I
103D CONGRESS
1ST SESSION
H. R. 960
To amend the Internal Revenue Code of 1986 to modify certain provisions
relating to the treatment of forestry activities.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 18, 1993
Mr. WYDEN (for himself, Mr. KOPETSKI, Mr. SUNQUIST, Mr. SMITH of Or-
egon, Mr. ROWLAND, Mr. CLYBURN, Mr. SWIFT, Mr. WILSON, Ms.
FURSE, Mr. EMERSON, Mr. BAKER of Louisiana, Mr. LAFALCE, Mrs.
UNSOELD, Mr. MONTGOMERY, Mr. HERGER, Mr. MCCRERY, Mr. LIVING-
STON, and Mr. BEVILL) 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 1993’’.
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. 1202. 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 the
lesser of—
‘‘(1) the net capital gain for the taxable year,
or
‘‘(2) the net capital gain for the taxable year
determined by taking into account only gains and
losses from 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 (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:
‘‘(15) PARTIAL
INFLATION
ADJUSTMENT
FOR
TIMBER.—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. Partial inflation adjustment for timber.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales or exchanges after Decem-
ber 31, 1993.
SEC. 3. APPLICATION OF PASSIVE LOSS LIMITATIONS TO
TIMBER ACTIVITIES.
(a) IN GENERAL.—Treasury regulations sections
1.469–5T(b)(2) (ii) and (iii) shall not apply to any closely
held timber activity if the nature of such activity is such
that the aggregate hours devoted to management of the
activity for any year is generally less than 100 hours.
(b) DEFINITIONS.—For purposes of subsection (a)—
(1) CLOSELY
HELD
ACTIVITY.—An activity
shall be treated as closely held if at least 80 percent
of the ownership interests in the activity is held—
(A) by 5 or fewer individuals, or
(B) by individuals who are members of the
same family (within the meaning of section
2032A(e)(2) of the Internal Revenue Code of
1986).
An interest in a limited partnership shall in no event
be treated as a closely held activity for purposes of
this section.
(2) TIMBER ACTIVITY.—The term ‘‘timber ac-
tivity’’ means the planting, cultivating, caring, cut-
ting, or preparation (other than milling) for market,
of trees.
(c) EFFECTIVE DATE.—This section shall apply to
taxable years beginning after December 31, 1993.
SEC. 4. AMORTIZATION OF REFORESTATION EXPENDI-
TURES AND REFORESTATION TAX CREDIT.
(a) 
INCREASE
IN
MAXIMUM
AMORTIZABLE
AMOUNT.—
(1) IN
GENERAL.—Paragraph (1) of section
194(b) of the Internal Revenue Code of 1986 (relat-
ing to maximum dollar amount) is amended by strik-
ing ‘‘$10,000 ($5,000’’ and inserting ‘‘$20,000
($10,000’’.
(2) INFLATION ADJUSTMENT.—Subsection (b)
of section 194 of such Code (relating to limitations)
is amended by redesignating paragraphs (2), (3),
and (4) as paragraphs (3), (4), and (5), respectively,
and by inserting after paragraph (1) the following
new paragraph:
‘‘(2) INFLATION ADJUSTMENT.—
‘‘(A) IN
GENERAL.—In the case of any
taxable year beginning in a calendar year after
1994, each dollar amount contained in para-
graph (1) shall be increased by an amount
equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment
under section 1(f)(3) for the calendar year
in which the taxable year begins, deter-
mined by substituting ‘calendar year 1993’
for ‘calendar year 1989’ in subparagraph
(B) of such section.
‘‘(B) ROUNDING.—If any increase deter-
mined under subparagraph (A) is not a multiple
of $50, such amount shall be rounded to the
next lowest multiple of $50.’’
(3) APPLICABILITY TO REFORESTATION CRED-
IT.—Paragraph (1) of section 48(b) of such Code
(relating to reforestation credit) is amended by strik-
ing ‘‘section 194(b)(1)’’ and inserting ‘‘paragraphs
(1) and (2) of section 194(b)’’.
(b) AMORTIZATION
PERIOD
SHORTENED
TO
MONTHS.—Subsection (a) of section 194 of such Code is
amended—
(1) by striking ‘‘84 months’’ and inserting ‘‘60
months’’, and
(2) by striking ‘‘84-month’’ and inserting ‘‘80-
month’’.
(c) AVAILABILITY OF DEDUCTION AND CREDIT TO
TRUSTS.—Subsection (b) of section 194 of such Code (as
amended by subsection (a)(2) of this section) is amend-
ed—
(1) by striking paragraph (4),
(2) in paragraph (5)—
(A) by inserting ‘‘AND TRUSTS’’ after ‘‘ES-
TATES’’, and
(B) by inserting ‘‘and trusts’’ after ‘‘es-
tates’’, and
(3) by redesignating paragraph (5) as para-
graph (4).
(d) EFFECTIVE DATE.—
(1) AMORTIZATION
PROVISIONS.—Except as
provided in paragraph (2), the amendments made by
this section shall apply to additions to capital ac-
count made after December 31, 1993.
(2) TAX CREDIT PROVISIONS.—In the case of
the reforestation credit under section 48(b) of the
Internal Revenue Code of 1986, the amendments
made by this section shall apply to property acquired
after December 31, 1993.
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