Kevin Hancock

President and CEO
Hancock Lumber
P.O. Box 299
Casco, ME 04051

Statement for the Record
U.S. Senate Finance Committee
Federal Estate Tax:  Uncertainty in Planning Under the Current Law
November 14, 2007

Chairman Baucus, Ranking Member Grassley, and members of the Committee:

As a sixth generation private business owner, it is an honor to provide you with my testimony concerning the matter of the federal estate tax, also known as the “death tax.”  I am the President and CEO of Hancock Lumber, a family-owned and operated business in southern Maine.  I want to share with you how the death tax will harm, if not destroy, not only our family’s business, but also a large forest.  To begin, allow me to share some background about our company. 

Hancock Lumber engages in three distinct but tangential operations.  Our first operation is the management of 30,000 acres of timberland, primarily Eastern White Pine.  This tree has a long and noble history, as its lumber was used over 200 years ago by the British Royal Navy to construct the masts for their vessels.  The Eastern White Pine takes 80-100 years to reach maturity, meaning a forest owner must take a long-term, multi-generational approach.  The trees which have taken seed during my life will not be ready for harvesting till my grandchildren are running the business.  It is important to note that these forests, though privately owned and maintained, are open to the public for hiking, camping, skiing, and in season, hunting.             

Our second operation is our saw mill business, which we operate through mills owned in the communities of Bethel, Pittsfield, and Casco.   Between these three saw mills, we are the largest manufacturer of white pine lumber in the United States.  We produce over 85 million board feet of lumber each year.  Our third and final operation is our retail business, which we run out of 10 stores throughout the state.  We sell our retail to both professional builders and homeowners. 

Hancock Lumber employs 550 workers and holds $50 million in illiquid assets, as well as added millions in forestland.  The value of this land is subjective to an owner who has local saw mills and a lumber retail business.  If sold on the open market, our forests – which are near the sprawling suburbs of southern Maine – would invariably be developed.  The forests are of minimal marginal value if you are not also the owner of a mill and do not have a branded retail name from which to sell the lumber.  Finally, it is important to note that we hold no cash reserves and my family has no major investments outside of the business. 

When my mother dies, the estate tax will be a major event for both the business and my entire family.  Because we have no liquid assets within the business or outside it, paying the death tax will be very difficult. We are spending $75,000 a year on life insurance, but we have been advised that this will not be enough. This means that to pay the death tax, will be forced to sell part or all of the business, depending on the valuation of the company.  Either way, some of the forestland will likely be the first to go, since we can more easily recoup those losses than our mills or retail stores. 

As I explained above, our forests are not simply potential lumber, but are natural areas on which wildlife thrives and humans are able to enjoy outdoor recreation.  I have no doubt that when they are sold, they will go to a developer.  Once it has been sold to a developer, it will be parceled off and will no longer be maintained as publicly-open forests.  This is particularly a shame in southern Maine, where green-space and curtailment of sprawl is a major political issue.  Unfortunately, the death tax has been a leading cause of green-space and forest loss in Maine, as multiple private forests have been sold in order to pay the death tax.  It saddens me that the death tax will likely result in our land being removed from forest to housing development. 

As you hopefully can understand, my family takes great pride in a business that was built on hard-work and stewardship.  We are not wealthy, and did not build our business through overnight marketing gimmicks.  My great, great, great-grandfather started this business with faith that his initial hard-work would be paid off to future generations, who would care for the land that he tended and the business he started.  That same work-ethic has been passed down through our family, and I have every hope of being able to pass it on to my children and grandchildren.  I would like to think that 30,000 acres of forests, 550 jobs, and the fruits of six-generations of family labor will be secure long after my death.

Members of the committee, I respectfully request that you support legislation to permanently address the death tax.  Doing this will remove one of the major impediments to the survivability to family-owned businesses, and will encourage the preservation of forest-land which cannot be created overnight, but which can easily be destroyed in a few days.  For the sake of my children and grandchildren, the Eastern White Pine forest which we manage, and 550 employees, please pass legislation to address the death tax.