Conservation Corner
Lott Praised For Reforestation Tax Incentives
by James L. Cummins

The U.S. Senate has passed a tax restructuring bill that will have a major impact for forest conservation in Mississippi. Leading the way for its passage was Senator Trent Lott.

The bill will eliminate several tax loopholes and, therefore, not cost taxpayers a dime nor increase the deficit.

The Mississippi Fish and Wildlife Foundation has voiced support for the efforts of Senator Lott that resulted in the bill's passage.

According to Senator Lott, "Mississippi's many forestry-related jobs will be directly impacted by this bill's tax incentives to encourage the harvesting and planting of trees in a responsible manner. As far as individuals are concerned, the bill clears the way for timber growth to be treated just like any other investment in terms of capital gains taxes. That's good news for thousands of Mississippians who's retirements, educations and other major expenses are dependent on a stand of timber, or whose jobs depend on forest industry."

Here is how it used to work. When a forest landowner reforested a tract of land, he or she had 84 months to deduct up to $10,000 of qualified reforestation expenditures. He or she also had 10 percent credit on up to $10,000 of qualified amortizable basis in timber property. The amount amortized under the first part was reduced by half of the amount of credit under the second part.

Reforestation costs, on average, have more than doubled since then. Reforestation of forest land is one of the most important elements of maintaining Mississippi's forest resource and promoting a healthy forest environment.

Now, one can deduct up to $10,000 of qualified reforestation expenditures in the first year paid or incurred (i.e., expensed). The Senate permits qualified reforestation expenses above $10,000 to be amortized over 84 months.

The Internal Revenue Service has issued eligibility requirements for the types of ownership, acreage and expenditures that qualify for amortization.

The bill also provides for capital gains treatment for outright timber sales without the taxpayer retaining an economic interest in the timber.

The bill also modified the safe harbor rules for timber real estate investment trusts (REITS).

The efforts of Senator Lott will benefit Mississippians for years to come. We appreciate his efforts to promote reforestation.

As a small, forest landowner himself, we are fortunate to be able to benefit from the experience and service of Senator Lott.

James L. Cummins is Executive Director of the Mississippi Fish and Wildlife Foundation in Stoneville, Mississippi. Known as "Wildlife Mississippi," the Foundation is a non-profit, conservation organization founded to conserve, restore and enhance fish, wildlife and plant resources throughout Mississippi. Their web site is www.wildlifemiss.org.