Abstract
Several calls for action have gone forth among the bird world. One deals with the federal government not loaning funds under the disaster relief management programs for aviculture. The second has to do with the massive disappointment among aviculturists that only 88 responses were forwarded to Fish & Wildlife concerning the draconian regulations passed for breeding consortiums under HR 5013. Both of these concerns required aviculturists to write letters to congressmen, Fish & Wildlife and other interested parties. In other words: publicize their existence.These seemingly unrelated problems have a common and unexpected nexus. In each case the cause, and to a certain extent the result, is dictated by the low compliance of aviculturists with reference to the federal tax laws. How so? No one actively avoiding paying their taxes can afford to be publicized by writing letters. A deceptively simple problem, yet also very complex as to its magnitude. The problem originated at the very inception of aviculture as an industry, and now is like a roller coaster most people are afraid to get off.
Obviously, the federal government would be acting irresponsibly in loaning money to businesses that haven't filed their tax returns reflecting profit, and more importantly where there exists insufficient national information regarding the financial aspect of the industry. Aviculture could very well be the only industry nationally that could be measured in the aggregate in the billions of dollars a year (capital asset base and revenues) where the number of tax returns on this revenue could measure only in the hundreds.
The aviculture industry hasn't been singled out for adverse congressional actions. When information is pulled from the government's records reflecting the size of our industry, this is based primarily on industry codes provided by the Treasury Department whose compilations come directly from the Internal Revenue Service via Schedule C for Sole Proprietorships or Schedule F for Farms and Ranches. If aviculturists do not comply with the tax laws, and do not file tax returns, then our industry looks deceptively small. The nature of politics dictates that financially insignificant industries are not taken seriously compared to well financed and well organized groups like the animal rights activist. Their membership rosters and political contributions are public record. Correspondingly, they are taken far more seriously than an industry that is seriously under represented insofar as public records are concerned.
The argument, of course, is that the bird industry is composed of hobbyists. Obviously there is some truth to this. However, each of us in the bird industry knows some, perhaps many, individuals who have developed quarter of a million to million dollar collections of birds. This was hardly accomplished through a "hobby". I personally know individuals who have purchased cars for cash and paid off their loans on their houses early yet still consider their aviculture enterprises as nontaxable hobby income.
Most aviculturists have little understanding of the tax laws and general business matters compared to the typical businessman. The frequent complaint, at least at the AFA convention in Salt Lake City, was an aviculturist couldn't make any money breeding birds. This is both true and false depending on your perspective. From the perspective of the typical aviculturist who trades offspring for more birds, or sells birds and turns around and purchases additional birds, there is a great deal of validity that their non-bird disposable income hasn't increased. The typical aviculturist typically just buys more birds with their money and has no extra spending money.
However, from an economic sense (or, more importantly, from an IRS perspective), there is a significant increase in wealth. An aviculturist could measure only in the hundreds.
The aviculture industry hasn't been singled out for adverse congressional actions. When information is pulled from the government's records reflecting the size of our industry, this is based primarily on industry codes provided by the Treasury Department whose compilations come directly from the Internal Revenue Service via Schedule C for Sole Proprietorships or Schedule F for Farms and Ranches. If aviculturists do not comply with the tax laws, and do not file tax returns, then our industry looks deceptively small. The nature of politics dictates that financially insignificant industries are not taken seriously compared to well financed and well organized groups like the animal rights activist. Their membership rosters and political contributions are public record. Correspondingly, they are taken far more seriously than an industry that is seriously under represented insofar as public records are concerned.
The argument, of course, is that the bird industry is composed of hobbyists. Obviously there is some truth to this. However, each of us in the bird industry knows some, perhaps many, individuals who have developed quarter of a million to million dollar collections of birds. This was hardly accomplished through a "hobby". I personally know individuals who have purchased cars for cash and paid off their loans on their houses early yet still consider their aviculture enterprises as nontaxable hobby income.
Most aviculturists have little understanding of the tax laws and general business matters compared to the typical businessman. The frequent complaint, at least at the AFA convention in Salt Lake City, was an aviculturist couldn't make any money breeding birds. This is both true and false depending on your perspective. From the perspective of the typical aviculturist who trades offspring for more birds, or sells birds and turns around and purchases additional birds, there is a great deal of validity that their non-bird disposable income hasn't increased. The typical aviculturist typically just buys more birds with their money and has no extra spending money.
However, from an economic sense (or, more importantly, from an IRS perspective), there is a significant increase in wealth. An aviculturist goes from a few birds to many birds over a relatively short period of time (let's say 10 years). This increase in wealth, i.e. more birds, is a taxable event. Internal Revenue Code section 61(a) says in part, "Except as otherwise provided in this subtitle, gross income means all income from whatever source derived ... ". The subtitle is the Internal Revenue Code. Congress has taken a very inclusive view that includes bartering, selling then rebuying, trading birds, eggs or any other source of bird related income. From all the tax education associated with my Master's degree, and in over a decade of practicing tax, I have never read nor even heard rumors of an exception in the Internal Revenue Code related to the nontaxability of income associated with parrot breeding or, for that matter, hobby income.
In an editorial several months back, Jack Clinton-Eitniear made reference to an animal rights group that called on members to report breeders to the Internal Revenue Service. This is not an isolated event. This is the beginning of a new offensive against aviculturists. Unfortunately, this is far easier to accomplish than most aviculturists suppose. One needs simply to go through the newspaper pulling phone numbers for breeder advertisements from the newspaper, then match the phone number to a name and address from a "criss cross" available at almost any public library. Even unlisted numbers can be found in such publications. Then it is just a matter of forwarding this information to the appropriate department of the Internal Revenue Service. There is even a special form for doing this!
If there is one thing I learned over the past half year battling the IRS in the largest parrot breeding tax case to come before the United States Tax Court, it is that we found the IRS very unsympathetic to aviculturists. We felt that the entire case was based upon an animal rights perspective. I seriously hope this is a local exception rather than a national rule.