An Act To Encourage Long-term Holding of l\1aine Timberland and Sustainable Forest Management
Maine Legislature, Session 122, LD 1305
Committee: Agriculture, Conservation and Forestry
Sponsors: FLOOD, DAMON, BIERMAN, CARR, JOY, MOODY, RICHARDSON, SA VIELLO, COURTNEY
Amends: 36 MRSA §5122, 36 MRSA §5200-A

Legislative Document 
No. 1305 
H.P.902 
House of Representatives, March 15,2005 
An Act To Encourage Long-term Holding of l\1aine Timberland and 
Sustainable Forest Management 
Reference to the Committee on Agriculture, Conservation and Forestry suggested and 
ordered printed. 
Presented by Representative FLOOD of Winthrop. 
Cosponsored by Senator DAMON of Hancock and 
'Ii/~ m.71!p£~ 
MILLICENT M. MacFARLAND 
Clerk 
Representatives: BIERMAN of Sorrento, CARR of Lincoln, JOY of Crystal, McCORMICK of 
West Gardiner, MOODY of Manchester, RICHARDSON of Warren, SA VIELLO of Wilton, 
Senator: COURTNEY of York. 
Printed on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 36 MRSA §5122, sub-§2, <J[Q, as corrected by RR 2003, c. 
1, §38, is amended to read: 
Q. 
A fraction of any amount previously added back by the 
taxpayer to federal adjusted gross income pursuant to 
subsection 1, paragraph N. 
(1) 
With respect to property first placed in service 
during taxable years beginning in 2002, the adjustment 
under this paragraph is available for each year during 
the 
recovery period, 
beginning 
years after the 
beginning of the taxable year during which the property 
was first placed in service. 
The fraction is equal to 
the amount added back under subsection 1, paragraph N 
with respect to the property, divided by the number of 
years in the recovery period minus 2. 
(2) 
With 
respect to all other property, 
for 
the 
taxable year immediately following the taxable year 
during which the property was first placed in service, 
the fraction allowed by this paragraph is equal to 5% 
of the amount added back under subsection 1, paragraph 
N with respect to the property. 
For each subsequent 
taxable year during the recovery period, the fraction 
is equal 
to 
95% 
of the 
amount 
added back 
under 
subsection 1, paragraph N with respect to the property, 
divided by the number of years in the recovery period 
minus 2. 
In the case of property expensed pursuant to Section 179 of 
the Code, the term "recovery period" means the recovery 
period that would have been applicable to the property had 
Section 179 not been applied; aBe 
Sec. 2. 36 MRSA §5122, sub-§2, <J[T, as amended by PL 2003, c. 
705, §12 and affected by §14, is further amended to read: 
T. 
For income tax years beginning on or after January 1, 
2002 and before January 1, 2004, an amount equal to the 
total premiums spent for long-term care insurance policies 
certified under Title 24-11., section 5075-11. as long as the 
amount subtracted is reduced by the long-term care premiums 
claimed as an itemized deduction pursuant to section 5125. 
For income tax years beginning on or after January 1, 2004, 
an amount equal to the total premiums spent for qualified 
long-term care insurance contracts certified under Title 
24-11., 
section 5075-11., 
as long as the amount subtracted is 
Page l-LRI758(1) 
reduced by any amount claimed as a deduction for federal 
income tax purposes in accordance with the Code, Section 
162(1) and by the long-term care premiums claimed as an 
itemized deduction pursuant to section 5125T; and 
Sec. 3. 36 MRSA §5122, sub-§2, <J[U is enacted to read: 
U. 
For income tax years beginning on or after January 1, 
2015, 
the gain attributable to the sale of eligible 
timberlands as calculated in this paragraph. 
(I) 
AS 
used in this paragraph, unless the context 
otherwise indicates, 
the following terms have the 
following meanings. 
(a) 
"Commercial 
harvesting" 
or 
"commercially 
harvested" means the harvesting of forest products 
that have commercial value. 
(b) 
"Eligible timberlands" means land of at least 
acres used primarily for the growth of trees to 
be 
commercially 
harvested. 
Land 
that 
would 
otherwise be included within this definition may 
not be excluded because of: 
(i) 
Use of the land for multiple public 
recreation activities; 
(ii) 
Statutory or governmental restrictions 
that prevent commercial harvesting of trees 
or require a primary use of the land other 
than commercial harvesting; 
(iii) 
Deed 
restrictions, 
restrictive 
covenants or organizational charters that 
prevent 
commercial 
harvesting of trees 
or 
require a primary use of land other than 
commercial harvesting and that were effective 
prior to January 1, 1982; 
or 
(iv) 
Past or present multiple use for 
mineral exploration. 
(c) 
"Forest products that have commercial value" 
means logs, pulpwood, veneer, bolt wood, 
wood 
chips, stud wood, poles, pilings, biomass, 
fuel 
wood, 
Christmas 
trees, 
maple 
syrup, 
nursery 
products used for ornamental purposes, wreaths, 
bough material or cones or other seed products. 
(2) 
The following amounts must be subtracted from 
federal adjusted gross income: 
(a) For eligible timberlands held by the taxpayer 
for at least a 10-year period 
beginning on or 
after January 1, 
2005 but less than an II-year 
period beginning on or after January 1, 2005, 10~ 
of the gain recognized on the sale of the eligible 
timberlands; 
(b) For eligible timberlands held by the taxpayer 
for at least an II-year period 
beginning on or 
after January 1, 2005 but less than a 12-year 
period beginning on or after January 1, 2005, 
20~ 
of the gain recognized on the sale of the eligible 
timberlands; 
(c) 
For eligible timberlands held by the taxpayer 
for at least a 12-year period 
beginning on or 
after January 1, 
2005 but less than a 
13-year 
period beginning on or after January 1, 2005, 
30~ 
of the gain recognized on the sale of the eligible 
timberlands; 
(d) 
For eligible timberlands held by the taxpayer 
for at least a 13-year period 
beginning on or 
after January 1, 2005 but less than a 14-year 
period beginning on or after January 1, 2005, 
40~ 
of the gain recognized on the sale of the eligible 
timberlands; 
(e) 
For eligible timberlands held by the taxpayer 
for at least a 14-year period 
beginning on or 
after January 1, 
2005 but less than a 
15-year 
period beginning on or after January 1, 2005, 
50~ 
of the gain recognized on the sale of the eligible 
timberlands; 
(f) For eligible timberlands held by the taxpayer 
for at least a 15 year period 
beginning on or 
after January 1, 2005 but less than a 16-year 
period beginning on or after January 1, 2005, 
60~ 
of the gain recognized on the sale of the eligible 
timberlands; 
(g) 
For eligible timberlands held by the taxpayer 
for at least a 16-year period 
beginning on or 
after January 1, 
2005 but less than a 
17-year 
period beginning on or after January 1, 2005, 70~ 
of the gain recognized on the sale of the eligible 
timberlands; 
(h) 
For eligible timberlands held by the taxpayer 
for at least a l7-year period 
beginning on or 
after January L 
2005 but less than an 18-year 
period beginning on or after January 1, 2005, 80~ 
of the gain recognized on the sale of the eligible 
timberlands; 
(i) 
For eligible timberlands held by the taxpayer 
for at least an 18 year period 
beginning on or 
after January L 
2005 but less than a 19-year 
period beginning on or after January 1, 2005, 
90~ 
of the gain recognized on the sale of the eligible 
timberlands; or 
(j) 
For eligible timberlands held by the taxpayer 
for at least a 19-year period 
beginning on or 
after January 1, 2005, 
100~ of the gain recognized 
on the sale of the eligible timberlands. 
In the case of timberlands owned by an entity that is 
treated as a pass-through entity for income tax purposes, 
the land must be treated as eligible timberland if ownership 
and use of the land by the pass-through entity satisfies the 
requirements of this paragraph. 
If the owner of the 
eligible timberlands is an S corporation, the taxpayer must 
subtract the owner's pro rata share of the gain. 
If the 
owner 
of 
the 
timberlands 
is 
a 
partnership 
or 
limited 
liability company taxed as a partnership, the taxpayer must 
subtract the 
taxpayer's distributive share of the gain, 
subject to the percentage limitations provided in this 
paragraph. 
This modification may not reduce Maine taxable income to 
less than zero. 
To the extent this modification results in 
Maine net income that is less than zero for the taxable 
year, the excess negative modification amount may be carried 
forward and applied as a subtraction modification for up to 
taxable years. 
The entire amount of the excess negative 
modification must be carried to the earliest of the taxable 
years to which, by reason of this subsection, the negative 
modification may be carried and then to each of the other 
taxable years to the extent the unused negative modification 
is not used for a prior taxable year. 
Earlier carry-forward 
modifications 
must 
be 
used 
before 
newer 
modifications 
generated in later years. 
Sec. 4. 36 MRSA §5200-A, sub-§2, <J[L, as amended by PL 2003, c. 
20, Pt. EE, §3, is further amended to read: 
L. 
An 
amount equal to the absolute value of any net 
operating loss arising from a tax year beginning or ending 
in 2001 for which federal taxable income was increased under 
subsection 1, paragraph M and that, pursuant to Section 102 
of the federal Job Creation and Worker Assistance Act of 
2002, Public Law 107-147, was carried back more than 2 years 
to the taxable year for federal income tax purposes, but 
only to the extent that: 
(1) Maine taxable income is not reduced below zero; 
(2) The taxable year is either within 2 years prior to 
the 
year 
in which 
the 
loss 
arose 
or within 
the 
allowable 
federal 
period 
for 
carry-over 
of 
net 
operating losses; and 
(3) 
The 
amount has not been previously used as 
a 
modification pursuant to this subsection; aRa 
Sec. 5. 36 MRSA §5200-A, sub-§2, <J[M, as repealed and replaced 
by PL 2003, c. 479, §6, is amended to read: 
M. 
A fraction of any amount previously added back by the 
taxpayer to federal taxable income pursuant to subsection 1, 
paragraph N. 
(1) 
With respect to property first placed in service 
during taxable years beginning in 2002, the adjustment 
under this paragraph is available for each year during 
the 
recovery period, 
beginning 
years after the 
beginning of the taxable year during which the property 
was first placed in service. 
The fraction is equal to 
the amount added back under subsection 1, paragraph N 
with respect to the property, divided by the number of 
years in the recovery period minus 2. 
(2) 
With respect to all other property, 
for 
the 
taxable year immediately following the taxable year 
during which the property was first placed in service, 
the fraction allowed by this paragraph is equal to 5% 
of the amount added back under subsection 1, paragraph 
N with respect to the property. 
For each subsequent 
taxable year during the recovery period, the fraction 
is equal 
to 
95% 
of the 
amount 
added back 
under 
subsection 1, paragraph N with respect to the property, 
divided by the number of years in the recovery period 
minus 2. 
... 
In the case of property expensed pursuant to Section 179 of 
the Code, the term ','recovery period" means the recovery 
period that would have been applicable to the property had 
Section 179 not been appliedT; and 
Sec. 6. 36 MRSA §S200-A, sub-§2, 'JIP is enacted to read: 
P. 
For income tax years beginning on or after January I, 
2015, 
the 
gain 
attributable 
to 
the 
sale 
of 
eligible 
timberlands as calculated pursuant to this paragraph. 
(1) 
As used in this paragraph, unless the context 
otherwise 
indicates, 
the 
following 
terms 
have 
the 
following meanings. 
(a) 
"Commercial harvesting" or "commercially 
harvested" means the harvesting of forest products 
that have commercial value. 
(b) "Eligible timberlands" means land of at least 
acres used primarily for the growth of trees to 
be 
commercially harvested. 
Land that would 
otherwise be included within this definition may 
not be excluded because of: 
(i) 
Use of the land for multiple public 
recreation activities; 
(ii) 
Statutory or governmental restrictions 
that prevent commercial harvesting of trees 
or require a primary use of the land other 
than commercial harvesting; 
(iii) 
Deed 
restrictions, 
restrictive 
covenants 
or 
organizational 
charters 
that 
prevent commercial harvesting of trees or 
require 
a 
primary use of land other than 
commercial harvesting and that were effective 
prior to January 1, 1982; or 
(iv) 
Past 
or 
present 
multiple 
use 
for 
mineral exploration. 
(c) 
"Forest products that have commercial value" 
means 
logs, 
pulpwood, 
veneer, 
bolt wood, 
wood 
chips, stud wood, poles, pilings, biomass, fuel 
wood, 
Christmas 
trees, 
maple 
syrup, 
nursery 
products used for ornamental purposes, wreaths, 
bough material or cones or other seed products. 
(2) 
of 
The taxable income of the taxpayer under the laws 
the United States must be decreased by: 
(a) For eligible timberlands held by the taxpayer 
for at least a la-year period 
beginning on or 
after January 1, 2005 but less than an II-year 
period beginning on or after January 1, 2005, 10% 
of the gain recognized on the sale of the eligible 
timberlands: 
{b} For eligible timberlands held by the taxpayer 
for at least an II-year period 
beginning on or 
after January 1, 
2005 but less than a 
12-year 
period beginning on or after January 1, 2005, 20% 
of the gain recognized on the sale of the eligible 
timberlands; 
(c) For eligible timberlands held by the taxpayer 
for at least a 12-year period 
beginning on or 
after January 1, 2005 but less than a 13-year 
period beginning on or after January 1, 2005, 30% 
of the gain recognized on the sale of the eligible 
timberlands; 
(d) 
For eligible timberlands held by the taxpayer 
for at least a 13-year period 
beginning on or 
after January 1, 
2005 but less than a 
14-year 
period beginning on or after January 1, 2005, 40% 
of the gain recognized on the sale of the eligible 
timberlands; 
(e) For eligible timberlands held by the taxpayer 
for at least a 14-year period 
beginning on or 
after January 1, 2005 but less than a 15-year 
period beginning on or after January 1, 2005, 50% 
of the gain recognized on the sale of the eligible 
timberlands: 
(f) 
For eligible timberlands held by the taxpayer 
for at least a 15-year period 
beginning on or 
after January 1, 
2005 but less than a 
16-year 
period beginning on or after January 1, 2005, 60% 
of the gain recognized on the sale of the eligible 
timberlands; 
(g) 
For eligible timberlands held by the taxpayer 
for at least a 16-year period 
beginning on or 
after January 1, 2005 but less than a 17 -year 
period beginning on or after January 1, 2005, 70% 
of the gain recognized on the sale of the eligible 
timberlands; 
(h) 
For eligible timberlands held by the taxpayer 
for at least a 17-year period 
beginning on or 
after January 1. 
2005 but less than an 18-year 
period beginning on or after January 1, 2005, 80~ 
of the gain recognized on the sale of the eligible 
timberlands; 
(i) For eligible timberlands held by the taxpayer 
for at least an 18-year period 
beginning on or 
after January 1. 2005 but less than a 19-year 
period beginning on or after January 1, 2005, 
90~ 
of the gain recognized on the sale of the eligible 
timberlands; or 
(j) 
For eligible timberlands held by the taxpayer 
for at least a 19-year period 
beginning on or 
after January 1, 2005, 
100~ of the gain recognized 
on the sale of the eligible timberlands. 
In the case of timberlands owned by an entity that is 
treated as a pass-through entity for income tax purposes, 
the land must be treated as eligible timberland if ownership 
and ~se of the land by the pass-through entity satisfies the 
requirements of this paragraph. 
If the owner of the 
eligible timberlands is an S corporation, the taxpayer must 
subtract the owner's pro rata share of the gain. 
If the 
owner 
of 
the 
timberlands 
is 
a 
partnership 
or 
limited 
liability company taxed as a partnership, the taxpayer must 
subtract the taxpayer's distributive share of the gain, 
subject to the percentage limitations provided in this 
paragraph. 
This modification may not reduce Maine taxable income to 
less than zero. 
To the extent this modification results in 
Maine net income that is less than zero for the taxable 
year, the excess negative modification amount may be carried 
forward and applied as a subtraction modification for up to 
taxable years. 
The entire amount of the excess negative 
modification must be carried to the earliest of the taxable 
years to which, by reason of this subsection, the negative 
modification may be carried and then to each of the other 
taxable years to the extent the unused negative modification 
is not used for a prior taxable year. 
Earlier carry-forward 
modifications 
must 
be 
used 
before 
newer 
modifications 
generated in later years. 
SUMMARY 
This bill provides an income tax deduction to individuals 
and corporations for the taxable gain on the sale of eligible 
timberlands held for at least a 10-year period beginning on or 
after January 1, 2005. 
The amount of the deduction is increased 
in 10'lt. increments depending on how many years beyond 10 the 
eligible timberlands are held prior to their sale. 
If the 
timberlands are held for at least 19 years after January 1, 2005, 
the tax deduction is 100'lt. of the gain on the sale of the eligible 
timberlands.