I
103D CONGRESS
1ST SESSION
H. R. 664
To amend the Internal Revenue Code of 1986 to provide incentives for
domestic timber production and manufacturing.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 27, 1993
Mr. DEFAZIO (for himself and Mrs. UNSOELD) 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 manufacturing.
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 ‘‘Domestic Timber Pro-
duction 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-
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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.—
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‘‘(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 taxpayer shall not be re-
quired to participate in the activity
for any minimum period of time dur-
ing such year, and
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‘‘(II) the performance of services
by individuals who are not owners of
interests in the activity shall not be
considered if the services are routinely
provided by individuals specializing in
such services and such services are
subject to the oversight, supervision,
and control of the taxpayer.
‘‘(B) PARTNERS
AND
S
CORPORATION
SHAREHOLDERS.—Subject to paragraph (2),
the determination of whether a partner or S
corporation shareholder shall be treated as ma-
terially participating in any timber activity of
the partnership or S corporation shall be based
upon the combined participation of all of the
partners or shareholders in the activity.
‘‘(C) TIMBER ACTIVITY.—For purposes of
this paragraph, the term ‘timber activity’ means
the planting, cultivating, caring, cutting, or
preparation (other than milling) for market, of
trees.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
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