Landowners face financial, cleanup decisions after storm

RAYMOND, Miss. -- In the aftermath of the recent winter storm that blanketed many areas of Mississippi in ice for days, timberland owners have some tough decisions to make.

The Jan. 23-27 storm left thousands of acres of timber damaged or destroyed and landowners wondering how to manage this financial loss.

Curtis VanderSchaaf, forestry specialist with the Mississippi State University Extension Service, said damage due to ice storms has historically been considered a casualty loss by the Internal Revenue Service, and some landowners will be able to claim a casualty loss deduction on their federal income taxes.

“Whether or not you should depends on many different factors,” he said. “And for some people, it may not be worth it. It is a case-by-case basis.”

The IRS recognizes timberland as either a business, an investment or for hobby use. All the classifications qualify for a casualty loss. Because of the major disaster declaration by the president on Feb. 6, hobby owners who use their property strictly for personal recreation can claim a casualty loss. 

To claim a casualty loss, landowners must know the fair market value, or FMV, of their timber before and after the loss and their timber basis, or what they have invested in their timber. How the property was acquired or established -- whether it was purchased, planted or otherwise artificially regenerated, inherited or received as a gift -- will also affect basis. 

Any further investment such as forest management expenses and property taxes may also increase the basis if these costs have not been previously recovered. But using basis to reduce timber revenues during thinnings or previous casualty loss claims will reduce the basis.

“Timber is a capital investment, meaning that you’re investing in your timber over many years and hoping it’s going to rise in value,” VanderSchaaf said. “Taxes are only paid on your investment when a gain is realized -- when that standing timber is sold. So, in the eyes of the Internal Revenue Service, if that gain is never realized, the only value in that standing timber is what’s in your basis. That’s why you need to know what this is.”

A casualty loss deduction is based on the FMV and the basis. The amount of the claim is the lesser of the loss in FMV or the basis.

“People should also understand the casualty loss amount is not money they will get back. The deduction reduces the amount of money you owe taxes on,” VanderSchaaf said. “The amount of your deduction is also dependent on your tax bracket and the associated marginal income tax rate.”

For landowners who do not have a basis or do not know their timber’s FMV, a registered forester can help.

“If you had standing timber prior to the ice storm, a certified forester can calculate fair market value before and after the ice storm and your basis, but you need to figure out whether spending the money to have that done is worth it,” VanderSchaaf said. “Foresters with the Extension Service or the Mississippi Forestry Commission can provide some understanding as to whether you should spend the money to have these values calculated.”

While salvage is not required to claim a casualty loss deduction, it is best practice to attempt salvage anytime there is a loss of timber or timber quality from a storm unless the salvage costs more than what can be gained from the salvage. In some instances, conducting salvage can help reduce site preparation costs if a landowner decides to replant.

“If the damage is light and you still have a manageable timber stand even without the salvage, you might want to skip it because any logging job is going to come with some damage to residual trees,” said MSU Extension forestry specialist Butch Bailey.

“But if the damage rises to the level of stand replacement, such as if there was so much damage that you don’t have a manageable stand left, you should at least attempt salvage. Even if you get pennies on the dollar for what it was worth before the storm, that’s still something,” he said.

However, it is important to consider the damage from the salvage in respect to what is gained from the salvage. This is individual to every stand, and a registered forester can help when making that decision.

Bailey said salvage will not be easy. First, the process to remove the damaged timber can be more difficult and dangerous than a traditional logging job. Second, because there will be a lot of this extra timber hitting the market at once, prices will fall steeply, sometimes to zero.

If landowners make the decision to salvage, it is critical to document the timber that existed before the storm, what was lost, what was damaged but not destroyed and what is left. Also, talk to neighbors to see how they fared. Then, begin making calls to loggers, and document every call.

“My advice to landowners in this situation is to get ready to do the leg work,” Bailey said. “If you make the decision to attempt salvage, you’re going to have to cast a very wide net and hope you get a response.

“The best case is that you have a relationship with a registered forester who can help you through this process. Landowners who have that existing relationship typically come out better in these situations. If not, call every logger you can get in touch with and hope one of them can squeeze you in. Don’t expect the same prices as you would have gotten pre-storm. But document literally everything. Every call.”

If salvage is not an option, it is best to discuss alternatives with a registered forester because of the variability of individual stands. For some stands, it may be best to leave it alone. For others, hiring someone to clean it up may be best. In other stands, prescribed fire may be an option, but fire can be dangerous and harmful because of the high amounts of fuel on the ground and the stress to the living trees, Bailey said.

“This is a decision that you really need to have a registered forester help you through,” he said.

In the aftermath of the storm, landowners also should monitor forest health closely. Generally, landowners can expect to see slow growth overall for a year or so because of the stress to the trees. Stressed trees are more susceptible to insects and diseases. Wildfire is also an increased risk for a few years because of the extra debris.

“What can happen to the health of a stand is extremely variable and depends on hundreds of factors that make every stand different,” Bailey said. “But typically, we see an increase in Ips beetles, which are pine bark beetles, following widespread ice storm damage in an area. And Ips beetles are what ate our lunch in 2023 and 2024 because of drought. Landowners need to keep an eye out for signs of bark beetle attacks and be ready to move quickly if they see any.”

Foresters with both the MSU Extension Service and Mississippi Forestry Commission, or MFC, can help landowners evaluate damaged timber and discuss the best options for stands. To find an MSU Extension forester, contact a local MSU Extension office. To find the MFC’s regional and service area foresters, visit their website.

For more information, download MSU Extension publications on timber casualty losses, the basics of basis and family forest management in Mississippi. MSU Extension Publication 3871 provides more information about casualty losses of shade trees and landscape elements.