Hurricane Damage Wish List

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.