Although no one expects a fundamental retooling of the federal tax code this year, tax reform is emerging as a highly visible priority for both parties in the next Congress, with dialogue centering on lowering and flattening income tax rates and then deciding:
• how to make up for the revenue presumed to be lost and
• finding some way to ensure “fairness”—that the “rich” pay something extra.
The most commonly discussed means is to adjust capital gains tax treatment, since capital gains are levied on the sale of investment assets, and investment assets are widely presumed to be held by rich people. It appears inevitable that any discussion of adjusting capital gains treatment would pull in the federal tax code’s treatment of timber, since treating timber revenue as a capital gain (rather than as ordinary income) stands out as a special provision in the tax code. We have word that Sen. Tom Coburn (R-Oklahoma), who serves on the Senate Finance Committee, has already floated the possibility of taking another look at various timber tax provisions—in the context of next year’s negotiations over tax reform.
The National Alliance of Forest Owners foresees a need to mount an aggressive defense of the federal tax code’s current treatment of timber tax, to prevent current treatment from being bargained away in a compromise next year. The effort cannot begin too soon. As national legislators campaign in their home districts over the coming six weeks, consider introducing a vigorous defense of the three main elements of current timber tax treatment if discussion turns to tax reform:
• Deduction for timber growing costs;
• Timber revenue subject to capital gains;
• Deduction and amortization of reforestation costs
NAFO has published a study it commissioned from Quantria Strategies, Private Forest Lands: Jobs, the Environment, and the Role of the U.S. Tax Code, 42 pages, a technical but quite readable examination of the matter. Download it here.