Reforestation Tax Act

The American Forest & Paper Association is promoting passage of (and seeking co-sponsors for) the Reforestation Tax Act (HR 1310), which provides incentives for landowners of all sizes to keep their land in forest and to manage it actively. To date, HR 1310 has attracted 54 sponsors, with good bipartisan distribution, and a companion bill should be introduced in the Senate in early July.

The legislation's two main provisions are, first, an inflation adjustment rule, which would reduce the amount of the taxable gain from the sale of timber by an amount keyed to the rate of inflation, to mitigate risks associated with long-term timberland holding; and, second, a provision allowing full, immediate expensing of reforestation costs, to encourage prompt replanting. In addition, the bill defines "passive loss rules," clarifying when individuals would be able to deduct normal operating expenses pertaining to woodlot management. AF&PA notes that U.S. tax treatment of timberlands places timber growing at a competitive disadvantage in the global economy and that incentives are needed to reverse trends toward parcelization and conversion of forest land to other uses.

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