I
103D CONGRESS
1ST SESSION
H. R. 1997
To amend the Internal Revenue Code of 1986 to provide incentives for
domestic timber production and manufacturing, and to deny the benefits
of certain export subsidies in the case of exports of unprocessed timber.
IN THE HOUSE OF REPRESENTATIVES
MAY 5, 1993
Mr. DEFAZIO 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 provide
incentives for domestic timber production and manufac-
turing, and to deny the benefits of certain export sub-
sidies in the case of exports of unprocessed timber.
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 ‘‘American Timber Sup-
ply and Manufacturing Incentives Act’’.
SEC. 2. INVESTMENT INCENTIVE FOR DOMESTIC TIMBER
PRODUCTION.
(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. 1202. INVESTMENT INCENTIVE FOR DOMESTIC TIM-
BER PRODUCTION.
‘‘(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—
‘‘(1) IN GENERAL.—The term ‘qualified timber
gain’ means the lesser of—
‘‘(A) the net capital gain for the taxable
year, or
‘‘(B) the net capital gain for the taxable
year determined by taking into account only
gains and losses from qualified timber.
‘‘(2) QUALIFIED TIMBER.—The term ‘qualified
timber’ means any timber with respect to which the
taxpayer has provided assurances (which are satis-
factory to the Secretary) that substantially all of the
processing of the timber will occur within the United
States.
‘‘(c) QUALIFIED PERCENTAGE.—For purposes of this
section, the term ‘qualified percentage’ means the percent-
age (not exceeding 30 percent) determined by multiply-
ing—
‘‘(1) 2 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 (if any) of 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 EXISTING LIMITATIONS.—
(1) Subsection (h) of section 1 of such Code
(relating to maximum capital gains rate) is amended
by inserting after ‘‘net capital gain’’ each place it
appears the following; ‘‘(other than qualified timber
gain with respect to which an election is made under
section 1202)’’.
(2) Subsection (a) of section 1201 of such Code
(relating to alternative tax for corporations) is
amended by inserting after ‘‘net capital gain’’ each
place it appears the following: ‘‘(other than qualified
timber gain with respect to which an election is
made under section 1202)’’.
(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 adding at the end the following new para-
graph:
‘‘(14) INVESTMENT INCENTIVE FOR DOMESTIC
TIMBER
PRODUCTION.—The deduction allowed by
section 1202.’’
(d) CONFORMING AMENDMENT.—The table of sec-
tions for part I of subchapter P of chapter 1 of such Code
is amended by adding at the end the following new item:
‘‘Sec. 1202. Investment incentive for domestic timber production.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales or exchanges after the date
of the enactment of this Act.
SEC. 3. APPLICATION OF PASSIVE LOSS LIMITATIONS TO
TIMBER ACTIVITIES.
(a) DETERMINATION
OF
MATERIAL
PARTICIPA-
TION.—Subsection (h) of section 469 of the Internal Reve-
nue Code of 1986 (defining material participation) is
amended by adding at the end the following new para-
graph:
‘‘(6) TREATMENT OF TIMBER ACTIVITIES.—
‘‘(A) IN GENERAL.—A taxpayer shall be
treated as materially participating in any tim-
ber activity for a taxable year if—
‘‘(i) the taxpayer’s participation in the
activity for such year constitutes substan-
tially all of the participation in the activity
of all individuals for such year, other than
individuals—
‘‘(I) who are not owners of inter-
ests in the activity,
‘‘(II) who are retained and com-
pensated directly by the taxpayer, and
‘‘(III) whose activities are subject
to the oversight supervision, and con-
trol of the taxpayer, or
‘‘(ii) based on all of the facts and cir-
cumstances, the taxpayer participates in
the activity on a regular, continuous, and
substantial basis during such year, except
that for purposes of this clause—
‘‘(I) the taxpayers shall not be
required to participate in the activity
‘‘(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 4. DENIAL OF CERTAIN EXPORT SUBSIDIES.
(a) FOREIGN SALES CORPORATION.—Paragraph (2)
of section 927(a) of the Internal Revenue Code of 1986
(relating to exclusion of certain property) is amended by
striking ‘‘or’’ at the end of subparagraph (C), by striking
the period at the end of subparagraph (D) and inserting
‘‘, or’’, and by adding at the end thereof the following:
‘‘(E) any unprocessed timber.
For purposes of subparagraph (E), the term ‘un-
processed timber’ has the same meaning as that
given to it in the Customs and Trade Act of 1990
(104 Stat. 629).’’
(b) DOMESTIC
INTERNATIONAL
SALE
CORPORA-
TIONS.—Paragraph (2) of section 993(c) of such Code (re-
lating to exclusion of certain property) is amended by
striking ‘‘or’’ at the end of subparagraph (C), by striking
the period at the end of subparagraph (D) and inserting,
‘‘, or’’, and by adding after subparagraph (D) the follow-
ing:
‘‘(E) any unprocessed timber.
For purposes of subparagraph (E), the term ‘un-
processed timber’ has the same meaning as that