Mississippi Society of American Foresters

MS SAF Position Statement on Estate Taxes

Position:

The Mississippi Society of American Foresters favors improving the Federal Estate Tax Laws and implementing a permanent increase in the exclusion amount of $5 million. Such changes will help maintain the future of family forest ownership and eliminate forced harvesting of timber stands that may adversely affect the owners' objectives. MS SAF also supports further simplification of the estate tax combined with modest increases in the the current exemption amount as this would reduce the burden of estate taxation for more family forest owners and provide greater assurance that family farms, businesses, and forests could continue to operate. Future increases in the exemption amount should be indexed for inflation to avoid the contentious debates so prevalent today. The MS SAF also favors the retention of a full step-up in basis for inherited property.

Background:

America's family forest owners, who own 35% of America's forest land (62% in Mississippi), are bearing more responsibility than ever before for the nation's environmental quality and sustainable timber production.

A study of the federal estate tax and its implications on Non-Industrial Private Forestland (NIPF) landowners, conducted in 1998 (Cushing et. al. 1998) showed that some forest landowners did harvest timber or sell land to pay estate taxes between 1987 and 1997. Out of 181 estates settled in the ten year period, 35% paid federal estate taxes. Twelve percent of the estates exceeded $3 million. Seven percent reported selling land or harvesting timber to pay estate taxes. Under current exemptions of $2 million many of these estates would have been exempted.

The $600,000 exclusion amount has been increased multiple times since 1997. In 2005, the exclusion amount was $1.5 million and was increased incrementally to $3.5 million in 2009. In 2011 and 2012 the exclusion amount was $5 million. In 2013, the exclusion amount reverts to $1.0 million. In addition, the marital deduction allows transfer of property to a surviving spouse tax-free. A permanent increase in the exclusion amount to $5 million, coupled with indexing for inflation, or the elimination of the estate tax would improve the ability of family-owned forests to maintain their ownership and management of the forest.

Current federal estate tax policies may lead to untimely timber harvest, a reduction in reforestation and decreased after tax returns, which disrupts established forest management programs. These policies lead to the premature liquidation of existing privately owned forests.

The current federal estate tax provisions can present a great burden to many individuals who inherit forestland. In 2012, estates tax rates are 35% but are set to increase to 55% in 2013. Generally, estate taxes are due nine months after the death of the owner. This short payment schedule leads to many forced harvests, thus limiting future forest management options. The tax may also force the estate to sell all or portions of the inherited land.

Originally adopted by Mississippi Society of American Foresters (MS SAF) on October 18, 2000 and revised on November 14, 2007 and again December 4, 2012. This statement will expire December 31, 2017, unless revised by the MS SAF.