Title: Florida forest steward
Full Citation
Permanent Link: http://ufdc.ufl.edu/UF00090040/00039
 Material Information
Title: Florida forest steward
Physical Description: Serial
Language: English
Creator: Institute of Food and Agricultural Sciences, University of Florida
Publisher: Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville, Fla.
Publication Date: Spring 2006
 Record Information
Bibliographic ID: UF00090040
Volume ID: VID00039
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.


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The Florida Forest Steward

A Quarterly Newsletter for Florida Landowners and Resource Professionals

Volume 12, No. 4

Spring 2006

II lhi, iIic: Happy 2006!

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Emerging biomass energy technol
implications for forest manage

A little late, yes, but we hope it's been a
good year so far and that you are on
track to reaching your land management
goals. Florida's Forest Stewardship
Program continues to grow and, due to
its high certification standards and
cooperative approach to providing
technical and educational services, is
among the top Stewardship Programs in
the Nation. The total number of
Stewardship Plans in Florida is now over
2,210, comprising over 629,000 acres.

This issue will feature an article by
Walton County Extension Agent, Mike
Goodchild, who just returned from a six-
month professional development project
about woody biomass and alternative
markets for small diameter pines. You
have probably noticed over recent years
that professionals in the natural resource
and energy fields are giving this topic
increasing attention. This topic will also
be the focus of the next SFRC/SAF
Spring Symposium coming up on March
28-29. Also in this issue of the Steward
is information for you to consider when
ogies and preparing your income tax return for the
ogen d 2005 year.




11 'FO I

Biomass as an Alternative
Energy Source
By Mike Goodchild, UF-IFAS Walton
County Extension Agent
(all photos by Mike as well)

Woody biomass is an abundant
renewable energy
source readily
available here in
Florida and
southern Georgia
and Alabama.

What is biomass?
Biomass is any
type of vegetative
material derived ood gasification unit in
from trees,
shrubs, grasses or other forms of plants.
Biomass can be cultivated in pine
plantations or grown naturally. By-
products of wood, such as construction
debris or waste material left over from
wood manufacturing, are also forms of
biomass. The energy stored in biomass is
released when the material is burned. A
common form of biomass used for
centuries is firewood.

New and old
technologies are now
being used to produce
electricity, liquid
fuels, gases, and
chemicals from wood
biomass. Wood
gasification is the new
technology being nit for heating anm
studied at several
Universities across the country. Believe
it or not, waste heat from burning wood
can be used to cool water to air condition
homes and commercial buildings. Wood
chips for commercial buildings or wood
pellets for residential homes are fed into

a boiler system. Hot water is produced,
which is then cooled through an
absorption chiller, with the end product
being air conditioning. Despite the
enormous energy-producing potential for
biomass, it is estimated that only 7% of
the annual biomass produced worldwide
is utilized for that
purpose. Most of
this utilization is
occurring in
S countries to produce
electricity and
countries for

My Coleman stove refused to work after
20 years of inactivity. Woody biomass
provided me with heat, hot food, and the
framework for hanging my pot. I also
enjoyed hot coffee filtered through toilet
paper on a cool, starry night. Now that's
living it up!

With the steady rise
in fuel prices, woody
biomass is an energy
source we should
utilize to the fullest.
Most wood biomass
fuel has been used in
recent years in the
ig residential home pulp and paper and
other wood product
manufacturing industry through the
burning of wood residues (bark,
sawdust, chips, lignin). Due to high
transportation costs, biomass energy
facilities can only purchase raw
materials within a 50-mile radius to be

Timber Tax Tips for 2005

Vood peletizing mill in Arkansas
cost effective in most situations. Wood
biomass is an excellent energy source,
especially if it is from residue left from
logging operations. Removal of logging
residue reduces site prep cost for

President Bush mentioned using woody
biomass in his State of the Union
Address and recent articles in local
newspapers have commented on how
much of this resource is available across
the region. It will take some time for this
relatively new technology to take hold,
but increasing energy costs are sure to
make it a prudent next step. As active
forest landowners and managers we have
an opportunity to act locally to better use
our resources to reduce fossil fuel use,
foreign oil dependency, and improve
forest health through removal of storm-
damaged trees, diseased trees, and small-
diameter pines. Utilizing wood biomass
could improve timber markets and
benefit wildlife by way of more
economical thinning treatments. If you
are interested in participating in or
promoting a wood biomass project,
please feel free to send me an email.

Mike Goodchild, Walton County
Extension Agent
E-mail: migo(@,ifas.ufl.edu

Each year Larry Bishop and John
Greene, USDA Forest Service Taxation
Specialist and Research Forester,
respectively, provide us with an updated
summary of tax tips for forest
landowners. The Bishop and Greene
summary is intended to inform you of
some of the things to keep in mind when
preparing your Federal income tax return
for the 2005 tax year, particularly if you
incurred any costs, revenues or cost-
share payments associated with
timberland management.

Before continuing with the summary
we'd like to recognize the retirement of
Larry Bishop and his many contributions
to the Southern Extension Forest
Resource Specialists and forestland
owners across the South. If you have had
the privilege to work with Larry or
attend one of his workshops you would
probably agree that his knowledge of the
IRS tax code, as it relates to timber
growers, is unsurpassed. His shoes will
be difficult to fill.

This summary is not exhaustive and we
strongly recommend consulting other
sources for a more comprehensive
treatment of topics that may be
particularly important to you. This
information is current as of December 1,
2005, and supersedes USDA Forest
Service Management Bulletin R8-MB
121. Some useful on-line resources are
provided at the end.

Your Basis and Tax Records

Part of the price you receive from a
timber sale is taxable income and part is
your investment, or basis, in the timber

sold. The original cost of purchased
timberland, or the value of inherited
land, should be allocated to land, timber,
and other capital accounts. Then, adjust
the basis in each of the accounts up for
new purchases or investments and down
for sales or disposals. Keep good
records, including a written management
plan, map, and documents supporting
current deductions six years beyond the
date the return is due. The basis and
timber depletion should be reported on
IRS Form T (timber), Part II.

Passive Loss Rules

Under passive loss rules you can be
classified in 1 of 3 categories: (1)
investor, (2) passive participant in a
trade or business, or (3) active
participant (materially participating) in a
trade or business. You are materially
participating if your involvement is
regular, continuous, and substantial.
Generally, active participants get the
best tax treatment of deductible
expenses, but you must show this with
thorough records. Keep records of all
business transactions related to
managing your timber stands and other
business activities such as landowner
meetings. Odometer readings to and
from landowner meetings, canceled
checks for registration fees, and copies
of meeting agendas are some examples
of documentation of meeting attendance.

If you are an active participant in a
timber business you must dispose of
your timber under the provisions of
Section 631 to qualify for capital gains.
Both "pay-as-cut" and lump sum
timber sales now qualifyfor capital
gain treatment under Section 631(b) as
of December 31, 2004.

Reforestation Tax Deduction and

You can deduct outright the first
$10,000 spent for reforestation during
the 2005 tax year. You can also deduct
over 7 years, all reforestation expenses
in excess of $10,000 Due to a half-year
convention, you can claim one half of
the deductible portion the first tax year,
so it takes 8 years to recover the
deductible portion. Elect to amortize
reforestation expenses on form 4562.
This election must be made on a timely
filed return for the year in which
expenses were incurred.

If you are an investor, take the
reforestation deduction on the
front of form 1040. Write
"RFST" and the amount on Line
36, the "adjustments to total
income" line.

If your forest is a trade or
business, take the reforestation
deduction on the "Other
expenses" line on form 1040,
Schedule C.

If part of a farm, take the
reforestation deduction on the
"Other expenses" line on Form
1040, Schedule F.

Elect to amortize reforestation expenses
on Form 4562, transfer it to Form 1040,
and elect to amortize reforestation
expenses on Form 4562. Election to
amortize must be made on a timely tax
return for the year in which the
reforestation expenses were incurred.
Passive owners may not be eligible for
this credit and amortization.

Capital gains and Self-employment

You could pay significantly more in
taxes if you report timber sale income as
ordinary income rather than as a capital
gain. Also, capital gains are not subject
to the self-employment tax, as is
ordinary income. The net self-
employment tax rate for 2005 is 15.3%
for self-employed income of $400 or
more. To qualify for long-term capital
gains treatment, timber sold after
December 31, 1997 must have been held
longer than one year. The maximum
long-term capital gains income tax rate
for 2005 is 15% for timber sold after
May 6, 2003.

Cost-share Payments

All or part of the cost-share payments
received in 2005 under any of the
Federal or State cost-share programs
must be reported. Here are the options:

1 Include the payments as income and
then recover the part that you pay plus
the cost-share payment through the
amortization and reforestation tax
deduction described above.

2 Exclude the excludablee portion"
from income if certain conditions are
a the cost-share program has to be
approved for exclusion by the IRS and
b the maximum amount excludable per
acre is the greater of the present value of
$2.50 per acre or the present value of
10% of the average income per acre for
the past 3 tax years.

Cost-share programs approved for
exclusion by the IRS include the Forest
Land Enhancement Program, Wetlands

Reserve Program, Environmental
Quality Incentive Program, and the
Wildlife Habitat Incentive Program. If
you decide to exclude, you must attach a
statement to your return that states
specifically what cost-share payments
you received, that you choose to exclude
some or all of them, and how you
determined the excludable amount.

Conservation Reserve Program (CRP)

If you planted trees during 2005 under
CRP you must report your annual
payment as ordinary income, but cost-
share payments are now excludable.
Follow the procedures above to
determine the excludablee portion" of
your CRP cost-share payment.

Casualty Losses

A casualty loss must result from an
event that is identifiable, damaging to
the property, and sudden or unexpected
or unusual in nature (e.g., wildfires and
storms). Your claim for casualty losses
cannot exceed the adjusted basis minus
any insurance or other compensation.
Note that the IRS has ruled that losses
resulting from drought or beetles
generally do not qualify for a casualty
loss deduction because they are not
sudden, but they may qualify for a
business- or investment-loss.

Management and Maintenance

IRS Revenue Ruling 2004-62 clarified
that the cost of post-establishment
fertilization is a deductible management
expense. It is usually best to itemize
your annual management expenses
during the tax year they are incurred,

although the amounts that can be
deducted depend on your tax category
(investor, active, passive). If it is not to
your advantage to itemize deductions for
2004 you should capitalize these


Proper tax planning is a tedious but
important part of timberland
management. We strongly recommend
contacting a professional tax advisor to
help you with this task if you are
uncertain of the procedures.

Timber Tax Resources on the Internet

You can access this, "Tax Tips for
Forest Landowners for the 2005 Year",
and other publications on-line at the
USDA Forest Service Forest Taxation
Web site at

See the National Timber Tax Web Site
for a comprehensive treatment of timber
taxes at www.timbertax.org.

IRS publications and forms are available
at www.irs.gov.

Timber Price Update

This information is useful for observing
trends over time, but does not
necessarily reflect current conditions at a
particular location. Landowners
considering a timber sale would be wise
to let a consulting forester help them
obtain the best current prices. Note that
price ranges per ton for each product is
included in parentheses after the price
per cord.

Stumpage price ranges reported across
Florida in the 4th Quarter 2005 Timber
Mart-South (TMS) report were:

* Pine pulpwood: $13-$26/cord ($5 -
$10/ton), [ from 3rd Quarter 2005
* Pine C-N-S: $61-$79/cord ($22 -
$29/ton), T
* Pine sawtimber: $102 $123/cord
($38 $46/ton), ---
* Pine plylogs: $108 $129/cord ($40
$48/ton), [
* Hardwood pulpwood: $13 $28/cord
($6- $11/ton), $

Trend Report

Average prices for the major timber
products across Florida were mixed this
quarter compared to those of 3rd quarter
2005. Chip-n-saw was up over a dollar
per ton, sawtimber stayed about the
same and average prices for plylogs,
poles, pine pulpwood and hardwood
pulpwood were all down. Contributing
to these trends at the regional level were
continuing salvage operations from
Hurricanes Katrina and Rita, high fuel
prices, and regional variations in
precipitation. While the western part of
the south has been in a drought, the
Atlantic Coast has seen above average
rainfall. Regional average prices for
pine sawtimber are nearly the same as
they were a year ago and pine pulpwood
prices have made modest gains, about
6% higher than 4th Quarter 2004. While
average hardwood sawtimber prices
continue to increase slightly in Florida,
they have broken their upward trend at
the regional level due to dry logging
conditions in Arkansas and Texas.

Average Pine Stumpage Prices for Florida
1st Qtr 1997 through 4th Qtr 2005

71 73 81 83 91 93 01 03 11 13 21 23 31 33 41 43 51 53

Year/Quarter (beginning first quarter 1997)

-- pulpwood -a-chip-n-saw -m-sawtimber

Congratulations to these
Landowners for Earning Forest
Stewardship Certification in
2005 and early 2006:

James and Jennifer Pochurek,
Marion County

Ron and Jennifer Fisher,
Walton County

Charles Dingmon, Putnam County

T. Lee, Jefferson County

Waukeenah Lee, Jefferson County

John Wethington, Jefferson County
Robert and Chris Larson,
Walton County

Ed Jowers, Walton County

Martha Pridgen, Walton County

If you have been officially certified as a
Florida Forest Steward (got the sign and
plaque) over the last year or so and
would like to be recognized in the
Florida Forest Steward, call Chris at


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