Recent Natural Disasters Bring Important Tax Issue For Landowners To The Forefront

The severe natural disasters devastating timberlands over the past few years have drawn attention to a huge flaw in our nation’s tax laws and the Forest Recovery Act aims to fix it.

Currently, landowners whose timber stands are destroyed by a natural disaster are dealt an unintended blow because they can only deduct the lesser amount of the fair market value (FMV), or adjusted cost basis, which is often $0 after the 84-month amortization period or only a fraction of the fair market value of the destroyed timber.  This means most private forest landowners impacted by catastrophic events are left to absorb the cost of the timber losses. 

A recent briefing paper by the U.S. Forest Service found that American family forest owners suffered an estimated average of “$266.3 million each year in fair market timber value losses due to tree mortality caused by events that could be considered casualty losses for tax purposes.”

The Forest Recovery Act has been introduced in Congress to resolve this issue, and landowners are encouraged to contact their representatives in Congress to express their support for the measure.