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Supporting Rural America in the Tax Code Means Supporting Forest Owners

With Congress back in town following its summer recess, all eyes are turning to the congressional tax-writing committees as they work to pass tax reform legislation.

Most rural Americans will be glad to see a simpler, more streamlined tax code. But, I hope that Congress, will consider how taxes impact a unique group of these rural Americans: family forest owners.

Family forest owners are an often-overlooked group. But, taken together, they are a powerful economic driver. Collectively, these individuals own more forests in the United States than corporations or the government.

In fact, according to an analysis by the American Forest Foundation, one in four rural Americans is a family forest owner.

Just as important as their size is their impact on all Americans’ daily lives. Family forest owners’ efforts to care for their forestland provides for Americans in critical ways: They protect and filter clean water and clean air, as well as provide habitat for our wildlife.

They are also a critical part of rural America’s economic backbone. These families provide wood for a $282 billion industry that supports more than 2.4 million jobs, most of which are in rural communities.

As Congress begins its work on an overhaul, they should be deliberate in creating a tax structure that promotes the management of family-owned woodlands. This will help landowners to continue to care for our environment and our economy.

Namely, they should consider five things.

First, Congress should continue to allow rural landowners to deduct forest management and restoration expenses. The costs of forest management are high, and most landowners fall in the middle income bracket, making less than $100,000 annually. Deducting these expenses allows landowners to conduct needed sustainable forest practices that keep their land in trees, and keep them healthy. Examples include creating fire breaks that reduce wildfire risk and installing culverts to protect streams. Without these deductions, most landowners could not afford to undertake many practices. In a new survey from the American Forest Foundation, 89 percent of landowners surveyed use these deductions to afford needed management practices, showing how important this is to good forest stewardship.

Second, Congress must continue to allow landowners to treat timber income as a capital gain. Most landowners harvest only once in a generation, yet they have annual expenses. What’s more, they take on substantial risk to see the growth of trees through to the end, such as wildfire, hurricanes, storms and insect infestations. Because of this, Congress should continue to treat timber income as the long-term investment it is.

Third, Congress should simplify the code by clarifying that forest owners who are managing their land long-term, even if they don’t receive regular income, can be treated as businesses and therefore eligible for business tax deductions. Caring for forestland requires investments much like farming or agribusiness. Landowners need a forest management plan, a forester and other professionals to assist in caring for the land. While they might not receive income annually, they are contributing to the economy like other small businesses.

Fourth, especially given the immense impact of Hurricane Harvey and others, Congress should allow landowners to deduct more of the losses they suffer when natural disasters strike. AFF’s survey found that more than 62 percent of landowners who dealt with disasters were not able to deduct their losses.

Finally, it’s important that landowners can pass on their land to future generations. To do this, Congress should continue to allow landowners to adjust the value of their estate when an heir inherits the land (i.e., stepped-up basis), as well as work to eliminate the estate tax burden on all forest owners.

If our elected officials are serious about supporting rural Americans, then it is vital landowners are supported in the tax code overhaul. With the right tax policy in place, they can continue in their role helping protect our environment and supporting rural economies.


Tom Martin is President and CEO of the American Forest Foundation.

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