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Statewide follow up to the Forest Congress and the pre-Congress roundtable in Alabama is
taking place. Identifying needed revisions to the federal taxation of private, non-industrial forest
lands is the first action step undertaken by the reconvened Alabama Roundtable. This topic
received a high level of support at the pre-Congress Alabama Roundtable and at the state's
back-home tables at the Washington, DC meeting. A meeting on federal taxation of
non-industrial forest lands was held in Montgomery, Alabama on November 20, 1996. The
developed and prioritized the following recommended revisions to Federal income and estate tax
Recommended revisions to Federal income tax regulations
(listed from highest to lowest priority):
The Internal Revenue Code should be modified to include a forestry-specific section.
Exempt non-industrial timberland from passive activity loss rules.
Immediate expensing against ordinary income of all forestry-related costs, including
Timber casualty losses should not be limited to the basis of the timber, but rather should be
allowed to the full fair market value of the timber in question.
Eliminate reforestation amortization and expand the reforestation credit to 40%.
Allow deductions or credits for the appraised value of environmetnal costs imposed by
Allow capital gains treatment on all sales or dispositions of timber.
Link differential exclusion rates to the age of the timber, greater exclusion for older timber.
Perhaps exclude 60% of income from loblolly pine harvested after age 40, 70% of income if after
age 50, etc.
Green savings accounts for regeneration costs.
Allow a tax credit, rather than a current deduction (as under present law), for qualified
conservation easements that impact timber production.
Link differential exclusion rates to the holding period of timber, with greater exclusions for
timber with longer holding periods.
Allow regeneration expenses to be deducted from timber sale proceeds (capital income) or
allowed as a capital loss if reforestation costs were incurred in years in which there was no
Index timber basis for inflation.
Index timber basis for inflation, but only after a five year holding period.
Reforestation amortization: 1) raise limit to $20,000 limit, then index it for inflation in
subsequent years, and 2) shorten amortization period to 5 years.
Timber sale income categorized as ordinary income should not be subject to the self
Allow immediate deductions or credits for expenditures for wildlife installations such as
food plots or other improvements to promote wildlife habitat.
Recommended revisions to Federal estate tax regulations
(listed from highest to lowest priority):
Allow the executor to put the land under a conservation easement after the death and before
the taxes are due with estate tax assessment based on current use.
At the election of the executor, exempt timber value from the estate tax; substitute a surtax
on the taxable gain when the timber is sold; and carry over decedent's basis.
Raise the annual gift tax exclusion to $25,000.
Raise the Unified Credit to an equivalent exemption of $1,000,000 and index for inflation.
Modify special use valuation procedures to recognize the realities of forest land ownership
and management (material participation requirements, modify special-use recapture provisions,
appraisal procedures to allow for the standard income approach).
Reduce the maximum estate/gift tax rate to the maximum long-term, non-corporate capital
Eliminate transfer taxes.
Pay estate tax on the real gain in value while in the hands of the decedent (decedent's basis
indexed for inflation).
Permit the standard income approach to be used for all estate valuation of timber and
Allow a deduction for interest on all money borrowed to pay the estate tax.
The group has formed the Forest Landowners Tax Council, a stand-alone organization, to pursue
the implementation of these recommendations.
Alabama roundtable organizers also envision moving ahead in 1997 to address other identified
action steps: i.e., improving forest education and information for landowners and the general
public, designation of more eastern wilderness, and protection of private property rights.
Contact: Ted Meredith, Alabama Forest Resources Center, 3632-C Dauphin St., Mobile, AL
36608, Phone: 334-343-0185, Fax: 334-342-6822.
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