FOOD CONSERVATION AND ENERGY ACT OF 2008 P

FOOD, CONSERVATION, AND ENERGY ACT OF 2008 P. L. 110 -234 Effective Date: May 22, 2008

Title XV • Heartland, Habitat, Harvest, and Horticulture Act of 2008 • Focus is on conservation, bioenergy, and balanced tax treatment of timber REIT’s and vertically integrated timber corporations • Timber production not a focus

15% Corporate Tax Rate on Timber • C-Corp capital gains reported separately but taxed at same rate as ordinary income • Applies to capital gains on timber Qualify under Sec. 631(a) or (b), and • Have held for more than 15 years • • Applies to alternative minimum and regular corporate tax • One year window only • Gains on and after May 22, 2008 and before May 22, 2009

Extension of Conservation Easement Deduction • Pension Protection Act of 2006 (PPA) • For contributions made in 2006 and 2007 • 30% contribution base limitation on contributions of capital gain property by individuals increased to 50% of the contribution base over the amount of all other allowable charitable contributions. • Individuals could carry over any qualified conservation contributions that exceeds the 50% limitation for up to 15 years.

Extension of Conservation Easement Deduction • Pension Protection Act of 2006 (PPA) • • For contributions made in 2006 and 2007 Qualified farmer or rancher could deduct a qualified conservation contribution of up to 100% of the excess of the taxpayer's contribution base over the amount of all other allowable charitable contributions. • Act extends PPA provisions to contributions made before January 1, 2010.

CRP Rental Payments Exempt From Self-Employment Tax • Statutory override of IRS Notice 2006 -108 • CRP rental payments excluded from selfemployment income, if • Received by retirees or disabled taxpayers who are receiving social security benefits • Effective date • Payments made after December 31, 2007

Endangered Species Recovery Expenditures • Qualified expenditures treated as soil and water conservation expenditures, Sec. 175 Offsets income from “farming” only • Timber revenue not “farm income” • • Applies to expenditures after December 31, 2008

Endangered Species Recovery Expenditures • Limited to site-specific management activities recommended in recovery plan approved under ESA • USF&W Service or state wildlife agency

Real Estate Investment Trusts (REIT’s) • Tests for corporation to qualify as REIT 95% gross income from passive sources • 75% of gross income from real estate related activities • 75% of assets consist of real estate, cash, receivables and gov’t. securities • • Tax treatment If 90% of dividends are paid out to shareholders , dividends taxed like regular stock mutual fund • Dividends taxed as “qualified dividends” • Capital gains taxed to shareholder whether distributed or not, in effect! •

Timber Real Estate Investment Trusts (REIT’s) • REIT may include timber gains to satisfy, 75% test for gross income from real estate, and • 95% test for gross income from passive sources • • Gains qualifying include • 631(a) gains qualify as well as 631(b), if cut timber is processed by a taxable REIT subsidiary (TRS)

Real Estate Investment Trusts (REIT’s) • Timber REIT authorized More than 50% of assets consist of real property used for trade or business of producing timber • Can include mineral royalties from REIT’s timberland for 95% gross income test • • Effective date First tax year beginning after May 22, 2008 • For one tax year •