II

106TH CONGRESS

1ST SESSION S. 1303

To amend the Internal Revenue Code of 1986 to modify certain provisions

relating to the treatment of forestry activities.

IN THE SENATE OF THE UNITED STATES

JUNE 29, 1999

Mr. MURKOWSKI (for himself, Mr. BREAUX, Mr. GORTON, Mr. COCHRAN, Mr.

HUTCHINSON, Ms. COLLINS, Mrs. LINCOLN, Mr. SHELBY, Ms. SNOWE,

Mrs. MURRAY, Mr. SESSIONS, Mr. SMITH of Oregon, Mrs. HUTCHISON,

Mr. GRAMS, and Mrs. LANDRIEU) introduced the following bill; which was

read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to modify

certain provisions relating to the treatment of forestry

activities.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Reforestation Tax Act

5 of 1999’’.

6 SEC. 2. PARTIAL INFLATION ADJUSTMENT FOR TIMBER.

7 (a) IN GENERAL.—Part I of subchapter P of chapter

8 1 of the Internal Revenue Code of 1986 (relating to treat-
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1 ment of capital gains) is amended by adding at the end

2 the following new section:

3 ‘‘SEC. 1203. PARTIAL INFLATION ADJUSTMENT FOR TIM4 BER.

5 ‘‘(a) IN GENERAL.—At the election of any taxpayer

6 who has qualified timber gain for any taxable year, there

7 shall be allowed as a deduction from gross income an

8 amount equal to the qualified percentage of such gain.

9 ‘‘(b) QUALIFIED TIMBER GAIN.—For purposes of

10 this section, the term ‘qualified timber gain’ means gain

11 from the disposition of timber which the taxpayer has

12 owned for more than 1 year.

13 ‘‘(c) QUALIFIED PERCENTAGE.—For purposes of this

14 section, the term ‘qualified percentage’ means the percent15 age (not exceeding 50 percent) determined by

16 multiplying—

17 ‘‘(1) 3 percent, by

18 ‘‘(2) the number of years in the holding period

19 of the taxpayer with respect to the timber.

20 ‘‘(d) ESTATES AND TRUSTS.—In the case of an es21 tate or trust, the deduction under subsection (a) shall be

22 computed by excluding the portion of (if any) the gains

23 for the taxable year from sales or exchanges of capital as24 sets which, under sections 652 and 662 (relating to inclu25 sions of amounts in gross income of beneficiaries of
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1 trusts), is includible by the income beneficiaries as gain

2 derived from the sale or exchange of capital assets.’’

3 (b) COORDINATION WITH MAXIMUM RATES OF TAX

4 ON NET CAPITAL GAINS.—

5 (1) Section 1(h) of such Code (relating to max6 imum capital gains rate) is amended by adding at

7 the end the following new paragraph:

8 ‘‘(14) QUALIFIED TIMBER GAIN.—For purposes

9 of this section, net capital gain shall be determined

10 without regard to qualified timber gain (as defined

11 in section 1203) with respect to which an election is

12 in effect under section 1203.’’

13 (2) Subsection (a) of section 1201 of such Code

14 (relating to the alternative tax for corporations) is

15 amended by inserting at the end the following new

16 sentence:

17 ‘‘For purposes of this section, net capital gain shall be

18 determined without regard to qualified timber gain (as de19 fined in section 1203) with respect to which an election

20 is in effect under section 1203.’’

21 (c) ALLOWANCE OF DEDUCTION IN COMPUTING AD22 JUSTED GROSS INCOME.—Subsection (a) of section 62 of

23 such Code (relating to definition of adjusted gross income)

24 is amended by inserting after paragraph (17) the following

25 new paragraph:
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1 ‘‘(18) PARTIAL INFLATION ADJUSTMENT FOR

2 TIMBER.—The deduction allowed by section 1203.’’

3 (d) TECHNICAL AMENDMENTS.—

4 (1) Subparagraph (B) of section 172(d)(2) of

5 such Code is amended to read as follows:

6 ‘‘(B) the exclusion under section 1202 and

7 the deduction under section 1203 shall not be

8 allowed.’’

9 (2) The last sentence of section 453A(c)(3) of

10 such Code is amended by striking ‘‘(whichever is ap11 propriate)’’ and inserting ‘‘or the deduction under

12 section 1203 (whichever is appropriate)’’.

13 (3) Section 641(c)(2)(C) of such Code is

14 amended by inserting after clause (iii) the following

15 new clause:

16 ‘‘(iv) The deduction under section

17 1203.’’

18 (4) The first sentence of section 642(c)(4) of

19 such Code is amended to read as follows: ‘‘To the

20 extent that the amount otherwise allowable as a de21 duction under this subsection consists of gain de22 scribed in section 1202(a) or qualified timber gain

23 (as defined in section 1203(b)), proper adjustment

24 shall be made for any exclusion allowable under sec-
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1 tion 1202, and any deduction allowable under sec2 tion 1203, to the estate or trust.’’

3 (5) The last sentence of section 643(a)(3) of

4 such Code is amended to read as follows: ‘‘The ex5 clusion under section 1202 and the deduction under

6 section 1203 shall not be taken into account.’’

7 (6) The last sentence of section 643(a)(6)(C) of

8 such Code is amended by inserting ‘‘(i)’’ before

9 ‘‘there shall’’ and by inserting before the period ‘‘,

10 and (ii) the deduction under section 1203 (relating

11 to partial inflation adjustment for timber) shall not

12 be taken into account’’.

13 (7) Paragraph (4) of section 691(c) of such

14 Code is amended by inserting ‘‘1203,’’ after

15 ‘‘1202,’’.

16 (8) The second sentence of paragraph (2) of

17 section 871(a) of such Code is amended by striking

18 ‘‘section 1202’’ and inserting ‘‘sections 1202 and

19 1203’’.

20 (e) CLERICAL AMENDMENT.—The table of sections

21 for part I of subchapter P of chapter 1 of such Code is

22 amended by adding at the end the following new item:

‘‘Sec. 1203. Partial inflation adjustment for timber.’’

23 (f) EFFECTIVE DATE.—The amendments made by

24 this section shall apply to sales or exchanges after Decem25 ber 31, 1998.
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1 SEC. 3. AMORTIZATION OF REFORESTATION EXPENDI2 TURES AND REFORESTATION TAX CREDIT.

3 (a) DECREASE IN AMORTIZATION PERIOD.—

4 (1) IN GENERAL.—Section 194(a) of the Inter5 nal Revenue Code of 1986 is amended by striking

6 ‘‘84 months’’ and inserting ‘‘60 months’’.

7 (2) CONFORMING AMENDMENT.—Section

8 194(a) of such Code is amended by striking ‘‘84-

9 month period’’ and inserting ‘‘60-month period’’.

10 (b) REMOVAL OF CAP ON AMORTIZABLE BASIS.—

11 (1) Section 194 of the Internal Revenue Code

12 of 1986 is amended by striking subsection (b) and

13 by redesignating subsections (c) and (d) as sub14 sections (b) and (c), respectively.

15 (2) Subsection (b) of section 194 of such Code

16 (as redesignated by paragraph (1)) is amended by

17 striking paragraph (4).

18 (3) Paragraph (1) of section 48(b) of such Code

19 is amended by striking ‘‘(after the application of sec20 tion 194(b)(1))’’.

21 (c) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to additions to capital account

23 made after December 31, 1998.

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