Tax

Maintain Pro-Growth Timberland Tax Provisions to Support Rural Communities

Forest owners of all types – from family owned businesses and small landowners, to TIMOs and REITs – support four critical pro-growth provisions that appropriately recognize the unique, long-term nature of timber.

Capital gains treatment of timber revenue.

The proceeds from timber harvests and the sale of standing trees are treated as capital gains, which compensates landowners and investors for their long-term risk and provides a return on their long-term investment. Capital gains treatment also provides parity across a broad number of timber ownership structures, including REITs, family partnerships, S Corporations, and individuals.

Treatment of timberland as real property for purposes of REIT rules.

The Real Estate Investment Trust (REIT) structure relies on the treatment of timber as real property instead of inventory. Trees are not inventory – they grow over decades rather than days or months, and they appreciate in value as they grow, rather than depreciate over time.

Deductions for timber growing costs.

Growing timber is capital intensive, requiring significant investment in regular operating costs like road maintenance and forest health treatments that reduce the risk of wildfire. Current tax law allows forest landowners to deduct operating costs in the year that they are incurred, rather than capitalizing these costs.

Deduction and amortization of reforestation costs.

Forest owners can deduct up to $10,000 per stand of reforestation costs as they are incurred and amortize the remaining costs over seven years. The separate deduction for tree planting encourages continued investment in trees.

How can the tax code support rural communities, forest owners and investors?

By continuing to support a positive investment climate for timber.

Timber relies on its classification as a capital asset to stay competitive with other kinds of investments – which is particularly critical for foreign investors and for tax-exempt organizations like public charities, school districts or public-employee retirement funds that invest in timber as a stable, long-term investment. Disrupting this balance will likely result in investment dollars flowing away from timber, creating an uncertain future for timber owners, rural communities, and investors.

In many rural communities, timber is the local economy.

Changes to the tax code will impact the entire forest supply chain, including land owners, foresters, loggers, truckers, mill workers, equipment suppliers, and service providers.

U.S. Working Forests, By Ownership

Approximately 360 million acres – about 70% – of working forests in the U.S. are on private land, owned by individuals, families, small and large businesses, and an increasing number of Americans who invest in working forests as part of their retirement portfolios.

WORKING FORESTS IN THE U.S. SUPPORT

TIMBER TAKES BETWEEN 25 AND 100 YEARS TO MATURE

Landowners planting seedlings today won’t see the return on their 2017 investment until at least 2042. Trees that take longer to mature might not be ready to harvest until 2097 or later. As trees grow, forest owners make significant investments – often millions of dollars – in regular operating costs like road maintenance, weed control, thinning, and preventing fire, insect infestation and disease.

final harvest ranges by tree species and region,
based on average rotations