Many Georgia tree farmers and Georgia Forestry Association members count on their timberlands to produce additional income, and, given the multiple-year growth cycle of trees, they rely upon reasonable and stable federal tax treatment of their long-term investment. However, timber-growers across the nation could lose this certainty if some tax proposals in Washington, D.C. gain traction.
A proposed tax reform package released last year—the Tax Reform Act of 2014—is still being discussed among members of Congress as they evaluate ways to overhaul the tax code. Among other things, the proposal would fundamentally change the taxation of private forests and the long-standing treatment of timber as a capital asset.
If Congress proceeds with last year’s proposal as its starting point and throws out provisions that have made private ownership of timberlands a good investment for generations, the consequences could be severe not only for the families and companies that grow trees, but also for our state’s economy and environment.
Today, these four tax provisions encourage landowners to invest in working forests:
- The long-term capital gains treatment of timber revenue. (IRC 1231(b)(2))
- The deductibility of timber growing expenses in the year they are incurred, rather than capitalizing these costs. (IRC Sections 162 and 263A(c)(5))
- Treatment of timberland and standing timber as real property for purposes of the real estate investment trust (REIT) rules. (IRC Section 856)
- The deductibility of up to $10,000 of reforestation expenses as these expenses are incurred and the allowable amortization of remaining reforestation expenses over a seven-year period. (IRC Section 194)
These provisions encourage growth in the forestry industry that supports 133,000 jobs and contributes an annual $28.9 billion to the state’s economy. At the same time, working forests help clean our air and water, create wildlife habitat and offer recreational opportunities for hunters and fishermen.
To their credit, many members of Congress are committed to reforming the U.S. tax system. The timber tax provisions, along with various others, are being eyed for cuts. But why would Congress tinker with a tax policy that is actually working?
As it deliberates, Congress must understand that the existing timber tax provisions are generating economic and environmental returns that are not only critical to landowners large and small, they also are a mainstay for rural communities. Lawmakers need to appreciate the hardships that landowners in their districts would face if the timber tax provisions are eliminated.
Tell Congress to Maintain Fair Forestland Tax Policy!
If you agree that federal tax policy should support an industry that helps both the economy and the environment, please sign our online petition right away.
We have made it easy. To find the petition and add your name, visit https://gfagrow.org/advocacy/legislative-action-center/take-action/ and follow the on-screen prompts. After the sign up is closed, a letter with the petition will be sent to the entire Georgia congressional delegation.
The current timber tax provisions are a great example of how Washington should help, not hinder, growth and prosperity. If you have any questions, contact Matt Hestad, director of communications and public relations, at email@example.com or at 478-992-8110.
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