Disaster Reforestation Act

Improved Deduction Calculations: Taxpayers experiencing a loss of uncut timber from causes like fire, storm, theft, insects, or drought can determine their deduction based on the appraised value before the loss minus the salvage value (Section 2(a)(2)(A)).

Flexibility in Tax Filing: If a taxpayer cannot get a required appraisal before their tax return is due, they can elect to use an estimate of the timber's value and then file an amended return once the official appraisal is completed (Section 2(a)(2)(B)(ii)(I)).

Inclusion of Developing Timber: The rule explicitly includes pre-merchantable timber in the definition of uncut timber, which may benefit those with growing timber (Section 2(a)(2)(D)).

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

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

Strict Appraisal Standards: Taxpayers must ensure their appraisals conform to the Uniform Standards of Professional Appraisal Practice, are limited to the value of the lost timber, and are completed by a Federal- or State-certified appraiser (Section 2(a)(2)(B)(i)).

Business Activity Restrictions: The special rule for the deduction does not apply if the timber is not 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)).