Max Baucus Out to Ax Timber Tax

Timber sales are typically taxed at the standard 15 percent capital gain rate. Yet timber companies typically pay the standard 35 percent corporate tax rate. This quirk in the tax law has led many timber companies including Plum Creek and Potlatch to restructure as real estate investment trusts (REITs), which enables them to take advantage of the lower 15 percent rate. Montana Senator Max Baucus wants to change that.

Now the chairman of the Senate Finance Committee, Max Baucus (D-Montana), wants all timber concerns to pay that rate, and he’s attempting to get this proviso added to the farm bill now before Congress.The Op-Ed page in today’s Wall Street Journal wants Baucus, who recently advocated a tax hike on hedge funds and private-equity shops, to extend a similar tax break across the board to all corporations. No surprise here. My question is if a solution already exists – shedding corporation status and restructuring as a REIT – why more timber companies aren’t going that route already?