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

2. 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 Title XV

3. 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 15% Corporate Tax Rate on Timber

4. 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

5. 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. Extension of Conservation Easement Deduction

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

7. 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

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

9. 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!

10. 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) Timber Real Estate Investment Trusts (REIT’s)

11. 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