The nature of forestry
operations entails costly tree planting, half-a-generation of care and
nurturing, and prolonged risk exposure from fire, storm, tree disease and
insect damage. The impact of taxing any gain from the eventual timber sales
income can be very powerful.
Many landowners continue to pay more than
their fair share of taxes on their timber income. Even if you use an
accountant, you should understand how timber expenses and income are taxed,
since some tax preparers are not well versed in tax treatment for forestry.
Knowing the tax laws will give you an advantage in planning your forest
management activities.
Although tax laws provide special incentives
for timber growers, you may not be aware of or are confused by the tax
treatment on timber. Adding to this frustration is the fact that there are
relatively few professional tax services offered in the timber tax specialty.
Furthermore, timberland owners must pay yearly property taxes, making timber
tax a major expense without annual income to offset the cost.
TAX
ASSISTANCE
Timber tax assistance,
including timber income tax, timberland property tax and timber-related sales
tax, is essential to ensure the healthy and sustainable development of timber
resources in the state. To serve the need and gap in timber tax assistance,
Texas A&M Forest Service provides timber tax education and training,
conducts timber tax research and assesses the implications of timber tax laws
and policies.
Our annual workshop provides basic information
about timber taxation and the latest changes to tax laws and rules for tax
return preparations. Topics generally focus on federal timber income tax issues
for private forest owners with a refresher on local timberland property tax
incentives. Participants gain a clear understanding of commonly misunderstood
timber tax issues.
2018
Timber Income and Property Tax Workshop
Sponsored by Texas A&M
Forest Service
and Texas Forestry Association
+ 2017 Texas Timber Tax Workshop Presentation Slides
- Timber
Taxation - Tamara Cushing
This includes basics about timber taxation
and tax laws and rules for 2016 tax return preparations. It provides an
overview of various topics in timber taxation including basis determination and
allocation, income tax considerations during timber sale and Form T and other
related tax forms.
- Income
Tax & Timber - Garvey Jackson
This covers federal timber income
tax issues and discussion on current tax related issues.
- Timberland
Property Tax in Texas - Joe Holcomb
This covers how timberland
productivity values are determined in Texas and what kinds of state incentives
are available for landowners.
+ 2016 Texas Timber Tax Workshop Presentation Slides
- Introduction
- Timber Income Tax
This topic includes the process, various tax
reforms, administration and other useful tax publications.
- Capital
Expenditures
Here is information on capital expenditures, recovery,
the importance of records, purpose for owning timberland, basis, land account,
merchantable timber account and pre-merchantable growth.
- Capital
Expenditure Recovery
Included in this portion of the presentation is
information regarding land accounts, depreciation, timber (cost) depletion,
reforestation amortization, investment tax credit and fertilizer.
- Forestry
Operating, Management and Protection Expenses
This is an overview of
deductions (expensing), hobby farm rules, forest management and protection
costs, passive activity loss rules and reporting timber expenses.
- Timber
Sale Income
Information in this chapter refers to capital gains tax
rates, qualifying for long-term capital gains, reporting a timber transaction
and the alternative minimum tax (AMT).
- Forestry
Cost-share Payments
Here is a general overview of how the tax codes
treat cost-share payments and how timber owners are affected by cost-share
programs.
- Income
Leveling Strategies
When harvesting small parcels is impractical,
forest landowners can take advantage of deferred payment contracts and
installment sales under IRC §453. This chapter explains how they work, what
their limits are and the criteria to qualify for their use.
- Forms
of Ownership
This section describes types of ownership: partnerships,
S corporations, regular C corporations, LLCs and trusts and estates.
- Like-Kind
Exchanges
This section refers to tax implications of business or
investment property (timberland) exchanges and how the courts have viewed
them.
- Casualty
Losses and Involuntary Conversions
This section helps define
casualty/non-casualty business losses; losses from theft; and the IRS position
on casualty losses and involuntary conversions.
- Christmas
Trees
Included in this chapter is an overview of how the IRS views
growing Christmas trees as a business.
- Tax
Implications of Employment Status
This is a look at how the IRS
defines who an employee is and the information about certain employees that has
to be reported to the IRS.
- Timber
Aspects of Social Security Tax
This chapter helps explain how timber
income (timber sales, cost-share payments, incentive payments, etc.) is treated
to determine Social Security taxes.
- Tax
Effects on Investment Returns
This chapter explains how capital
expenditures, timber operating, managing and protection costs, reforestation,
timber sales, cost-share payments, investment returns (after-tax) and interest
rate adjustments affect tax.
- State
Income Taxes
Some states collect state income tax. Here’s an example
of how the IRS helps states to collect their income taxes; and how those taxes
are determined. This also shows state taxes in the South and the impact of
those taxes.
Dr. Haney’s 2016 Timber Income Tax and
Timberland Property Tax workbook, used at the 2016 Timber Tax Seminar, has
detailed explanations of all of these topics. Limited copies of the workbook
are available for $50. For additional information or questions about obtaining
a copy of the workbook, please contact us at 979-458-6630.
+ Texas Timberland Property Tax Information
Timberland
Property Tax in Texas (2016) covers how the property tax is determined,
what kinds of state incentives are available for landowners, and updates on
Texas tax laws related to timber management.
+ Contact
Aaron Stottlemyer
Forest Resource
Analyst
200 Technology Way
College Station, TX 77845
Phone:
979-458-6630
Fax: 979-458-6633
astottlemyer@tfs.tamu.edu
Questions about forest taxation, text them to (936) 239-9034.