Federal tax reform and private working forests

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TALLAHASSEE – Although Florida is widely recognized for its beautiful beaches, our state also owes a debt of gratitude to its more than 17 million acres of healthy and productive forestlands that provide a host of benefits both economic and environmental, and are also key to the production of more than 5,000 items consumers use every day.

Working forests provide critically-needed high wage jobs for almost 78,000 Floridians, mostly in rural areas, and a $16.1 billion boost to the state’s economy, making forestry and forest products Florida’s top agricultural commodity and export. At the same time, these forests protect surface waters and many of our iconic springs while they also filter the rainwater that recharges underground aquifers – the source of drinking water for 90 percent. of Florida residents. These forests also clean the air we breathe, provide wildlife habitat for game and threatened and endangered species, and provide a multitude of outdoor recreation opportunities.

The economics surrounding a long-term (think generational), capital-intensive timber investment, however, are not well understood. The continued health, vitality and sustainability of Florida’s working forests rely on strong markets for forest products, smart regulation that recognizes this is a beneficial land use to society, and importantly, tax policies that recognize the unique nature of this enterprise and promote the ongoing investment in healthy working forests.

Federal tax reform gives us an important opportunity to position not just urban America, but rural America as well, with bold, pro-growth economic policies. Key tax provisions that allow working forests to thrive fit squarely within these pro-growth goals.

For example, proposals that allow businesses and the private non-industrial landowners who currently hold most of the working forests to annually expense their operating costs are critical to the forestry sector. Currently forest landowners deduct most operating costs in the year incurred, rather than capitalizing these costs. This enables landowners to afford forest health treatments that reduce the risk of natural disturbance and makes road maintenance, research, weed control, fertilization, and replanting affordable.

The unique, long-term nature of growing timber is recognized by certain principles in the tax code, such as capital gains treatment of timber income and the treatment of timber as real property rather than inventory. Timber takes from 20-80 years to mature. Treating it as a capital asset and timber revenue as long-term capital gains helps rationalize the long waiting periods before realizing returns similar to other long-term investments.

Tax policies that continue to support robust investments in healthy and productive working forests will ensure a sufficient domestic timber supply. This, in turn, will strengthen many rural communities critically dependent upon the timber economy. The forestry sector relies heavily on trucking, railroads, ports, and many other parts of the economy, resulting in a much broader, more diversified tax base and a large economic multiplier effect.

It is vital that Congress, in simplifying and modernizing our tax code, recognize the economic and environmental importance of our forestry sector, the critical green infrastructure it provides, and the unique long-term and capital intensive nature of this business if we’re to retain all the economic, environmental and social benefits this sector provides.

Michael Dooner, a Society of American Foresters-certified forester, is the founder and president of Southern Forestry Consultants Inc. He directs much of the company’s Northwest Florida operations and coordinates activities of sister companies Southern Forestry Realty and Wiregrass Ecological Associates. He is currently president of the Florida Forestry Association.

A career conservationist, Eric Draper is executive director of Audubon Florida, the state’s most influential conservation group. He is recognized as a leading advocate for Everglades restoration, water resource protection and land conservation.

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