Lehmann, Ullman and Barclay LLP Certified Public Accountants
Washington Resource Report

Washington Resource Report - USA ©2013 Forest Landowners' Tax Council

Month Ending 03/31/13 


Death Tax:  A coalition of diverse groups - including the American Loggers Council and the Forest Landowners Tax Council - signed a letter of gratitude to Sen. John Thune (R-SD) for his amendment to Senate Continuing Resolution 8, the FY 2014 Senate Budget Resolution, creating a deficit-neutral reserve fund to provide for the full and permanent repeal of the estate tax. The letter expressed appreciation for his work to lead the country towards a common sense tax code that does not impose a destructive double or triple tax at death. The forestry community supports full and permanent repeal of the federal estate tax.

Forest Roads:  On March 20, the forestry community welcomed a Supreme Court decision reversing the May 2011 ruling from the U.S Court of Appeals for the Ninth Circuit (NEDC v. Brown) that forest roads used for timber harvest require Clean Water Act (CWA) industrial stormwater discharge permits typically applied to factories and other facilities.  The Court’s decision validates EPA’s longstanding policy that rainwater runoff from forest roads is best addressed through state adopted best management practices. Although the decision overturns the Ninth Circuit ruling, many forest owners nationwide remain vulnerable to new litigation, such as a recently filed case in the Ninth Circuit challenging the EPA December 2012 amendment to its stormwater discharge rule clarifying that forestry operations do not require CWA permits. Green plaintiffs have already teed-up the next round of lawsuits and told the Supreme Court they will not stop until permits are required.  The best way to break the litigation cycle and resolve this issue is through legislation clarifying once and for all that forest roads are not point sources.

Tailoring Rule:  Chief Justice John Roberts has extended by 30 days the deadline for most parties planning to ask the Supreme Court to overturn EPA's greenhouse gas (GHG) regulatory package -- though at least one party, the Utility Air Regulatory Group (UARG), will file its petition for a writ of certiorari by the original March 20 deadline.  The parties that sought and won a 30-day extension to April 19 say they want time to coordinate their efforts. The litigants are seeking to overturn a ruling from the  U.S. Court of Appeals for the District of Cdolumbia Circuit in  Coalition for Responsible Regulation, et al. v. EPA, et al., where the court upheld EPA's finding that GHGs from vehicles endanger public health and welfare, first-time fuel economy and tailpipe rules, and “tailoring” and “timing” rules implementing first-time GHG limits for some stationary sources' air permits, which affect wood burning emissions in the same was as fossil fuel burning.

EPA:  President Barack Obama has nominate Environmental Protection Agency air chief Gina McCarthy as the agency's next administrator and MIT physicist Ernest Moniz to take over the Energy Department. The announcements will fill two crucial holes in Obama's cabinet, especially important to fulfilling the president's promises to tackle climate change.  As head of EPA's air office, McCarthy has been at the forefront of the agency's fight to enact greenhouse gas regulations (e.g., Tailoring Rule).  Moniz served in the Clinton administration as undersecretary of energy. At the Massachusetts Institute of Technology, Moniz is a physics professor and director of the university's Energy Initiative, which draws funding from industry oil and gas heavyweights like BP, Saudi Aramco and Shell. 

Tax Reform:  As tax code reform appear forthcoming, the forestry community supports retaining the current “timber tax” provisions in the Internal Revenue Code to keep private working forests economically viable and to benefit the environment.  For years the best minds in the timber tax arena - umbrellaed by the forest Landowner Tax Council - have highlighted the benefits of these provisions and the negative economic and environmental impacts if they are eliminated. For decades, Congress has recognized the unique challenges of managing private forests for economic return and environmental benefits and has provided carefully tailored provisions in the Internal Revenue Code (collectively referred to as the “timber tax” provisions) to maintain these benefits: 1) Deduction for timber growing costs.  Current law allows forest landowners to deduct operating costs in the year that they are incurred, rather than capitalizing these costs. (IRC Sections 162 and 263A(c)(5)), 2) Timber revenue subject to capital gains.  Since 1943, the Internal Revenue Code has treated proceeds from timber harvest and the sale of standing trees as capital gains. (Sections 1231(b)(2) and 631(a)&(b)) 2) Deduction and amortization of reforestation costs.  Because reforestation involves significant up-front costs and is environmentally beneficial, current law allows forest owners to deduct up to $10,000 of reforestation costs per stand as they are incurred and amortize remaining costs over 7 years. (Section 194).

Regulation:  A group of bipartisan lawmakers have introduced HR 935, the Reducing Regulatory Burdens Act of 2013, to remedy a double regulation of pesticide applications.  This bill would amend the Federal Insecticide, Fungicide, Rodenticide Act (FIFRA) and the Clean Water Act (CWA) to clarify Congressional intent and eliminate the requirement of a National Pollutant Discharge Elimination System (NPDES) permit for the use of pesticides already approved for use under FIFRA. This legislation passed the U.S. House of Representatives on March 31, 2011 as H.R. 872, The Reducing Regulatory Burdens Act of 2011. Additionally, it advanced out of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry, but the full Senate failed to consider it during the last Congress.  H.R. 935 is necessary to address the negative economic consequences of the ruling posed by the case National Cotton Council v. EPA (6th Cir. 2009). Under the court ruling, pesticide users are required to obtain a redundant permit under the Clean Water Act (CWA) or be subject to a costly fine. The bill would remove duplicative and costly ‘red-tape’ requirements that provide no additional health or environmental benefits, while providing assurance that the pesticide community is not subject to redundant permitting requirements if they comply with EPA’s current regulations. This legislation passed last year by a bipartisan super majority, and it is key to job creation and the elimination of unnecessary regulations that hamper our economic growth.