What This Bill Does
This bill changes how people calculate tax deductions when they lose uncut timber (trees that have not been cut down) due to fire, storms, theft, insects, invasive species or severe drought. Instead of using the salvage value (what remains after the loss), taxpayers can use an appraised value (a professional estimate of what the timber was worth before the loss) to determine their deduction.
Who It Affects
Taxpayers who own uncut timber that is held for the purpose of being cut and sold as part of a non-passive business (a business the owner actively participates in, not a passive investment).
Key Provisions
- Taxpayers with casualty losses of uncut timber from fire, storm, theft, wood-destroying insects, wood-destroying invasive species, or severe drought can base their deduction on the appraised value of the timber just before the loss minus the salvage value, rather than other methods (Sec. 2(a)(2)(A))
- Appraisals must be completed by a Federal- or State-certified appraiser, follow Uniform Standards of Professional Appraisal Practice (USPAP, a set of guidelines for appraisers), and be finished no later than 1 year after the loss occurs (Sec. 2(a)(2)(B))
- If a taxpayer cannot get an appraisal by their tax filing deadline, they may estimate the timber's value on their tax return and file an amended return later with the actual appraised value (Sec. 2(a)(2)(B)(ii))
- Taxpayers must replant the lost timber area with hardwoods, softwoods, or both through planting, seeding, or site preparation within 5 years of the loss, or they must repay the tax benefit they received (Sec. 2(a)(2)(E))
- Pre-merchantable timber (young trees not yet ready to harvest for sale) counts as uncut timber under this rule (Sec. 2(a)(2)(D))
What Changes
Taxpayers who experience timber casualties will be able to claim larger deductions based on the appraised value before the loss instead of the salvage value. Taxpayers will have the option to use an estimated value on their original tax return and adjust it later once a professional appraisal is completed. However, they must agree to replant the damaged area within 5 years or repay the tax savings they received.
Important Definitions
- "Uncut timber": Trees that have not been cut down, including pre-merchantable timber (young trees not yet ready for sale)
- "Casualty": Fire, storm, theft, wood-destroying insects, wood-destroying invasive species, or severe drought
- "Salvage value": The remaining value of timber after a loss
- "Passive activity": Not explicitly defined in the bill text; references section 469 of the Internal Revenue Code
Effective Date
The law applies to losses sustained in taxable years beginning after the date the bill becomes law. (Sec. 2(b))
II
118TH CONGRESS
1ST SESSION
S. 217
To amend the Internal Revenue Code of 1986 to provide a special rule
for certain casualty losses of uncut timber.
IN THE SENATE OF THE UNITED STATES
FEBRUARY 1, 2023
Mr. CASSIDY (for himself and Mr. WARNOCK) introduced the following bill;
which was read twice and referred to the Committee on Finance
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-
1
tives of the United States of America in Congress assembled,
2
SECTION 1. SHORT TITLE.
3
This Act may be cited as the ‘‘Disaster Reforestation
4
Act’’.
5
SEC. 2. CASUALTY LOSSES OF UNCUT TIMBER.
6
(a) IN GENERAL.—Section 165(b) of the Internal
7
Revenue Code of 1986 is amended—
8
(1) by striking ‘‘For purposes of subsection
9
(a)’’ and inserting the following:
10
VerDate Sep 11 2014
05:17 Feb 11, 2023
Jkt 039200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6201
E:\BILLS\S217.IS
S217
pbinns on DSKJLVW7X2PROD with $$_JOB
2
•S 217 IS
‘‘(1) IN GENERAL.—For purposes of subsection
1
(a)’’, and
2
(2) by adding at the end the following new
3
paragraph:
4
‘‘(2) SPECIAL RULE FOR CASUALTY LOSS OF
5
UNCUT TIMBER.—
6
‘‘(A) IN GENERAL.—In the case of the loss
7
of any uncut timber from fire, storm, or other
8
casualty, or from theft, the basis for deter-
9
mining the amount of the deduction for such
10
loss (as otherwise determined under paragraph
11
(1)) shall not be less than the excess of—
12
‘‘(i) the appraised value of such uncut
13
timber determined immediately before such
14
loss was sustained, over
15
‘‘(ii) the salvage value of such timber.
16
‘‘(B) APPRAISAL METHODS.—
17
‘‘(i) IN
GENERAL.—With respect to
18
the appraisal of a timber casualty loss de-
19
scribed in subparagraph (A)—
20
‘‘(I) the appraisal valuation date
21
shall be not later than 1 year after
22
the casualty loss, and
23
‘‘(II) the appraisal shall—
24
VerDate Sep 11 2014
05:17 Feb 11, 2023
Jkt 039200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\S217.IS
S217
pbinns on DSKJLVW7X2PROD with $$_JOB
3
•S 217 IS
‘‘(aa) conform to the Uni-
1
form Standards of Professional
2
Appraisal Practice (USPAP),
3
‘‘(bb) be limited to the value
4
of the lost timber, and
5
‘‘(cc) be completed by a
6
Federal- or State-certified ap-
7
praiser.
8
‘‘(ii) DELAY IN COMPLETION OF AP-
9
PRAISAL.—
10
‘‘(I) IN GENERAL.—In the case
11
of any taxpayer who is unable to ob-
12
tain an appraisal described in clause
13
(i) before the due date of the return
14
of tax (including any extension of
15
time for filing such return) for the
16
taxable year in which the timber cas-
17
ualty loss occurred, the taxpayer may
18
elect to—
19
‘‘(aa) with respect to the re-
20
turn of tax for such taxable year,
21
include an estimate of the value
22
of the uncut timber determined
23
immediately before the loss was
24
sustained, and
25
VerDate Sep 11 2014
05:17 Feb 11, 2023
Jkt 039200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\S217.IS
S217
pbinns on DSKJLVW7X2PROD with $$_JOB
4
•S 217 IS
‘‘(bb) upon completion of
1
the appraisal within the period
2
described in clause (i)(I), file an
3
amended return for such taxable
4
year with respect to any adjust-
5
ment in taxable income as deter-
6
mined pursuant to subclause (II).
7
‘‘(II) ADJUSTMENT OF TAXABLE
8
INCOME.—With respect to any tax-
9
payer who elects to provide an esti-
10
mate described in subclause (I)(aa)
11
for any taxable year in which a timber
12
casualty loss occurred, the taxable in-
13
come of the taxpayer for such taxable
14
year shall be increased or decreased,
15
as applicable, by an amount equal to
16
the difference between—
17
‘‘(aa) the appraised value of
18
such uncut timber determined
19
immediately before such loss was
20
sustained, as determined pursu-
21
ant to the appraisal described in
22
clause (i), and
23
‘‘(bb) the estimate provided
24
by the taxpayer under subclause
25
VerDate Sep 11 2014
05:17 Feb 11, 2023
Jkt 039200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6201
E:\BILLS\S217.IS
S217
pbinns on DSKJLVW7X2PROD with $$_JOB
5
•S 217 IS
(I)(aa) with respect to such
1
uncut timber.
2
‘‘(C) EXCLUSION OF TIMBER NOT HELD
3
FOR SALE.—Subparagraph (A) shall not apply
4
to any timber unless such timber is held for the
5
purpose of being cut and sold in connection
6
with a trade or business that is not a passive
7
activity within the meaning of section 469.
8
‘‘(D) INCLUSION OF PRE-MERCHANTABLE
9
TIMBER.—For purposes of this paragraph, the
10
term ‘uncut timber’ shall not fail to include pre-
11
merchantable timber.
12
‘‘(E) REFORESTATION REQUIREMENT.—
13
‘‘(i) IN GENERAL.—Subparagraph (A)
14
shall not apply unless the uncut timber
15
subject to the loss is reforested (with hard-
16
woods, softwoods, or any combination
17
thereof) by planting, seeding, or appro-
18
priate site preparation, not later than the
19
close of the 5-year period beginning on the
20
date of such loss.
21
‘‘(ii)
RECAPTURE.—The
Secretary
22
shall, by regulations, provide for recap-
23
turing the benefit of any deduction allowed
24
under this section with respect to any
25
VerDate Sep 11 2014
05:17 Feb 11, 2023
Jkt 039200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6201
E:\BILLS\S217.IS
S217
pbinns on DSKJLVW7X2PROD with $$_JOB
6
•S 217 IS
uncut timber subject to loss to which sub-
1
paragraph (A) applied if the taxpayer fails
2
to comply with clause (i) during the period
3
provided under such clause.
4
‘‘(F) OTHER CASUALTIES.—For purposes
5
of subparagraph (A), the term ‘other casualty’
6
shall include loss of any uncut timber from—
7
‘‘(i) wood-destroying insects,
8
‘‘(ii) wood-destroying invasive species,
9
or
10
‘‘(iii) severe drought.’’.
11
(b) EFFECTIVE DATE.—The amendments made by
12
this section shall apply to losses sustained in taxable years
13
beginning after the date of the enactment of this Act.
14
Æ
VerDate Sep 11 2014
05:17 Feb 11, 2023
Jkt 039200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6301
E:\BILLS\S217.IS
S217
pbinns on DSKJLVW7X2PROD with $$_JOB