Even managed pre-salable timber stands have increased the property value of forestland significantly compared to bare or unmanaged, cutover woodland. The range of returns is wide because of variations in soil productivity, stand condition, tree species, markets (both availability and price fluctuations), intensity of management, and availability of financial incentives from state and federal agencies.
Federal and state governments offer financial incentive programs for woodlot owners. Several programs provide cost-sharing payments that reimburse landowners for various timber management activities. Other programs provide tax incentives, tax credits, and deductions for reforestation expenses.
This article will discuss the many cost-share resources available to landowners for forestry management in North Carolina.
Forestry Management Cost-Share Resources
The cost-share resources available to North Carolina landowners for forestry management are divided into two broad categories: Cost-share programs and tax credits and deductions.
Cost-Share Programs For Forestry Management
1) The North Carolina Forest Development Program (FDP)
The North Carolina Forest Development Program (FDP) is a reforestation cost-share program administered by the North Carolina Forest Service (NCFS).
Under the FDP, a landowner is partially reimbursed for site preparation, seedling purchases, tree planting, vegetation removal competing with desirable seedlings, and many other practices needed to establish and improve timber stands. Landowners must have a forest management plan approved by NCFS to qualify for this assistance.
The FDP currently reimburses the landowner for as much as 40 percent of the actual cost per acre or 40 percent of the prevailing rate for most of the region's site preparation and management practices, whichever is less.
2) The North Carolina Agriculture Cost Share Program (ACSP)
The North Carolina Agriculture Cost Share Program (ACSP) addresses nonpoint source pollution by reducing sediment, nutrients, animal wastes, and pesticide runoff into the state’s surface waters.
The program offers cost-share reimbursements for installing best management practices (BMPs), such as establishing covers and converting fields. Participating landowners are reimbursed for as much as 75 percent of the average cost of the forest management practices.
To be eligible for this program, landowners must have had agricultural operations for over three years. The local North Carolina Soil and Water Conservation Districts administer the program.
3) The Conservation Reserve Program (CRP)
The Conservation Reserve Program (CRP) protects millions of acres of highly erodible, marginal cropland and is designed to safeguard the nation’s natural resources. Landowners who enroll during the CRP “general signup” agree to retire cropland to produce permanent wildlife habitat or to grow trees, permanently introduce grasses and legumes, native grasses and legumes, or combinations of permanent covers.
Enrollment practices vary but may include the establishment of longleaf pine, forested riparian buffers, wetland restoration, and bottomland hardwood. The Farm Service Agency (FSA) will reimburse participating landowners for as much as 50 percent of the cost of establishing permanent covers.
4) The Environmental Quality Incentive Program (EQIP)
The Environmental Quality Incentive Program (EQIP) is an agricultural production and environmental conservation program that provides financial and technical assistance for installing practices on eligible agricultural land and forestland.
EQIP contracts may fund forest management practices such as forest stand improvement, fire break installation, prescribed burning, restoration, and management of declining forest habitats and tree establishment. EQIP provides a flat payment for practice installation based on 75 percent of the average costs of conservation practices.
EQIP activities must be carried out according to a comprehensive management plan approved by a Natural Resources Conservation Service.
Tax Credits And Deductions For Forestry Management
- Reforestation Tax Credit and Amortization Deduction. Landowners may claim up to $10,000 (married filing jointly) in federal income tax deductions annually for qualifying reforestation expenses per qualified property in the year incurred. The cost of site preparation, seedlings or seeds, planting, tools, and depreciation on equipment may be included.
- Excluding Cost Sharing Payments from Income. Federal and North Carolina tax laws allow landowners to exclude certain cost-share payments partially or totally from taxable income.
- Annual Deductions. Part or all the management expenses incurred each year may be deductible, even if no timber income is received in that tax year. The Tax Reform Act of 1986 instituted passive loss rules that dictate how a forest landowner may deduct expenses.
- Long-Term Capital Gains. Income from the sale of timber owned for more than 12 months should qualify as long-term capital gains for federal tax purposes. The long-term capital gains tax rate is 15%, with an additional 3.8% Medicare surtax if the family's annual income is more than $321,408. The rate is 20% if the annual income exceeds $612,351.
- The North Carolina Forestry Present-Use Valuation (PUV) is a voluntary tax break program through which qualifying North Carolina forest landowners can receive property tax relief for managed timberland upon approval of their application.
- To qualify for the land use program, a landowner must have at least 20 acres of timberland, live on the property or have owned it for four years, and have a forestry management plan for managing the timber for timber production.
Many cost-share resources are available to North Carolina landowners to assist with the costs involved in actively managing their timber resources for multiple-use management that improves our forest resources' overall diversity, health, and sustainability.
However, the overall driving force behind forest management is the ability to produce periodic income from selling timber products on private lands. Cost-share programs and tax incentives help with management costs, but income from the sale of timber resources is the most important factor in whether or not forestland is actively managed in most cases.
Because of this, the timber products industry is very important to the overall forest management in North Carolina.
Church & Church Lumber Company Is Important To Forestry Management
Church & Church Lumber Company is a major buyer of timber products from private land in the mountains of North Carolina, providing income to landowners and jobs throughout the state. Income from the sale of timber products can fund proper land management activities for various natural resources.
Church & Church, a family-owned company, serves much of North Carolina and the neighboring areas. We offer a wide range of services, from logging and forest management to direct lumber sales, and in some cases, we can assist in securing funding from available cost-share programs.
One of our key objectives is to assist landowners in maximizing their investments while also considering the environment. Contact Church & Church today for more information about how we can help you better manage your land by utilizing cost-share programs.