A GREAT Tool for Woodland Analysis

A GREAT Tool for Woodland Analysis
Norman E.Elwood

Have you ever wanted to predict the future of your woodland operation's silvicultural and financial performance, but been unable to find the right tool for the job? Have you wondered how your upcoming sale would "pencil out" under different tax strategies? If your answer to either is "yes," then you'll want to continue reading. The Oregon State University Extension Forestry Program has developed a personal computer model that handles these tasks and more.

The Grass Roots Economic Analysis Tool (GREAT model) is a spreadsheet-based forest management, economics and tax analysis program. It analyzes short-run (10-year) periods of forest management scenarios, including pertinent federal and Oregon income, property and Oregon forest taxes.

The model will be useful to woodland owners considering different silvicultural, harvesting, marketing and tax strategies. Users may specify up to three different management options, five harvesting methods, three market options and 12 products. The model automatically compares and displays volume produced and financial results for three federal tax sale types and three Oregon forest tax programs.

Management options may be thought of as activities like "clearcut," "thin," and "partial cut." Harvesting methods could include skyline, tractor and horse logging. Markets may be thought of as different physical outlets for products. Products can be thought of as things like log grades or different timber products (saw logs, pulp, chips, boughs, etc.). Users can define and name each of these categories however desired.

GREAT reflects the federal tax situation for the unincorporated, self-employed and private woodland owner operating as a sole proprietor. It is not applicable to partnerships; standard or sub-chapter S corporations; or limited liability companies. It includes the effects of income, self-employment and capital gains taxes on the economic results of the user's forest management activities. Sales of cut logs and stumpage receive different federal income tax treatment under Internal Revenue Service (IRS) Code Sections 631(a) log sales and 631(b) stumpage sales. GREAT compares these two sale types with log sales where all sale revenue is taxed as ordinary income ["No 631(a)" sales]. The model has been programmed with federal income tax data reflecting the 2001 tax year. Users may override this year's data with future years' data as needed.

The model incorporates Oregon income, property and forest taxes. Annual property taxes are calculated using specially assessed values for forestland use in individual counties. Across Oregon, forest taxation includes three tax programs: Privilege Tax, Western Oregon Small Tract Optional Tax (WOSTOT) and Forest Products Harvest Tax (FPHT). The Privilege Tax Program is divided into two categories based on ownership size: Large Landowners (5,000 or more acres) and Small Landowners (less than 5,000 acres). GREAT incorporates calculations for the Privilege Tax, Large and Small Landowner programs, WOSTOT and FPHT. Oregon income and forest tax parameters reflect 2001 through 2003.

Each iteration of the model reports the following information:

  • FINAL CUMULATIVE VOLUME CUT - The grand total of all commercial volume cut during the 10-year analysis period from all harvesting activities specified.

  • FINAL CUMULATIVE NET CASH - The grand total amount of money available at the end of the 10-year analysis period including interest earned after paying all relevant costs including taxes.

  • FINAL CUMULATIVE NET ASSET VALUE - The forest stand's cumulative value at the end of the 10-year analysis period including the land plus the value of the residual trees plus the Cumulative Net Cash generated during 10-year period.

    GREAT is very user friendly and flexible. Users may create and save file templates to facilitate data input in repeated runs. Users will input data describing the management options they want to analyze including, for example, silviculture regimes, volumes (existing and removed), harvesting methods and costs, product specifications (type of product, prices), and various economic and tax parameters. For most data inputs, users can override any model-supplied default, providing near complete control over key model parameters.

    Running the model requires an IBM-based personal computer that supports the Microsoft Excel spreadsheet version 97 or newer. A color monitor is essential for easy model use. A compact disc (CD) drive is essential to access the model and user's guide files. While not absolutely necessary, a color printer will greatly enhance the usability of certain printed sheets.

    Model development is currently in the final stages with public release by the Oregon State University Extension and Experiment Station Communications Department expected later this fall. Your local OSU Extension Service Forestry agent or the author can be contacted about obtaining the model. The cost to obtain a copy of GREAT has not yet been determined, but is expected to be modest (hopefully under $100).

    Norman E. Elwood is an associate professor and Extension specialist, Department of Forest Resources, Oregon State University, Corvallis, and GREAT's lead developer. He can be reached at 541-737-2693 or Norman.Elwood@orst.edu.





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