I 
110TH CONGRESS 
1ST SESSION 
H. R. 721 
To amend the Internal Revenue Code of 1986 to allow a deduction for 
qualified timber gains. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 30, 2007 
Mr. DAVIS of Alabama (for himself, Mr. BRADY of Texas, Mr. NORWOOD, Mr. 
JONES of North Carolina, Mr. MCHENRY, Mr. JINDAL, Mr. THOMPSON 
of Mississippi, Mr. REICHERT, Mr. SIMPSON, Mr. CRENSHAW, Mr. HALL 
of Texas, Mr. SMITH of Washington, Mr. BAIRD, Mr. INSLEE, Mr. 
MELANCON, Mr. LARSEN of Washington, Mr. BERRY, Mr. MANZULLO, 
Mr. SENSENBRENNER, Mr. SESSIONS, Mr. GALLEGLY, Mr. MCHUGH, 
Mr. CONAWAY, Mr. HASTINGS of Washington, Mr. GORDON of Tennessee, 
Mr. BLUNT, Mr. LEWIS of Kentucky, Mr. BARTON of Texas, Mr. DAVIS 
of Kentucky, Mr. CUELLAR, Mr. BONNER, Mr. BUTTERFIELD, Ms. 
HOOLEY, Mr. BISHOP of Georgia, Mr. BROWN of South Carolina, Mr. 
WILSON of South Carolina, Mr. ALEXANDER, Mr. DICKS, Mr. SOUDER, 
Mr. BOUSTANY, Mr. PETRI, Mr. HAYES, Mr. DEFAZIO, Mr. TERRY, Mr. 
BOOZMAN, Mr. CANTOR, Mr. BARTLETT of Maryland, Ms. FOXX, Mr. 
MARCHANT, Mrs. CUBIN, Mr. ROSS, Mr. GOHMERT, Mr. ADERHOLT, and 
Mr. BAKER) introduced the following bill; which was referred to the Com-
mittee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to allow a 
deduction for qualified timber gains. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Timber Tax Act of 
2007’’. 
SEC. 2. DEDUCTION FOR QUALIFIED TIMBER GAIN. 
(a) IN GENERAL.—Part I of subchapter P of chapter 
1 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new section: 
‘‘SEC. 1203. DEDUCTION FOR QUALIFIED TIMBER GAIN. 
‘‘(a) IN GENERAL.—In the case of a taxpayer which 
elects the application of this section for a taxable year, 
there shall be allowed a deduction against gross income 
in an amount equal to 60 percent of the lesser of— 
‘‘(1) the taxpayer’s qualified timber gain for 
such year, or 
‘‘(2) the taxpayer’s net capital gain for such 
year. 
‘‘(b) QUALIFIED TIMBER GAIN.—For purposes of 
this section, the term ‘qualified timber gain’ means, with 
respect to any taxpayer for any taxable year, the excess 
(if any) of— 
‘‘(1) the sum of the taxpayer’s gains described 
in subsections (a) and (b) of section 631 for such 
year, over 
‘‘(2) the sum of the taxpayer’s losses described 
in such subsections for such year. 
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‘‘(c) SPECIAL RULES FOR PASS-THRU ENTITIES.— 
In the case of any qualified timber gain of a pass-thru 
entity (as defined in section 1(h)(10)), the election under 
this section shall be made separately by each taxpayer sub-
ject to tax on such gain.’’. 
(b) COORDINATION WITH MAXIMUM CAPITAL GAINS 
RATES.— 
(1) 
TAXPAYERS
OTHER
THAN
CORPORA-
TIONS.—Paragraph (2) of section 1(h) of the Inter-
nal Revenue Code of 1986 is amended to read as fol-
lows: 
‘‘(2) REDUCTION OF NET CAPITAL GAIN.—For 
purposes of this subsection, the net capital gain for 
any taxable year shall be reduced (but not below 
zero) by the sum of— 
‘‘(A) the amount which the taxpayer takes 
into account as investment income under sec-
tion 163(d)(4)(B)(iii), and 
‘‘(B) the lesser of— 
‘‘(i) the amount described in para-
graph (1) of section 1203(a), or 
‘‘(ii) the amount described in para-
graph (2) of such section.’’. 
(2) CORPORATIONS.—Section 1201 of such 
Code is amended by redesignating subsection (b) as 
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subsection (c) and inserting after subsection (a) the 
following new subsection: 
‘‘(b) QUALIFIED TIMBER GAIN NOT TAKEN INTO 
ACCOUNT.—For purposes of this section, in the case of 
a corporation with respect to which an election is in effect 
under section 1203, the net capital gain for any taxable 
year shall be reduced (but not below zero) by the corpora-
tion’s qualified timber gain (as defined in section 
1203(b)).’’. 
(c) DEDUCTION ALLOWED WHETHER OR NOT INDI-
VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a) 
of section 62 of the Internal Revenue Code of 1986 is 
amended by inserting before the last sentence the fol-
lowing new paragraph: 
‘‘(22) QUALIFIED TIMBER GAINS.—The deduc-
tion allowed by section 1203.’’. 
(d) DEDUCTION
ALLOWED
IN
COMPUTING
AD-
JUSTED CURRENT EARNINGS.—Subparagraph (C) of sec-
tion 56(g)(4) of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new clause: 
‘‘(vii) DEDUCTION
FOR
QUALIFIED 
TIMBER GAIN.—Clause (i) shall not apply 
to any deduction allowed under section 
1203.’’. 
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(e) DEDUCTION ALLOWED IN COMPUTING TAXABLE 
INCOME OF ELECTING SMALL BUSINESS TRUSTS.—Sub-
paragraph (C) of section 641(c)(2) of the Internal Rev-
enue Code of 1986 is amended by inserting after clause 
(iii) the following new clause: 
‘‘(iv) The deduction allowed under 
section 1203.’’. 
(f) CONFORMING AMENDMENTS.— 
(1) Subparagraph (B) of section 172(d)(2) of 
the Internal Revenue Code of 1986 is amended to 
read as follows: 
‘‘(B) the exclusion under section 1202 and 
the deduction under section 1203 shall not be 
allowed.’’. 
(2) Paragraph (4) of section 642(c) of such 
Code is amended by striking the first sentence and 
inserting the following: ‘‘To the extent that the 
amount otherwise allowable as a deduction under 
this subsection consists of gain described in section 
1202(a) or qualified timber gain (as defined in sec-
tion 1203(b)), proper adjustment shall be made for 
any exclusion allowable to the estate or trust under 
section 1202 and for any deduction allowable to the 
estate or trust under section 1203.’’ 
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(7) The table of sections for part I of sub-
chapter P of chapter 1 of such Code is amended by 
adding at the end the following new item: 
‘‘Sec. 1203. Deduction for qualified timber gain.’’. 
(g) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to taxable years ending after 
the date of the enactment of this Act. 
(2) TAXABLE YEARS WHICH INCLUDE DATE OF 
ENACTMENT.—In the case of any taxable year which 
includes the date of the enactment of this Act, for 
purposes of the Internal Revenue Code of 1986, the 
taxpayer’s qualified timber gain shall not exceed the 
excess that would be described in section 1203(b) of 
such Code, as added by this section, if only disposi-
tions of timber after such date were taken into ac-
count. 
Æ 
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