Search this site:

Land Management Incentives and Disincentives

Taxes—Sampson and DeCoster (1997) reported that influential national and regional forestry leaders believe tax policy rewards to be the most effective motivators for private landowners. McColly (1996) suggested that tax reforms, particularly for inheritance, capital gains, property taxes, and passive loss rules, were the number one concern of NIPF owners throughout the United States.

Since many NIPF owners receive land-based income through infrequent activities such as timber harvesting and land sales, they are viewed as passive investors. Such investors are subject to rules making it difficult to recapture expenses incurred for services such as expert advice or conservation and maintenance measures (DeCoster 1996). Federal tax law provides for the recovery of a percent of invested monies, excluding government cost-share monies, in the form of a tax credit. Provisions also allow early amortization of reforestation and afforestation expenses (Kluender and others 1999). Peters and others (1996) found numerous studies of forest estate cases suggesting that Federal and State estate tax burdens may cause heirs to harvest timber prematurely or abandon timber production activities. Cubbage and others (1993) surmised that high property taxes might lead some landowners to prematurely harvest timber or convert forest lands to more profitable uses, to generate cash needed for tax bills. Peters and others (1996) suggested that expert information and estate planning assistance could save forest land heirs a substantial amount of Federal and State taxes and could help avoid disruptions in management efficiency and continuity. Schelhas (2000) reported that inadequate estate planning was one of the principal obstacles to forest management on minority-owned land. For a detailed discussion of State and Federal tax laws and their influence on forest management activity, see chapter 8.

Private owners have varying opinions about the importance of taxes to forest ownership and management. Newman and others (1996) found that more than half of new Georgia private owners did not consider property taxes to be an important issue. Jacobson (1998) found that only one-fourth of Florida NIPF owners had taken advantage of reforestation tax credits. Megalos (2000) reported <5 percent of North Carolina NIPF owners selected tax-related issues as a management deterrent. More than half of them, however, indicated likely participation in future programs that would reduce property taxes and provide income tax relief. A third also favored the idea of a tax-deferred green investment reforestation account (GIRA) as an incentive. A GIRA, as described by DeCoster (1996), would provide for a tax-free savings account to fund reforestation activities.

Government regulations—For a comprehensive review of State and Federal land and water laws and policies influencing private forest management practices in the South, see the section on Protective Regulatory Policies in chapter 8. The authors conclude that regulatory policies may limit acreage that can be used for certain purposes and otherwise alter landowner management strategies, increase costs, and possibly reduce income. Impacts may vary with tract size, tract resource attributes, location, and owner management objectives. Landowners seeking to maximize income through timber sales, for example, could be more adversely affected than those managing for natural amenity values. Megalos (2000) found, however, that only 7 percent of North Carolina NIPF owners believed government regulations would discourage management.

Government forest management assistance programs—Government technical, educational, and financial forestry assistance programs have been designed over the years to promote certain forest management practices by NIPF owners. Timber production historically has been a primary emphasis of such programs. Perhaps this is one reason why Jacobson and others (1996) concluded that past studies of NIPF owners have usually focused on timber-related issues. Megalos (2000) noted that the strongest justification for government timber-oriented programs might be the nontimber benefits enjoyed by the public, including soil and water-quality protection, scenic beauty, wildlife habitat, carbon sequestration, and recreation. Gaddis (1996) stated that government cost-share incentives program costs are offset by reductions in prices of forest-related goods, such as wood products, as well as public amenities.

The history of Federal-State forestry assistance programs began with the creation of the U.S. Department of Agriculture Division of Forestry in 1898, to assist and educate private landowners (Megalos 2000). Congress passed the first Federal-State cooperative forestry legislation in the Clarke-McNary Act in 1924. This act attempted to slow the rate of timber price increases and forestall a foreseen national timber supply shortage. It provided matching funds to States to supply tree seedlings used for windbreak, shelterbelt, and farm woodlot plantings (Cubbage and Wear 1993).

Gaddis (1996) thoroughly described the history of Federal-State cooperative programs since the 1930s. A summary of this information is presented here. The Agricultural Conservation Program, authorized in 1936, used cost-share monies as incentives for farmers to implement certain soil conservation measures, such as pasture improvement, tree planting, timber stand improvement, and wildlife habitat improvement. In 1956, the first Conservation Reserve Program (CRP) (the Soil Bank) paid farmers to retire farmland from crop production and shared the costs for practices that improved watershed conditions, wildlife habitat, recreation, and aesthetics; controlled soil erosion; and increased wood supplies. The Forestry Incentives Program (FIP) was initiated in 1973 to share the costs of tree planting for timber production. A new CRP was authorized in 1985 to convert highly erodible cropland to pasture or forest. Its primary goals were soil and water conservation and wildlife habitat improvement. These activities were supported by cost-share funds and annual payments to landowners (Gaddis 1996).

In 1990, several new programs were authorized that emphasized forestry practices on private land. In that year, CRP, along with the Wetlands Reserve Program (WRP), was made a part of the Environmental Conservation Acreage Reserve Program (ECARP). Under ECARP, CRP was modified to encourage hardwood tree planting and conversion of grassland to forest. The WRP provided cost-share monies for wetland reforestation (Gaddis 1996).

The FSP and the Stewardship Incentives Program (SIP) were authorized by the Forest Stewardship Act of 1990 to promote management of NIPF tracts of at least 10 acres for multiple objectives, including timber, recreation, wildlife, aesthetics, water-quality and soil conservation. SIP cost-share incentives were designed to replace the timber-oriented FIP incentives. The FSP required a written management plan to be prepared for landowners by State forestry agency personnel or other qualified professionals. SIP cost-share funds were used to help landowners implement approved practices (Gaddis 1996).

Since 1991, a reported 36,786 FSP management plans, covering 8,586,730 acres of NIPF land, have been prepared for southern landowners. In the year 2000 alone, 3,031 plans were prepared, involving 459,864 acres of private forest land (U.S. Department of Agriculture Forest Service 2001).

Esseks and Moulton (2000) reported a profile of the average FSP participant. Participants from the South were predominantly male (85 percent) and white (95 percent), held at least a bachelor’s degree (61 percent), and owned from 50 to 199 acres of forest land (36 percent). The median acreage owned was 102 acres. Most did not live on their land (58 percent), had owned it for >10 years (58 percent), and were interested primarily in growing trees and providing wildlife habitat (79 percent). Most had never before received advice about forest land management from a specialist (58 percent), had had someone from a public agency prepare their FSP plan (70 percent), and had received follow-up assistance (72 percent), primarily from a State agency (80 percent). Participants’ annual incomes ranged from <$25,000 (10 percent) to >$75,000 (30 percent). Their median income was between $50,000 and $75,000 per year.

Eight Southern States currently have their own forestry incentives programs. In 1970, Virginia led the way with the creation of its Reforestation of Forest Lands program. This program provides cost-share funds to private landowners to support reforestation, site preparation, timber stand improvement, firebreak construction, prescribed burning, and fencing. Other Southern States with forestry incentives programs include Alabama, Florida, Kentucky, Louisiana, Mississippi, North Carolina, and Texas (Megalos 2000).

Landowner use of cost sharing—Cost-share programs are very popular with landowners because they reduce initial investment costs for various forestry practices and increase rates of financial return (Kluender and others 1999). Studies designed to determine whether cost-share monies take the place of other available capital have had mixed results. In a review of related research, Gaddis (1996) found that some researchers did find evidence of cost-share fund substitution for available capital, while others did not. Kluender and others (1999) found that Arkansas cost-share users with timber management interests would probably have pursued tree growing and commercial forestry activities regardless of assistance payments. Esseks and others (2000), however, found that 60 percent of southern FSP participants would not have accomplished as much management plan implementation if they had not received cost-share payments. Only one-fourth would have implemented their plans without cost-share funds.

As mentioned earlier, Newman and others (1996) reported that cost sharing and other government payments were strong secondary factors influencing reforestation activities. Williams and others (1996) noted that Arkansas NIPF owners have historically reforested a large portion of their harvested land only during periods of government incentives programs. Megalos (2000), however, found that only one-third of North Carolina forest owners favored future cost-share funding assistance for tree planting and timber management. Reasons for this were not requested from, or provided by, the landowners. Gunter and others (2001) found that a large number (44 percent) of NIPF owners in Mississippi had used government cost-share funds to help cover their reforestation expenses.

Kluender and others (1999) reported that NIPF owners in Arkansas who owned land primarily for wildlife, water, and natural beauty were not likely to be users of government cost-share incentives. Incentives users were found to most likely own land primarily for growing trees and to use or lease their land for hunting. Somewhat similar results in part were reported by Melfi (1998), who found that 60 percent of FSP participants in South Carolina had timber management as a primary objective, while 28 percent had wildlife management as a primary objective.

Predicting cost-share use is difficult. Kluender and others (1999) found that cost-share users, on average, were better educated and had higher income levels than nonusers. Megalos (2000), however, found annual income and education levels were not significant predictors of forest owner participation in North Carolina’s forestry cost-share program. In addition, a study of Louisiana NIPF owners found that, although 89 percent of SIP cost-share users had either completed college or had some college education, no significant positive relationships existed between educational levels and cost-share use (Lorenzo and others 1996).

Tract size seems to be a predictor of cost-share program participation. Both Megalos (2000) and Lorenzo and others (1996) found significant positive relationships between the likelihood of cost-share fund use and relatively large forest acreage ownership and tract size. Jacobson (1998) found that 43 percent of Florida NIPF owners of tracts >20 acres in size had participated in cost-share programs.

Megalos (2000) found that gender was not significantly related to North Carolina NIPF owner cost-share use. Resident landowners were less likely to participate than nonresidents. Not surprisingly, landowner awareness of program assistance was found to be the most important predictor of participation. Other than for individuals in the finance, real estate, and insurance professions, owner occupation was not a significant predictor of cost-share use. Lorenzo and others (1996) also found that NIPF owner occupation was not significantly associated with cost-share use in Arkansas.

Significant regional (substate) differences were found among private landowners in North Carolina concerning likelihood of participation in forestry incentives programs (Megalos 2000). These programs involved income tax relief, property tax relief, cost sharing, low-interest loans, and educational and technical assistance activities.

Landowner education and technical assistance—Educational programs help landowners understand forestry opportunities and provide incentives for undertaking various management practices. McColly (1996) suggested that education was the second most important issue for NIPF owners, following tax reform. Numerous Federal and State agencies, universities, private forest industries, and other groups are involved in educational efforts of various kinds. Their messages and objectives differ. A report on nationwide non-Federal forest management opportunities noted the importance of Federal–non-Federal partnerships in educational outreach and program delivery (National Research Council 1998).

When asked to rank their interest in various educational and technical assistance program topics, Florida NIPF owners indicated that information about property rights and regulations was very important. Timber prices and taxes were the next most important topics. Megalos (2000) found that educational programs which provided better timber price information would be popular with nearly half of North Carolina private forest owners.

Within a specific forest owner group, subgroups may have differing educational preferences. Jacobson (1998), for example, found that Florida absentee NIPF owners owning <100 acres were most interested in recreation and wildlife habitat. They also preferred to attend educational meetings on weekends. The larger landowners (500+ acres) were more interested in receiving information through workshops. Absentee landowners as a whole indicated they would rather receive information through publications than attend meetings. Meetings held in the city in the evening were preferred over meetings held during the day in the woods.

Gunter and others (2001) reported that a majority of Mississippi NIPF owners who had harvested timber in recent years had not participated in landowner educational programs. Of those who had participated, the likelihood that they reforested land was significantly related to a higher rate of educational program participation.

Most minority NIPF owners in a two-county area of southeastern Alabama were found willing to participate in continuing education programs to improve their knowledge and skills in forest management (Gan and Kollison 1999). Megalos (2000) found that less than a third of North Carolina NIPF owners would be interested in participating in future programs involving educational demonstrations and tours. Gunter and others (2001) reported that a majority of NIPF owners in Mississippi believed the most important sources of basic forestry information were books, bulletins, and newsletters. Only one-fourth indicated that meetings and short courses and were highly important sources of information. The same finding held true for the importance of receiving information from any individual agency or professional organization.

Although technical advice and assistance provided by professional natural resource managers can be assumed to be important influences on landowner management activity, related research information is scarce. One study found that technical assistance was thought by most (71 percent) southern FSP participants to be a very important factor positively influencing FSP plan implementation (Esseks and others 2000). A large percentage (68 percent) of Florida NIPF owners were found by Jacobson (1998) to have received technical assistance, primarily from State forestry agency personnel. More than half of Mississippi NIPF owners who had reforested their land after harvest felt that the advice of a professional forester was highly important. Of those who had not undertaken reforestation, only one-fourth had sought advice about reforestation from a professional forester (Gunter and others 2001). About two-thirds of minority NIPF owners in a two-county area in Alabama were found to have received past forest management or marketing assistance from forest industries, the extension service, consulting foresters, or State forestry professionals (Gan and Kollison 1999). Of NIPF owners in Mississippi who had received professional assistance, most were found to believe that the services of consulting foresters and State forestry agency foresters were most useful (Gunter and others 2001).

Bliss and others (1997) suggest that future southern foresters will need to be competent in assessing and prescribing management practices appropriate for a diversity of forest resource values. Future professionals will need a more explicitly environmental orientation in all aspects of the profession, from undergraduate education to continuing education (Bliss and others 1997). A key conclusion of Megalos (2000) was that alternatives to traditional timber-oriented management plans were needed to cater to the diverse ownership objectives of North Carolina NIPF owners.