Disaster Reforestation Act

Improved Loss Deductions: The bill establishes that for losses of uncut timber, the basis for a deduction shall not be less than the appraised value of the timber immediately before the loss, minus the salvage value. This provides a specific formula for determining loss amounts (Section 2(a)(2)(A)).

Inclusion of Pre-merchantable Timber: The definition of uncut timber is expanded to ensure it includes pre-merchantable timber (Section 2(a)(2)(D)).

Expanded Definition of Casualties: The bill expands the scope of what constitutes a casualty to include losses from wood-destroying insects, invasive species, or severe drought (Section 2(a)(2)(F)).

Flexibility for Taxpayers Unable to Obtain Appraisals: If a taxpayer cannot get an appraisal before their tax return is due, they can elect to include an estimate of the value and later file an amended return once the professional appraisal is complete (Section 2(a)(2)(B)(ii)(I)).

Reforestation Requirements: To receive the deduction, the taxpayer must reforest the area with hardwoods, softwoods, or a combination of both through planting, seeding, or site preparation within five years of the loss (Section 2(a)(2)(E)(i)).

Recapture of Benefits: If a taxpayer fails to meet the reforestation requirement within the five-year window, the Secretary will recapture the benefit of the deduction (Section 2(a)(2)(E)(ii)).

Strict Appraisal Standards: To use this rule, an appraisal must be completed by a Federal- or State-certified appraiser, conform to the Uniform Standards of Professional Appraisal Practice, and be completed no later than one year after the loss (Section 2(a)(2)(B)(i)).

Limited Eligibility: The special rule for the deduction does not apply to timber unless it is held for the purpose of being cut and sold in connection with a trade or business that is not a passive activity (Section 2(a)(2)(C)).