[Congressional Record (Bound Edition), Volume 149 (2003), Part 4]
[Senate]
[Page 4891]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     TIMBER TAX SIMPLIFICATION ACT

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                            HON. MAC COLLINS

                               of georgia

                    in the house of representatives

                      Thursday, February 27, 2003

  Mr. COLLINS. Mr. Speaker, I rise today to introduce legislation which 
corrects an inequity in the Internal Revenue Code which affects the 
sale of certain assets.
  Under current law, landowners who are occasional sellers of timber 
are often classified by the Internal Revenue Service as ``dealers.'' As 
a result, the seller is forced to choose between a ``lump sum'' payment 
method or a pay-as-cut contract which often results in an under-
realization of the fair value of the contract. While electing the pay-
as-cut contract option provides access to capital gains treatment, the 
seller must comply with special rules in Section 631(b) of the Internal 
Revenue code. The provisions of Sec. 631(b) require these sellers to 
``retain an economic interest'' in their timber until it is harvested. 
Under the retained economic interest requirement, the seller bears all 
the risk and is only paid for timber that is harvested, regardless of 
whether the terms of the contract are violated. Additionally, since the 
buyer pays for only the timber that is removed or ``scaled'' there is 
an incentive to waste poor quality timber, to under scale the timber, 
or to remove the timber without scaling.
  The legislation I am introducing will provide greater consistency by 
removing the exclusive ``retained economic interest'' requirement in 
IRC Section 631(b). This change has been supported or suggested by a 
number of groups for tax simplification purposes, including the 
Internal Revenue Service. I urge my colleagues to join in this tax 
simplification effort and strongly urge its passage.

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