FLA believes that federal tax policies based on equality and certainty are required to encourage the nation’s private forest landowners to make sustained, long-term capital investments in forest management.
Rather than distorting market forces, taxation should place private forest landowners on near-equal playing fields with other capital ventures, including agriculture, as this will encourage practices that retain forests as working, contributing assets to the nation. Tax policies must recognize the unique and long-term characteristics associated with timber and forest management investments, including the inter-generational transfer of forest assets, to alleviate uncertainty in tax treatment. Comprehensive tax policy will ensure the sustained environmental and social benefits within a predictable economic framework.
FLA believes that timber should be treated as a capital asset, not as inventory. The existing tax code as it relates to private forests recognizes the long-term nature of timber investment and should not be amended.
Tax Victories for Forest Landowners
Reduced Tax-Related Regulatory Burdens
In 2017, FLA’s policy advocacy in Washington resulted in two important wins for forest landowners: the inclusion of Timber Tax provisions in the final Tax Cuts and Jobs Act and the withdrawal of proposed changes to Section 2704 of the IRS.
As a strong advocate of the sweeping tax reform, the safeguarding of the timber tax provisions was particularly important to family and forest businesses. Also crucial to the economic viability and legacy of private forest lands, the tax reform contained provisions that created a new deduction that lowers the effective tax rate for pass-through entities and lowers the corporate tax rate from 35% to 21%. Most importantly, the legislation doubles the Estate, Gift, and Generation-Skipping Tax (GST) exemptions from $5.6 million to $11.2 million per individual, and $22.4 million per couple with portability, effective January 1, 2018.
FLA was also victorious in the withdrawal of proposed Obama-era changes to Section 2704. Had they been implemented, the changes would have effectively doubled the estate tax valuations for timberland by removing legitimate valuation discounts for estate, gift, and generation-skipping taxes. FLA was the only organization advocating on behalf of family forest owners to withdraw the regulations.