This issue of the newsletter did not get lost in the Christmas mail or crush of last-minute tax returns. We've received many calls requesting information on topics such as the Timber Mart-South timber prices, and since the first quarter price summary just arrived (see page 8) it is time for this issue to get in the mail. Hopefully, you will find this more relevant because of the delay. We intend to release the next few issues in shorter time to keep up with our quarterly schedule. Thanks for the calls!
A five-year status report for the Forest Stewardship Program was released
at the end of 1994. Nationwide, slightly over 83,000 landowners have enrolled
just over 10 million acres in the Programs. The northeastern and southern
states account for 40% and 25% of these totals, respectively; and Florida
has a little less than 10% of the southern acres. The majority of cost-share
payments have been for management plan, reforestation, forest improvement
and wildlife habitat practices. You, the participants in this program,
are providing the leadership for the expansion of sustainable forestry
on private lands, a concept that is being embraced worldwide by everyone
from the forest industry to environmental coalitions. Keep up the good
Scott Sanders, the former Stewardship Biologist Coordinator in Tallahassee, moved late last year into a new position as the Florida Game and Fresh Water Fish Commission's Assistant Bureau Chief of Wildlife Management. Scott worked with many landowners in the development of their Stewardship Management Plans, and on their behalf we wish him well in his new position.
Chuck McKelvy succeeded Scott as the statewide Stewardship Biologist Coordinator. Chuck comes into this position with extensive experience in wildlife management and private landowner assistance after working as a Resource Biologist with the Commission in Lake City since 1980.
As reported in the last issue of the newsletter, forest fertilization is now eligible for cost sharing as a site preparation treatment under Practice SIP2. Landowners can use fertilization as one of their three site preparation treatments for which they receive cost shares. Fertilization at the time of site preparation or planting can have positive impacts on growth on many poorly drained or very poorly drained soils, especially those classified as savannas or flatwoods soils. Your consultant or county forester will help you determine if your soils fit into one of the responsive soil groups.
Although fertilization in older (age 15 to 20 years) stands is not a
cost-shared practice, it can provide a very good return on your investment
on many of Florida's soils. Again, your county forester or consultant can
help determine an appropriate prescription for your particular soils.
We expect that available cost shares for reforestation from all sources will become more limited in the future. From a landowner's perspective it is helpful to realize that the long (and short) term trends in increasing timber values can often justify the cost of reforestation even when cost shares are not available. The Reforestation Tax Credit can help landowners to write off their expenses. Landowners should also consider reserving a portion of their timber sale revenue for reforestation before allocating it elsewhere.
Finally, we goofed in the last issue of the Florida Forest Steward newsletter
in the statement on page 3 that landowners no longer need to sign a Forest
Stewardship Creed. That is still an important step in the inauguration
of a Stewardship plan and program.
This issue is at the forefront of many discussions today, from corporate boardrooms to policy formulation in government offices to newspaper headlines. We are likely to see some significant developments in the next few years if recent activities are indicators of the direction this issue is taking.
For instance, an Appeals Court ruling last year in the "Sweet Home" case suggested that the Endangered Species Act prohibition of "harm" to endangered species on private land only applied to direct action against a listed animal or plant, and not to habitat modification. The Supreme Court has agreed to include a review of that ruling on its 1995 docket. If the ruling is upheld it will mean that habitat protection on private lands can no longer be required, under existing endangered species legislation.
Both houses of Congress are considering legislation involving compensation if land values are diminished by federal environmental laws as well as reform of the Endangered Species Act. Along with other natural resource issues that are in committee hearings or headed for the floor, this pending legislation could turn the 104th Congress into a truly historic session.
Well, it looks like we missed the April 15 deadline with this bit of news, but it may still be useful for next year or an amended return. The Internal Revenue Service ruled last year (Revenue Ruling 94-27) that at least a portion of SIP cost-share payments (for all nine SIP practices) could be excluded from gross income at your discretion, as has been previously allowed with FIP and ACP cost shares for reforestation. Even if the payments are excluded, they must be reported to the IRS as excludable under Section 126 of the Internal Revenue Code. The mathematics of calculating the excludable amount are complicated; however, if you harvested timber within the past three years, all of the cost-share payments received can generally be excluded.
Perhaps the most interesting aspect of the new ruling was the provision that excludability be retroactive to the start of the program. So, if you received cost shares in previous years, and counted them as ordinary income, you can file amended returns to recover that exclusion.
While we are on the subject of taxes, a soon-to-be-released stewardship
publication (Income Taxes & Private Forest Landowners) describes
important recordkeeping concerns for landowners. Keeping good documentation
of income and expenses can be a relatively painless task, once organized,
but it will be invaluable if that day of reckoning (the IRS Audit) ever
arrives. A simple accounting system (on a pad of paper, in an accountants
book or in a computer) should include separate accounts for capital expenditures,
capital income, ordinary income and normal expenses.
Along with developing a good system for recordkeeping, it is important that landowners understand their IRS classification relative to their use of the land. Differences between personal use, investment or business can have major impacts on tax deductions and treatment of timber sale revenue. If these are matters of concern to you be sure to request a copy of the new publication when it reaches County Forester or Extension offices this summer.
One last item related to taxes. The U.S. Forest Service recently released the publication Estate Planning for Forest Landowners; What will Become of Your Timberland? This new handbook (General Technical Report SO-197) provides guidance in applying estate planning techniques to their forests, and it discusses the Federal estate and gift tax laws that affect timber owners. Single free copies of the 186-page book are available from the Forest Service Information Center, Suite 850, 1720 Peachtree Road NW, Atlanta, GA 30309-2417.
The potential value for increasing returns in the future from hardwood management were mentioned in the previous newsletter. Although the length of the trend is short term, at best, a comparison of the stumpage values in the last issue and those on the last page of this issue indicate definite increases in hardwood values. We will address a number of concepts important to hardwood management in future issues.
One of the easiest ways to manage for hardwoods may be to accept the mixed pine-hardwood stands that naturally occur, even when trying to manage for pure pines. Many hardwood species are prolific seed producers and sprout readily from stumps when cut. In the process of ecological succession, they would gradually replace pine trees if given enough time without major interventions such as high-intensity fires. Thus, their occurrence in forest stands may be viewed as one component of ecologically-based management. Rather than trying to control, or eliminate, them from all corners of pine plantations, they could be retained in portions or corners of the stands where the cost of trying to remove them may be more than offset by their increasing value. Retention of such hammocks or hardwood pockets would also add to the diversity of wildlife habitats and food sources on your property.
If you are seriously concerned about opportunities for managing your hardwoods you may be interested in Southern Hardwood Management, a new publication from the Cooperative Extension Services and U.S. Forest Service (Management Bulletin R8-MB 67). Single free copies are available from the Forest Service Information Center listed in the Tax Updates section of this newsletter. A limited number of copies are also available at our Extension office at U.F. (904-846-0849).
The University of Florida and Florida Society of American Foresters will sponsor the annual Spring Symposium May 17-18 with the theme Ecosystems of Florida, Conserving and Managing for the Future. The Symposium will be held at the University Centre Hotel, Gainesville, and you can call the Office of Conferences (904-392-5930) for registration information.
The Florida Forestry Association (904-222-5646) has taken the lead in coordinating a variety of technology transfer and continuing education opportunities for landowners and natural resource professionals. Participating organizations include the Florida Division of Forestry, private industry, forestry consultants, Lake City Community College and the University of Florida.
Scheduled workshops and shortcourses for the rest of 1995 include:
of "Global Warming" on Trees
Although the study will run for many more years, third year results are already showing some significant effects of the elevated carbon and temperature. It appears that loblolly pine is well adapted to elevated carbon conditions and is likely to increase growth rates if atmospheric carbon increases. If loblolly pine is a good indicator for other species, many of our southern forests may actually experience increased growth rates in a slightly changed global climate.
That is the title of a colorful new brochure just published by the Florida
Division of Forestry and Florida Forestry Association. It's filled with
fascinating information on forests in the state. For example:
The Conservation Reserve Program (CRP) began in 1986 with the purpose of placing perennial crops on highly erodible agricultural lands to reduce soil erosion and improve water quality. Nationwide, over 2.4 million acres of forest plantations have been established since then using CRP cost sharing, with landowners receiving rental payments over 10 years. The first of these contracts are now expiring and many more will expire in the next few years. Although contracts that expire during Calendar Year 1995 can receive a one-year extension upon request, future extensions are uncertain. Landowners with CRP plantations can choose among a number of alternatives for future management of their land.
Four of the more likely alternatives to consider include: growing the trees to financial maturity (around 25 to 30 years); selling or leasing the timber rights while maintaining land ownership; clear-cutting trees at CRP expiration and leaving the land idle; or returning to annual crop production. A recent University of Georgia evaluation of these options indicated that landowners will earn higher returns from retaining pine plantations than they would by converting these lands back to row crops such as soybeans or corn.
Substantial increases in tree size and value occur between ages 10 and 20 as trees grow into merchantable size and higher value products. Landowners can receive substantially more total revenue by waiting until age 15 or older to thin a portion of these stands and harvesting the rest later. Before thinning, immediate returns can be realized from harvesting pine straw, although we do not recommend this treatment more than 1 or 2 times on these soils, nor on erodible slopes. Fertilization treatments around the same time could also stimulate extra growth on the remaining trees (depending on the previous cropping history of the soils), with potentially sizeable gains in revenue when the rest of the stand is finally harvested. Non-monetary benefits from maintaining the plantations will include reduced soil erosion losses, improved water quality, enhanced fish and wildlife habitat, reduced stream sediment and reduced production of surplus agricultural commodities.
Considering the financial as well as non-monetary benefits, it is reasonable to conclude that maintaining the plantations until they reach commercial timber size will generally make more sense (and cents) than converting them when the CRP contracts expire and they are just reaching that financially important part of their growth curves. Landowners who enrolled in the Soil Bank Program during the 1950's also followed this logic; approximately 80 percent of the Soil Bank plantations were retained until maturity.
Average timber prices in Florida are summarized quarterly by Timber
Marts, Inc in North Carolina based on their surveys of many different timber
purchasers and sellers. The information in the following table was extracted
from their first quarter (1995) report that was released in early April.
Because of the large number of information sources for these averages,
the average prices may be very useful for observing trends over time, but
may not necessarily reflect current conditions at any particular location.
Regarding trends, prices in almost all timber sizes are up substantially
since the first half of 1994. Some of the increase is due to lower lumber
supplies from other sections of the country, especially the northwest,
and some resulted from very high demands for pulp and paper on world markets.
We added a column for average price per ton of wood in order to value
all products on a common unit and to help you compare the relative values
of different products and tree sizes.