FICT > Priority Issues

Estate Tax

Family owned tree farms and small timber businesses will be destroyed by the federal estate tax. Inflation, particularly in land values, has pushed otherwise modest businesses and farms into confiscatory estate tax brackets. The $10,000 gift exclusion and the $750,000 special use valuation were the only areas indexed for inflation by the 1997 Taxpayer Relief Act.

The estate tax has a harmful effect on the environment. Timber landowners are often "land rich and cash poor." When faced with an estate tax bill, heirs are forced to sell or develop environmentally sensitive land in order to pay the tax. Eliminating the death tax could remove one of the most powerful forces driving the subdivision and development of large land tracts in America today.

Family owned farms and small businesses are highly illiquid. The family constantly plows earnings back into the business. A substantial estate tax liability generally forces the liquidation of the family business in order to pay the tax. Four our timber industry, this could force heirs to cut timber prematurely or liquidate a portion of the tree farm to pay the tax. The net effect of either course can be unwanted development with deforestation and loss of wildlife.

Reforestation Tax Act

The Reforestation Tax Act of 1999 would remove disincentives for private investment in our forests and help with the cost of maintaining them. By reducing the capital gains paid on timber for individuals and corporations by 3 percent each year the timber is held-up to a maximum of 50 percent-forest landowners would be partially protected from being taxed on inflationary gains.

Removing the cap on expense eligible for the reforestation tax credit and reducing the amortization period would encourage private forest land owners to plant more trees and enhance sound environment management on private land.

All rights reserved Forest Industries Council on Taxation © 2000