WINTER 2000WOR K I NG TOG ETH ER FOR HEALTHY FOR ESTS

California Forest Stewardship Program

ForestlandS t e w a r d

California Dept. of Forestry & Fire ProtectionForest Stewardship ProgramP.O. Box 944246Sacramento, CA 94244-2460

ADDRESS SERVICE REQUESTED

Presort StandardU.S. Postage

PAIDStockton, CA

Permit No. 168

Hardwoods coming into their own

Until recently, hardwoods inCalifornia played second fiddleto the more economically

valuable softwood species. Consideredby many to be “weed” species taking upspace and other resources from theconifers, hardwoods have been dispar-aged, burned, poisoned, and otherwiseremoved from the landscape.

But this view is fortunately changing.In the last decade there has been agrowing appreciation of the value ofhardwoods both for ecological andeconomic reasons.

Hardwoods play an essential role innumerous forest functions includingerosion control, air and water quality,nutrient cycling, etc. In addition, theycontribute color, beauty, recreationalopportunities, and other amenities soimportant to human beings.

Hardwood forests provide some ofthe richest wildlife habitat in the state.Over 300 species of vertebrates dependon oak woodlands for their survival andthose animals contribute their part to theecosystem in complex interrelationshipsthat are necessary, though often not wellunderstood.

There is not just one, but rather a

large number of unique hardwood eco-systems. Oak woodlands are found in thefoothills as well as at lower elevations.These lands are dominated by oakspecies and have historically been man-aged primarily for grazing. Over 50distinct oak habitat types have beendescribed.

Hardwoods are also an integral com-ponent of the higher elevation mixedconiferous forests. There they can befound in various assemblages, althoughseldom as pure stands of one species.

Riparian zones are another hard-wood domain. Riparian species helpstabilize banks and reduce erosion inaddition to providing some of the mostimportant habitat for wildlife.

Economically, the Californiahardwood industry has lagged far behindits successful eastern counterpart. Thelack of interest in hardwoods has beendue in large part to the fact that high-quality softwood timber could be loggedeasily and in large volumes. Now, withmuch of the old growth gone andincreasing limitations on timber harvest,there is renewed interest in encouraginga sustainable hardwood industry as away to bring economic stability to rural

areas. New techniques and a greaterunderstanding of hardwood ecologyhave contributed to the current optimismsurrounding hardwood utilization.

Along with the increased apprecia-tion of hardwoods has come a growingconcern for the future of these habitats.Since 1945, over one million acres ofhardwood rangeland has been lost.California’s population, which is expect-ed to grow by an average of 630,000persons per year for the next 20 years, ispushing into the foothills and oakwoodlands, fragmenting habitat forwildlife and destroying the integrity ofthe ecosystem. The increased develop-ment value of the lands has beendisasterous for many families oflandowners as high estate taxes force thesale of family lands, resulting indevelopment or conversion.

As is true for other forest types, goodstewardship of hardwood rangelandinvolves appreciation, knowledge, andcareful decision-making. Resourcesprovided in this newsletter can help youfind the information and technicalassistance you need to achieve yourmanagement objectives with the leastdisturbance to the resources. �

2 Winter 2000

Forestland Steward

Fores t l andS t e w a r d

Forestland Steward is a publicationof the California ForestStewardship Program

P.O. Box 944246Sacramento, CA 94244-2460

(916) 653-8286Fax (916) 653-8957

http://ceres.ca.gov/foreststeward

GovernorGray Davis

Secretary of ResourcesThe Resources Agency

Mary D. Nichols

DirectorCalif Dept of Forestry & Fire Protection

Andrea E. Tuttle

Editorial CommitteeLaurie Litman, InfoWright

Claralynn NunamakerRichard Harris

Jim Geiger

Printed on recycledpaper with soy ink

Something is killing tanoaks(Lithocarpus densiflorus) inlocalized areas from Santa Rosa

to Big Sur. It strikes healthy, maturetrees which can develop symptoms anddie within 4 to 6 weeks! The reason forthis unprecedented dieback has yet tobe discovered.

Mysterious tanoak deathsThe first instances of the tanoak

sudden death were observed in MillValley, Marin County in 1995. Affectedtrees have now been found in Sonoma,Santa Cruz, Santa Clara and Montereycounties as well.

The first symptoms occur when amature tree develops very pale greenshoots which then droop or wilt. Oldfoliage changes from dark to lightgreen, then suddenly the whole crownturns brown. The trees lose their leavesduring the following growing season.

Beetles enter the pictureWhile the pathogen that causes the

dieback has not yet been identified,western oak bark beetles(Pseudopityophthorus pubipennis) and oakambrosia beetles (Monarthrum spp.) areinvariably associated with the diseasedtrees. These beetles, which are notusually able to invade healthy trees,find the dead and dying trees extremelyattractive. They have been reproducingwildly within the stricken trees.

California live oaks attackedWith beetles at epidemic propor-

tions, a new threat has arisen: thebeetles have begun attacking coast liveoak (Quercus agrifolia). Tens of thou-sands of trees have died—even seeming-ly healthy trees. This is very unusualsince these beetles are consideredsecondary pests, that is, they only attack

Tanoak dieback affecting coast live oaks tooalready weakened trees. Some thinkthat environmental stress may increasethe risk to individual trees. Goodmaintenance of oak trees to preventtree stress is currently considered thebest way to avoid beetle attack.(Information on the correct care of oakscan be found on the California OakFoundation website:http://www.californiaoaks.org.)

Identify diseased treesOak bark beetles and ambrosia

beetles are very small insects (1.7 to 4mm long) so it is easiest to find them byindirect signs. Beetle attack can beidentified by the following symptoms:

� The first signs of western oak barkbeetle infestation of live oaks aredark brown-to-black colored gran-ules and stained bark surface belowentrance holes. Reddish-brownboring dust appears on the lowerbark surface near the tree base.

� Oak ambrosia beetles can be iden-tified through the fine white sawdustthat appears on the tree trunk.

These massive diebacks in tanoaksand live oaks have never been seenbefore. There is concern not only forthe loss of the trees but also the seriousfire hazard that may result from thebuild-up of dry fuel from the deadtrees.

Many questions remain to be an-swered. Emergency funds have recentlybeen granted to try to learn the cause ofthe disease. Scientists don’t knowwhether the coast live oak are succumb-ing to the same pathogen as the tanoaksor whether the live oak deaths aresimply a result of the increase inbeetles. Identification of the disease willhelp to determine the best approach tothe problem.

Pest Alert

What to doCurrently, experts recommend that

landowners remove dead trees as soonas possible, chipping smaller branchesand splitting the wood for firewood.The logs should then be cut andcovered with clear plastic sheeting forsix months to prevent beetle emergenceand infestation of nearby oaks.

For more information, contact yourlocal UC Extension advisor. Ask forPest Alert #3B, Protecting Live OaksAgainst Bark Beetles and Ambrosia Beetles.

3Winter 2000

Forestland Steward

Seasonal Stewardship

Your seedlings are safely in theground after great effort andcost. Now, what can you do to

help ensure they survive to become trees?Even healthy young trees face a num-

ber of threats, one of which is their tasti-ness to various animals—deer, rabbits,rodents, insects and others. There are anumber of options available for protect-ing seedlings: physical barriers, repel-lents, habitat modification, hunting, etc.Your decision will be based on whatanimals are after your trees, the charac-teristics of your site, and, last but notleast, cost. As with anything else, eachmethod has advantages and limitations.

� Fencing. Fencing works well to keepout deer and animals that don’t climb orburrow (if it’s high enough). However,fencing is costly and excludeseverything—humans and other nontargetwildlife. Fences can be electrified forgreater deterrence.

� Vexar tubes. Perhaps the most com-mon protective barrier used for coniferseedlings is vexar tubing, usually put inplace at the time of planting. Thesediamond-shaped rigid mesh tubes areavailable in various sizes and can protectagainst a number of herbivores. Thematerial biodegrades in sunlight but canbe purchased with UV inhibitors thatincrease the life of the tube (this is unne-cessary if the protection is needed foronly one season. Note that biodegrada-tion is variable and tubes may need to beremoved by hand.) Tubes should be setup with two stakes to hold them uprightand prevent seedling damage in strongwinds. For protection from rabbits theyneed to be at least 2' high; 3' for deer.

Protect your seedlings after planting� Vexar leader tubes. These aresimilar to vexar tubes but protect onlythe seedling terminal bud. It may benecessary to support smaller terminals toprevent bending.

� Below-ground deterrents. To protectagainst burrowing animals such asgophers, various types of cages can beconstructed. One relatively easy designuses aluminum screen placed aroundlarge yogurt or cottage cheese containersthat are open at both ends and slit at thesides. The container is buried in the soilso that the top is at the soil surface. Thecage prevents stem damage while thecontainer keeps out burrowing animalsthat can damage roots.

� Netting. Plastic mesh can be easilyslipped up over seedlings and may bepulled up over the elongating terminalduring the growing season. While thenetting is effective in preventing brows-ing, it can cause bent leaders. To preventthis, bamboo stakes can be used to holdthe netting away from the seedling.

� Bud caps. Paper bud caps arerectangular pieces of weatherproof paperfolded lengthwise and stapled around theterminal leader and bud. These are notas effective as vexar tubes for protection.Polyester bud caps are also available.

� Sleeves. Porous, polyester sleeves aresewn into tubes and secured by staplesaround the seedling. Sleeves can causeheat injury to seedlings on hot, dry siteswhich can be minimized by using largerdiameter sleeves and lighter-weightmaterial.

� Tree shelters. These protectivedevices are used for hardwoods such asoaks; not for conifers. Tree shelters aretall plastic tubes that not only protectseedlings from animals but also create asmall greenhouse effect around eachindividual plant. As with a greenhouse,

the plastic tube creates a microclimatethat traps carbon dioxide and moistureand moderates the temperature, whileallowing light to pass through for photo-synthesis. Tree shelters are common inEngland but are still relatively new to theUS. The shelters appear to improveseedling survival especially on difficultsites where the soil is poor, the climateextreme, or competition strong.Concerns include biodegradability andstem abrasion due to wind.

� Repellents. There is a great variety ofrepellents in use including moth balls,hot pepper sauce, human hair, bone tar,and a number of commercial formula-tions. Repellents can be costly withextremely variable results, therefore arenot generally considered for large areas.Some repellents need to be reappliedafter rainfall. Those formulations thatrepel by taste are most effective whenapplied to dormant trees since newgrowth that develops after treatment willbe unprotected. Other repellents act bysmell such as putrescent egg solids orputrefied meat scraps. Effectivenessvaries for many reasons including theweather, animal hunger level, alternativefood availability, and conditioning. Achili-garlic repellent that appeared to besuccessful in northern California wastested in the southern part of the state.There the rabbits preferentially soughtout those plants with the chili-garlic.

Hot off the presses!The newly-revised Nursery Sourcesfor California Natives by M.A.Showers is available for $10.00 fromthe Division of Mines and Geology.Contact the Publications andInformation Office, 801 K Street,MS 14-33, Sacramento, CA 95814-3532. (916) 445-5716.

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4 Winter 2000

Forestland Steward

California Hardwoods

John R. Shelly, PhD

There is a sizable hardwoodcomponent to California’s forests(see Table 1). Despite this, the

native hardwoods never played animportant role in the products producedfrom the forest. Today the major uses ofhardwoods in California are for fuelchips, pulp chips, and firewood, allproducts that return little value to thelandowner. Traditionally, hardwoodshave also been a source of food (nuts andacorns), wildlife habitat, timber for localfarm and home use, and firewood…butof little commercial value for value-added products.

As we move into the 21st century, anincreasing understanding of the scienceof ecology and societal pressures arecausing a reevaluation of our naturalresources with an emphasis on sustain-able production and improving ruraleconomies. In certain situations, hard-woods may be a viable resource for localneeds, specialty products, or perhapseven for a larger commodity market.The high-density hardwoods such as tan-oak, madrone, California black oak, andthe white oaks may have economicpotential. Local products made by arti-sans, woodworkers and hobbyists provethat high value products can be madefrom many of these native hardwoodspecies. The high cost of production willlikely be a major limiting factor.

OpportunitiesResource—Hardwoods represent anunderutilized resource. Hardwood spe-cies in California are about 16% of theinventory of standing timber (growingstock volume) and 6% of the sawtimbervolume (greater than 11-inch diameter,dbh). Sixty percent of the hardwoodinventory is located in the timberlandforests and the remaining 40% is foundin the rangelands and valley regions.

About one-third of the timberland hard-wood growing stock is sawlog quality.Harvesting volumes of native hardwoodsare not available, but it is likely thatsustainable harvesting levels could beincreased dramatically.

Demand—California is one of thenation’s major consumer markets forhardwood flooring, furniture, cabinets,and other wood products. Manufacturingthese products near the markets can offerdistinct economic advantages in lowtransportation costs. These two factorshave created a furniture-manufacturingsector in California that uses more thanone million board feet of hardwoodlumber per year. However, less than 5%of the total comes from the western U.S.species, and nearly all of that is red alder.Most (about 80%) is shipped from theeastern half of the US and about 10% isimported from tropical regions. Clearly,there is an opportunity for westernhardwood lumber if consistent qualitycan be offered at a competitive price.California furniture manufacturers havea high demand for wood componentsand sub-assemblies—intermediateproducts that are well suited to the nativehardwood resource.

Economic Development—The growthof an industry to produce wood productsfrom an underutilized resource has thepotential to create many jobs in ruralcommunities with a timber resourcebase. These jobs may offset some of theemployment losses resulting from reduc-tions in softwood harvesting and themodernization and closing of sawmills.

Marketing—California hardwoodspresent unique marketing opportunities,especially in niche markets. There isoften a distinct advantage to productsthat are locally grown and produced. Inmany cases, the sustainable harvest of

California hardwoods may qualify forecological certification by third partymonitors. This certification has the po-tential to increase the value of a productto customers who place a premium onenvironmentally sound manufacturing.Even without an additional economicvalue, it may give a marketing edge overa product that is not certified.

Raw Material Properties—Many ofCalifornia’s hardwood species comparefavorably with the benchmark species ofthe furniture industry. With the excep-tion of the lower density hardwoodssuch as poplar, cottonwood, buckeye,and willow, most of the California hard-woods will perform very well in conven-tional hardwood products. The high-

Utilization opportunities and challengesTable 1: Estimated Growing Stock Volumeof Hardwoods Typically Found in theTimberland and Woodland Regions of Calif.

Common Name Scientific Name Total Volume(million ft3)

Timberland Species

California black oak Quercus kelloggii 2420Tanoak Lithocarpus densiflora 2167Pacific madrone Arbutus menziesii 1272California bay laurel Umbellaria californica 270Alder Alnus spp. 267Oregon white oak Quercus garryana 245Bigleaf maple Acer macrophyllum 165California white oak Quercus lobata 49Giant chinquapin Castanopsis chrysophylla 45Poplar/cottonwood Populus spp. 14Oregon ash Fraxinus latifolia 7

Woodland Species

Canyon live oak Quercus chrysolepsis 1379Coast live oak Quercus agrifolia 140Interior live oak Quercus wislizeni 70Quaking aspen Populus tremuloides 24Eucalyptus Eucalyptus spp. 19Blue Oak Quercus douglasii 11Walnut Juglans hindsii 1Sycamore Platanus racemosa <1

5Winter 2000

Forestland Steward

�

density California hardwoods (specificdensity > 0.50) have very good machin-ing and finishing properties, and some ofthe finer textured woods such asmadrone and red alder are exceptional.Many of the high-density hardwoodsalso have unique and interesting grainpatterns that add to the appearance valueof the wood. All of the moderate to high-density hardwoods also have very goodstrength properties. A few, such astanoak, madrone, Oregon white oak,valley oak, and eucalyptus, exhibit veryhigh hardness values making them anexceptional choice for hardwood floor-ing. A summary of properties for someCalifornia hardwoods are listed in Table2, along with the comparable values fornorthern red oak, a benchmark species.

ChallengesManufacturing—There are numerouschallenges to manufacturing productsfrom California hardwoods. In somecases, the high density and unique woodproperties that may create marketingopportunities often create difficultmanufacturing situations. For example,California hardwoods have a reputationfor being hard to dry. Extra care duringdrying is required with the dense woodsthat have a tangential shrinkage (tangentto the growth rings) greater than 10%and a warp index greater than 2.0 (Table2). These woods are expected to have a

high frequency of drying defects if theyare dried improperly. Tanoak, madrone,and the white oak species are threespecies with a high tendency to warp andcollapse during drying. However, goodresults can be obtained by drying slowlywith good control of the drying condi-tions. A kiln capable of reaching atemperature of 150ºF (the temperaturerequired to sterilize insect-infested wood)that has a method to reintroducemoisture at the end of drying to relievestresses can successfully dry any of thesehardwoods to the desired final moisturecontent of 8%.

Marketing—Manufacturers and consum-ers are largely unaware of Californiahardwoods. The California HardwoodInitiative, a statewide effort supported bythe California Trade and CommerceAgency, California Department ofForestry and Fire Protection, USDAForest Service and the University ofCalifornia, has successfully raised thelevel of awareness but more needs to bedone. The commodity lumber marketsdemand large volumes of lumber,readily available at a competitive priceand manufactured to existing industrystandards. In contrast, the niche marketis more flexible because a specificproduct or customer is targeted and theproduct is tailored to the customer’sneeds. Availability and quality concernsmake it difficult for a new product to

enter the commodity market; however,based on the properties and characteris-tics of the California hardwoods success-ful niche markets are quite possible.

State of the IndustryA recent survey of hardwood sawmillmanufacturers in California revealed 34sawmills and 60 secondary manufactur-ers that are currently working with orinterested in working with nativeCalifornia hardwoods. The sawmills areexclusively mini-mills, often with porta-ble equipment, with annual productionsless than 500 thousand board feet(MBF). Many of these mills produce lessthan 50 MBF per year. The estimatedtotal production of all the mills in 1999was only about 4 million board feet. Atthe time this survey was completed therewere two large production softwoodsawmills considering limited tanoakproductions. These two mills have thepotential to dramatically increase theavailability of California hardwoods.

Based on the physical and mechani-cal properties, any of the common hard-wood consumer goods could be manu-factured from California hardwoods.Some woods are better suited forparticular products than other woodsand factors such as resource availability,cost of production, and quality of the endproduct will determine the long-termviability of a California hardwoodbusiness venture. These hardwoodspresent some manufacturing challenges,but the technology exists to address thesechallenges. With an understanding ofsome of the fundamental wood proper-ties and basic manufacturing principles,many of these hardwoods can bemanufactured into high value products.

For more information and references, goto our website at http://ceres.ca.gov/foreststeward/hardwood.

John R. Shelly is a Cooperative ExtensionAdvisor in Forest Products and Biomass,University of California Forest ProductsLaboratory, Richmond, CA.

Table 2. Properties of Common California Hardwoods Compared with Northern Red Oak

Specific Machining Finishing Hardness Tangential Warp IndexDensity Quality Quality (lb) Shrinkage (%)

Bigleaf maple 0.44 good good 850 7.1 1.9Blue gum eucalyptus 0.63 good good 1650 15.3 2.0California bay laurel 0.54 good very good 1270 8.1 2.9California black oak 0.50 good good 1080 7.8 2.1California white oak 0.60 good very good 1570 9.8 2.4Chinquapin 0.44 fair good 780 7.4 1.6Madrone 0.61 excellent very good 1530 13.7 2.4Oregon ash 0.50 good very good 1160 8.1 2.0Oregon white oak 0.66 good very good 1780 9.0 2.1Red alder 0.39 very good very good 620 7.3 1.7Tanoak 0.59 good good 1450 12.0 1.9Northern red oak 0.56 very good very good 1290 8.6 2.1

6 Winter 2000

Forestland Steward

Estate Planning

Consider the future of your forestland

A recent survey of Californialandowners found that 1) mostlandowners are concerned that

estate taxes will prevent them fromtransferring their land to their children;and 2) most landowners have not doneadequate estate planning to ensure thatestate taxes will not force their childrento sell the family land to pay the taxes.*

Are you one of the concerned-but-unprepared majority?

Granted, estate planning is not one ofthe easiest topics to think about. Or totalk about. And estate planning can beexpensive and time consuming. Butputting off this important task can meanthe tragic loss of your forestlands fromthe family and may even lead to thedevelopment of your property in waysthat you never intended.

The problemEstate taxes can be astronomical.

Forestland in California is extremelyvaluable and many tracts of undevel-oped land are valued even higher basedon their development value. Landownersmay find themselves land-rich but cashpoor. Your heirs will be responsible foran estate tax bill based on your totalassets that could require selling the landin order to satisfy the bill.

Loss of family forestland and farm-land to estate taxes has become a hugeconcern to landowners, but it also affectsthe public as environmental amenitiessuch as open space, aesthetics, waterquality, etc. are lost when large tracts ofland are subdivided and developed.

Don’t despairHowever, there are steps that can be

* From “Preserving Family Lands inCalifornia: An Online Guide to PlanningYour Estate” by the California OakFoundation (see Resources, next page)

taken to minimize this danger. Theoptions are complex and take a greatdeal of planning and decisionmaking.Estate planning should be done early,while there is still plenty of time to makecareful decisions.

How to beginFirst of all, be aware that estate

planning is not a do-it-yourself job. Thelaws are too complex, the options tooindividual, and the stakes too high.Instead, plan to approach this as a teamproject. You will need a number ofexperts to do this effectively—a lawyerwith forestland estate experience, anaccountant who specializes in estateplanning, a forester, and possibly others.If possible, involve your heirs in thediscussions.

One of your first jobs will be to findout the value of your land. A completeappraisal includes physical inspection,research of deeds and local land useregulations, a complete investigation ofmarket conditions, and a determinationof value. Be sure that the appraiser hasexperience with forestland and has noconflict of interest, such as an interest inselling the property to developers.

Here are five steps from theCalifornia Oak Foundation that can helpyou begin to organize your estate.

1. Clearly determine your goals, yourspouse’s goals, and goals you mayhave set for your land, business orother family members. Your secureretirement will undoubtedly be yourfirst goal.

2. Estate taxes are based on the value ofyour estate at the time of your death.It is important to determine the valueof your current estate and theprojected value of your estate to yourlife expectancy.

3. Consider all readily available tax

deductions.

4. Investigate strategies that will reducethe value of your estate in order toreduce your future tax liability.

5. Develop a “liquidity plan” to ensurethat there will be cash available topay any foreseen estate taxes, whichare generally due within nine monthsfrom date of death.

Estate planning strategiesThe tax planning tools available to a

landowner are many. They are alsocomplex. You will need to determine thebest combination for your uniquesituation and goals. Here are some of thestrategies you may want to consider:

Living Trust. This ensures that probateis avoided and protects a certain amountof the estate from being taxed.

Gifting. You can give away up to$10,000 each year ($20,000 if spousegives too) to each of an unlimited num-ber of recipients without being taxed onthe gift. Each spouse may transfer pro-perty up to $625,000 during his or herlifetime. A number of new provisions inthe Taxpayer Relief Act of 1997 will in-crease the exemption amounts over time.

Valuation Discounts and FamilyPartnerships. There are various ways todiscount the value of an estate. Checkwith your lawyer.

Life Insurance and Life InsuranceTrust. Life insurance can be used to payestate taxes or provide cash to yourheirs. Determine the best insurancestructure for your needs.

Charitable Remainder Trust. A CRTputs your assets in a trust that allows youto use them during your lifetime andthen transfers the remaining assets to acharity of your choice after your death.This may provide a substantial tax

7Winter 2000

Forestland Steward

Q. How is form “T,” Forest IndustriesSchedules, used to formulate adjustedbasis and depletion of timber lands?A. Schedule “F” of Form “T” providesa series of questions that establishesdepletion or adjusted basis (basis isessentially a calculation of “book value”for the land.)

Q. What is “Special Use Valuation” and howdoes it apply to forest ownership?A Special Use Valuation is a specialprovision within the Federal Tax Codethat allows an estate to be evaluated byits present use rather than the highestand best use, which is normally used.Under certain circumstances, forestestates can be appraised for timbergrowing rather than for potentialdevelopment use, thus reducing thevalue of the estate and estate tax liability.

Q. Who is the consulting forester you haveworked with in other estate planningendeavors?A Although the answer may includeseveral foresters, you should expect thelawyer to have a working relationshipwith a capable and trustworthy forester.

Q. What is a “Conservation Easement?”A. It is an agreement between alandowner and a conservation organiza-tion or public agency that restricts theuse of the property in perpetuity, tokeep the land in forest use.

Q. When a conservation easement ispassed to a legal recipient, how many yearsdoes one have to use up (carry forward) thevalue in tax deduction?A. Five years.

Q. What is a “Remainder Interest?”A. The act of making a gift now to takeeffect at the time of death.

Q. At what estate value must one beginbeing concerned about federal estatetaxes?

A. In 1997, estates of $600,000 or morewere subject to federal estate taxes.Under the Taxpayer Relief Act of 1997,that figure will rise to $1 million overthe next 10 years.

Q. Under the “General Rule,” how muchmay a taxpayer who makes a charitablecontribution of property deduct from his/her income?A. 30 percent

Q. Under the “Special Rule,” whatprovisions apply?A. Under this rule, a taxpayer whomakes a charitable gift of appreciatedproperty can choose to reduce theamount of the deduction to the cost/basis of the property.

Q. Who is Stephen J. Small?A. He is the author of PreservingFamily Lands, a book on estateplanning, and the original author of theFederal Tax Law that provides specialtax treatment for donated conservationeasements.

Other important questions:

Q. How many estate plans have youprepared for nonindustrial privateforestland owners?

Q. What is your fee schedule?

Q. How will you determine what myinterests and objectives are? (It isimportant that you choose a lawyerwho has your interests and objectivesin mind.)

Q. Can you provide three nonindustrialprivate forestland owner referenceswho have received estate planningservices from you? (You should contactthe references for recommendations.)

—questions by Lloyd Casey, US Forest Service,originally published in Forest StewardshipBulletin Volume 13, a publication of thePennsylvania Forest Stewardship Program.

Questions to ask when choosing anestate planning lawyer

Estate planning for forest landowners is unique. Your lawyer must be knowledgeablein this specialized field. The following questions are designed to help you assess thecandidate’s knowledge of estate planning as it relates to forestland.

deduction and reduce capital gains taxliability.

Charitable Gifts. Gifts of land made tononprofit organizations may reduce yourincome taxes during your lifetime,reduce your estate tax liability, andpreserve your land in its natural state.

Conservation Easements. This veryimportant tool can allow you to passyour land on to family members,continue to use the land as you wish, andreduce the value of your land and taxliability. A conservation easement is alegal agreement between the landownerand an appropriate governmental ornonprofit organization that restrictscertain activities (such as development)on the land. Because the land use isrestricted, its value may be lowered,which can lead to significant estate taxreductions. Each conservation easementagreement is unique, depending on thewishes of the landowner. The restrictionsin a conservation easement stay with theland in perpetuity and are binding tofuture owners.

ResourcesPreserving Family Lands in California: AnOnline Guide to Planning Your Estate is a12-page publication available from theOak Foundation at http://www.californiaoaks.org/assets/images/presbrosec.pdf

Estate Planning for Forest Landowners:What Will Become of Your Timberland? byHarry L. Haney, Jr., and William C.Siegel. 1993. USDA Forest Service,New Orleans, Louisiana. GeneralTechnical Report SO-97. This 186-pagereport is somewhat dated, so use withcaution.

Preserving Family Lands II, More PlanningStrategies for the Future by Stephen J.Small. At this site there is also alandowners quiz to give you an idea ofthe estate taxes that would be due onyour estate. In addition there is a gooddiscussion on the Taxpayer Relief Act of1997. http://www.stevesmall.com/. �

8 Winter 2000

Forestland Steward

Tax Time

Larry M. Bishop,Forest Management/Taxation Specialist

Here is some information to keepin mind when you prepare your1999 federal income tax return.

This discussion is necessarily brief—youshould consult other sources for a morecomprehensive treatment of the issues.

Basis and Tax RecordsPart of the price you receive from a

timber sale is taxable income, but part isalso your investment (i.e., basis) in thetimber sold. Allocate your total costs ofacquiring purchased forestland—or thevalue of inherited forestland—among land,timber, and other capital accounts as soonas possible. Adjust this basis up for newpurchases or investments and down forsales or other disposals. When you sellyour timber, you can take a depletiondeduction equal to ((Adjusted basis / Totaltimber volume just before the sale) x(Timber volume sold)). Good recordsinclude a written management plan and amap of your forestland. Keep records thatsupport current deductions 6 years be-yond the date the return is due. Keeprecords that support your basis 6 yearsbeyond your period of ownership. Reportbasis and timber depletion on Form T(Timber), Schedule B.

Passive Loss RulesThe passive loss rules continue to be a

real puzzle for forest landowners. Thissubject is too complex to cover in detailhere; what follows is a very briefsummary. Under the passive loss rules,you can be classified in one of threecategories: (1) investor, (2) passive partici-pant in a trade or business, or (3) activeparticipant (materially participating) in atrade or business.

The law’s intent is that you are“materially participating” if your involve-ment is regular, continuous, and

substantial; however, a low level of acti-vity is adequate if that level is all that isrequired to sustain the trade or business.This means that record keeping is veryimportant! To show material participa-tion, landowners will need to keeprecords of all business transactions relatedto managing their timber stands. Like-wise, it would be a good idea to keeprecords of other business-related activitiessuch as landowner meetings attended,odometer readings to and from meetings,cancelled checks for registration fees, andcopies of meeting agendas. Generally,you will get the best tax advantage if youare “materially participating” in a timberbusiness because all management expen-ses, property taxes, and interest onindebtedness is fully deductible againstincome from any source. However, if youare “materially participating,” you mustdispose of your timber under the provi-sions of Section 631 to qualify for capitalgains. (This means that you must sell yourtimber on a “pay-as-cut” or “cut andconvert” basis, rather than lump sum.)On the other hand, if you have consider-able passive income (such as Conserva-tion Reserve Program annual rentalpayments), it may be to your advantageto be considered “passive.” Most of thediscussion that follows applies to forestlandowners who are “materiallyparticipating.”

Reforestation Tax Credit andAmortization

The reforestation tax credit and 7-yearamortization is one of the best tax advan-tages for forest landowners. If you refor-ested during 1999, you can claim a 10-percent investment tax credit for the first$10,000 you spent for reforestation duringthe tax year. In addition, you can amor-tize (deduct) all of your 1999 reforestationcosts (up to $10,000), minus half the taxcredit taken, over the next 7 years

(actually 8 tax years). The election toamortize must be made on a timely taxreturn for the year in which the reforesta-tion expenses were incurred. Elect toamortize reforestation expenses on Form4562. (Passive owners may or may not beeligible for the amortization and credit).

Here’s how it works. Assume youspent $4,000 to reforest a cutover tract in1999. You claim a $400 tax credit (10percent of $4,000) for 1999. You can alsodeduct 95 percent of these reforestationcosts over the next 8 tax years. Due to ahalf-year convention you can only claimone-half of the annual amortizable por-tion for 1999. This means that on your1999 tax return you can deduct one-halfof (0.95 x $4,000 / 7) or $271. For thenext 6 tax years you can deduct (0.95 x$4,000 / 7) or $543, and the remaining$271 can be deducted the 8th tax year.

The annual reforestation amortizationis claimed on Form 1040 on the line foradjustments rather than being claimed onSchedule A under miscellaneous deduc-tions. (If you use Schedule A for thispurpose, you can claim only aggregatedmiscellaneous deductions that exceed 2percent of adjusted gross income). UseForm 3468 to claim the investment taxcredit.

Any reforestation costs exceeding the$10,000 annual limit must be capitalized(entered into your timber account). Youcan recover (deduct) these costs whenyou sell your timber.

A final word of caution: the tax creditand 7-year amortization deductions aresubject to recapture if you dispose of yourtrees—within 5 years of planting for thecredit and within 10 years of planting forthe amortization.

Capital Gains and Self-Employment Taxes

If you report your timber sale incomeas ordinary income, you could pay signifi-

Tax tips for forest landowners

9Winter 2000

Forestland Steward

cantly more in taxes than you would ifyou report it as a capital gain. Also, capi-tal gains are not subject to the self-employment tax, as is ordinary income.The net self-employment tax rate for1999 is 15.3 percent for self-employmentincome of $400 or more. The rate con-sists of a 12.4 percent component for oldage, survivors, and disability insurance(OASDI) and a 2.9 percent componentfor hospital insurance (Medicare). Themaximum income subject to the OASDIcomponent of the tax rate is $72,600,while the Medicare component is unlim-ited. However, if wages subject to SocialSecurity or Railroad Retirement tax arereceived during the tax year, the maxi-mum is reduced by the amount of wageson which these taxes were paid. To qual-ify for long-term capital gains treatment,timber sold after December 31, 1997 musthave been held longer than 12 months.The maximum long-term capital gainsrate for 1999 is 20%. (For taxpayers in thelowest income bracket, the maximumrate is 10%).

Cost-share PaymentsIf you received cost-share assistance

under one or more of the Federal or Statecost-share programs during 1999, youmay have to report some or all of it asordinary income. You have severaloptions. You have the option to include itas income and then recover the part thatyou pay plus the cost-share paymentthrough the amortization and reforesta-tion tax credit already described. You alsohave the option to exclude the “exclud-able portion” from income if certainconditions are met. These conditions are(1) the cost-share program has to beapproved for exclusion by the IRS and(2) the maximum amount excludable peracre is the greater of: (a) the present valueof $2.50 per acre or (b) the present valueof 10 percent of the average income peracre for the past 3 tax years. This secondrequirement gets rather complicatedbecause you have to determine anappropriate interest rate to compute thepresent values. Programs approved forexclusion by the IRS include the Forestry

Incentives Program (FIP), the ForestStewardship Incentive Program (SIP), theWetlands Reserve Program (WRP), theEnvironmental Quality IncentivesProgram (EQIP), and Wildlife HabitatIncentive Program (WHIP), plus severalState programs [including CFIP].

Generally, if you harvested the tractwithin the last 3 years, probably all of thecost-shares received can be excludedfrom income. In some cases, taxpayersmay be better off to exclude cost-sharepayments. Other taxpayers may be betteroff not to exclude cost-share payments.Instead, they may be better off to claimthe cost-share payments as part of thereforestation tax credit/7-yearamortization. The important point hereis: You must report cost-sharepayments. If you decide to exclude,attach a statement to your return thatstates specifically what cost-sharepayments you received, that you chooseto exclude some or all of them, and howyou determined the excludable amount.

Casualty LossesA casualty loss must result from some

event that is 1) identifiable, 2) damagingto property, and 3) sudden and unex-pected or unusual in nature. Examplesinclude wildfire and storms. Generally,your claim for casualty losses can be nomore than the adjusted basis minus anyinsurance or other compensation.

The IRS has issued position state-ments on southern pine beetle losses intimber stands and drought losses of plant-ed seedlings. In both cases, the IRS statedthat, generally, neither circumstancequalified for casualty-loss deductionsbecause they failed to meet the sudden-ness standard. It may be possible, howev-er, to take a business- or investment-lossdeduction for both types of damage.

Management and MaintenanceGenerally, your annual expenses for

the management and maintenance of anexisting stand of timber can be expensedor capitalized. In most cases, you arebetter off to expense those costs duringthe tax year they are incurred, rather

than capitalizing them. If it is not to youradvantage to itemize deductions for1999, you should capitalize these expen-ses. If you choose to itemize deductions,you can deduct these expenses, but thepassive loss rules apply.

ConclusionRemember these points when you file

your 1999 Federal income taxes:

1 Decide if you are going to be an activeor passive participant or an investor.Generally you will get the best taxadvantage if you are active.

2. Establish your basis as soon as possi-ble and keep good records! Recordsinclude a management plan and map,receipts for business transactions, dia-ries, and landowner meeting agendas.

3. If you had reforestation (timber standestablishment) costs, be sure to consi-der the 10-percent reforestation taxcredit / 7-year amortization.

4. If you sold timber during 1999, youmay be able to benefit from the long-term capital gains provisions becauseyou do not have to pay self-employ-ment tax on capital gains.

5. If you had cost-share assistance during1999, you must report it to the IRS.You may choose to exclude some orall of it, if certain qualifications aremet, but you still must report it.

6. If you participated in the CRP, yourannual payments must be reported asordinary income. Likewise, if youreceived CRP cost-share assistancefunds, you must report them asordinary income.

7. Proper tax planning is just as import-ant as the management techniques togrow a profitable timber crop. Forhelp, contact a professional taxadvisor.

—abridged from “Tax Tips for ForestLandowners for the 1999 Tax Year,”provided by the USDA Forest Service.Available at http://www.r8web.com/taxtipsSee also: National Timber Tax Website atwww.fnr.purdue.edu/ttax/newintro.htm. �

10 Winter 2000

Forestland Steward

California Department of Forestryand Fire ProtectionForest Landowner AssistancePrograms

Jim Geiger(916) 653-8286jim_geiger@fire.ca.gov

California Association of RCDsThomas Wehri(916) 447-7237carcd@ns.net

California Resources Agency:California Environmental ResourcesEvaluation System (CERES)

Deanne DiPietro(916) 653-8614deanne@ceres.ca.gov

Natural Resources ConservationService

Jerry Reioux(530) 792-5655jerry.reioux@ca.usda.gov

Technical Assistance Resources

Farm Service AgencyLarry Plumb(530) 792-5520

California Dept of Fish & GameBarrett Garrison(916) 653-1738bagarris@hq.dfg.ca.gov

U.C. Cooperative Extension ForestryRichard Harris(510) 642-2360rrharris@nature.berkeley.edu

Gary Nakamura(530) 224-4902gmnakamura@ucdavis.edu

USDA Forest ServiceSandra Stone(707) 562-8918sstone/r5@fs.fed.us

Many agencies are available to provide technical assistance, referrals,information, education, land management plan assistance, and advice.

California Stewardship Helpline (800) 738-TREE; ncsaf@mcn.org

Resources

�

�

Need some background to helpmake those important decisions

regarding your oak woodland?Guidelines for Managing California’sHardwood Rangelands is certainly agreat place to start.

This 180-page booklet/manual iseasy to read and use. It presentsvarious management options availableto rangeland owners, along withdetailed information to assist indecisionmaking.

There are worksheets to help youassess your property and goals,discussions of ecological and economicconsiderations, tables of essential

Want moreinformation on

hardwoods?The Integrated Hardwood RangeManagement Program (IHRMP) is aresearch and education program of theUniversity of California which focuseson oak woodlands. Their websiteincludes articles, publications, and muchmore. There are descriptions of the var-ious oak habitats in California and theirassociated wildlife species along with thehabitat requirements of vertebrates.http://danr.ucop.edu/ihrmp

The UC Forest Products Laboratorydoes research and education in variousareas involving California’s woodresources including hardwood utilization.http://www.ucfpl.ucop.edu/

The Institute for Sustainable Forestry(ISF) promotes ecological and economi-cal well-being of forest-based communi-ties in Northwestern California. Thefocus is on developing a sustainablehardwoods industry. Their websitecontains information on certification,research projects, and numerous publica-tions and educational opportunities.http://www.isf-sw.org

The California Oak Foundation(COF) is dedicated to protecting andperpetuating California's native oakwoodlands and the wildlife habitat andwatershed benefits they provide. Theyhave excellent information about oakwoodlands, including a booklet on thecare and planting of oaks. There is alsoan online estate planning guide,“Preserving Family Lands in California.”http://www.californiaoaks.org/index.html

The California Hardwood IndustryInitiative was established in October,1996 to increase investment in compan-ies that use California hardwoods in asustainable manner. Learn more athttp://commerce.ca.gov/regional/hardwood/index.html

Guidelines provides a thoughtfuldiscussion of hardwood management

information, and basic managementrecommendations.

Topics include general hardwoodrangeland values, wildlife ecology andhabitat relationships, livestock and graz-ing, developing recreational sources ofincome, alternative forest products,sustainable management and regenera-tion, fire, and erosion control. Sourcesof technical assistance are alsoprovided.

To order, send $15 (payable to UCRegents) to Joni Rippee, IHRMP, 163Mulford Hall, UC Berkeley, CA 97420.(510) 643-5429; fax: (510) 643-5438;rippee@nature.berkeley.edu.

11Winter 2000

Forestland Steward

For more information on these calendar items,call the number given or the ForestStewardship Helpline, 1-800-738-TREE. Tosubmit an event or to receive this calendar by e-mail, contact Sherry Cooper, 530-224-4902;shcooper@ucdavis.edu.

Calendar

ONLINE CALENDAR!You will find a more

comprehensive calendar,updated regularly, at the Calif.

Forest Stewardship website:

http://ceres.ca.gov/foreststeward

March 2, 2000CLFA Spring Workshop: InteractionsBetween Silvicultural Practices AndWildlife HabitatsSacramento, CACalifornia Licensed Foresters Assn.Hazel Jackson 209-293-7323;clfa@volcano.net; $130-$155; www.clfa.org/

March 2–5, 200018th Annual Salmonid RestorationConferenceFortuna, CAAmeriCorps Watershed Stewards Project,Cal. Comm. Salmon Trollers, CCC, etc.707-268-8182; salrestfed@aol.com; $55-$100www.northcoastweb.com/srf

March 3–4, 2000CLFA Annual Conference: ForestryTrends For The 21st CenturySacramento, CACalifornia Licensed Foresters Assn.Hazel Jackson 209-293-7323, fax 209-293-7544; clfa@volcano.net; $150-$175http://www.clfa.org/

March 6–9, 200019th Vertebrate Pest ConferenceSan Diego, CAThe Vertebrate Pest CouncilTerrell Salmon 530-752-8751, fax 530-752-4154; tpsalmon@ucdavis.edu; $135http://www.davis.com/~vpc/welcome.html

March 7–8, 2000Forest Road Stewardship WorkshopCorvallis, OROregon State UniversityConference Assistant 541-737-2329conference@cof.orst.eduwww.cof.orst.edu/cof/extended/conferen

March 7, 14, 21, 28 & April 4Ranch Water Quality Planning ShortCourseWillows and MaxwellCalif Cattlemen’s Assoc, CARCD, etc.530-865-1107; mrhorney@ucdavis.edu; $30

March 11, 2000Grant Writing Course For CitizenWatershed GroupsSacramento, CASacramento Urban Creeks CouncilDave Tamayo 916-456-6154;tamayo2@jps.net; $25

March 14–16, 2000ForestviewBeaverton, ORAtterbury Consultants, Inc.503-646-5393, 503-644-1683jaschenbach@atterbury.com; $495http:www.atterbury.com

March 20–31, 2000Volunteers Needed For ForestConservation Days 2000Saratoga, CANCSAF, Americorps, Cal. For. Prod.Comm., Cal. For. Soils Council,CDF, Davey Tree, Forest Prod. Soc., ISA,PG&E, PLT, SRM, TAT, USFS, UC, etc.Don Gasser 707-253-0576, Laura Alber510-482-8478Overnight accommodations available

March 30, 2000Applying The Basics Of CaliforniaHydrologySan Francisco, CAUC Berkeley Extension; $295510-642-4111, fax 510-642-0374http://amber.berkeley.edu:4243/em/nr7.htmlCourse EDP 263129

April 3, 2000Managing California Watersheds: AStatewide ConferenceSacramento, CAUC Davis Extension800-752-0881, fax 530-757-8558$180, before March 6 $155www.universityextension.ucdavis.edu Section994U600

April 6, 2000TMDL: The Total Maximum DailyLoad Program In California RiversSan Francisco, CAUC Berkeley Extension510-642-4111, fax 510-642-0374; $295http://amber.berkeley.edu:4243/em/nr8.htmlCourse EDP 253781

April 17–19, 2000National Watershed OutreachConferenceSan Diego, CAUS EPA, UC Coop Extension, UC SeaGrant, Aquatic Outreach Institute, & Co.of San Diego Watershed Working GroupStacie Craddock 202-260-3788craddock.stacie@epa.gov or Melissa Bowen703-385-6000 bowenme@tetratech-ffx.com;$85; www.epa.gov/OWOW/watershed/outreach/events/aprilconf.html

April 24–25, 2000Riparian Management Areas: TheEcology, Functions And ManagementWilsonville, ORWestern Forestry & Conservation Assn.503-226-4562 fax 503-226-2515richard@westernforestry.orgwww.westernforestry.org

April 27–29, 2000Forest Landowners of CaliforniaAnnual MeetingLake Natoma Inn, FolsomIncludes field day at Edwards Family TreeFarm in Colfax.Dan Weldon, 916-972-0273;dweldon@forestlandowners.org

Maintaining Forest & RanchRoads in the Sierra Nevada

April 14—San AndreasApril 28—North ForkMay 12—Georgetown

One-day workshops for privatelandowners about rural road designand maintenance. Presented by UCCooperative Extension in collabora-tion with local RCDs. Cost: $15.Call 530-224-4902 or e-mailshcooper@ucdavis.edu for more info.

Coming in spring and summer:Forest Stewardship Workshops inthe Central Sierras and SouthernCalifornia. Call Sherry Cooper, 530-224-4902, for details.

How can the Forestland Steward newsletter help you?

I’d like to see more information on ____________________________

_______________________________________________________

My suggestion is __________________________________________

_______________________________________________________

❑ Add me to the mailing list / change my address:

Name___________________________________________________

Address _________________________________________________

City, Zip ____________________________ Phone_______________

Send to CDF, Forestry Assistance, P.O. Box 944246, Sacramento, CA 94244-2460.Phone: (916) 653-8286; Fax: (916) 653-8957; e-mail: jim_geiger@fire.ca.gov

12 Winter 2000

Wildlife Tips

William Tietje, UC Integrated HardwoodRange Management Program

Firewood cutting in the oakwoodland can be conducted withminimal damage to most wildlife

if care is taken to protect the habitatresources that wildlife use. In evaluatingpossible woodcutting projects, considerthe available habitats and how selectivewood removal would alter them.Indiscriminate firewood cutting tends toremove important wildlife resources suchas snags and downed wood, and simplifyvegetation structure and composition.These and other adverse effects ofwoodcutting can be minimized withthoughtful planning. Here are someconsiderations and guidelines for devel-oping a wildlife-compatible firewoodharvesting plan.

� Acorn production differs greatlybetween trees and between years.Monitor acorn production for at leasttwo years and mark good acornproducing trees. Protect these treesduring firewood harvesting.

� Thinning should consider thewoodland’s long-term regenerationcapabilities. This is important topreserve both woodland viability andmanagement options. When cutting,leave seedlings and saplings to ensurereplacement. For sustained yield,never remove more wood than can beadded by growth. If regeneration isnot adequate to maintain the wood-land at a given level, either do not cutor supplement natural regenerationwith planting.

� Many kinds of wildlife depend on oaksnags for food and shelter. Sometimeshabitat values may be better main-tained by leaving a snag and cutting aliving tree instead—though not one that

is a prolific acorn producer. Retain atleast one snag per acre.

� Zones of vegetation along watercourses are especially valuable towildlife. These riparian zones providean unusual diversity of food and coverresources. Be very selective in cuttingin riparian areas or, better yet, do notcut at all.

� Wildlife cover is usually reduced byfirewood cutting due to direct removalof the trees and removal of associatedbrush and ground cover. To compen-sate this loss, use branches of cut treesto construct brush piles for cover. Thepiles will be used by quail, other smallbirds, and small mammals for raisingyoung, and for shelter from predatorsand winter weather.

� Maintain corridors that will enablewildlife to move between blocks ofhabitat. Especially important are thosecorridors that connect feeding andwatering areas.

� For aesthetic and wildlife values, andto ensure regeneration, maintain amixed-species and uneven-agedwoodland.

— reprinted from “Wildlife Among the Oaks:A Management Guide for Landowners,” apublication of the Integrated HardwoodRange Management Program. Single copiesare free on request from IHRMP, 163Mulford Hall, No. 3114, University ofCalifornia, Berkeley, CA 94720-3114, FAX:510-643-5438, rippee@nature.berkeley.edu

Minimize wildlife disturbance whencutting firewood in oak woodlands