caused the value of forest and other rural lands to 
increase, strong markets have caused timber prices 
to rise relative to the prices of most other commodi- 
ties, mounting operating costs have increased the 
revenue needs of many local governments, and the 
quality of tax administration has improved so that 
appreciating land values ar now more quickly re- 
flected in higher assessments. Becauseof these 
changes, strict reliance on an unmodified ad val- 
orem tax could conceivably force substantial 
acreages of forest land into other uses. 
The second reason is that many Southern 
States have chosen to reinvest the revenues de- 
rived from some of their special forest taxes--in par- 
ticular their severance taxes--back into the forestry 
sector. These revenues are being usedto support a 
variety of activities. As described in volume 20 of the 
Timber Tax Journal (Forest Industries Committee 
onTimber Valuation and Taxation 1984), the specific 
expenditure guidelines being employed in each 
State are as follows: 
e Alabama--All severance tax receipts are dis- 
tributed under the supervision of the State 
Forester. At least 85 percent of the revenues 
must be used for forest protection purposes. 
e@ Arkansas--All severance tax receipts go to the 
State Forestry Fund and are allocated by the 
Forestry Commission. Expenditure guidelines 
are not prescribed by law. 
e@ Mississippi--Eighty percent of all yield tax pro- 
ceeds go to the State's forestry incentives pro- 
gram. The remaining funds go to the county of 
origin. 
e North Carolina--All severance tax revenues go 
to the State's forestry incentives program. 
e@ South Carolina--All severance tax receipts go to 
the State's forestry incentives program. 
e@ Virginia--All severance tax proceeds are dis- 
tributed by the Virginia Division of Forestry. At 
least 50 percent ofthe revenues must be ex- 
pended in the countyof origin. The moneys are 
used to support forest protection efforts, State 
tree nurseries, and the State's forestry incen- 
tives program. 
The Federal Estate Tax 
Certain provisions of the Federal 1976 Tax Re- 
form Act were enacted to alleviate estate tax prob- 
lems for farm and forest properties. These amend- 
ments to the law are specifically directed to the 
inherent illiquidity of many farm and forest assets 
and the necessity of forced sales to pay the tax 
(Gardner and others 1984). 
Special Use Valuation 
Special use valuation is one such provision. Itis 
applicable to estates whose primary resource are 
farm, woodland, or closely-held business properties. 
If certain qualifying conditions (table 6) are met, the 
executor is permitted to value the estate at its "use" 
value rather than at fair market value as determined 
by the highest and best use. This election will gener- 
ally result in a reduced estate tax bill. Tax savings 
are permitted by decreasing an estate's qualified 
property values in an aggregate amount not to ex- 
ceed a maximum of $750,000. 
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