What This Bill Does
This bill changes federal tax rules for people who lose uncut timber (trees that have not been cut down) due to disasters like fires, storms, insects, droughts or theft. The bill creates a special tax deduction rule so timber owners can claim losses based on the timber's value before the loss, minus what can be salvaged. (Sec. 2)
Who It Affects
Timber owners who hold uncut timber for the purpose of cutting and selling it as part of an active business (not a passive investment activity).
Key Provisions
• When timber owners lose uncut timber from fire, storm, insects, invasive species, drought, theft or other casualty, the tax deduction is based on the timber's value before the loss minus the salvage value. (Sec. 2(A))
• The appraisal (expert evaluation of value) of the timber loss must happen no later than one year after the loss and must follow Uniform Standards of Professional Appraisal Practice (USPAP). (Sec. 2(B)(i-ii))
• The appraisal must be completed by a Federal-certified or State-certified appraiser. (Sec. 2(B)(iii))
• Timber owners must replant the damaged area with hardwoods, softwoods or a combination of both through planting, seeding or site preparation within five years of the loss to qualify for the tax deduction. (Sec. 2(E))
• The rule applies to pre-merchantable timber (young trees not yet ready to harvest). (Sec. 2(D))
What Changes
The Internal Revenue Code now includes a special deduction rule for timber casualty losses that allows deductions based on pre-loss value minus salvage value, as long as the timber owner gets a certified appraisal and replants within five years.
Important Definitions
• Uncut timber: Trees that have not been cut, including pre-merchantable timber (young trees not yet ready to harvest).
• Passive activity: Not defined in this bill text.
Effective Date
The changes apply to tax years beginning after the date the bill becomes law. The exact date is not specified in the bill text.
I
118TH CONGRESS
1ST SESSION
H. R. 655
To amend the Internal Revenue Code of 1986 to provide a special rule
for certain casualty losses of uncut timber.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 31, 2023
Mr. CARTER of Georgia (for himself and Ms. SEWELL) 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
a special rule for certain casualty losses of uncut timber.
Be it enacted by the Senate and House of Representa-
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tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE.
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This Act may be cited as the ‘‘Disaster Reforestation
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Act’’.
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SEC. 2. CASUALTY LOSSES OF UNCUT TIMBER.
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(a) IN GENERAL.—Section 165(b) of the Internal
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Revenue Code of 1986 is amended—
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(1) by striking ‘‘For purposes of subsection
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(a)’’ and inserting the following:
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•HR 655 IH
‘‘(1) IN GENERAL.—For purposes of subsection
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(a)’’, and
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(2) by adding at the end the following new
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paragraph:
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‘‘(2) SPECIAL RULE FOR CASUALTY LOSS OF
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UNCUT TIMBER.—
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‘‘(A) IN GENERAL.—In the case of the loss
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of any uncut timber from fire, storm, insects,
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invasive species, drought, or other casualty, or
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from theft, the basis for determining the
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amount of the deduction for such loss (as other-
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wise determined under paragraph (1)) shall not
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be less than the excess of—
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‘‘(i) the value of such uncut timber
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determined immediately before such loss
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was sustained, over
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‘‘(ii) the salvage value of such timber.
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‘‘(B) APPRAISAL METHODS.—With respect
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to the appraisal of a timber casualty loss de-
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scribed in subparagraph (A)—
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‘‘(i) the appraisal valuation date shall
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be not later than 1 year after the casualty
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loss; and
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‘‘(ii) the appraisal shall—
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•HR 655 IH
‘‘(I) conform to the Uniform
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Standards of Professional Appraisal
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Practice (USPAP);
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‘‘(II) be limited to the value of
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the lost timber; and
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‘‘(III) be completed by a Federal-
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or State-certified appraiser.
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‘‘(C) EXCLUSION OF TIMBER NOT HELD
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FOR SALE.—Subparagraph (A) shall not apply
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to any timber unless such timber is held for the
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purpose of being cut and sold in connection
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with a trade or business that is not a passive
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activity within the meaning of section 469.
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‘‘(D) INCLUSION OF PRE-MERCHANTABLE
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TIMBER.—For purposes of this paragraph, the
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term ‘uncut timber’ shall not fail to include pre-
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merchantable timber.
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‘‘(E) REFORESTATION
REQUIREMENT.—
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Subparagraph (A) shall not apply unless the
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uncut timber subject to the loss is reforested
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(with hardwoods, softwoods, or any combination
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thereof) by planting, seeding, or appropriate
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site preparation, not later than the close of the
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5-year period beginning on the date of such
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loss.’’.
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•HR 655 IH
(b) EFFECTIVE DATE.—The amendments made by
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this section shall apply to taxable years beginning after
2
the date of the enactment of this Act.
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Æ
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