I 
108TH CONGRESS 
1ST SESSION H. R. 1310
To amend the Internal Revenue Code of 1986 to modify certain provisions 
relating to the treatment of forestry activities. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 18, 2003
Ms. DUNN (for herself, Mr. SANDLIN, Mr. HERGER, Mr. COLLINS, Mr. 
ENGLISH, Mr. FOLEY, Mr. RAMSTAD, Mr. LEWIS of Kentucky, Mr. JEF-
FERSON, Mr. MCCRERY, Mr. CAMP, Mr. MCINNIS, Mr. HAYWORTH, Mr. 
SHAW, and Mr. BRADY of Texas) 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 2003’’. 
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 multi-
plying—
‘‘(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 (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 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 (A), 
by striking the period at the end of subparagraph 
(B) and inserting ‘‘; and’’, and by adding at the end 
the following new subparagraph: 
‘‘(C) 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 fol-
lowing 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 (18) the following 
new paragraph: 
‘‘(19) 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(c)(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 Decem-
ber 31, 2002. 
SEC. 3. 100 PERCENT DEDUCTION FOR REFORESTATION EX-
PENDITURES TO REPLACE AMORTIZATION. 
(a) IN GENERAL.—Part VI of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
itemized deductions for individuals and corporations) is 
amended by adding at the end the following new section: 
‘‘SEC. 199. REFORESTATION EXPENDITURES. 
‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of 
any qualified timber property with respect to which the 
taxpayer has made (in accordance with regulations pre-
scribed by the Secretary) an election under this sub-
section, there shall be allowed as a deduction for the tax-
able year an amount equal to the reforestation expendi-
tures paid or incurred by the taxpayer during such year 
with respect to such property. 
‘‘(b) QUALIFIED TIMBER PROPERTY.—The term 
‘qualified timber property’ means a woodlot or other site 
located in the United States which will contain trees in 
significant commercial quantities and which is held by the 
taxpayer for the planting, cultivating, caring for, and cut-
ting of trees for sale or use in the commercial production 
of timber products.
‘‘(c) REFORESTATION EXPENDITURES.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘reforestation expenditures’ means di-
rect costs incurred in connection with forestation or 
reforestation by planting or artificial or natural 
seeding, including costs—
‘‘(A) for the preparation of the site, 
‘‘(B) of seeds or seedlings, and 
‘‘(C) for labor and tools, including depre-
ciation of equipment such as tractors, trucks, 
tree planters, and similar machines used in 
planting or seeding. 
‘‘(2) COST-SHARING PROGRAMS.—Reforestation 
expenditures shall not include any expenditures for 
which the taxpayer has been reimbursed under any 
governmental reforestation cost-sharing program un-
less the amounts reimbursed have been included in 
the gross income of the taxpayer. 
‘‘(d) LIFE TENANT AND REMAINDERMAN.—In the 
case of property held by one person for life with remainder 
to another person, the deduction under this section shall 
be computed as if the life tenant were the absolute owner 
of the property and shall be allowed to the life tenant.’’
(b) TERMINATION OF AMORTIZATION OF REFOREST-
ATION EXPENDITURES.—Section 194 of such Code (relat-
ing to amortization of reforestation expenditures) is 
amended by adding at the end the following new sub-
section: 
‘‘(e) TERMINATION.—This section shall not apply to 
any amount paid or incurred after the date of the enact-
ment of this subsection.’’
(c) CLERICAL AMENDMENT.—The table of sections 
for part VI of subchapter B of chapter 1 of such Code 
is amended by inserting at the end the following new item:
‘‘Sec. 199. Reforestation expenditures.’’
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred after 
the date of the enactment of this Act.
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