ber 31, 1979, may report capitalized reforestation 
expenditures on their Federal income tax returns in 
one of two ways: they may claim a 10-percent tax 
credit on an annual maximum of $10,000 of refor- 
estation expenditures and amortize 95 percent of 
those expenditures over a 7-year period (84 
months), or they may claim an 8-percent tax credit 
and amortize 100 percent of their expenditures up 
to the $10,000 annual limit over the 7-year period. 
Qualifying costs include expenditures for seeds or 
seedlings and the costs of labor, tools, and site 
preparation incidental to planting, seeding, or natu- 
ral regeneration. 
The reforestation tax incentives and cost- 
sharing are not exclusive programs; that is, qualify- 
ing landowners may take advantage of both incen- 
tives. For example, a _ nonindustrial private 
landowner may receive cost-sharing under FIP, re- 
port it as ordinary income, and then apply the tax 
credit and amortization to all of his or her reforesta- 
tion expenditures up to the $10,000 annual limit. If 
the cost-share payment is not reported as ordinary 
income, then the landowner may apply the tax in- 
centives only to his or her share of the expenditures. 
The major provision of FIP is a Federal cost- 
share that, until recently, ranged up to 75 percent of 
the costs of tree planting, timber stand improve- 
ment, or natural regeneration. The Forestry Incen- 
tive Program's maximum cost-share rate is now 65 
percent. States and counties are further permitted 
to adjust this rate downward through the State Agri- 
cultural Stabilization and Conservation Boards that 
administer the program. To be eligible for FIP assis- 
tance, a landowner must be nonindustrial and hold 
fewer that 1,000 acres of commercial forest land. 
Landowners are limited annually to $10,000 of cost- 
share assistance. Also, the candidate site must be 
capable of growing 50 cubic feet of wood annually. 
The Agricultural Conservation Program pro- 
vides cost-sharing for tree planting, up to a maxi- 
mum Federal share of 60 percent. In each ACP 
case, however, the primary purpose for the assis- 
tance must be soil and water conservation. Under 
the ACP, landowners may receive cost-shares to 
plant trees in counties not designated to receive FIP 
monies or in counties where all the FIP assistance 
has been used. 
Under the Conservation Reserve Program, 
landowners elect to retire highly erodible, recently 
cultivated land and may receive up to a 50-percent 
76 
Federal cost-share to plant their land with trees (or 
grass) as well as receive up to $50,000 annually in 
rental payments (established through bids) over a 
10-year contract period. During that period, the 
landowners must keep their land out of cultivation. 
Lands enrolled in the CRP must meet erosion criter- 
ia established by the Soil Conservation Service. No 
more than 25 percent of the cropland in any one 
county may be enrolled in the program. 
State forestry cost-share programs are avail- 
able in seven Southern States: Virginia, North Car- 
olina, South Carolina, Florida, Alabama, Mississippi, 
and Texas. Each of the seven States with cost-share 
programs requires an approved _forest- 
management plan for candidate sites, and each 
precludes the simultaneous use of State and Feder- 
al cost-share funds. Other eligibility requirements 
and the administration of the programs vary among 
the States, as shown in table 1. 
The relative importance of Federal and State 
cost-share programs across the South can be seen 
in funding levels and planting accomplishments 
over the past 5 years. As shown in table 2, the 
prominence of FIP in the South, a region that re- 
ceives approximately 75 percent of the disburse- 
ments from the national program, has declined over 
the past 5 years, but that decline has been largely 
Offset by increases in State cost-share programs 
and ACP. In 1981, FIP accounted for nearly 70 per- 
cent of the cost-share dollars spent in the South. By 
1985 that proportion was under 45 percent. The 
increase in State spending over the 1981-85 period 
is due in part to the startup of four new State pro- 
grams, but spending also increased in existing 
State programs. These trends seem to signify a 
willingness by the States to pick up the slack in 
Federal assistance. 
Planting levels across the South further reflect 
the declining prominence of FIP, although FIP con- 
tinues to put more trees in the ground than the State 
programs combined (table 3). Nonetheless, cost- 
sharing by the Southern States has become in- 
creasingly important, growing from less than 20 per- 
cent of the cost-shared acres in 1981 to over 40 
percent of the acres planted with public cost- 
_ sharing in 1985. Acres in the Agricultural Conserva- 
tion Program have experienced an even greater rate 
of increase in recent years, with ACP accounting for 
20 percent of the cost-shared acres in 1985. 
