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[FLM MAY / JUNE 2012 ] HTML
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Visit us at: WWW.FORESTLANDOWNERS.COM

 

Earlier this year, the U.S. Forest Service released a report, which outlines the U.S. Department of Agriculture’s (USDA) goals for forest health. In the report, the agency stated one of its goals is to increase annual timber harvests from 2.4 billion board feet to 3 billion board feet in fiscal year 2014.On March 27, Rep. Glenn ‘GT’ Thompson, Chairman of the House Agriculture Committee’s Subcommittee on Conservation, Energy, and Forestry,held a public hearing to review several aspects affecting forest health, including timber harvests, wildlife management, invasive species, and the

U.S. Forest Service’s planning rule. The final planning rule was published in the Federal Register on April 9, 2012.

“we need to make sure the Forest service and its partners work together to improve forest restoration and conservation while promoting a robust forest industry that supports local stakeholders and results in restored jobs and a vibrant rural economy. the Forest service should always consider the multiple uses of our national forestland including timber production, habitat preservation, natural resource management and recreation and ensure local economic development and environmental protections work in harmony, instead of in competition, with each other,” Ranking Member Tim Holden (D-PA).

The Forest Landowners Association Year 2013 appropriations bills that today joined 81 groups in submitting would prohibit the use of funds to a letter to U.S. House Appropriations implement the new National Ocean Committee Chairman Harold Rogers Policy. The request was made as (KY), as well as the Chairperson part of an effort to achieve a pause of each House Appropriations in policy implementation that would Subcommittee, asking that provide more time for oversight and language be included in all Fiscal examination of potential impacts.

While this initiative is primarily about ocean activities, as the process has moved forward it has come to light that forest landowners could be adversely affected—no matter how far inland they are. The risk of unintended economic and societal consequences is high, due to the unprecedented geographic scale under which the policy is to be established.

YOUR ANSWERS TO TOUGH QUESTIONS

The DeathTax Destroys Family Businesses and Farms

Fully one-third of all small business owners wind up selling some or all of their businesses due to the death tax.

Family businesses are often sold off in part or whole to pay the tax.

70% of family businesses do not survive the second generation and 87% do not survive the third generation.

Your THouGHTS:

I don’t understand why this is an issue your organization keeps promoting. To be fair, above a certain level, you will have either an estate tax or a tax on capital gains made during life. I can tell you that it is much harder to do the accounting on the latter. I don’t support this initiative that seems far removed from what I would have guessed the mission of this organization would be.

Weston Milliken, Los Angeles, CA

I am the 5th generation of the Bell-Andrews-Sanders family to have the privilege of being the steward of Bell Plantation, which is 1,000 acres of pine timberlands in southwest Georgia. My passion is to leave the property—in its entirety—so that the 5th generation below me will be able to enjoy its benefits 150 years from now. Our family faces many threats to the timber business including global (and often unfair) competition in timber markets, onerous government regulation which impacts us as timber owners, as well as impacting our partners in the logging and paper/lumber industry. But, no threat stands to put us out of business in one fell swoop so much as the death tax. When my grandmother died in 1972, my family spent several years in litigation with the IRS over estate valuation, the end result of which was that all of her liquid assets as well as the proceeds of the sale of her home were turned over to the confiscatory tax of the Federal government. My experience in this matter is not just personal. I have spent 30 years as a Certified Financial Planner, and in that capacity I have consulted many clients who have struggled with a tax code, which encourages wealth accumulation, then penalizes it at death through the onerous estate tax. This strikes especially at farm owners due to the illiquidity of farmland as an asset. Furthermore, for the last 12 years we have had to cope with the uncertainty of a law with no permanency. The solution is simple. The death tax needs to be put to death with a total and permanent repeal. Now is the time to take this decisive action.

Tom Sanders, Barnwell, SC

Anonymous

I have struggled through a 36-year Navy career, pinching my pennies to buy timberland to manage when I retired from the service. I somehow managed to do quite well and amassed around 800 acres of timberland. Since retiring, I have put it all into production and will be able to supplement my Navy retirement pay as I planned. The problem is the uncertainty and nature of the unfair “death tax.” We have already paid our taxes on these items in our estate that the government wants to tax again under the death tax system. In my specific case, almost all my estate value is in my timberland. Even if the vote before 31 Dec 2012 is to keep the threshold at $5 million (I am a single man), I will be on the line and will have to do some very careful planning to keep my children from paying the high death tax upon my death. However, if the death tax threshold reverts back to $1 million, my children would have to sell almost all the timberland (at reduced value because of the 90 days they have to pay it) undoing the plan I have worked for my entire life. To me, the death tax is a socialist system to break up our American land ownership thus preventing a hard working and astute planner from taking advantage of the American capitalist system and building an estate to leave for his/her children. All of us landowners, whether we concentrate on timber, dirt farming, cattle, or any other form of making our living from the land, will be watching the administration and Congress very carefully next fall and winter. With the increase in value of timber and farm land, there are millions and millions of us out there today that are “land poor” and subject to being destroyed by the death tax whether it be $5 or $1 million. Whatever the decision before 31 December, it cannot be another one year fix, we need time for good planning and management!

Don East, Lineville,AL

Rest assured that the Forest Landowners Association is working the halls of Congress; educating policy makers and their staff about the impact this tax has on private forest landowners and rural America. We will not stop working on this issue, but the voice of forest landowners and rural America is best heard from those of you with personal stories and legitimate concerns.

Telling your story will have an impact. Do not underestimate the value of your voice in Washington!

These real life implications are but a few responses from the recent FLA survey regarding the Death Tax. These heart-felt stories will be forwarded to Congress. Our thanks to all who responded, regardless of your viewpoint.

Estate taxes are a fair way to insure an egalitarian America. You’re use of “death tax” inflames the debate and keeps us from refining estate taxes to protect small family business and breakup billionaire “family” businesses.

I have been a Forestry Consultant since 1982 and have worked with NIPFs for the entire career. Back when the exemption was $500,000 and $600,000 the tax law generated a lot of business for us. I could tell it was always a burden for the Families to pay the tax and most wanted to keep the land so they turned to timber sales to try and keep the farm. It always seemed that the timing of these sales was during down market times but the landowner had a bill to pay. Now that the exemption is higher we do not seem to be having as many of these death tax sales but I am sure they are happening somewhere every year. Just last year a large landowner that had many assets besides timber contacted us about a possible timber sale. My estimate of roughly $750,000 in timber sales over a six-month period was not enough to satisfy a judge then handling the estate tax owed by the family. In my opinion, exemptions should never go backwards and should at least increase every year. Best scenario = no death tax. Jake Almond, Kingston, TN

My forestland is in central California, where we have unique rules for harvest schedules. According to our regulations, there must be at least ten years between harvest cycles. Many of us have acreage that is too small to economically harvest piecemeal; we go in and do everything at once or we don’t make any money. None of us can really predict when we are going to die. If our heirs are very lucky, the property will change hands on a harvest year. If not, they will have to wait up to nine years before they can harvest to pay off taxes. Unfortunately, that argument does not hold much water with the IRS. They want their money this year and don’t care what you need to liquidate to get it done, and they ARE going to include your unharvestable trees in their inventory. This complicates inheritance planning hugely and forces us who have the means

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9

The

FlighT To Farmland

BY: ClaY Jenkins & stephanie BloYd, ResouRCe ManageMent seRviCe, llC

Should timberland owners seriously consider diversifying their holdings to farmland? Forest Landowner magazine takes a look.

Amidan escalation in demand for farmland, moreand more forest landowners are being approached about selling their propertyto a buyer who intends to harvest thetimberandthenconverttosometypeofagriculturalcrop. Whileitisunclear whether this is a sustainable, historical cycle or justanother “bubble,” farmland values have risen sharply over the past few years as demand has outpaced supply. It is atempting option for forest landowners to consider, butwhatare the risks?

 

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