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01.17.2024 Legal News

Harvesting Timberland in Virginia? Consider Claiming the Riparian Buffer Tax Credit

Since 2000, the Virginia legislature has granted individual landowners and partnerships up to $17,500 in tax credits for leaving waterway-adjacent stands of trees intact when harvesting timberland. To claim this credit, landowners must apply to the State Forester during the year in which they intend to cut adjacent timber from the plot. The State Forester calculates the tax credit as 25% of the unharvested timber’s value. The credit, applicable against an individual’s state tax liability, may be carried over five years.
There are several important caveats that govern this state tax credit program. First, the trees must form a “timber buffer” around any waterway no less than 35 feet and no greater than 350 feet in width. The applicable State Code provision defines “waterway” as any perennial or intermittent stream of water depicted on the then most current United States Geological Survey topographical map. Second, landowners must not harvest the buffer and cannot claim subsequent tax credits on the same plot for 15 years following the harvest date. 
Maximizing your Tax Credit Return
The riparian buffer tax credit program offers unique benefits to landowners with specific tract characteristics or timber production models. Leaving buffer zones around in-tract waterways improves water quality, mitigates erosion, and preserves ecological habitats within the harvested tract. Retention of timber buffers add value to the properties in other ways, such as enhancing the property’s value for hunting, recreational, or resale purposes.
Beyond the environmental benefits, the program allows landowners to repeatedly “harvest” the same trees for tax credit purposes. This is especially beneficial when slow-growing or valuable hardwoods populate a riparian buffer. Landowners harvest pine plantations on an 18-to-25-year timeline, depending on a variety of factors, including market conditions, tract quality, and the purpose for which they are producing timber. Slower-growing hardwoods require longer periods of time to reach maturity. Because the state uses the value of trees within the buffer to calculate the credit amount but issues tax credits concurrent with plot harvests, landowners may take tax credit value from hardwoods on the same timescale as pine plantations. In short, a landowner could, for tax credit purposes, “harvest” the same stand of valuable hardwoods over the life of the trees, extracting value from the same plot without incurring replanting costs.
Moreover, claiming the tax credit returns value to landowners who leave trees uncut around hard-to-access areas, including cuts, draws, and ravines. This enables landowners to glean value from land which might be difficult to access or left unharvested for topographical reasons. Where wet terrain or steep grades make harvesting unfeasible, the riparian buffer tax credit enables landowners to obtain some return from less productive land.
Virginia’s Riparian Buffer Tax Credit incentivizes landowner stewardship of the state’s ecological resources and can help maximize the financial return of timberland. Landowners seeking to take advantage of this credit should consult with their attorney, tax accountant, or the Virginia Department of Forestry for more specific details.