Forest Health Protection Cost Share Tax Update

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Forest Health Protection Cost Share Tax Update

• Updated August 2009

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Dr. Linda Wang

• National Forest Tax Specialist
• USDA Forest Service
• lwang_at_fs.fed.us

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Forest Health Protection Cost Share

• Forest Health Protection program cost share
  provide treatment for
• southern pine beetle
• western bark beetle
• forest diseases
• invasive plants
• or other major insect infestations

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Cost Share Tax Treatment

• Generally governmental cost share payment are
  taxable income
• However, qualified cost share payment may be
  excluded from a taxpayers income (Tax Code 126)

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Sec. 126 Income ExclusionAn example

• Mr. Smith received 3,000 cost share payment
  (shown on Form 1099-G) from qualified forestry
  program to manage his timberland.
• He may elect to exclude all or part of the
  3,000 from his income, using the IRS formula,
  under the tax regulation of 126

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Sec. 126 Income ExclusionExamples of Qualified
Programs

• Forest Land Enhancement Program cost share
• Environmental Quality Incentive Program cost
  share
• Various state forestry programs
• Forestry Development Program
  NC
• Reforestation of Timberlands Act Program
  VA
• Forest Improvement Program
  CA
• Forest Renewal Program
  SC
• Forestry Development Program
  IL

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Filing for Sec. 126 ExclusionForest Health
Protection Cost Share

• First step
• The Secretary of Department of Agriculture has
  approved the Forest Health Protection cost share
• (Tax Code 126 (b)(1)(A))
• (USDA Reg. 7 CFR part 14)

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Filing for Sec. 126 ExclusionForest Health
Protection Cost Share

• Second step
• The Forest Health Protection cost share program
  is approved by the IRS
• Revenue ruling 2009-23 was issued by the IRS (IRB
  2009-32)

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Forest Health Protection Cost Share Approved for
Sec. 126

• For more information,
• please go to www.timbertax.org front page