Big-game hunters snare profitable quarry: tax breaks

GERING, Neb. — The ibex head was jammed next to the moose, whose velvety antlers brushed against a rare red lechwe and an African bongo. Below them were several preserved bobcats, and at the far end of the storage container stood endangered leopards, frozen in lifelike midprowl.

In all, more than 800 big-game and exotic animals were piled into an old railroad car behind the Wyobraska Wildlife Museum, a modest and lightly visited facility far from any population center. It was just one of four large containers packed with animal mounts and skins, trophies shot on expedition or safari to places such as South Africa, Mongolia and Texas.

Most of the animals are destined for auction, often at bargain-basement prices, but they're in Gering largely because they remain surprisingly valuable to one group in particular: the hunters who shot them and had them preserved.

Often appraised for many times their market value, the trophies can yield hefty income-tax deductions if nonprofits accept them as charitable gifts. And the Wyobraska museum and others have been more than willing.

According to critics in Congress, top officials at natural-history museums and animal-rights advocates, this form of charitable giving allows wealthy hunters to go on big-game expeditions essentially at taxpayers' expense, an arrangement so blatant that one animal-trophy appraiser advertises his services under the headline: "Hunt for Free." The taxpayer subsidies also encourage hunters to shoot the largest, fittest and rarest of the world's animals, the critics say.

Powerful backers

Nobody knows how many trophy mounts are donated yearly to nonprofit collections or how much tax revenue is being lost to charitable deductions. At the Wyobraska museum, though, the floodgates are open wide.

Records show that Wyobraska took in mounts worth $1.4 million in 2000. The value of donations grew to more than $5 million in 2004, the museum's curator said, even though display rooms and storage containers were overflowing.

Big-game hunters, whose interests are actively promoted in Washington by the politically powerful Safari Club International, have been quietly donating animal mounts to nonprofits for years. Advocates say the public benefits by getting to see animals they otherwise would never encounter. The Safari Club says revenue from big-game hunting gives nations an incentive to encourage conservation.

Whether the public is being served or fleeced by donations such as these was the subject of a Senate Finance Committee hearing this month. Chairman Charles Grassley, R-Iowa, has been investigating possible abuses in how art and other "noncash donations" are appraised and donated to nonprofits, and he sees trophy animals as a prime example.

"The phoniness of this kind of donation calls out for congressional action," Grassley said. The issue is "in the Finance Committee's crosshairs."

Valuation questioned

What makes charitable giving so popular with big-game hunters is that their trophies are being appraised at top dollar, often using a donor-friendly "cost-of-replacement" method that estimates how much a hunter would have to pay to track down the same quarry again.

But the IRS allows this approach only when no market exists to establish a fair market price, and the tax agency has taken the position that there is such a market in big-game trophies. Officials note, for instance, that the Lolli Brothers auction company in Macon, Mo., holds four large taxidermy auctions a year, selling thousands of big-game trophy mounts to businesses and sportsmen. Auctioneer Jim Lolli said the mounts have become something of a commodity, and winning bids generally are 10 to 20 percent of the appraised values.

"A hunter or a museum will tell me the value of an elk is appraised at $10,000, and I'll have to tell them they'll be lucky to get $1,000," Lolli said. "But they have that paper with the big appraisal, so it takes some convincing."

"Hunt for free," says ad

One active appraiser is Robert Bruce Duncan, founder of the Chicago Appraisers Association. According to Wyobraska Museum curator Mike Boone, almost all the animals given to his museum in 2004 came via Duncan, who values the mounts and arranges the donation.

Duncan was sentenced to 10 months in prison in 1991 and fined $47,000 for helping to place mounts of illegally hunted endangered animals in the North Carolina Museum of Natural Sciences, a facility that, like Wyobraska, took in hundreds of Duncan-appraised trophies in the mid-1980s before federal agents stepped in.

Duncan has been aggressive about promoting possible tax advantages. His Chicago Appraisers brochure, which explains how to "Hunt for Free," says: "If you write and tell us where you are going, we'll suggest what extra animals to take and donate for tax savings. We'll then send you a written guarantee we have a museum to accept them upon your return."

Duncan defended his appraisals as accurate and legal and said criticism came only from people with "an animal-rights agenda." The specimens sent to Wyobraska, he said, were for "educational and research purposes only."

Wyobraska curator Boone, however, said it was always clear that most of the donations would be sold. He told an undercover team of investigators from the Humane Society of the United States that "most people donate for the tax write-off."

James Merrigan, president of the Wyobraska Museum board of directors, defended the charitable deductions as valuable to the public because they allow small-town museums such as Gering's to acquaint residents with unusual animals from around the world.

But Merrigan also said the size and number of the trophy tax deductions raised legitimate questions, especially since the market value of the mounts generally is so much lower. In 2003, for instance, his museum sold mounts with an appraised value of $4.2 million for about $67,000, according to its yearly tax report.

"The system has to be reviewed — that's clear," Merrigan said. "We can't abuse the system because that will turn the public off to charitable giving."

Skirting the law

Merrigan and curator Boone stressed that the museum is following IRS rules, citing that none of the donated animals are sold for at least two years. According to IRS publications and tax lawyers, however, the two-year rule refers to a reporting requirement — that the price of any donated item sold by the museum within that period has to be reported to the donor, because it could lower his tax deduction. By not selling mounts for two years, the museum does not have to report the sales price to the donor and thus preserves the donor's tax break.

The Humane Society believes so strongly that the tax deductions contribute to the improper killing of animals that it arranged a sting to see how the process works. Undercover investigators contacted Duncan at Chicago Appraisals and asked him to value two mounts they had purchased and then have them placed in a museum.

Based only on photos and invented descriptions about where the animals were shot and preserved, Duncan provided two appraisals — $8,500 for a gnu and $8,000 for a wildebeest — and arranged for the animals to be sent to Wyobraska. Humane Society officials said the appraised values were about double what they had actually paid. Posing as resort-lodge owners interested in buying mounts, two society investigators then went to Gering in January and videotaped their visit.

Hans-Dieter Sues, associate director for research and collections at the Smithsonian's National Museum of Natural History, said he and others in the field think hunters and some museums are abusing the donation laws.

"Not only does it encourage trophy hunting, but the trophies hunted are often endangered animals illegally brought into the United States," he said. "Over the years, few of our museums have been blameless in this area. But now we're very much opposed."