Branching Out is the free, quarterly, forest stewardship newsletter
published by Maryland
Cooperative Extension to provide current information to forest
landowners, natural resource professionals, and the public. The newsletter
has a simple 4-page format that provides an in-depth story on a selected
topics, along with a calendar of events, information on new resources,
and short stories of upcoming educational programs.
To view the Winter 2000 issue of Branching Out
in pdf/printable format, click
here.
Economic Considerations of Forest Stewardship
The 125,000 private individuals who own more than 85 percent of
Maryland's forests have diverse reasons for owning their forestland.
Athough most forest landowners do not look to their property primarily
as a source of income, many are interested in deriving some economic
return if only to pay the property taxes. Forest surveys show that
a large percentage of landowners will consider harvesting timber
in the next decade. However, income from timber is infrequent and
by itself fails to recognize all the economic factors that impact
private forest stewardship. Landowners can enhance the economic
benefits of forestland by reducing taxes, increasing the value of
their forests, and pursuing nontraditional sources of income.
As a forest landowner, you need to evaluate seriously your personal
and physical resources before you jump into any activity on your
property.
Look Before You Leap
Discuss with your family, or others involved, your goals for the
use of the property. Just as important, discuss their goals for
the property. Often an enthusiastic forest landowner assumes that
family members or other forest stewardship partners are willing
to commit more to an endeavor than is the case. Time committed to
the proper management of your forestland can reduce the time available
for other endeavors.
Realize how your residency affects your objectives for your forestland.
Do you live on the property? If you live off the property, you may
need to eliminate income possibilities that require regular attention.
You also may need to address security of the property.
Let's look at steps that you can take to affect the economics of
your forest stewardship:
$ Take advantage of tax features.
1. Property tax assessments. Maryland forest landowners
can reduce significantly their property tax assessment by implementing
a forest stewardship plan. They can enter a 15-year Forest Conservation
and Management Agreement with the DNR Forest Service or submit a
forest stewardship plan to the county assessor every three years.
The three-year option may carry a slightly higher assessment but
has fewer strings attached. Farmers can have forestland associated
with the farm assessed at a forestry rate that may be lower than
the agricultural value assessment. Contact your DNR state forester
for more information on these options.
2. Timber sale taxes. If you sell timber, be certain
you pay as few taxes as legal. The value of timber on property when
you purchase or inherit it is known as basis value. This must be
separated from the buildings and other improvements. The basis value
and certain costs related to producing the timber can be subtracted
from harvest income to lower the amount on which you pay taxes.
Timber sale income can be taxed at the capital gains rate, which
is lower than the ordinary income rate. Before you sell timber,
determine the most advantageous receipt of income. The financial
return can be significant. A licensed professional forester can
establish your basis value. Contact your DNR forester for a list
of licensed foresters or go to the online forester at www.dnr.state.md.us.
Find an accountant or tax preparer knowledgeable in timber taxes
to help with your income and tax strategies.
3. Estate planning and taxes. Learn what will
happen to your estate when you die. Understand and apply the estate
planning tools that can protect the future stewardship of your property,
if that is your objective. Increased land values or the non-liquidity
of your forestland may force your heirs to sell the property or
conduct a quick timber sale to pay the estate taxes. Contact an
estate planning attorney. Remember, if you do not plan your estate,
the government will.
$ Use a consultant forester when selling forest products. The strong
demand for forest products encourages timber buyers to solicit landowners.
Landowners are tempted to accept an attractive price for the best
trees without considering the impact a harvest will have on the
future value of the forest. That is similar to a livestock farmer
selling his blue-ribbon breeding stock and keeping the runts, hoping
they will flourish. A wise long-term strategy for landowners is
to remove poorer trees and leave the better ones to grow. A timber
harvest that removes trees above a certain diameter and leaves the
smaller ones typically degrades future economic values as well as
wildlife and other non-timber features. Frequently, the remaining
smaller trees can be the same age as the larger trees and not have
good growth potential. Contact a professional forester who can help
you fulfill your objectives and increase the value and benefits
of the forest.
$ Realize that trees growing in your forest are like compound interest.
A healthy tree 14-inches in diameter, though approaching market
size, increases in value significantly each year. Its continued
growth over several years adds more volume, and thus more value,
than that of a smaller tree during the same years. Thinning your
forest can open the forest canopy, let in sunlight, and increase
the growth rate. A 14-inch diameter tree growing in a crowded forest
may take 6 years to grow 1 inch in diameter, an annual growth rate
of 2.5 percent. In a thinned the forest, the same tree could take
only 3 years to grow 1 inch in diameter, a rate of 4.9 percent (see
chart 1). Thinning the forest also can benefit wildlife habitat
and trail access.
$ Consider other natural resource income opportunities. Collect
information on a few enterprises that interest you and see how they
fit with your goals and those of your family or forest stewardship
partners. To be certain you will make a profit, develop an enterprise
budget that lists your costs and revenues. Tap into the resources
of your county Cooperative Extension office, your DNR state forester,
and even the Internet to explore these possibilities. Most of these
opportunities are included in three broad areas:
1. Forest farming and utilization enterprises:
Firewood, high-quality sawtimber and veneer, ginseng, goldenseal,
other medicinals, mushrooms, Christmas trees, maple syrup, pine
straw, native plants and materials, wooden and native crafts, custom
sawmilling, and kiln-drying services.
2. Recreational access and tourism enterprises:
Fee hunting and fishing, hunting preserve, sporting clay, guide
service, wildlife viewing, camping, outdoor sports, high-risk recreation,
bed >n breakfast, and vacation cabins.
3. Alternative agricultural and horticultural enterprises
that use non-forest resources: Aquaculture, small fruits,
vegetables, herbs, specialty livestock, deer farming, and greenhouses.
There is much more to be said about the economic factors affecting
the stewardship of your forest. A 3-hour video conference on April
15 presents a group of experts who will address these subjects.
Check the article on this page that lists the sites across the state
and register to attend. Bring along family members or forest stewardship
partners as well as other forest landowners.
If a tree that yields a log 8 inches x 16 feet is allowed to grow
1 inch in diameter, it adds 8.9 cubic feet.
If a tree that yields a log 14 inches x 16 feet is allowed to grow
1 inch in diameter, it adds 15.18 cubic feet.
What a difference an inch on a larger tree makes!
********************************************************************
Chart 1. Compound Rate of Interest for Trees of Different Diameter
and Growth Rates
Every year 4-H youth compete in the National 4-H Forestry Judging
Invitational. Before the competition, they study tree identification,
forest evaluation, tree measurement, compass orienteering, insects
and diseases, and more. You are needed to help organize and train
youth for a team in your county or region. All the training manuals
are provided.
For more information, contact your county Cooperative Extension
4-H agent or the state coordinator Bonnie Dunn, at 301-390-7259,
bd61@umail.umd.edu. Information about the contest and training manuals,
also useful for school activities, are available at http://www.invitational.uiuc.edu.
EPA Proposes Silviculture Changes
Under proposed Environmental Protection Agency regulations, private
forest landowners and others engaged in silviculture could be required
to obtain federal permits before conducting management activities
near certain waterways, reversing a 27-year determination under
the Clean Water Act. Activities affected would include harvesting,
site preparation, reforestation, and prescribed burning near designated
waterways. For more information, contact your DNR forester, representatives
in Congress, or http://www.treefarmsystem.org , http://www.safnet.org/policy
or http://frwebgate5.access.gpo.gov/.
Forest Economics Videoconference
Forest landowners throughout the Northeast can learn about the
economic and financial aspects of forest stewardship through a videconference,
Saturday, April 15, 9 a.m. to noon. National experts will discuss
strategies for taking control of the revenue potential of your land
and reducing your tax burden.
"Economic Considerations to Enhance Forest Stewardship of
Private Landowners in the Northeast" includes
$ A landowner's perspective on the value of recognizing ecnomic
issues,
$ Assessing your situation when considering a natural resource enterprise,
Managing your tax burden,
$ Examples of natural resource enterprises,
$ Landowner examples of natural resource enterprise development,
$ Planning your estate, and
$ Panel discussion when viewers can telephone in questions to be
answered live by the presenters.
The videoconference currently is scheduled for the sites listed
below. Register with the contact person by April 6. Participants
should be seated by 8:45 a.m. and are encouraged to bring a bag
lunch to eat during the followup questions and answer session. Registration
fees include conference proceedings and coffee and doughnuts.
Carroll Community College, Westminster, $10 also includes breakfast;
contact Mike Bell, Carroll County Extension, 410-386-2760, mb232@umail.umd.edu;
Harford Community College, Bel Air, $5; Bob Halman, Harford County
Extension, 410-638-3255, rh6@umail.umd.edu;
Western Maryland Research and Education Center, 18330 Keedysville
Road, Keedysville, $5; Sharon Bartlett, 301-432-2767 x305, sb274@umail.umd.edu;
Wye Research and Education Center, Cheston Lane near Carmichael,
Queenstown, $5; Bob Tjaden, 410-827-8057, rtjaden@umd.edu.
Some sites may have afternoon activities to complement the morning
sessions.
$ Best Management Practices and water quality for each state, with
federal, state, and local legislation, requirements and permits,
training and education opportunities, and state ratings. http://www.us.abmp.net
Editors: Jonathan Kays, Vera
Mae Schultz, Pam Townsend
Published four times a year and distributed to forest landowners,
resource professionals, and other interested in forest stewardship.
Issues are posted online at www.naturalresources.umd.edu/BranchingOut.cfm.
To sign up for online updates, e-mail listserv@listserv.umd.edu.
In the body of the message, type SUB branchingout your name (ex: SUB
branchingout John Doe). For a hardcopy subscription ($10 per year
- make checks payable to University of Maryland) or to send news items,
e-mail cmason@umd.edu; call 301-432-2767x338;
or write
Branching Out
Maryland Cooperative Extension
18330 Keedysville Road
Keedysville, MD 21756-1104.
The sponsoring agencies' programs are open to all citizens without
regard to race, color, gender, disability, religion, age, sexual
orientation, marital or parental status, or national origin.
Educational Programs
