Oregon’s Uniform Forest Management Planning System

April 2012 Final Review Draft

TAX AND BUSINESS MANAGEMENT

What needs to be in the Plan?

  • Describe how you will treat your forest land for income tax purposes: for personal use, as an investment, or as a business. Verify you know your basis in both your land and timber accounts.[Tip: Visit the National Timber Tax Website for more information.]
  • Summarize how you are going to approach record keeping and timber harvest reporting (volume and value).
  • If applicable, describe what steps you have taken for estate planning and transfer of your property to your heirs. [Tip: See Oregon State University’s Ties to the Land Program for succession planning guidance.]
  • List best business practices required for landowner recognition and/or certification programs.

Why this Information is Useful

How you treat your forest for income tax purposes is important because it will determine how you are allowed to handle expenses and forest income for state and federal tax purposes.

Good record keeping and tax planning can help landowners manage their assets, increase their revenues, and minimize their tax liability.

Estate planning helps you manage your tax liability upon inheritance of your property by a beneficiary and in many cases can avoid the unfortunate case where the property (or portions thereof) must be sold to pay the tax bill.

Suggested “To Do’s” for Tax and Business Management

Disclaimer: The following is provided for informational purposes to help you get started. This is not tax advice and all ideas should be followed up with a professional tax advisor or consultant.

Property Tax – There are several property tax (special assessment) programs available to Oregon landowners. These include the Forestland Program, Small Tract Forestland Option, Farm Wood Lot Program, Wildlife Habitat Conservation and Management Program, Riparian Land Assessment, and the Conservation Easement Option. Completion of the Woodland Discovery portion of your plan identified which one you are currently in. You couldnow consult your tax advisor and discuss which program best fits your needs; or to affirm that you are already in the right program.

Harvest Tax – Timber harvest operations that yield more than 25,000 board feet are subject to a harvest tax (in addition to any deferred property tax that may be due). Know your timber harvest reporting obligations to the Oregon Department of Revenue.

Income Tax – Timber harvests and other revenue generating activities generally produce a federal and state income tax liability. Many expenses and other costs of forest management may be deductable (or eligible for a tax credit) if you meet certain Internal Revenue Service provisions that allow you to treat yourself as a forestry business. You could investigate whether this is appropriate for you.

Estate Tax – Investigate estate planning and business incorporation options with your tax advisor that may lessen tax liability when passing land to heirs.

Financial Incentive Programs – There are a number of programs (cost share, grant, rental payment, regulatory certainty, conservation easement, etc) available to you that can assist you in meeting your objectives. Some programs can substantially reduce the cost of certain forest management activities. Investigate and identify programs that fit your needs. [Tip: See Helping Fish, Wildlife and Habitat: Incentive and Assistance Programs for Private Landowners for a handy reference summarizes programs available in Oregon.]

Use professionally trained loggers, licensed pesticide applicators and hire contractors that are compliant with all workmen’s compensation, safety and other applicable labor laws.

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