Tax Reform Takeaway -- A Few Highlights

Thanks to our friends at the Forestry Association of South Carolina, we thought it would be a good idea to bring a recap of some highlights of the tax reform bill that could impact forest landowners. Even though a main goal of the "Republican tax reform plan" was to simplify the tax code, it still seems mighty complex to the writer of this blog post (a small-town, Horry county gal)!

1. The Corporate tax rate drops from 35% down to 21%.
2. Owners of pass-through entities (such as an LLC) will get a 20% discount on individual tax rate for the first $315,000 of joint income.
3. The estate tax (aka, the death tax) is maintained -- ie NOT REPEALED --, but current exemption levels are doubled. The current stepped-up basis rules still apply.
4. Property, state and local tax deductions are limited to $10,000 for all three combined. This seems like a negative for landowners, particularly those in a high-tax state.
   
   Perhaps the most specific one as it relates to timber folks:
5. Current tax code provisions that provide incentives to forest owners are maintained. Some of these incentives encourage landowners to keep their land in trees due to the capital gains treatment of timber revenue, deductions for timber-growing costs, and continues deductions and amortization of the costs of reforestation. Deductions for "forest management costs" such as pest / disease / fire prevention, thinning, fertilization, protection of wetlands & wildlife are still in place.
6. Individual tax cuts are set to expire in 2025; corporate tax cuts are permanent.

These changes are coming for the 2018 tax year. We are NOT tax professionals or accountants here at Johnson Land & Timber. Any information here is simply given as an interpretation of reading and studying to try to navigate our taxation system in these great United States. If reading this has sparked a question, please ask a trusted professional in the "tax" business.

SC Loggers / Forestry Products Industry Lose Millions Due to Flooding

An estimate of $65 Million has been given as a number to quantify the loss in production associated with the flooding in South Carolina in early October of 2015.

Ouch. And that's not all.

Gene Kodama, SC Forestry Commission State Forester has stated, "As far as the loggers go, they've taken one of the biggest hits. Some of those folks have already gone out of business, turned in their equipment. They're done. They didn't have the cash flow or the reserves." The total numbers of losses to the entire SC timber industry could total as much as $130 million, some sources predict. Of course, much of the damage sustained to the industry has yet-to-be calculated, with losses to loggers, mills, suppliers, and private forests and roads that are still unknown. 

“It’s been an event that I have not witnessed in my career here in South Carolina.”

— Crad Jaynes, President & CEO of SC Timber Producers Assn.

Road closures, wet harvesting conditions, higher operating costs to loggers, destruction of timber lands due to soft ground, and overall lost productivity are a few of the issues that have tormented those in the timber industry since October 2015. And the rain doesn't seem to have let up very much! So far, in January 2016, rainfall levels in the state are in the record maximum range. Many timber and forestry professionals in the state cannot remember a time when our area of South Carolina has seen so much water.

Use your best judgement, but for the record, South Carolina Forestry Commission officials have cautioned that landowners should not feel that they have to cut and sell their timber simply because their trees have been flooded. If your trees have reached beyond seedling size, typically, they will survive short term flooding. If your seedlings have been submerged for a week or more, they are not as likely to survive.

Always consult a registered forester if you have concerns when you monitor your forested areas and private timber land. We are thankful for our SC Forestry Commission and the great work they have done with the emergency operations across the state.