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Weyerhaeuser Still Awaiting Timber Tax Relief

Posted by ecoshift on December 20, 2007

Weyerhaeuser Still Awaiting Timber Tax Relief
December 19, 2007: 07:55 PM EST
By Paula L. Stepankowsky, Dow Jones Newswires

LONGVIEW, Wash. -(Dow Jones)- Forest products giant Weyerhaeuser Co. (WY) will have to wait until early 2008 to find out if it will get a key tax break it has sought for several years.

The company and its investors are watching the so-called Tree Act closely because the Federal Way, Wash., company has said it believes getting tax relief for timberlands holders is a better way to maximize value than restructuring into a real estate investment trust, as some investors have urged.

The Tree Act was most recently attached to the Energy Bill, said Bruce Amundson, Weyerhaeuser spokesman. But it was dropped from that bill on Dec. 13 as part of the negotiations that later led Congress to pass it and President Bush to sign it Wednesday.

The Tree Act has now been attached to the Farm Bill, which was passed last week in the Senate by a vote of 79 to 14, Amundson said. The Tree Act, however, was not in the version of the Farm Bill passed by the House of Representatives, Amundson said.

House and Senate Agriculture Committee leaders will now negotiate a compromise between the bills passed by the House and Senate, leaving Weyerhaeuser hopeful that the Tree Act will still be included.

“We have very strong support from the leaders in both houses and on both sides of the aisle, so we’re hopefully and confident it will remain in the fill,” Amundson said Wednesday…

Weyerhaeuser has resisted converting into a REIT so far, in part because it could potentially trigger a large tax liability, depending on how the Internal Revenue Service viewed the transaction. If the IRS deemed the conversion primarily a strategy to avoid taxes, it could trigger an estimated $3 billion to $4 billion tax liability.

This liability would be based on the estimated value of the company’s timber today compared with what it cost when Weyerhaeuser bought much of the 6.4 million acres it manages in the U.S. more than 100 years ago, the company has said.

Instead, Weyerhaeuser continues to support the Tree Act, which would give tax relief for it and other timber companies that must pay taxes first before distributing profits to shareholders.

Under current law, Weyerhaeuser is taxed 35% at the corporate level and then shareholders are taxed an additional 15% when they sell their stock. REIT shareholders are taxed once at a 15% rate, Amundson said.

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