Families, Forests, and Taxes

Key Findings from the Southern Forest Futures Project Technical Report

Financial incentive programs are generally successful in promoting sustainable practices among family forest owners. Photo by Zoe Hoyle, USDA Forest Service.
Financial incentive programs are generally successful in promoting sustainable practices among family forest owners. Photo by Zoe Hoyle, USDA Forest Service.

The Southern Forest Futures Project Technical Report is now available online, both entire and by chapter. The report provides an interdisciplinary assessment of potential futures of southern forests and the many benefits they provide. The Southern Forest Futures Project (SFFP) started in 2008 as an effort to study and understand the various forces reshaping the forests across the 13 states of the Southeast. Chartered by the U.S. Forest Service Southern Region and Southern Research Station, along with the Southern Group of State Foresters, the project examines a variety of possible futures and how they might shape forests and their many ecosystems and values.

Chapter 11 of the technical report  delves into the effects of taxes and financial incentives on family-owned forest land in the Southeast. Federal, state, and local taxes are an important consideration for owners and managers of private forest land, and a critical factor in determining the level of stewardship practiced and types of products and services provided.

Of the 751 million acres of forest land in the United States, 35 percent (264 million acres) is owned by families, and 18 percent (138 million acres) is owned by forest industry. Private forest ownership is even more prevalent in the South, with 59 percent of forest land (128 million acres) held by families and 27 percent (57 million acres) held by forest industry.

Key findings from the report:

  • Most family forest owners are aware of some general business provisions of the Federal income tax, but half or fewer are aware of provisions specifically for forests and other working lands, such as the reforestation incentives and special treatment of qualifying cost-share payments.
  • Federal and State taxes reduce the pre-tax value of family-owned forest land in the South by amounts ranging from little more than one-quarter to nearly half, with the greatest share of the reduction attributable to the Federal income tax and State property taxes.
  • For family forest owners who do not grow timber for sale, State property taxes are of greater concern than any other tax, because they occur annually and are perceived as being high in relation to the value of the land.
  • State-to-State variability in property taxes produces relative disadvantages to holding forest land and likely contributes to conversion of family-owned forest land in States that tax property at higher rates.
  • Owners of family forests and other working lands are many times more likely than U.S. taxpayers in general to incur the Federal estate tax. Of the forest estates that owe estate tax, 40 percent sell timber or land to pay part or all of the tax, with roughly one-quarter of the acres sold converted to other uses.
  • Financial incentive programs are generally successful in promoting sustainable practices among the family forest owners who participate in them, but funding levels and owner confusion about the requirements to apply for and participate in the programs limit the number of acres that are treated.

Now available! Tax Tips for Forest Landowners for the 2013 Tax Year.

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