[Congressional Record Volume 145, Number 99 (Wednesday, July 14, 1999)]
[Senate]
[Pages S8512-S8514]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SHELBY:
  S. 1370. A bill to amend the Internal Revenue Code of 1986 to extend 
the time for payment of the estate tax on certain timber stands; to the 
Committee on Finance.

[[Page S8513]]

           TIMBERLAND CONSERVATION AND TAX RELIEF ACT OF 1999

  Mr. SHELBY. Mr. President, I recently introduced legislation that 
would amend our estate taxation laws to correct a highly unjust 
situation that regularly occurs throughout our country. The problem I 
am referring to is the difficult situation persons who inherit valuable 
timberland often find themselves. Because the timberland is usually the 
major estate asset, the estate frequently lacks the liquidity to pay 
the hefty tax burden. Therefore, many times persons are forced to 
harvest the timber or even worse, to sell portions of the land, just to 
be able to meet this large tax liability.
  Besides essentially invalidating many testamentary gifts, such a tax 
policy creates numerous economic and ecological problems. As estate 
taxes are due nine months after a decedent's death, the current law 
strongly encourages persons to harvest the timber regardless of it's 
maturity, prevailing price or demand. Encouraging such behavior not 
only leads to economic waste, but also discourages responsible use of a 
valued natural resource. The decision of if and when to harvest 
timberlands should be made by the individual landowner after he has 
considered the current market, tree maturity and other relevant 
factors. It certainly should not be based on an uncompromising tax code 
that completely disregards these critical factors.
  Mr. President, the decision to sell the land is in no way a viable 
alternative to premature harvesting. Selling portions of a contiguous 
tract leads to fragmentation of the land, which in turn can lead to 
legal disputes and other inefficiencies. Furthermore, wildlife and 
forestry conservation efforts by earlier landowners are often ignored 
by new owners who look to exploit the land in order to turn a quick 
profit. But most importantly, our tax code should never place someone 
in a position where they must sell a testamentary gift just to be able 
to pay the taxes on the transfer. Besides being inherently unfair, such 
a tax tramples upon the property rights of American landowners.
  Mr. President, we must not allow the tax code to perpetuate these 
injustices. My bill, the Timberland Conservation and Tax Relief Act of 
1999 eliminates these problems by removing mechanical and unthinking 
tax laws from the decision of when it appropriate to harvest American 
timberlands. It introduces a flexible deferred payment provision into 
the estate taxation scheme that will allow timberland owners to 
exercise their own good judgment in deciding what the most efficient 
use of their land would be. Furthermore, the Timberland Conservation 
and Tax Relief Act promotes the responsible use of our environment by 
no longer placing persons in a position where they must harvest 
immature or unneeded timber. For these reasons, I strongly urge my 
colleagues in the Senate to join me in support of this bill.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1370

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. EXTENSION OF TIME FOR PAYMENT OF ESTATE TAX ON 
                   CERTAIN TIMBER STANDS.

       (a) In General.--Subchapter B of chapter 62 of the Internal 
     Revenue Code of 1986 (relating to extensions of time for 
     payment) is amended by adding at the end the following:

     ``SEC. 6168. EXTENSION OF TIME FOR PAYMENT OF ESTATE TAX ON 
                   CERTAIN TIMBER STANDS.

       ``(a) In General.--In the case of an interest in a 
     qualified timber property which is included in determining 
     the gross estate of a decedent who was (at the date of his 
     death) a citizen or resident of the United States, the 
     executor may elect to pay part or all of the tax imposed by 
     section 2001 on or before the date which is the earliest of--
       ``(1) the date the property is no longer qualified timber 
     property,
       ``(2) the date the individual who inherited the interest in 
     the qualified timber property either transfers the interest 
     or dies, or
       ``(3) the date which is 25 years after the date of death of 
     the decedent.
       ``(b) Limitation.--The maximum amount of tax which may be 
     paid under this subsection shall be an amount which bears the 
     same ratio to the tax imposed by section 2001 (reduced by the 
     credits against such tax) as--
       ``(1) the fair market value of the interest in the 
     qualified timber property, bears to
       ``(2) the adjusted gross estate of the decedent.
       ``(c) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Qualified timber property.--The term `qualified 
     timber property' means trees and any real property on which 
     such trees are growing which is--
       ``(A) located in the United States, and
       ``(B) used in timber operations (as defined in section 
     2032A(e)(13)(C)).
       ``(2) Adjusted gross estate.--The term, `adjusted gross 
     estate' means the value of the gross estate reduced by the 
     sum of the amounts allowable as a deduction under section 
     2053 or 2054. Such sum shall be determined on the basis of 
     the facts and circumstances in existence on the date 
     (including extensions) for filing the return of tax imposed 
     by section 2001 (or, if earlier, the date on which such 
     return is filed).
       ``(3) Certain transfers at death of heir disregarded.--
     Subsection (a)(2) shall not apply to any transfer by reason 
     of death so long as such transfer is to a member of the 
     family (within the meaning of section 267(c)94)) of the 
     transferor in such transfer.
       ``(d) Election.--Any election under subsection (a) shall be 
     made not later than the time prescribed by section 6075(a) 
     for filing the return of tax imposed by section 2001 
     (including extensions thereof), and shall be made in such 
     manner as the Secretary shall by regulations prescribe. If an 
     election under subsection (a) is made, the provisions of this 
     subtitle shall apply as though the Secretary were extending 
     the time for payment of the tax.
       ``(e) Time for Payment of Interest.--If the time for 
     payment of any amount of tax has been extended under this 
     section, interest payable under section 6601 on any unpaid 
     portion of such amount shall be paid at the time of the 
     payment of the tax.
       ``(f) Special Rule for Certain Direct Skips.--To the extent 
     that an interest in a qualified timber property is the 
     subject of a direct skip (within the meaning of section 
     2612(c)) occurring at the same time as and as a result of the 
     decedent's death, then for purposes of this section any tax 
     imposed by section 2601 on the transfer of such interest 
     shall be treated as if it were additional tax imposed by 
     section 2001.
       ``(g) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to the application of this 
     section.
       ``(h) Cross References.--
       ``(1) Security.--For authority of the Secretary to require 
     security in the case of an extension under this section, see 
     section 6165.
       ``(2) Lien.--For special lien (in lieu of bond) in the case 
     of an extension under this section, see section 6324A.
       ``(3) Period of limitation.--For extension of the period of 
     limitation in the case of an extension under this section, 
     see section 6503(d).
       ``(4) Interest.--For provisions relating to interest on tax 
     payable under this section, see subsection (j) of section 
     6601.''.
       (b) Conforming Amendments.--
       (1) Section 163(k) of the Internal Revenue Code of 1986 is 
     amended by striking ``6166'' in the heading and the text and 
     inserting ``6166 or 6168''.
       (2) Section 2053(c)(1)(D) of such Code is amended--
       (A) by striking ``6166'' and inserting ``6166 or 6168'', 
     and
       (B) by striking ``6166'' in the heading and inserting 
     ``6166 or 6168''.
       (3) The following provisions of such Code are amended by 
     striking ``or 6166'' each place it appears and inserting 
     ``6166, or 6168'':
       (A) Section 2056A(b)(10)(A).
       (B) Section 2204(a).
       (C) Section 2204(b).
       (D) Section 6503(d).
       (4) Section 2011(c)(2) of such Code is amended by striking 
     ``or 6166'' and inserting ``, 6166, or 6168'':
       (5) The following provisions of such Code are amended by 
     inserting ``or 6168'' after ``6166'' each place it appears:
       (A) Section 2204(c).
       (B) Section 6601(j) (except the second sentence of 
     paragraph (1)).
       (C) Section 7481(d).
       (6) Section 6161(a)(2) of such Code is amended--
       (A) in subparagraph (A), by striking ``or'' at the end,
       (B) in subparagraph (B), by adding ``or'' at the end,
       (C) in the matter following subparagraph (B)--
       (i) by striking ``subparagraph (B)'' and inserting 
     ``subparagraph (B) or (C)'', and
       (ii) by inserting ``or payment'' after ``installment'', and
       (D) by inserting after subparagraph (B) the following:
       ``(C) any part of the payment determined under section 
     6168,''.
       (7) Section 6324A of such Code is amended--
       (A) by adding at the end the following:
       ``(f) Application of Section to Deferred Tax Under Section 
     6168.--Rules similar to the rules of this section shall apply 
     to the amount of tax and interest deferred under section 6168 
     (determined as of the date prescribed by section 6151(a) for 
     payment of the tax imposed by chapter 11).'', and
       (B) in the title, by striking ``estate tax deferred under 
     section 6166'' and inserting ``deferred estate tax''.
       (8) The table of sections for subchapter B of chapter 62 of 
     such Code is amended by adding at the end the following:


[[Page S8514]]


``Sec. 6168. Extension of time for payment of estate tax on certain 
              timber stands.''.
       (9) The item relating to section 6324A in the table of 
     sections for subchapter C of chapter 64 of such Code is 
     amended by striking ``estate tax deferred under section 
     6166'' and inserting ``deferred estate tax''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying after the date of 
     enactment of this Act.

                          ____________________