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Because North Carolina’s private landowners own close to 90 percent of the state’s 18 million acres of forestland, they play a critical role in assuring that our forests are healthy and productive. The decisions landowners make on their land have a long-term impact on wildlife habitat, clean air, clean water, wood supply and outdoor recreational opportunities.

So it’s important that they have the information they need to make knowledgeable forest management decisions that assure that North Carolina continues to enjoy the many benefits that forests provide.

A copy of the NCFA's Landowner Guide can be requested by calling the NCFA office at (800) 231-7723 or by clicking here.

Landowners interested in learning more about potential timber buyers in their area can research a comprehensive list provided by the North Carolina Forest Service... Click here to access that site.

Landowners who want to learn more about insurance for their timber can...check out this brochure.

Tax tips and estate planning documents for landowners can be found on the Pubs & Videos section...Click here to reach that section.

 

Economics
Many investment analysts consider reforestation to be one of the best long-term investment opportunities available to landowners. This conclusion is based on the appreciation of timber products over the past 50 years. On the basis of these and current trends, analysts believe:

  • Prices paid to landowners nationally for softwood sawtimber and quality hardwood sawtimber will rise at a rate at least equal to inflation.
  • Prices paid for standing timber in the Southeast may rise more rapidly than in other regions because of increased demand and competition.

 

Cost Share Assistance

Financial assistance for reforestation is available at both state and federal levels.

State cost-share programs such as the Forest Development Program and the Southern Pine Beetle Prevention Program are available through the N.C. Division of Forest Resources.

Landowners may receive up to 40 percent of the cost of site preparation, planting or timber stand improvement through the Forest Development Fund. Funding for this program is provided by the state and the forest products industry in North Carolina.

At the federal level, cost-share funds may be available under the 2009 Farm Bill. The Farm Services Agency (FSA) and the Natural Resources Conservation Service (NRCS), encourage landowners who might be interested in various cost-share avaiable in the Farm Bill to plan ahead before signing up for a specific program. Click here for a list of programs that are offered annually.

How to Apply – What to Apply for – Honor the Contract
1. Provide Initial Information: Forestland owners interested in any of the programs should visit their local Farm Service Agency (FSA) first. Landowners should bring a copy of the deed for the land and complete background information (name, address, social security) of any names listed on the deed. In the case of an LLC, the landowner who is designated as the president or leader must make the application, but all of the members listed in the LLC have to provide their respective information. This step will allow the FSA to properly identify the property.

2. Eligibility: The cost-share programs available through Farm Bill are not first-come, first serve programs. A landowner or LLC must first complete paperwork – namely the Adjusted Gross Income (AGI) Limitation Form - to see if it is eligible based on the income of the applicant. Those applicants with an average non-farm AGI of more than one million dollars are not eligible. This limitation may be waived it the land has some specific environmental significance. Landowners who are unsure where they might fall in the AGI should take the time to investigate the paperwork with the FSA.

3. Investigate the Programs Available: The FSA and NRCS both administer to cost-share programs to landowners. In many cases, both agencies are located in the same building so it will not be difficult to explore all of the programs that are available. In general, there are programs that address working lands, easements and stewardship.

4. Applications are Ranked: FSA and NRCS personnel will rank applications based on their environmental significance and impact. In general, a plan that creates the most benefits will gain a higher rating. The highest rated projects obtain the top priority spots for funding.

5. Understand the Contract: It is important for landowners to understand that they when they sign up for one of these cost-share programs, they are entering into a contract with the United States Government. Work detailed in the plan must be commenced within 12 months of signing the agreement.

There are more options than ever for forest landowners in this new Farm Bill. The following contact information for NRCS and the Farm Services Agency should be consulted for more information on the individual programs. The NRCS can be reached at 919-873-2100 or www.nc.nrcs.usda.gov and the FSA can be reached at 919-875-4800 or www.fsa.usda.gov/nc.

 

Timber Taxation

Taxation of timber income and timber assets are major concerns of landowners. Proper accounting and planning can save you thousands of dollars in taxes and help preserve your estate.

Below are some key points and recommendations regarding timber taxation. This is general information only and should not be considered an official interpretation of federal and N.C. income tax laws. Tax laws are subject to interpretation and frequent change. Please check with your tax advisor on the applicability of current tax law to your particular situation and consult with your forester and accountant to determine what should be done to best protect your assets. 

In October of 2004, the President signed HR 4520, the American Jobs Creation Act of 2004. This bill grew out of the need for Congress to respond to a World Trade Organization ruling that a $5 billion annual subsidy for U.S. exporters was illegal. As usual, this bill became a vehicle to do other things. 

Included in it were two major changes in federal tax policy that affect private landowners and forestry.

The legislation contained language that amends the Internal Revenue Code (IRC) Section 631(b) to eliminate the requirement for timber sale contracts to contain a "retained economic interest" provision, which means that non-industrial private forest landowners are no longer forced to sell under pay-as-cut contracts and are able to use "lump sum" sale contracts with no concern over the loss of capital gains treatment.

Other timber-tax provisions added to the bill allow expensing of up to $10,000 for reforestation costs in the year of occurrence with an accelerated amortization rate of 60 months for the remaining costs (a change from the current $10,000 tax credit), allow voluntary election of IRC Section 631(a) by timber industry to help with how they calculate their capital gains on timber and establishes a modified safe harbor rule for timber Real Estate Investment Trusts.

The changes to the reforestation tax provisions were significant. At one time, a landowner could expense only 10% of $10,000 invested in reforestation in the year it was incurred. The remaining amount could be amortized over 72 months. A landowner can now expense $10,000 in the year it’s incurred and then expense the remaining amount over five years (60 months). These changes went into effect January 1, 2005. 

Timber Sales

When selling timber, be certain your interests are protected. Professional assistance is well worth the cost. Like most landowners, you probably sell timber infrequently and should not rely on personal judgment. You should confer with both a forester and an attorney experienced in timber sales.

Timber is generally sold either on a lump-sum basis or under a pay-as-cut agreement. Tax considerations, timber quality and quantity, and other factors should influence your decision on how the timber is sold. In a lump sum sale, the landowner receives a set price (lump sum) for the stand of timber.

Under a pay-as-cut agreement, the landowner is paid as the timber is cut and for only that timber that is harvested.

If you make infrequent sales and have good quality timber, it is often in your best interest to sell by advertising the sale to potential buyers, receiving sealed bids and selling on a lump-sum basis. You should then execute a timber sale contract. While no two contracts are exactly alike, all should include the following basic provisions:

  • Guarantee of title and description of the land and boundaries
  • Specific description of timber being conveyed, method of designating trees to be cut, estimated volumes, species, products and harvest method(s)
  • Terms of payment
  • Duration and starting date of the agreement
  • Clauses to cover damage to non-designated trees, fences, ditches, streams, roads, bridges, fields and buildings
  • Clauses to cover fire damage where harvesting crew is negligent and to protect the seller from liability that may arise in the course of harvesting
  • Clauses for compliance with applicable state regulations and defined best management practices
  • Clauses for arbitration in case of disagreement.

 

As you would for any other investment, you need to protect your forest from the threat of wildfire, insect attack and disease. While these and other things will always pose some threat, there are things you can do to minimize the risk and reduce potential damage. Here are a few things:

  • Thinning overcrowded stands will keep your forest vigorous and reduce potential for insect or disease attack.
  • If an insect outbreak, such as southern pine beetle, is found, the infected trees should be cut down and removed as soon as possible.
  • Hardwood strips in pine stands can act as barriers to the spread of a bark beetle infestation. Mixed stand management may also reduce the threat of bark beetles.
  • Certain soils are more conducive to disease problems, particularly in pine. Shortleaf and loblolly on the wrong sites are susceptible to some root diseases.
  • Periodic prescribed burning (every three to five years) will reduce fuel for a wildfire and, if a wildfire occurs, will keep it from doing serious damage to the stand. In areas where rust diseases such as fusiform rust are prevalent, burning will help control oak, which is the alternate host for the disease.
  • If you harvest pine timber in the summer and plan to plant new pine seedlings in the fall or winter, the seedlings should be dipped in an approved insecticide to guard against pales weevil.