Congress Takes the Stuffing out of Taxidermy Charitable Donations
While the L.A. Times reported recently that inflated appraisals for charitable donations of fine art continue to defraud the U.S. government of millions of dollars in uncollected taxes, specific language in the Pension Protection Act of 2006 has eliminated similar abuses in the trophy hunting industry.
An investigation by the Humane Society of the United States, bolstered by a front-page exposé in The Washington Post and an editorial in The New York Times , revealed a complex tax scam involving hunters, "friendly" appraisers, and receptive museums. One museum accepted gifts of taxidermy mounts appraised at $4.2 million, which when sold on the open market realized only $67,000. On top of the already exaggerated estimates, the inflated appraisals built in the entire cost of safaris in Africa, with any and all associated expenses. One unethical appraiser blatantly described the scam in his marketing slogan, "Hunt for Free."
Such premium replacement valuations are not allowed for charitable deduction purposes unless it can be demonstrated that no market exists to establish the more appropriate Fair Market Values. While implicated appraisers attempted to make this argument, a clear big game trophy market is evident by the recent Steve Hendricks Collection of Taxidermy sold at Heritage Auctions and by numerous other sales each year at such houses as Lolli Brothers in Macon, MO, the results of which clearly provide any appraiser with sufficient data for market comparison analysis.
So outraged was Congress by these abuses that Senator Charles Grassley (R-IA) spearheaded the Pension Protection Act, which now mandates that the current basis for taxidermy donations is the lesser of FMV or the immediate cost of preparing, stuffing and mounting. The Pension Protection Act also increased penalties for donating taxpayers and their appraisers if the IRS determines the valuations were incorrect.