The U.S. Fish and Wildlife Service (FWS) Wildlife and Sport Fish Restoration Program, or WSFR Program, is the umbrella for funds collected under the authority of Pittman-Robertson and Dingell-Johnson Acts and continues to be the backbone of conservation in this country. However technological advances, inconsistent regional application and enforcement, and procedural loopholes in the laws that didn't even exist when they were passed are now threatening to cripple this vital source of state-level conservation revenue. The Wildlife Management Institute, with funding through a Multi-State Conservation Grant, is working to resolve these issues and restore integrity and fairness to the application of these two important conservation laws.

In 1937, Congress passed the Pittman-Robertson Act at the urging of the firearms manufacturing industry and America's sportsmen and women. This Act permanently reauthorized an 11 percent excise tax on firearms and ammunition paid at the manufacturer's level and dedicated it to state fish and wildlife agencies to be used for wildlife restoration programs. In 1950, Congress passed a similar Act (Dingell-Johnson) to provide dedicated excise tax funding from fishing equipment to fisheries restoration, with similar requirements and similar spectacular conservation successes. These funds are collected by the Treasury, transferred to the FWS Wildlife and Sport Fish Restoration Program, or WSFR Program, and apportioned to states based on their size and number of license buying hunters and anglers.

While the WSFR Program is essential to state-level conservation, it appears to be in need of a tune-up. In today's business climate, companies are able to either knowingly or unknowingly avoid or mitigate the tax. And they have little risk of being caught or penalized if they do so. Because the tax on imported taxable items is collected at the first point of sale within the U.S., companies wishing to avoid or mitigate the tax are using three primary mechanisms to do so: 1) the use of direct Internet sales by smaller manufacturers provides a difficult scenario for enforcement if the manufacturer fails to pay the required tax; 2) the use of foreign companies that receive exported manufactured products, then sell them back into the United States via the Internet, thus shifting the tax burden to the individual purchaser; and 3) the use of shell corporations that are branches of offshore manufacturers are used to purchase products at a greatly reduced cost, thus reducing the amount of the tax owed, although the product ultimately is imported and sold at list price (the price at which the product should be taxed).

The example of technology exceeding the capabilities of the program due to the proliferation of online direct-to-consumer purchases from foreign suppliers is the most troubling given the increasing trend for consumers to purchase via the Internet. This is perhaps having the most significant negative impact on the amount of excise tax dollars passed to the states for fish and wildlife conservation. An equally important negative impact is the unfair tax advantage that this unintended loophole provides for manufacturers that choose to operate in this manner ? resulting in the consequence of forcing manufacturers to consider a similar business model in order to stay competitive.

The avoidance or reduction of federal excise tax, through these or other strategies, presents a competitive disadvantage for manufacturers that lawfully operate under the requirements of the Pittman-Robertson and Dingell-Johnson Acts. This inequity means that companies and manufacturers that are in compliance must reduce inputs and sacrifice quality and/or profit in order to successfully compete with those that avoid the law. Additionally, this inequity is potentially costing the state fish and wildlife agencies millions of dollars annually that would be used to conserve our fish and wildlife resources across the country, at a time when the need for conservation funding is critical.

An essential component in solving the inequity in federal excise tax payments lies with enhancing the knowledge of the Internal Revenue Service (IRS) Excise Tax Branch staff regarding these particular excise taxes. It is critical to raise awareness of specific areas of abuse, potential for abuse, or specific companies that are non-compliant. Administrative and/or legislative action to address products and technological advances that were not available 75 years ago is likely necessary in order to create a level playing field for all manufacturers. This approach is not unprecedented and is overdue in order to fully modernize the WSFR Program.

WMI is working with the IRS to achieve solutions to these goals: 1) familiarize ourselves with the staff of these critical Excise Tax Branch positions, 2) offer training on the complexities of the myriad of products that are susceptible to the federal excise tax, 3) improve understanding of mechanisms to properly pay the federal excise tax and avoid creating competitive inequities, and 4) develop a legislative strategy to eliminate any loopholes in the excise tax law that have come about as the result of emerging technology. We are simultaneously working with the USFWS to achieve the following: 1) develop relationships to re-create and sustain a positive long-term working relationship with the IRS, and 2) provide support and funding to the IRS in order to adequately enforce proper excise tax payments on applicable products.

The importance of the WSFR Program to state fish and wildlife conservation cannot be understated. We must work together as a community of state and federal agencies, industry, and conservation NGO's to collectively develop solutions to breakdowns in the Program in order to keep it healthy and sustainable for the next 75 years. (jg)