Critical Context
When hurricanes, wildfires, ice storms, or pest outbreaks hit, the financial impact on forest landowners can be devastating. Timber, the most valuable asset in most family-owned forests, can be wiped out in an instant. Yet under current law, timber is excluded from the Federal Crop Insurance Program and casualty tax deductions are limited. With limited assistance from the government and no widely available private insurance options, forest landowners are exposed to decades of risk without financial protection.
That means landowners must rely solely on management practices to mitigate risk and, if eligible, the Emergency Forest Restoration Program (EFRP), a cost-share program that covers up to 75% of restoration costs when a disaster hits. While helpful, EFRP does not compensate landowners for the market value of timber assets lost.
But a new bill in Congress could change this.
Senators Bill Cassidy (R-LA) and Raphael Warnock (D-GA) have introduced the Disaster Reforestation Act, a bipartisan bill aimed at updating the tax code to help forest landowners with financial relief after a disaster hits.
Why This Matters
Under current tax rules, if your timber is destroyed by a disaster, you can only deduct losses up to your adjusted basis rather than the appraised value of the impacted timber. Your adjusted basis is the portion of your property’s value that you’ve officially assigned to the standing timber.
How basis works:
- If you buy 100 acres for $200,000 and assign $50,000 of that to the timber, that’s your timber basis.
- If you inherit land, your basis is usually the value of the timber at the time you inherited it.
- If the timber grows naturally and you’ve never assigned a value (as many don’t), the basis might be $0.
Since many landowners don’t track their timber basis, they are often unable to deduct casualty losses on their tax returns. Talking to your forester and tax professional can ensure you understand how to properly assign a basis to your timber investments under current tax law.
What Would Change
The Disaster Reforestation Act would fix this by allowing landowners to deduct the full market value of timber lost to disasters like wildfire, floods, ice storms, severe droughts, and pest outbreaks, regardless of basis.
Landowners would be able to deduct the difference between:
- The appraised value of their timber just before the disaster, and
- What the timber is worth after the disaster (its salvage value)
This gives you a realistic deduction that reflects what you actually lost, not just your historical basis. Appraisals take time and tax deadlines don’t wait. So the bill stipulates that you could file your taxes using your own estimate of the timber’s value before the loss and then you’d have up to 1 year after the disaster to get a certified appraisal and file an amended return. The IRS would then “true-up” your deduction based on the certified appraisal numbers.
This is especially important for family forest owners, who manage 58% of America’s forests and are key stewards of the country’s natural capital.
Why NCX Cares
We work with thousands of landowners to help them understand, grow, and monetize their natural capital portfolios. The introduction of this bill is a major win for anyone whose land includes timber assets. Not only does it offer a fair approach to tax deductions, it helps protect the long-term financial viability of family forests – the backbone of market and ecological value in places like the US Southeast.
If passed, this legislation could unlock a new level of security for forest landowners across the country, ensuring that when disaster strikes, the real value of the timber asset is considered. We’ll be watching this bill closely and will share updates as it moves through Congress. Want an easy way to track opportunities and threats to your natural capital portfolio? Create a free account at ncx.com.
