I
105TH CONGRESS
2D SESSION
H. R. 4126
To amend the Internal Revenue Code of 1986 to modify certain provisions
relating to the treatment of forestry activities.
IN THE HOUSE OF REPRESENTATIVES
JUNE 24, 1998
Ms. DUNN 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.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Reforestation Tax Act
of 1998’’.
SEC. 2. PARTIAL INFLATION ADJUSTMENT FOR TIMBER.
(a) IN GENERAL.—Part I of subchapter P of chapter
1 of the Internal Revenue Code of 1986 (relating to treat-
ment of capital gains) is amended by adding at the end
the following new section:
‘‘SEC. 1203. PARTIAL INFLATION ADJUSTMENT FOR TIM-
BER.
‘‘(a) IN GENERAL.—At the election of any taxpayer
who has qualified timber gain for any taxable year, there
shall be allowed as a deduction from gross income an
amount equal to the qualified percentage of such gain.
‘‘(b) QUALIFIED TIMBER GAIN.—For purposes of
this section, the term ‘qualified timber gain’ means long-
term capital gain from the sale or exchange of timber.
‘‘(c) QUALIFIED PERCENTAGE.—For purposes of this
section, the term ‘qualified percentage’ means the percent-
age (not exceeding 50 percent) determined by multiply-
ing—
‘‘(1) 3 percent, by
‘‘(2) the number of years in the holding period
of the taxpayer with respect to the timber.
‘‘(d) ESTATES AND TRUSTS.—In the case of an es-
tate or trust, the deduction under subsection (a) shall be
computed by excluding the portion of (if any) the gains
for the taxable year from sales or exchanges of capital as-
sets which, under sections 652 and 662 (relating to inclu-
sions of amounts in gross income of beneficiaries of
trusts), is includible by the income beneficiaries as gain
derived from the sale or exchange of capital assets.’’
(b) COORDINATION WITH MAXIMUM RATES OF TAX
ON NET CAPITAL GAINS.—
(1) Subsection (h)(4) of section 1 of such Code
(relating to maximum capital gains rate) is amended
by striking ‘‘and’’ at the end of subparagraph (C),
by striking the period at the end of subparagraph
(D) and inserting ‘‘, and’’, and by adding after sub-
paragraph (D) the following new subparagraph:
‘‘(E) qualified timber gain with respect to
which an election is in effect under section
1203.’’
(2) Subsection (a) of section 1201 of such Code
(relating to the alternative tax for corporations) is
amended by inserting at the end thereof the follow-
ing new sentence:
‘‘For purposes of this section, net capital gain shall be
determined without regard to qualified timber gain (as de-
fined in section 1203) with respect to which an election
is in effect under section 1203.’’
(c) ALLOWANCE OF DEDUCTION IN COMPUTING AD-
JUSTED GROSS INCOME.—Subsection (a) of section 62 of
such Code (relating to definition of adjusted gross income)
is amended by inserting after paragraph (17) the following
new paragraph:
‘‘(18) PARTIAL
INFLATION
ADJUSTMENT
FOR
TIMBER.—The deduction allowed by section 1203.’’
(d) TECHNICAL AMENDMENTS.—
(1) Subparagraph (B) of section 172(d)(2) of
such Code is amended to read as follows:
‘‘(B) the exclusion under section 1202 and
the deduction under section 1203 shall not be
allowed.’’
(2) The last sentence of section 453A(c)(3) of
such Code is amended by striking ‘‘(whichever is ap-
propriate)’’ and inserting ‘‘or the deduction under
section 1203 (whichever is appropriate)’’.
(3) Section 641(d)(2)(C) of such Code is
amended by inserting after clause (iii) the following
new clause:
‘‘(iv) The deduction under section
1203.’’
(4) The first sentence of section 642(c)(4) of
such Code is amended to read as follows: ‘‘To the
extent that the amount otherwise allowable as a de-
duction under this subsection consists of gain de-
scribed in section 1202(a) or qualified timber gain
(as defined in section 1203(b)), proper adjustment
shall be made for any exclusion allowable under sec-
tion 1202, and any deduction allowable under sec-
tion 1203, to the estate or trust.’’
(5) The last sentence of section 643(a)(3) of
such Code is amended to read as follows: ‘‘The ex-
clusion under section 1202 and the deduction under
section 1203 shall not be taken into account.’’
(6) Subparagraph (C) of section 643(a)(6) of
such Code is amended by inserting ‘‘(i)’’ before
‘‘there shall’’ and by inserting before the period ‘‘,
and (ii) the deduction under section 1203 (relating
to partial inflation adjustment for timber) shall not
be taken into account’’.
(7) Paragraph (4) of section 691(c) of such
Code is amended by inserting ‘‘1203,’’ after
‘‘1202,’’.
(8) The second sentence of paragraph (2) of
section 871(a) of such Code is amended by striking
‘‘section 1202’’ and inserting ‘‘sections 1202 and
1203’’.
(e) CLERICAL AMENDMENT.—The table of sections
for part I of subchapter P of chapter 1 of such Code is
amended by adding at the end the following new item:
‘‘Sec. 1203. Partial inflation adjustment for timber.’’
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales or exchanges after
December 31, 1997.
SEC. 3. AMORTIZATION OF REFORESTATION EXPENDI-
TURES AND REFORESTATION TAX CREDIT.
(a) DECREASE IN AMORTIZATION PERIOD.—