Reforestation tax incentive impacts on financial returns of loblolly pine plantations for family forest landowners in Mississippi

Curtis VanderSchaaf; Yanshu Li

doi:10.21750/REFOR.18.01.117

Authors

Dr. Curtis L. VanderSchaaf Mississippi State University
Dr. Yanshu Li University of Georgia

DOI:

https://doi.org/10.21750/REFOR.18.01.117

Keywords:

income tax; Pinus taeda; growth and yield; deduction; amortization

Abstract

Rates of return from forest plantation investments depend not only on survival and growth rates, but also costs and revenues associated with various practices. Beyond that, tax related issues are another important consideration that are often not addressed, or directly addressed at least, in forest financial assessments. Many financial assessments can be defined as “before-tax.” Forest landowners within Mississippi have the potential to reduce reforestation cost burdens through two important tax-related opportunities. The first being the Federal reforestation deduction and amortization provisions and the second being the state-based reforestation tax credit. An overabundant supply of wood in Mississippi has resulted in fairly poor pine market conditions, particularly for pulpwood stumpage. This has resulted in the likelihood of marginal returns for many landowners without some type of assistance. Beyond that, substantial inflation and increases in fuel costs have resulted in greater reforestation costs plus additional reductions in stumpage values, among other reasons, because of greater costs for loggers during forest harvesting operations.

The impacts of these two income tax reduction opportunities on loblolly pine financial returns were examined for three planting densities of 1,122 and 1,282 and 1,495 seedlings ha^-1 for a site index 19.8 m site (base age 25). A combination of chemical and mechanical site preparation was conducted and mass control pollinated (MCP) bareroot seedlings were hand-planted. Varying degrees of rectangularity were assumed, reducing reforestation costs. A first-year herbaceous weed control treatment was implemented but no thinnings and fertilization treatments were conducted. A final harvest clearcut was conducted at age 26. For Federal income tax purposes, a landowner classified as an Investor within the 22% Federal income tax bracket was assumed. Whether before-tax or after-tax, the most viable planting density financially was found to be 1,122 ha^-1 seedlings. Reduced reforestation costs and greater yields ha^-1of the more valuable sawlog product class were found to be more influential on landowner financial returns than any reforestation tax provisions.

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Author Biographies

Dr. Curtis L. VanderSchaaf, Mississippi State University

Dr. VanderSchaaf received his degrees in forestry from Stephen F. Austin State University, University of Idaho, and Virginia Tech. His PhD work was funded by the Loblolly Pine Growth and Yield Research Cooperative housed at Virginia Tech. For nearly 2.5 years, he has been working as a regional forestry extension specialist with Mississippi State. Prior to this appointment, he has worked on numerous growth and yield studies and field trials and has developed many applications and Timber Decision Support Systems (TDSSs). This work was completed while employed as an analyst with the East Texas Pine Plantation Research Project (ETPPRP) at Stephen F. Austin State University, the Intermountain Forest Tree Nutrition Cooperative at the University of Idaho, a research specialist and an Assistant Professor of Forest Biometrics with the University of Arkansas at Monticello, Southern Forest Nursery Management Cooperative at Auburn University, a Resource Analyst with Texas Forest Service, a biometrician/forest modeler with Minnesota DNR, and an Assistant Professor of Forest Biometrics and Measurements with Louisiana Tech. He has produced more than 15 TDSSs.
Dr. Yanshu Li, University of Georgia

Associate Professor at the University of Georgia, Forest Economics and Taxation Outreach Specialist.

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