I

107TH CONGRESS

1ST SESSION H. R. 1581

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

relating to the treatment of forestry activities.

IN THE HOUSE OF REPRESENTATIVES

APRIL 25, 2001

Ms. DUNN (for herself, Mr. BISHOP, Mr. ALLEN, Mr. BAIRD, Mr. BALDACCI,

Mr. BARTON of Texas, Mr. BLUMENAUER, Mr. BLUNT, Mr. CALLAHAN,

Mr. CAMP, Mr. COLLINS, Mr. COOKSEY, Mrs. EMERSON, Mr. ENGLISH,

Mr. HERGER, Mr. HILLIARD, Mr. HUTCHINSON, Mr. ISAKSON, Mr.

LARSEN of Washington, Mr. LEWIS of Kentucky, Mr. GREEN of Wisconsin, Mr. MCCRERY, Mr. THOMPSON of California, Mrs. JOHNSON of

Connecticut, Mr. OBERSTAR, Mr. OTTER, Mr. PICKERING, Mr. ROSS, Mr.

SCHAFFER, Mr. SHOWS, Mr. SIMPSON, Mr. STUPAK, Mr. SMITH of

Washington, Mrs. THURMAN, Mr. WALDEN of Oregon, and Mr. WICKER)

introduced the following bill; which was referred to the Committee on

Ways and Means

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’’.
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1 SEC. 2. PARTIAL INFLATION ADJUSTMENT FOR TIMBER.

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

3 1 of the Internal Revenue Code of 1986 (relating to treat4 ment of capital gains) is amended by adding at the end

5 the following new section:

6 ‘‘SEC. 1203. PARTIAL INFLATION ADJUSTMENT FOR TIM7 BER.

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

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

10 shall be allowed as a deduction from gross income an

11 amount equal to the qualified percentage of such gain.

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

13 this section, the term ‘qualified timber gain’ means long14 term capital gain from the sale or exchange of timber.

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

16 section, the term ‘qualified percentage’ means the percent17 age (not exceeding 50 percent) determined by

18 multiplying—

19 ‘‘(1) 3 percent, by

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

21 of the taxpayer with respect to the timber.

22 ‘‘(d) ESTATES AND TRUSTS.—In the case of an es23 tate or trust, the deduction under subsection (a) shall be

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

25 for the taxable year from sales or exchanges of capital as26 sets which, under sections 652 and 662 (relating to inclu-
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1 sions of amounts in gross income of beneficiaries of

2 trusts), is includible by the income beneficiaries as gain

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

4 (b) COORDINATION WITH MAXIMUM RATES OF TAX

5 ON NET CAPITAL GAINS.—

6 (1) Subsection (h)(4) of section 1 of such Code

7 (relating to maximum capital gains rate) is amended

8 by striking ‘‘and’’ at the end of subparagraph (A),

9 by striking the period at the end of subparagraph

10 (B) and inserting ‘‘, and’’, and by adding at the end

11 the following new subparagraph:

12 ‘‘(C) qualified timber gain with respect to

13 which an election is in effect under section

14 1203.’’

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

16 (relating to the alternative tax for corporations) is

17 amended by inserting at the end thereof the fol18 lowing new sentence:

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

20 determined without regard to qualified timber gain (as de21 fined in section 1203) with respect to which an election

22 is in effect under section 1203.’’

23 (c) ALLOWANCE OF DEDUCTION IN COMPUTING AD24 JUSTED GROSS INCOME.—Subsection (a) of section 62 of

25 such Code (relating to definition of adjusted gross income)
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1 is amended by inserting after paragraph (17) the following

2 new paragraph:

3 ‘‘(18) 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 such Code is amended to read as follows:

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

9 the deduction under section 1203 shall not be

10 allowed.’’

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

12 such Code is amended by striking ‘‘(whichever is ap13 propriate)’’ and inserting ‘‘or the deduction under

14 section 1203 (whichever is appropriate)’’.

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

16 amended by inserting after clause (iii) the following

17 new clause:

18 ‘‘(iv) The deduction under section

19 1203.’’

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

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

22 extent that the amount otherwise allowable as a de23 duction under this subsection consists of gain de24 scribed in section 1202(a) or qualified timber gain

25 (as defined in section 1203(b)), proper adjustment
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1 shall be made for any exclusion allowable under sec2 tion 1202, and any deduction allowable under sec3 tion 1203, to the estate or trust.’’

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

5 such Code is amended to read as follows: ‘‘The ex6 clusion under section 1202 and the deduction under

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

8 (6) Subparagraph (C) of section 643(a)(6) of

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

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

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

12 to partial inflation adjustment for timber) shall not

13 be taken into account’’.

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

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

16 ‘‘1202,’’.

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

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

19 ‘‘section 1202’’ and inserting ‘‘sections 1202 and

20 1203’’.

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

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

23 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, 2000.

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 such Code is amended by

15 striking subsection (b) and by redesignating sub16 sections (c) and (d) as subsections (b) and (c), re17 spectively.

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, 2000.

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