example: you enrolled 40 acres in 2020 at $1.25/acre ($50/year) but withdraw in 2024 after four years. The assessor determines your parcel would have been taxed at $80/acre ($3,200 total) each year. The rollback is ($3,200 - $50) × 4 years = $12,600, plus 6% interest on each year's shortfall, roughly $1,500 more, for a total penalty near $14,000. Interest accrues from the date each year's tax was due ^[1]. The county treasurer adds the rollback and interest to your next winter tax bill as a special assessment. You can appeal the assessed value used in the rollback calculation through the March Board of Review, but you cannot appeal the statutory 6% interest rate ^[1]. Voluntary withdrawal, sale to a buyer who does not continue enrollment, or rezoning that makes the land ineligible all trigger rollback ^[1]. Transferring the parcel to a new owner who affirmatively continues the plan avoids rollback, but the new owner must file a continuation form with the county within 90 days of the deed ^[2].

What is forest management, and what does the required plan include?

Forest management is the applied practice of controlling stand composition, stocking, age structure, and health to meet ownership objectives (timber, wildlife, recreation, water quality) while sustaining long-term productivity. In practice, you inventory what you have, decide what you want, and write prescriptions (thinning, regeneration cuts, invasive control, planting) to move current conditions toward your goal over time. Michigan's Qualified Forest Program requires a written management plan prepared by a consulting forester certified by the state ^[2]. The plan must include: - A forest-type map with stand delineations and acreages

• Stand descriptions: species, age, basal area, trees per acre, volume
• Landowner objectives (timber income, wildlife, aesthetics, or a mix)
• Silvicultural prescriptions for each stand: what treatment, when, and why
• A 10-year timeline for harvest, thinning, or regeneration activities
• Estimated volumes and revenues if harvest is prescribed ^[2] The forester visits your land, collects data using variable-radius plots or fixed-area transects, maps stands with GPS, and writes the plan in a format DNR accepts ^[2]. Costs range from $15 to $40 per acre for plans on 20 to 100-acre parcels; larger tracts cost less per acre ^[4]. You pay the forester directly; the state does not reimburse planning costs. The plan is a living document. You file annual compliance reports with DNR documenting harvest activity, regeneration success, and any deviations from the timeline ^[2]. If you skip a planned harvest or substitute a different treatment, you must amend the plan and get DNR approval before the next compliance period.

How does enrollment work, and what is the forest management bureau's role?

You start by hiring a consulting forester to write your management plan ^[2]. The forester submits the completed plan to the Michigan Department of Natural Resources Forest Resources Division (often called the Forest Management Bureau in shorthand) for review ^[2]. DNR staff check that the plan meets stocking standards, prescriptions are silviculturally sound, and the property qualifies by size and zoning. Once DNR approves the plan, you file an application (Form 2699) with your township or city assessor by May 1 of the year you want enrollment to begin ^[2]. Attach a copy of the DNR approval letter and the recorded deed showing you own the parcel. The assessor forwards the application to the county equalization director, who places the parcel on the Qualified Forest roll for the following tax year ^[2]. Enrollment is not automatic. The assessor can reject the application if the parcel is zoned residential, platted into lots smaller than 20 acres, or if the forest type map doesn't match the current use ^[2]. You have 30 days to appeal a denial to the county Board of Review. After enrollment, you file an annual compliance affidavit (Form 2699-A) by February 1 each year ^[2]. The affidavit declares whether you harvested timber, planted trees, controlled invasives, or took any other management action during the prior calendar year. If you harvested, you attach a copy of the timber sale contract and stumpage receipts. DNR audits a random 5% of enrolled parcels each year; if you're selected, a forester visits to verify stocking and compliance ^[2]. The WoodlotLedger Current-Use Enrollment & Compliance Kit walks you through gathering township forms, assembling deed and zoning documentation, and preparing your annual affidavits once a forester completes your management plan. It doesn't replace the forester (state law requires one), but it organizes the bureaucracy around that core requirement.

Do you have to pay taxes on timber sales from enrolled land?

Yes. Timber income is federally taxable, and Michigan also taxes it as ordinary income ^[5][6]. The Qualified Forest Program's $1.25 property-tax cap does not shield timber sale proceeds from income tax; the two systems are separate. The IRS treats standing timber you own for more than one year as a capital asset ^[5]. When you sell timber (stumpage), you recognize capital gain equal to sale proceeds minus your adjusted basis in the timber ^[5]. Basis usually starts at the purchase price allocated to timber and increases by the cost of planting, thinning, or other improvements that add value to the stand ^[5]. Michigan follows federal treatment: capital gain on stumpage sales is taxed at your ordinary income rate (Michigan has no separate capital-gains rate) ^[6]. If you report the sale as capital gain on federal Schedule D, Michigan taxes that same gain at 4.25% for 2024 ^[6]. One shelter: if you hold timber for investment or as a business (not personal use), you can elect to treat the sale as IRC Section 631(b) gain, which qualifies for long-term capital-gains treatment at the federal level and can be offset by capital losses ^[5]. You must have owned the timber more than one year and sold it under a lump-sum or pay-as-cut contract that transfers ownership before harvest ^[5]. Self-employment tax does not apply to standing-timber sales (stumpage) because you're selling an asset, not performing services ^[5]. If you harvest the timber yourself and sell logs, that's ordinary income subject to SE tax.

How do I report timber sales on my tax return?

For standing-timber sales (stumpage), report the gain on federal Form 8949 and Schedule D as a long-term capital gain if you owned the timber more than one year ^[5]. Calculate gain as sale proceeds minus adjusted basis in the timber sold. Attach Form T (Timber) if you're electing Section 631(b) treatment or claiming a timber depletion deduction ^[5]. If you don't have a timber basis (you inherited the land or bought it decades ago without allocating value to timber), you can establish basis by getting a timber cruise (volume inventory) and applying stumpage price data from the year you acquired the property ^[5]. The IRS allows reasonable estimation if contemporaneous records don't exist, but you need documentation: a forester's written basis calculation, published stumpage price reports, and a volume estimate tied to stand age and site index ^[5]. Michigan does not require a separate timber-sale form ^[6]. You report the capital gain on Michigan Schedule 1 (additions and subtractions) as part of federal adjusted gross income. Michigan taxes all capital gains as ordinary income at 4.25%, so the gain appears in your Michigan taxable income total ^[6]. If you received a Form 1099-S or 1099-MISC for the timber sale (mills and loggers sometimes issue these), cross-check the reported amount against your contract. Report the full proceeds on Schedule D and claim your basis deduction separately; don't net them and report only the gain, or the IRS computers will flag the mismatch. For pay-as-cut contracts where you receive periodic payments over multiple years, you recognize gain each year in proportion to the volume harvested ^[5]. Keep a running timber depletion account: track basis consumed each year, adjust for remaining volume, and recalculate unit basis annually. A forester or tax preparer familiar with timber can set this up.

How do I avoid or reduce capital gains tax on timber sales?

You can't avoid federal capital-gains tax on stumpage sales, but you can reduce it by maximizing your timber basis, timing sales to use up capital losses, and structuring contracts to spread income ^[5]. First, document every dollar of basis. If you planted trees, the cost of seedlings, site prep, and labor adds to basis ^[5]. If you paid for timber-stand improvement (TSI), precommercial thinning, or invasive control that increased stand value, those costs increase basis ^[5]. Keep receipts, contracts, and forester invoices. At sale time, add up all capitalized costs and subtract that total from sale proceeds. Second, use a pay-as-cut contract instead of lump-sum if you have capital losses expiring ^[5]. A lump-sum sale recognizes the entire gain in one year; a pay-as-cut contract (where the logger pays you per unit delivered) spreads gain over two or three years, letting you offset it with losses from other investments ^[5]. Third, consider an installment sale under IRC Section 453 if you're selling land and timber together ^[7]. You can defer gain recognition over the payment term (up to 30 years) and pay tax as you receive principal. Interest income is ordinary, but the deferred gain remains capital ^[7]. This doesn't work for stumpage-only sales; the buyer must purchase the land. Fourth, if you're 59½ or older and have self-employed income from timber-management or consulting, you can shelter timber gain by making a large SEP-IRA contribution in the sale year ^[5]. The deduction offsets ordinary income, and you can use the reduced AGI to stay under Medicare surcharge thresholds. Michigan offers no timber-specific exclusion or deferral ^[6]. The state taxes all capital gains as ordinary income at 4.25%, and there's no mechanism to roll gain into a replacement property or defer it beyond the federal installment-sale rules.

How are timber sales taxed if I sell the land and timber together?

When you sell land and timber in a single transaction, you must allocate the sale price between the two assets ^[5]. The IRS requires this because timber held more than one year qualifies for capital-gains treatment, while the land itself is also a capital asset but may have different basis and holding-period issues (especially if you claimed cost-segregation or Section 179 deductions on improvements) ^[5]. The typical allocation method: get a timber cruise and appraisal shortly before sale. The appraiser values standing timber at current stumpage rates (dollars per thousand board feet or per cord), multiplies by volume, and reports that figure as the timber component ^[5]. The remainder of the sale price is allocated to land and any buildings. Example: you sell 40 acres for $200,000. A forester cruises the timber and values it at $60,000. Your purchase price 15 years ago was $80,000, of which you allocated $20,000 to timber based on a cruise at acquisition. You've added $5,000 in TSI costs (capitalized) to timber basis over the years. Timber gain is $60,000 sale price minus $25,000 adjusted basis = $35,000 long-term capital gain. Land gain is $140,000 sale price minus $60,000 land basis = $80,000 long-term capital gain. Total gain reported: $115,000. If the buyer is a developer who plans to clear-cut and subdivide, they may resist paying separately for timber. You can still allocate it on your return; the allocation doesn't require the buyer's agreement, but it does require reasonable documentation (the cruise, a forester's letter, comparable stumpage sales) ^[5]. Michigan taxes the combined gain at 4.25% ^[6]. There's no step-up or exclusion for land held as basis-of-land investment. If you're selling a principal residence that was also enrolled in Qualified Forest (rare, but possible for a large parcel with a home on part of it), only the residential curtilage qualifies for the IRC 121 exclusion; the wooded acreage is fully taxable.

Can I stay enrolled in Qualified Forest after a timber sale?

Yes, and Michigan expects it ^[2]. The program's entire purpose is to encourage active forest-management, which includes periodic harvest. As long as the stand regenerates or you replant within two years and maintain at least 50% forest cover across the enrolled acreage, you remain eligible ^[2]. You must report the sale on your annual compliance affidavit (Form 2699-A) filed by February 1 following the harvest year ^[2]. Attach a copy of the timber sale contract, the logger's stumpage settlement statement, and any reforestation receipts if you replanted. DNR uses this documentation to verify that the harvest matched your management plan's prescriptions. If you clearcut a stand, the plan must prescribe natural regeneration or replanting ^[2]. DNR foresters check regeneration success three to five years post-harvest. If the stand fails to restock (fewer than 400 stems per acre of desirable species), DNR can require replanting or withdraw that stand from the program ^[2]. Withdrawal of a portion of the parcel does not trigger full rollback; only the understocked acres revert to full assessment. Harvest income does not affect your Qualified Forest property-tax rate. You continue to pay $1.25 per acre whether you harvest or not ^[1]. Some owners worry that a large timber sale will flag their parcel for higher assessment; it won't, because the statute freezes the rate ^[1]. The only property-tax consequence of harvest is that the stand's market value (relevant only if you withdraw) drops temporarily until the new cohort matures. If you sell timber and then decide to sell the land, the buyer can continue enrollment if they file a continuation form within 90 days and commit to the remaining years of your 10-year term ^[2]. Most buyers do this if they're purchasing for recreation or long-term investment; developers do not, and that triggers rollback.

What are the stocking and forest-type requirements to stay enrolled?

Enrolled land must remain at least 50% forested by area ^[1][2]. DNR defines "forested" as land supporting (or capable of supporting after regeneration) at least 400 trees per acre of commercial species, with crown closure of 25% or more ^[2]. Stands that drop below this threshold due to mortality, windthrow, or failed regeneration must be replanted or released to advance natural regeneration within two years ^[2]. Commercial species include oak, maple, ash, aspen, cherry, pine, spruce, and other species with recognized stumpage markets in Michigan ^[2]. Stands dominated by non-commercial species (eastern red cedar in southern Michigan, hawthorn, sumac) do not qualify unless they're nurse crops over desirable understory regeneration. The management plan maps each stand and assigns a forest type (northern hardwood, oak-hickory, aspen, planted pine, etc.) ^[2]. If you convert a stand from one type to another (clearcut oak, plant spruce), you must amend the plan before the conversion and get DNR approval ^[2]. Unapproved conversion can trigger a compliance violation and removal from the program. DNR tolerates small non-forested areas (trails, food plots, small openings for wildlife) as long as the total enrolled acreage remains at least 50% forested ^[2]. If you want to build a home or outbuilding, you must withdraw that footprint plus curtilage (typically one acre for a home, proportional for sheds or barns) from the program before construction ^[2]. Withdrawing less than 20 acres from a parcel originally 40 acres or more does not disqualify the remainder, but you pay rollback on the withdrawn portion.

How does Qualified Forest compare to Michigan's Commercial Forest Program?

Michigan's Commercial Forest (CF) Program offers a lower property-tax rate, $1.10 per acre, but requires parcels of 40 acres or more (80 acres for new enrollments beginning in 2024), public access for hunting and fishing, and a longer commitment ^[8]. Qualified Forest requires 20 to 640 acres, no public access, and a 10-year commitment ^[1][2]. CF also imposes a 25% state timber-severance tax on stumpage value when you harvest ^[8]. Qualified Forest has no severance tax; you keep the entire stumpage payment and pay only federal and state income tax on the gain ^[1]. For a $30,000 timber sale, CF costs you $7,500 in severance tax; Qualified Forest costs zero at the property level. Rollback differs too. CF rollback is $200 per acre flat penalty if you withdraw for development, plus four years of back tax ^[8]. Qualified Forest rollback is four years of tax difference plus 6% interest, often higher in absolute dollars but lower per acre on small parcels ^[1]. CF enrollment is perpetual; it runs with the land unless you formally withdraw ^[8]. Qualified Forest is a 10-year term that renews automatically if you don't withdraw ^[1]. Many owners prefer the flexibility to exit Qualified Forest after a decade without penalty, especially if they're considering a future sale. For parcels under 40 acres, Qualified Forest is the only option. For 40 to 640 acres, you choose based on public-access tolerance and timber-income timing. If you plan heavy harvest in the next 10 years, Qualified Forest saves the 25% severance. If you harvest lightly or want maximum property-tax reduction for decades, CF may net more.

What records should I keep for enrollment and tax compliance?

Keep a dedicated file (paper or digital) for each enrolled parcel with six categories: deed and legal, DNR enrollment, management plan and amendments, annual affidavits, timber sales, and forest improvements ^[2][5]. Deed and legal: recorded deed, title-insurance policy, legal description, county plat map, and zoning verification from the township. You'll need these for initial enrollment and any boundary disputes. DNR enrollment: Form 2699 application, DNR approval letter, county confirmation of enrollment, and any correspondence about compliance audits ^[2]. File every annual affidavit (Form 2699-A) even if you had no activity that year. Management plan: the original approved plan, any amendments, stand maps, cruise data, and the consulting forester's volume tables and stocking calculations ^[2]. When you update the plan at year 10, keep the old version; it documents historical stocking if DNR questions regeneration success. Timber sales: contracts, bid sheets, stumpage settlement statements, mill scale tickets, and 1099 forms if issued ^[5]. Note the date of sale (when you conveyed title to standing timber), volume sold, species breakdown, and per-unit prices. You need this to calculate gain and to prove you followed the management plan's harvest schedule. Forest improvements: receipts for seedlings, site prep, TSI, access road grading, and herbicide application. These costs add to timber basis ^[5]. Also keep receipts for forester fees, because those are deductible as investment expenses or (if you're in the timber business) Schedule F costs. Tax returns: keep copies of federal Schedule D, Form T, and Michigan returns for at least seven years after you sell timber or exit the program ^[5]. If the IRS audits your timber gain, you'll need to reconstruct basis from decades-old invoices; scanned PDFs stored offsite (cloud backup) are your friend.

Frequently asked questions

What is the forest management bureau in Michigan?

The term "forest management bureau" is informal shorthand for the Michigan Department of Natural Resources Forest Resources Division, the state agency that reviews and approves Qualified Forest management plans, conducts compliance audits, and administers timber programs on state and private land. You submit your plan and annual affidavits to the DNR Forest Resources Division office serving your county.

What is forest management?

Forest management is the practice of controlling stand density, species composition, age structure, and health through silvicultural treatments (thinning, regeneration cuts, planting, invasive control) to meet landowner goals such as timber income, wildlife habitat, recreation, or watershed protection while sustaining the forest's productive capacity over time.

How do I report the sale of timber on my tax return?

Report standing-timber (stumpage) sales on IRS Form 8949 and Schedule D as long-term capital gain if you owned the timber more than one year. Calculate gain as sale proceeds minus adjusted basis in the timber. Attach Form T (Timber) if electing Section 631(b) treatment. Michigan taxes the gain as ordinary income at 4.25% on Schedule 1 of your state return.

How do I avoid capital gains tax on a timber sale?

You cannot eliminate federal capital-gains tax on stumpage sales, but you can reduce it by maximizing your timber basis (documenting planting, TSI, and improvement costs), using a pay-as-cut contract to spread income over multiple years and offset with capital losses, or structuring an installment sale of land and timber together under IRC 453 to defer gain recognition.

Do I have to pay taxes on timber sold?

Yes. Timber income is federally taxable as capital gain if you held the timber more than one year, and Michigan taxes that gain as ordinary income at 4.25%. The Qualified Forest Program's property-tax cap does not shield timber sale proceeds from income tax; property tax and income tax are separate systems.

Do you have to pay taxes on timber sales?

Yes. The IRS treats standing timber as a capital asset; sale proceeds minus your adjusted basis in the timber are taxed as long-term capital gain at the federal level. Michigan taxes the same gain as ordinary income at 4.25%. Self-employment tax does not apply to stumpage sales because you're selling an asset, not performing services.

Do you pay taxes on timber sales in Michigan?

Yes. Michigan taxes timber sale gains as ordinary income at 4.25%, following federal treatment. There is no separate timber-severance tax under the Qualified Forest Program, but you pay state income tax on the capital gain reported on your federal Schedule D. Qualified Forest's $1.25 property-tax rate is unaffected by timber sales.

How are timber sales taxed?

Standing-timber (stumpage) sales are taxed as long-term capital gain if you owned the timber more than one year. Gain equals sale proceeds minus adjusted basis (purchase price allocated to timber plus improvement costs). Michigan taxes that gain as ordinary income at 4.25%. If you harvest and sell logs yourself, that income is ordinary and subject to self-employment tax.

How do I report timber sales on my taxes?

Report stumpage sales on federal Form 8949 and Schedule D as capital gain. Calculate gain as proceeds minus basis. Attach Form T (Timber) if claiming Section 631(b) election or depletion. Michigan includes the capital gain in your adjusted gross income and taxes it at 4.25% on Schedule 1; no separate timber form is required.

How do I report timber sales on my tax return if I received a 1099?

Report the full proceeds shown on Form 1099-S or 1099-MISC on Schedule D as gross sales. Separately deduct your adjusted timber basis to arrive at gain. Do not report only the net gain, or IRS computers will flag a mismatch. Attach Form T and your basis calculation worksheet as supporting documentation.

Can I enroll land in Qualified Forest if I already have a conservation easement?

Maybe. Qualified Forest requires the legal right to harvest timber under a management plan. If your conservation easement allows sustainable forestry and commercial harvest, you can enroll. If the easement bars timber cutting or restricts management to non-commercial methods, you cannot qualify. Review the easement deed and confirm with your county assessor before applying.

What happens to my Qualified Forest enrollment if I die?

Enrollment continues through the remaining term if your heirs inherit the property and file a continuation form (part of Form 2699) with the county assessor within 90 days of probate. If they sell the land or fail to file continuation, withdrawal occurs and rollback is assessed against the estate or heirs. The $1.25 rate remains in effect until formal withdrawal.

Can I hunt on my Qualified Forest land, or is public access required?

You retain exclusive access to Qualified Forest land. There is no public-access requirement. You can hunt, post the property, and exclude the public entirely. Michigan's Commercial Forest Program requires public hunting and fishing access, but Qualified Forest does not. This is one of the program's key advantages for recreational landowners.

How long does it take to get Qualified Forest approval?

After your consulting forester submits your management plan to the DNR Forest Resources Division, review typically takes 30 to 90 days. Simple plans on well-stocked stands approve faster; plans with complicated prescriptions or boundary issues take longer. Once approved, you file the application with your township assessor by May 1, and enrollment begins the following tax year.

Sources

1. Michigan Legislature, Natural Resources and Environmental Protection Act 451 of 1994, Part 511 (Qualified Forest Program): Qualified Forest specific tax rate is $1.25 per acre; withdrawal triggers four-year rollback plus 6% interest; parcels must be 20-640 acres
2. Michigan Department of Natural Resources, Private Forestry Assistance Programs: Management plan required by consulting forester; annual affidavit due Feb 1; 50% forest cover; 10-year commitment; Form 2699 application
3. Michigan Department of Treasury, Property Tax Estimator: County-level millage rates and assessed value data for Michigan municipalities
4. Michigan State University Extension, The Cost of a Forestry Management Plan: Consulting forester fees for management plans range $15-40 per acre depending on parcel size and complexity
5. Internal Revenue Service, Publication 544: Sales and Other Dispositions of Assets: Timber held >1 year is capital asset; basis includes purchase price allocation plus improvement costs; Section 631(b) election for stumpage sales; Form T reporting
6. Michigan Department of Treasury, Individual Income Tax Forms and Instructions: Michigan taxes all capital gains as ordinary income at 4.25%; no separate capital-gains rate or exclusion
7. Internal Revenue Service, Publication 537: Installment Sales: Installment sale under IRC 453 defers gain recognition over payment term; applies to land and timber sold together
8. Michigan Department of Natural Resources, Commercial Forest Program: Commercial Forest rate $1.10/acre; 40-acre minimum (80 acres for new enrollments); 25% severance tax; public access required; $200/acre withdrawal penalty