Lincoln, Crapo Introduce Legislation to Protect Domestic Timber Industry, Jobs

FOR IMMEDIATE RELEASE: January 27, 2009
Contact: Katie Laning (202)224-4843

Washington – Senate Finance Committee members Blanche Lincoln (D-Ark.) and Mike Crapo (R-Idaho) have introduced legislation to help our domestic timber industry—a vital part of our nation’s economy and source for more than a million jobs—remain competitive in the global marketplace.

“The forest products industry is a significant piece of Arkansas’s economy and culture, and is the source of more than 32,000 jobs across rural parts of our state,” Lincoln said.  “Yet the timber sector has been under intense pressure in recent years.  More than 181,000 jobs nationwide, or 14 percent of the workforce, have been lost since 2006.  This industry is critical to our economy and to the families it supports, and we must ensure that all business forms have the necessary tools to be successful in the global marketplace.”

“We need to provide stability to the timber industry in Idaho and other states during these tough economic times,” Crapo said.  “While we made a good start in the last Congress, we need further action to keep the industry competitive in international markets.  This legislation addresses that need in making the provisions from the last Congress permanent.  I look forward to working with Senator Lincoln and my colleagues on the Senate Finance Committee to successfully move this legislation to the Senate floor and into law.”

Our nation’s integrated timber sector—those that own land and operate mills and manufacturing factories—is disappearing.  The cause of this evolution has been a disparity in the tax treatment of timber gains depending on the structure of the business. 

Any individual or business that is taxed at the individual level, such as an S Corporation or a Real Estate Investment Trust, pays the 15 percent capital gains rate on timber sales.  Any integrated company, organized as a C Corporation, pays the corporate rate of 35 percent. 

C Corporations are reorganizing to take advantage of the 15 percent rate, which requires them to separate their mills and plants from their timber.  Across the country, this trend has resulted in plant closures and job losses.  In fact, nearly 340 mills have closed and more 193,000 jobs have been lost since 1999 as a result of these tax-driven decisions.

Lincoln and Crapo’s legislation provides an alternative minimum tax rate of 15 percent for gain on timber harvest by a C Corporation.  The legislation makes permanent Lincoln’s provision—set to expire in May 2009—that was included in the 2008 Farm Bill.

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