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P.L. 110-234 Effective Date: May 22, 2008

P.L. 110-234 Effective Date: May 22, 2008. FOOD, CONSERVATION, AND ENERGY ACT OF 2008. Title XV. Heartland, Habitat, Harvest, and Horticulture Act of 2008 Focus is on conservation, bioenergy, and balanced tax treatment of timber REIT’s and vertically integrated timber corporations

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P.L. 110-234 Effective Date: May 22, 2008

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  1. P.L. 110-234 Effective Date: May 22, 2008 FOOD, CONSERVATION, AND ENERGY ACT OF 2008

  2. Title XV Heartland, Habitat, Harvest, and Horticulture Act of 2008 Focus is on conservation, bioenergy, and balanced tax treatment of timber REIT’s and vertically integrated timber corporations Timber production not a focus

  3. 15% Corporate Tax Rate on Timber • C-Corp capital gains reported separately but taxed at same rate as ordinary income • Applies to capital gains on timber • Qualify under Sec. 631(a) or (b), and • Have held for more than 15 years • Applies to alternative minimum and regular corporate tax • One year window only • Gains on and after May 22, 2008 and before May 22, 2009

  4. Extension of Conservation Easement Deduction • Pension Protection Act of 2006 (PPA) • For contributions made in 2006 and 2007 • 30% contribution base limitation on contributions of capital gain property by individuals increased to 50% of the contribution base over the amount of all other allowable charitable contributions. • Individuals could carry over any qualified conservation contributions that exceeds the 50% limitation for up to 15 years.

  5. Extension of Conservation Easement Deduction • Pension Protection Act of 2006 (PPA) • For contributions made in 2006 and 2007 • Qualified farmer or rancher could deduct a qualified conservation contribution of up to 100% of the excess of the taxpayer's contribution base over the amount of all other allowable charitable contributions. • Act extends PPA provisions to contributions made before January 1, 2010.

  6. CRP Rental Payments Exempt From Self-Employment Tax • Statutory override of IRS Notice 2006-108 • CRP rental payments excluded from self-employment income, if • Received by retirees or disabled taxpayers who are receiving social security benefits • Effective date • Payments made after December 31, 2007

  7. Endangered Species Recovery Expenditures • Qualified expenditures treated as soil and water conservation expenditures, Sec. 175 • Offsets income from “farming” only • Timber revenue not “farm income” • Applies to expenditures after December 31, 2008

  8. Endangered Species Recovery Expenditures • Limited to site-specific management activities recommended in recovery plan approved under ESA • USF&W Service or state wildlife agency

  9. Real Estate Investment Trusts (REIT’s) • Tests for corporation to qualify as REIT • 95% gross income from passive sources • 75% of gross income from real estate related activities • 75% of assets consist of real estate, cash, receivables and gov’t. securities • Tax treatment • If 90% of dividends are paid out to shareholders , dividends taxed like regular stock mutual fund • Dividends taxed as “qualified dividends” • Capital gains taxed to shareholder whether distributed or not, in effect!

  10. Timber Real Estate Investment Trusts (REIT’s) • REIT may include timber gains to satisfy, • 75% test for gross income from real estate, and • 95% test for gross income from passive sources • Gains qualifying include • 631(a) gains qualify as well as 631(b), if cut timber is processed by a taxable REIT subsidiary (TRS)

  11. Real Estate Investment Trusts (REIT’s) • Timber REIT authorized • More than 50% of assets consist of real property used for trade or business of producing timber • Can include mineral royalties from REIT’s timberland for 95% gross income test • Effective date • First tax year beginning after May 22, 2008 • For one tax year

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