Southern Forestry Realty

Tips For Purchasing Acreage

admin — Fri, 18 Sep 2009 21:16:11 +0000

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Ready to purchase some acreage? Forest land? Undeveloped stands? Consider these steps before making your purchase.

Decide exactly what you want before you start your search. Write everything down on paper, including what you want the property to be used for (residence, industry, recreational, investment), how far the property is from a municipality and the amount of development that the property will need, if any, to become what you ultimately intend for it to be.

Biofuels - Good or Bad?

admin — Fri, 16 Jan 2009 19:35:39 +0000

With the evolving “green” movement in the United States and in the world economy, comes a new set of cause-and-effect considerations. While the idea of “going green” and the widespread use of biofuels and ethanol sounds great in theory, there are many factors that must be considered. Just because one aspect of a process produces less hydrocarbons than it did previously does not mean that the net effect of the entire process will result in fewer greenhouse gases. This is especially true where the green movement relates to the timber industry.

Producing cellulostic (plant-based) biofuels has many unarguable advantages, with one of the most enticing being the idea of freeing the United States from dependence upon foreign oil. However, in order to truly evaluate the full impact of such a movement, as many factors as possible must be considered. One of the critical impacts of a growing demand for biofuels, especially those that are plant-based, is the effect that such a demand will have on the existing land usage in a country and even on a worldwide scale.

According to the Convention on Biological Diversity, the “amount of land that could be dedicated to energy biomass is limited, as most of the suitable land is, in use for agriculture, human settlement, covered by forests, or locked up in protected areas (FAO, 2003). Therefore, energy biomass plantations may compete with the existing agricultural land uses and/or may lead to the use of the remaining natural landscape that should be kept under conservation.”

As the competition for agricultural usage begins to encroach onto forested land (timber), the obvious result is deforestation. The net effect is quite often an INCREASE in greenhouse gases rather than a decrease in greenhouse gases. There are studies that show that harvesting forest resources to produce biofuel results in 25 to 30% of the greenhouse gases released into the atmosphere each year (1.6 billion tones). If the deforested land is then replanted with row crops rather than tree stands, the added long-term cumulative result is even worse because there are then less trees to convert carbon dioxide the oxygen through photosynthesis.

While the ultimate result of the effectiveness of various aspects of the green movement, and the production and use of biofuels in particular, are still under evaluation and may be for many years to come, one thing is for certain. Whatever means are employed should be well thought out with an open mind that is free from pre-determined conclusions. An effective movement toward “going green” will be composed of a variety of ideas, actions, and innovative methods, but must be tempered with common sense looking at the whole picture from a cause-and-effect perspective. We must push for processes that result in overall greenhouse reductions and freedom from fossil fuel bases energy rather than simply jumping onto any bandwagons simply because it sounds good or may be politically expedient to do so.

National Wildfires Programs Database

admin — Fri, 09 Jan 2009 22:14:00 +0000

Did you know that there was a centralized database that listed state and local wildfire programs?
The national database of state and local wildfire hazard mitigation programs serves as a clearinghouse of information about nonfederal policies and programs that seek to reduce the risk of loss of life and property through the reduction of hazardous fuels on private lands. The database is searchable by state, jurisdiction (city, town, etc.), and even by program type.

The site is sponsored by the USDA Forest Service / Southern Research Station. The database seems fairly inclusive although there are some links in the summaries that are out of date.

To view their site and search for articles in your state, visit http://www.wildfireprograms.usda.gov/

U.S. Forest Service History

admin — Fri, 19 Dec 2008 16:19:45 +0000

The USDA Forest Service is an agency of the United States Department of Agriculture. The U.S. Forest Service administers the 155 national forests and 20 national grasslands in the United States. Major divisions of the agency include State and Private Forestry, the National Forest System, and branch responsible for Research and Development.

The U.S. Forest Service has its origins in 1876 when Congress created the office of “Special Agent in the Department of Agriculture” to assess the state of the forests in the United States. In 1881, the office expanded into what became known as the Division of Forestry. Then in 1891, the Forest Reserve Act authorized withdrawing land from the public domain as “forest reserves,” managed by the Department of the Interior. In 1901, the Division of Forestry was formally renamed as the “Bureau of Forestry”. Early in the 20th century, The U.S. Forest Service gained its current title when the Transfer Act of 1905 transferred the management of forest reserves from the General Land Office of the Interior Department to the Bureau of Forestry. The Bureau of Forestry has been known as the USDA Forest Service ever since and is more traditionally referred to as the “U.S. Forest Service”.

Across the United States, there are 155 national forests, organized into ranger districts employing district rangers and other personnel. The districts construct and maintain trails, operate campgrounds, regulate grazing, patrol wilderness areas, protect culturally significant heritage sites, and manage vegetation and wildlife habitat. The Forest Service also has seven regional research stations, including the International Institute of Tropical Forestry and Forest Products Laboratory, that study the ecosystems of the national forests, as well as other federal, state, and private lands. The Forest Service also provides funding and technical assistance to non-federal land owners through a branch called State and Private Forestry.

Although a large volume of timber is logged every year, not all National Forests are entirely forested. There are tidewater glaciers in the Tongass National Forest in Alaska and ski areas such as Alta, Utah in the Wasatch-Cache National Forest. In addition, the Forest Service is responsible for managing National Grasslands in the midwest. Furthermore, areas designated as wilderness by acts of Congress, prohibit logging, mining, road and building construction and land leases for purposes of farming and or livestock grazing.

In August 1944, to reduce the number of forest fires, the Forest Service and the Wartime Advertising Council began distributing fire education posters featuring a Black Bear. The poster campaign was a success; the Black Bear would later be named “Smokey Bear,” and would, for decades, be the “spokesbear” for the Forest Service. Smokey Bear has appeared in untold TV commercials; his popular catch phrase, “Only YOU can prevent forest fires”, is one of the most widely recognized slogans in the United States. A recent study found that 95% of the people surveyed could complete the phrase when given the first few words.[3] Unfortunately, in certain fire-adapted ecosystems the ensuing decades of fire suppression unintentionally caused a buildup of fuels that replaced the historically natural fire regime of slow-burning, relatively cool fires with fast-burning, relatively hot wildfires in the fire-adapted forest lands across the nation.

WANT MORE INFORMATON ABOUT THE U.S. FOREST SERVICE?

Please visit http://www.wikipedia.org for more complete information on the U.S. Forest Service and for a list of important legislation that has helped shape the policies and administrative structure of the service.

To visit the U.S. Forest Service website, please point your browser to http://www.fs.fed.us/.

Tips for Forest Landowners for the 2008 Tax Year

admin — Fri, 24 Oct 2008 20:27:55 +0000

(by Linda Wang, Forest Taxation Specialist and John L. Greene, Research Forester, Southern Research Station)

This bulletin summarizes key federal income tax provisions for forestland owners, foresters, loggers, forest product businesses, and tax practitioners. It is current as of October 1, 2008, and supersedes Management Bulletin R8-MB 130. Consult your tax and legal professionals for advice on your particular tax situation.

TIMBER SALES If you have held standing timber for over 12 months, income from the sale or disposal of the timber generally qualifies as a long-term capital gain. This is an advantage since, among other reasons, long-term capital gains are taxed at lower rates than ordinary income and are not subject to self-employment tax.

Short-term capital gains are taxed at the same rates as ordinary income. For most individual forestland owners, the tax rate for long-term capital gains is 15%. From 2008–2010, however, a special 0% rate applies to long-term capital gains which, when added to your ordinary income fit under the ceiling for the 15% bracket for ordinary income ($32,550 for single taxpayers, $65,100 for married taxpayers filing jointly). Also, income from timber which a C corporation has held for more than 15 years is subject to a 15% capital gains tax rate, effective one year beginning on May 22, 2008.

Example 1. In 2008 you sold 200 tons of pine sawtimber out of a total of 1,000 tons on your entire tract for $8,000. Your basis for the entire tract is $10,000 and your sale expenses were $900. Your depletion unit is $10/ton ($10,000 ÷ 1,000 tons). Your taxable gain is $5,100 ($8,000 – (200 tons x $10/ton) – $900).

If you sell cut timber, only the gain from appreciation of the standing timber can qualify as a capital gain; the value added by cutting and hauling the timber is ordinary income. Further, you only can treat the value of the standing timber as a longterm capital gain if you have a an IRC section 631(a) election in effect. Make the election on Form T, Part II.

Investors report timber income on Form 1040, Sched. D, and active business owners report it on Form 4797. If you claim a depletion deduction, sell timber lump-sum under section 631 (b), or make or use a 631(a) election, you also must file Form T; the form is available at http://www.irs.gov/pub/irs-pdf/ft.pdf. Partnerships and LLCs file Form 1065, Sched. K and K-1. S corporations report it on Form 1120S, Sched. K and K-1, and C corporations on Form 1120.

If you receive payments from the sale or disposal of timber in 2 or more years, you can use the installment method to spread the income – and the tax on it – over the years you receive payments. Report an installment sale first on Form 6252, and then the amount can be carried over either to Form 4797 or Sched. D of Form 1040.

TIMBER MANAGEMENT EXPENSES If you manage your forestland for profit – as an investment or a trade or business – you can deduct ordinary and necessary timber management expenses. These include timber cruises, fees paid a consulting forester, brush control, protecting the forest from fire, insects and disease, tools of short useful life, precommercial thinning, timber stand improvement, hired labor, and mid-rotation fertilization. Costs associated with reforestation, including supervision by a forester and brush control, are subject to the reforestation deduction and amortization provisions (see below). Costs associated with a timber sale, including a pre-sale timber cruise, are deductible from the sale proceeds. Property taxes and interest paid also are currently deductible, but you may elect to capitalize them if doing so provides a tax benefit. Car and truck expense related to timber activities also may be deducted using either the standard mileage allowance (50.5 cents per mile for 2008) or the actual expenses (including depreciation if you own the vehicle).

For investors, property taxes are fully deductible in the Taxes You Paid section of Form 1040, Sched. A. Other management expenses, however, must be reported in the Job Expenses and Certain Miscellaneous Deductions section, where they are combined with other such deductions and only the amount that exceeds 2% of your adjusted gross income is deducted. Active business owners deduct all management expenses, including property taxes and interest paid, on Form 1040, Sched. C. Management deductions may be disallowed unless you can substantiate them. This makes it important to keep supporting records such as sales slips, receipts, invoices, canceled checks, and mileage records and have them on hand for an IRS examination or audit.

FOREST PLANTING COST You can deduct outright the first $10,000 per year ($5,000 per year for married couples filing separately) of reforestation expenses per qualified timber property and amortize (deduct) any additional amount over 8 years. These provisions apply both to the cost of establishing a plantation and practices to encourage natural regeneration.

Example 2. You planted pine seedlings in 2008 at a cost of $6,000. You can deduct all $6,000 outright because it is less than $10,000. Investors take the deduction on the front of Form 1040, as an adjustment to income; material participants take it on Form 1040, Sched. C or F (if you qualify as a farmer).

If the planting cost had been $14,000, you only could deduct $10,000 outright. But you could take an amortization deduction for 1/14th of the remaining $4,000 ($287) on your tax return for 2008, 1/7th ($571) on your returns for 2009 through 2014, and the last 1/14th on your return for 2015. Elect to amortize and show your deductions on Form 4562, Part VI.

DEPRECIATION AND FIRST-YEAR EXPENSING You may take annual depreciation deductions to recover your investment (basis) in property such as timber equipment, machinery, buildings, bridges, culverts, temporary roads, fences or the surfaces of permanent roads you placed in service for timber production. Cars, light-duty trucks, logging equipment, and road building equipment generally are depreciated over a 5-year period. If you purchased property for your timber business in 2008, you can elect to expense up to $250,000, subject to phase-out and taxable income limitations, up from $128,000. In addition, for property purchased and placed in service in 2008, a bonus depreciation in the amount of 50% of the property costs is available.

COST-SHARE PAYMENTS If you received a payment from a public cost-share program, you also should receive a Form 1099-G. If the program is approved under section 126, however, you can elect to exclude a calculated portion of the payment from your gross income. Approved federal programs include the Conservation Reserve Program (CRP), Environmental Quality Incentives Program (EQIP), Wildlife Habitat Incentives Program (WHIP), and Wetlands Reserve Program (WRP). Cost-share programs for southern pine beetle and mountain pine beetle are under IRS review, but as of press time, had not been approved for exclusion. Several state programs also qualify. The amount of a cost-share that can be excluded is the present value of the larger of $2.50 per acre or 10% of the average annual income from the property over the last 3 years. Calculating present value requires using an interest rate, but the IRS has provided little guidance as to what rate to use.

Example 3. You received a $3,000 cost-share from EQIP in 2008. Your only income from your 40-acre forestland in the last 3 years was $9,000 from a 2006 timber sale. Using 7.56%, the 2008 Farm Credit Bank interest rate for your region, you can exclude all $3,000 of the cost-share from your gross income: $2.50 x 40 acres = $100 and 10% x ($9,000 ÷ 3) = $300; the present value of $300, the larger of the two amounts, is $300 ÷ 7.56% = $3,968, which is more than the cost-share. Attach a statement to your tax return showing the amount and nature of the cost-share payment and how you determined the excludable amount.

CRP RENTAL PAYMENTS Land rental payments received under CRP are not cost-shares and cannot be excluded from gross income. Beginning in 2008, however, CRP rental payments are exempt from self-employment tax for taxpayers who are retired or disabled.

TIMBER BASIS Basis is a measure of your investment in timber. The total cost of acquiring purchased forestland should be allocated proportionately among capital accounts for the land, the timber, and other capital assets acquired with them. The fair market value of inherited forestland should be allocated similarly. This usually results in a step-up in basis because the fair market value of the property is higher than the decedent’s basis.

Establishing your basis can lower your income tax by reducing the taxable amount of timber income. It also can help you recover reforestation costs or your investment in timber lost in a casualty or theft. If you did not establish your basis when you first acquired your timber, you can do it retroactively. You may need a professional forester to determine the volume and value of the timber at the time you acquired it. If you acquired your timber or forestland many years ago, you should compare the potential tax savings from establishing your basis retroactively with the time and expense involved, to see whether it is financially worthwhile. Report your original basis in timber and land on Form T, Part I.

TIMBER CASUALTY LOSSES You can take a deduction for timber lost in a casualty – an event that is sudden, unexpected, and unusual, like a fire, ice storm or hurricane. Start with the timber “block” that includes the damaged area (if you keep track of all your timber in one account, that is your timber block). Your deduction is the lesser of the decrease in value caused by the casualty or your basis in the timber block.

Example 4. This year a hurricane destroyed timber on your 50-acre tract. Your forester estimates the timber was worth $10,000 before the storm but only $1,000 after, a $10,000 decrease in value. Your basis in the timber is $2,000. Your casualty loss deduction is $2,000, the lesser of the two numbers. Keep in mind the IRS may verify your basis and damage estimate. Report a casualty loss on Form 4684, Section B; adjust your timber basis on Form T, Part II.

LIKE-KIND EXCHANGES Instead of selling appreciated timberland, paying tax on the income and then acquiring replacement property using after-tax dollars, you can structure the transaction as a like-kind exchange (section 1031 exchange) so that gains are not currently taxed. To qualify, you must identify the replacement property within 45 days after closing on the relinquished property. The exchange must be completed by the earlier of the 180 days after the closing of the relinquished property or the due date (including extensions) of the tax return in the tax year of exchange.

CONSERVATION EASEMENTS You can take a charitable contribution deduction for donation of a permanent conservation easement. The amount you can deduct for 2008 is limited to 50% of your adjusted gross income, but your can carry forward any unused amount to be deducted over the next 15 years. If you generate more than 50% of your total income from a timber business, the amount you can deduct is limited to 100% of your adjusted gross income.

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, age, disability, and where applicable, sex, marital status, familial status, parental status, religion, sexual orientation, genetic information, political beliefs, reprisal, or because all or a part of an individual’s income is derived from any public assistance program. (Not all prohibited bases apply to allprograms.) Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA’s TARGET Center at (202) 720-2600 (voice and TDD). To file a complaint of discrimination write to USDA, Director, Office of Civil Rights, 1400 Independence Avenue, S.W., Washington, D.C. 20250-9410 or call (800) 795-3272 (voice) or (202) 720-6382 (TDD). USDA is an equal opportunity provider and employer.

Forestry 101 Conference

admin — Fri, 26 Sep 2008 21:03:06 +0000

Got Trees? Forestry 101 Conference

Earlier this month, GFA mailed program and registration materials for a major landowner conference to be held on November 8 in Atlanta. The conference is designed for active and absentee landowners and investors and will feature an expert array of speakers and facilitators. If you fall into this group, you are highly encouraged to attend.

For information on the conference and to register early, log on to www.gfagrow.org and click on Got Trees?

Suggestion: If you are a manufacturer or consultant, consider sponsoring one or more of your key landowner partners to attend this conference to learn how to better manage their forests and to understand trends that will affect their timberland.

HB1211 Amendment 1

admin — Fri, 26 Sep 2008 20:20:59 +0000

Amendment 1

The next fifty days will be critical to our initiative to finally establish a property tax program in Georgia that is friendly to large forest landowners, regardless of ownership type and acreage. GFA’s statewide promotional campaign is underway to achieve voter approval in November of Amendment 1 to implement the GA Forest Land Protection Act of 2008.

The campaign has raised $247,000 to date - all from just 20 contributors. The goal of the Georgia Forestry Association is $300,000, a modest amount to run a statewide campaign. Of course, many more landowners will benefit if Amendment 1 passes; in fact, the extent to which this measure will conserve our large forests will ultimately benefit most anyone who is connected to forestry and forest product manufacturing.

We are asking that you consider contributing to this colossal effort. (» Download and print your contribution form)

I know for many these are difficult economic times – whatever you can contribute is appreciated! Thank you in advance for recognizing this historic opportunity to keep Georgia’s forests in forests!

Most of the ‘covert’ activity associated with the campaign will occur in the final weeks before the election. We will soon authorize some initial polling in conjunction with the other two amendment campaigns that will be very helpful in directing our resources. We have begun distributing bumper stickers and this week will approve and send to press a one-page flyer that will be distributed selectively in hard copy and will be available electronically from GFA. Town Hall meetings are being planned around the state and meetings with selected newspaper editorial boards will be scheduled. A 12-minute video has been produced which counties across the state will broadcast on their cable systems to educate the public on the three constitutional amendments on this year’s ballot.

The campaign website is complete – www.ForOurForests.com – and posted on the GFA website. Supporters are encouraged to place a link on their websites and to begin to use the site to promote Amendment 1 within your universe of influence. Additional collateral materials may be produced and selectively distributed across the state depending upon availability of funds.

Please begin thinking of ways that you can promote Amendment 1 in your respective communities.

Hurricane Effects on Coastal Forest Ecosystems

admin — Fri, 12 Sep 2008 20:38:50 +0000

One often overlooked effect of a hurricane is its effect on forest ecosystems. Coastal forests are obviously the most directly affected. Forests can undergo significant damage on many levels, occurring primarily within close proximity to the coast. According to the USDA Forest Service, for instance, nearly 90 percent of all forests damaged during Hurricane Katrina, were within 60 miles of the coast, predominantly in Mississippi. (1)

Of the damaged trees, nearly 60 percent of the damage to trees occurred to softwoods, predominantly pine trees, with the remaining 10% of the damage occurring, not surprisingly, to hardwoods. On average, about 20% of previously standing trees were damaged substantially, with rates of as high as 35 to 40% in some areas located near, or on, the coast.

There can also be substantive changes to the soil composition of the forest floor. According to the University of South Carolina, soil samples taken one month after the hurricane [Katrina] showed substantially higher concentrations of sodium, phosphorous, magnesium, calcium and potassium, as well as differences in pH, cation-exchange capacity, and nitrogen in storm-surged areas.(2)

While forests can, and do, recover from such disturbances, the level and rate of recovery depend upon such factors as mortality rate, degree of damage to healthy trees, responses of surviving trees and plant life to changing environmental conditions and stress factors, and rate of germination of new trees, either from seeds in the local soil seed bank or from seeds that arrive from sites outside of the affected forest ecosystem.

Effects and/or damage to a forest from a hurricane occur on many fronts:

High wind damage
Storm surge
Salt spray above normal waterline
Soil composition changes
Newly introduced species

If you’ve noticed changes in your forest or timberland, or suspect changes in soil composition, contact Southern Forestry Consultants. You may need a professional evaluation of your land to determine its health and to put in place a solid land management plan.

(1) USDA Forest Service, Southern Research Station
(2) University of South Carolina

Timber Market Report

admin — Fri, 05 Sep 2008 22:14:01 +0000

Timber markets just can’t seem to catch a break these days. Lingering drought, poor housing markets, mill downtime, and rocketing fuel costs have conspired to push prices for most timber products down, or at least not allow them to rise. Even pine pulpwood prices, recently somewhat of a silver lining in the market, have suffered some lately. This is primarily due to record fuel prices and government mandated boiler maintenance at Georgia-Pacific’s pulp mill at Cedar Springs, Georgia.

Lumber, oriented strand board (OSB), and other solid wood products continue to suffer from poor prices and limited markets, although plywood has been somewhat better. As the U.S. housing market has spiraled downward, it has dragged the lumber market down with it. Pine chip-n-saw has fared the worst, as mills have been faced with cutting delivered prices even further due to higher fuel/logging costs or shutting down. Some sawmills have closed, but most have managed to stay open and run on reduced schedules with tighter log specifications to limit their losses.

FWC Considers Prohibition on Permanent Duck Blinds on Four Lakes

admin — Fri, 05 Sep 2008 22:10:53 +0000

The Florida Fish and Wildlife Conservation Commission (FWC) approved a draft rule prohibiting anyone from hunting in or near a permanent duck blind on four lakes near Tallahassee.

The lakes are Miccosukee, Iamonia, Carr, and Jackson. Following final review of the draft rule at the FWC’s September meeting, the rule will take effect prior to the fall waterfowl season.

Under the rule, no one can duck hunt within 30 yards of a permanent blind. A permanent blind is defined as anything that provides shelter, cover or concealment for a hunter but does not include any rooted vegetation. Neither does it include any temporary blind used only while the hunter is present.

The FWC took action to ban hunting from permanent blinds on the four lakes as a result of continuing conflicts between the people who build them and claim ownership on sovereign state lands and others who use the same area. In addition, FWC officials say constructing the blinds on public lakes is a violation of existing Florida Statutes.