II

107TH CONGRESS

1ST SESSION S. 1002

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 7, 2001

Ms. SNOWE (for herself, Mrs. LINCOLN, Mr. MURKOWSKI, Mr. BREAUX, Mr.

HUTCHINSON, Mr. MILLER, Mr. CRAIG, Ms. LANDRIEU, Mr. SMITH of

Oregon, and Ms. COLLINS) 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 2001’’.

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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•S 1002 IS

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) IN GENERAL.—Section 1(h) of the Internal

6 Revenue Code of 1986 (relating to maximum capital

7 gains rate) is amended by adding at the end the fol8 lowing new paragraph:

9 ‘‘(13) QUALIFIED TIMBER GAIN.—For purposes

10 of this section, net capital gain shall be determined

11 without regard to qualified timber gain (as defined

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

13 in effect under section 1203.’’.

14 (2) CONFORMING AMENDMENT.—Subsection (a)

15 of section 1201 of such Code (relating to the alter16 native tax for corporations) is amended by inserting

17 at the end the following new sentence:

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

19 determined without regard to qualified timber gain (as de20 fined in section 1203) with respect to which an election

21 is in effect under section 1203.’’.

22 (c) ALLOWANCE OF DEDUCTION IN COMPUTING AD23 JUSTED GROSS INCOME.—Subsection (a) of section 62 of

24 the Internal Revenue Code of 1986 (relating to definition
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1 of adjusted gross income) is amended by inserting after

2 paragraph (18) the following new paragraph:

3 ‘‘(19) PARTIAL INFLATION ADJUSTMENT FOR

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

5 (d) TECHNICAL AMENDMENTS.—

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

7 the Internal Revenue Code of 1986 is amended to

8 read as follows:

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

10 the deduction under section 1203 shall not be

11 allowed.’’.

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

13 such Code is amended by striking ‘‘(whichever is ap14 propriate)’’ and inserting ‘‘or the deduction under

15 section 1203 (whichever is appropriate)’’.

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

17 amended by inserting after clause (iii) the following

18 new clause:

19 ‘‘(iv) The deduction under section

20 1203.’’.

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

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

23 extent that the amount otherwise allowable as a de24 duction under this subsection consists of gain de25 scribed in section 1202(a) or qualified timber gain
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1 (as defined in section 1203(b)), proper adjustment

2 shall be made for any exclusion allowable under sec3 tion 1202, and any deduction allowable under sec4 tion 1203, to the estate or trust.’’.

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

6 such Code is amended to read as follows: ‘‘The ex7 clusion under section 1202 and the deduction under

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

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

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

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

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

13 to partial inflation adjustment for timber) shall not

14 be taken into account’’.

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

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

17 ‘‘1202,’’.

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

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

20 ‘‘section 1202’’ and inserting ‘‘sections 1202 and

21 1203’’.

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

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

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

‘‘Sec. 1203. Partial inflation adjustment for timber.’’.
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1 (f) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to sales or exchanges after Decem3 ber 31, 2001.

4 SEC. 3. AMORTIZATION OF REFORESTATION EXPENDI5 TURES AND REFORESTATION TAX CREDIT.

6 (a) DECREASE IN AMORTIZATION PERIOD.—

7 (1) IN GENERAL.—Section 194(a) of the Inter8 nal Revenue Code of 1986 is amended by striking

9 ‘‘84 months’’ and inserting ‘‘60 months’’.

10 (2) CONFORMING AMENDMENT.—Section

11 194(a) of such Code is amended by striking ‘‘84-

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

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

14 (1) Section 194 of the Internal Revenue Code

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

16 by redesignating subsections (c) and (d) as sub17 sections (b) and (c), respectively.

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

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

20 striking paragraph (4).

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

22 is amended by striking ‘‘(after the application of sec23 tion 194(b)(1))’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to additions to capital account

3 made after December 31, 2001.

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