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5.4 Discussion and Conclusions

Softwood harvest on NIPF land is projected to increase from 5.2 billion cubic feet in 1997 to 7.2 billion cubic feet by 2050 in response to reduced harvests on national forest and other Federal land (Haynes, in press). Most of the increase in supply is projected to come from pine plantations in the South. If these plantations are not established, timber availability could be a problem in some areas.

The long-term nature of forestry investments, coupled with the up-front capital required to establish regeneration and perceived low rates of return, are major disincentives to some NIPF landowners. Cost-sharing payments partially offset landowners' initial costs for site preparation, tree planting, and forest stand improvement and increase profits at harvest.

Most State cost-share assistance programs are patterned after the Federal FIP, ACP, or SIP programs. However, specific program features vary greatly among the States.

Program funding is generally from State revenues, most commonly from timber harvest taxes and general State appropriations (Table 3). A variety of private sources have contributed to funding of several States' programs. The Texas cost-sharing program is unique in that it is funded entirely by a voluntary, self-assessed tax on forest industry firms. The Virginia Agricultural Best Management Practices Cost-Share Program is funded in part by contributions from a private organization, the Alliance for the Chesapeake Bay.

Definitions of eligibility vary among the States but generally include one or more of the following criteria: (1) minimum or maximum ownership or project size limitations, (2) site productivity ranking, and (3) priority ranking of projects according to State resource goals (Table 2). All programs focus primarily on NIPF land, but other ownerships are eligible in some States. Corporate and industrial forests are eligible for cost-sharing in North Carolina, South Carolina, and Virginia. The South Carolina program specifically excludes wood processing industries; in contrast, the North Carolina and Virginia programs include forest industries as eligible ownerships. Non-Federal public land is also eligible in Alabama and Mississippi.

Eligible forestry practices generally include tree planting, site preparation for natural and artificial regeneration, timber stand improvements, and prescribed burning. Other activities that may be eligible include management plan development, soil and water quality protection practices, and fish and wildlife habitat improvement.

Maximum cost-share payment rates in 2000 ranged from 40 percent in North Carolina and Virginia to 75 percent for direct-seeding and mixed stand regeneration in Mississippi. Most commonly, rates are 50 to 60 percent. All State programs require landowners to develop a management plan and require that practices be retained for 10 years (Table 2). None of the Southern State programs permit landowners to receive concurrent Federal and State cost-sharing assistance for the same project.

The tax treatment of cost-sharing payments has been favorable for landowners. Under Section 126 of the Internal Revenue Code, all or a part of cost-sharing payments for reforestation and some other practices may be excludable from the landowner's taxable income (Hoover 1989).

Cost-sharing payments from Federal programs that have been approved for exclusion for Federal income tax purposes include FIP, SIP, WRP, EQIP, and WHIP. To date, CRP cost-sharing payments have not been ruled excludable. Cost-sharing payments from the following State programs have been approved for exclusion: (1) the Louisiana Forest Productivity Program, (2) the Mississippi Forest Resource Program, (3) the North Carolina Forest Development Program, (4) the South Carolina Forest Renewal Act Program, and (5) the Virginia Reforestation of Timberlands Act Program.

The southwide accomplishments of State cost-sharing assistance programs for tree planting and timber stand improvement were about 140,000 acres in 1994. In 2000, treatments nearly doubled to 278,000 acres. In 1993, the leading State programs were in Virginia, Mississippi and North Carolina where 40,393, 39,254 and 38,441 acres, respectively, were treated. Projects in these three States represented about 90 percent of the acreage treated in the South and about 83 percent of the acreage treated nationwide with State cost-share funding(Haines 1995).

In 2000, the leading State programs were again in Virginia, Mississippi, and North Carolina, in addition to the newly implemented program in Louisiana. Treated acres were 75,900, 63,588, 52,000, and 50,000, respectively. These totals represented about 87 percent of the 278,000 acres of cost-shared accomplishments across the South in 2000 (Table 3).

Assistance for forest land management that does not include timber production as a primary goal has expanded greatly over the past 15 years. Awareness of the importance of nontimber forest resources, especially water quality and wetlands, has increased markedly. In the South, State cost-sharing programs for soil and water conservation and riparian zone protection have been established in Kentucky, North Carolina, Tennessee, and Virginia.

The efficiency of cost-sharing programs might possibly be improved by lowering cost-share rates, particularly in times of increasing stumpage prices. In this way, more owners and more acres might be covered with the same expenditures. In addition, discontinuing some Federal programs and redirecting Federal dollars to State cost-sharing programs could decrease administrative costs. In 1996, Federal funding of $750,000 was appropriated to the Texas cost-sharing program.

In addition to cost-sharing programs, potential policy mechanisms to improve forest productivity and expand the forest land base include: mandatory reforestation regulations or a mixture of incentive programs with regulatory mandates. For example, minimum reforestation standards might be require on harvested sites and cost-share payments might be offered only for tree planting on open land. Additional afforestation opportunities include tree planting to offset environmental degradation such as that from pollutants emitted by coal-fired plants or to sequester carbon from other sources (Moulton 1994).

State-level tax incentive programs to promote forestry have been implemented in some Southern States. Mississippi offers a State income tax credit for reforestation costs. Oklahoma and Texas have exempted products used for forestry purposes from sales tax. Another incentive in Texas is the retention of the agricultural property tax assessment for 15 years after trees are planted on former agricultural land. Previously, the tax rate escalated upon planting of seedlings.

In recent years, State tax incentive programs have been initiated specifically to preserve, improve and create wetlands and riparian zones. Reduced property tax assessments are available in Oklahoma for riparian buffer strips and in Texas for riparian buffer strips and endangered species habitat. State income tax credits are offered in Arkansas for the costs of establishing and maintaining wetlands and riparian zones. In Virginia, a tax credit is available for 25 percent of the value of the timber retained in riparian buffers, up to $17,500.

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