Hurricane Damage Wish List

The following suggested provisions, which would give some measure of relief from the ravages of the 2004 – 2005 wave of hurricanes and the resulting environmental disaster particularly in forested area, were developed by FLTC members and others in response to Congressional inquires:

  • 1.   Taxation of gains resulting from the sale of timber damaged by storm:
    • a.  Exclude from taxable income all gains resulting from the sale of timber damaged by storm.
    • b.  The tax on gain from salvaged timber (timber cut in a salvage area) would not exceed a rate of 5%.
    • c. The tax on gain from salvaged timber (timber cut in a salvage area) would not exceed a rate of 10%.
  • 2.   Since many timber owners have little or no tax basis in the timber, allow a loss deduction equal to the greater of the tax basis or 50% of the amount of the loss. For instance, if an individual taxpayer has an economic loss of $500,000 and a related basis of $10,000, allow a casualty deduction equal to $250,000 (basis in the tract will be reduced to zero). At maximum tax rates, the loss will equal a benefit of approximately $100,000 which the taxpayer may use to clear and reforest.
  • 3.   In determining the amount of the casualty loss, the ordering rules established in the Weyerhaeuser case would be followed. Determined in Weyerhaeuser v. United States , KTC 1994-707 (Ct. Cls.1994) and affirmed in Weyerhaeuser Company v. United States , KTC 1996-294 (Fed. Cir. 1996).
  • 4.   Taxpayers could elect to expense (deduct in arriving at adjusted gross income) all payments (cost of) for reforestation; restoration of the entire property (including but not limited to roads, culverts, bridges, fences, etc.) to the state it was in before the casualty; and other (similar) silvicultural, habitat, and erosion control expenses. (This should be a permanent change.)
  • 5.   Allow taxpayers to average over 3 or 5 years any gains from sale of damaged timber (timber cut in a salvage area).
  • 6.   The AMT exemption amount would be increased by any casualty gains (gain on the sale of timber cut in a salvage area).
  • 7.     Mill incentives:
    • a.  Allow the converting facilities (mill etc.) a current deduction against taxable income for all purchases of storm wood (as opposed to an addition to cost of sales or inventory) effectively accelerating deduction into an earlier year.
    • b.  Allow converting facility a credit against its tax due based on dollar amount of storm wood purchased.
    • c.  Temporarily lifting the weight limits on Federal highways to expedite harvesting.