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2. The 6
Litter Exemption
PAWS provides an exemption
for a person who (a) does not whelp
more than 6 litters of dogs or cats
and (b) sells only dogs or cats bred
or raised on the premises directly at
retail to persons who purchase the animals
for their own use and enjoyment and
not for resale.
If a breeder whelps more
than 6 litters a year, he does not get
the breeder exemption. If he whelps
fewer than 6 litters a year, but sells
even a single dog or cat that was not
bred or raised on his premises, he does
not get the breeder exemption.
Serious questions are
raised. The statements recently made
by AKC officers and agents about this
provision are deceptive and incomplete.
Ron Menaker made the
following statement:
If you produce less
than seven litters, you are not subject
to regulation, even if you sell many
more than 25 dogs. Similarly, if you
sell fewer than 25 (sic) dogs, you
can have in excess of six litters
and not be covered.25
As we can see, the 6
litter exemption applies to a person
who whelps (not produces - whatever
that term may mean) more than 6 litters
and who sells only
dogs or cats bred or raised
on the premises directly at retail to
persons who purchase for their own use
and enjoyment and not for resale.
When the 6 litter exemption
is analyzed, we start to see the difficulties
attendant with fitting under it.
Example: Tom is a top
Kerry Blue Terrier breeder. He has a
top Kerry Blue Terrier stud dog, Trigger.
Tom proudly watched Trigger go Best
in Show at the National Specialty several
years ago. Tom breeds four litters in
2006 after PAWS passes. He gets 6 puppies
in the first three litters, and 7 puppies
in the fourth. He sells them all, some
on co-ownerships to show homes.
Trigger is much in demand
as a stud dog. Trigger's stud fee is
$1,500.00. Tom and Trigger live in Westchester
County, New York.
Tracy owns a wonderful
Kerry Blue bitch, Transue. Tracy is
a single woman who works for her local
telephone company in Tacoma, Washington.
Tracy can't afford to hire a handler
for Transue, so she finished Transue
herself, owner-handled, from the Open
Bitch Class at 3 years of age. Tracy
also has parakeets that she bred and
raised before turning her attention
to dogs.
Tracy thinks Trigger
is the perfect stud dog for Transue.
Tracy, however, does not have $1500,
and cannot afford to ship Transue to
New York. Tracy calls Tom and asks if
she can breed to Trigger. Tom, who likes
Transue very much (and who has a fondness
for Tracy) consents. Tom will not charge
Tracy a stud fee. Instead, he will take
pick puppy back. Further, he agrees
to ship frozen semen to Tracy's veterinary
clinic in Tacoma.
Transue comes in season.
Tom has Trigger collected. The semen
is shipped to Tacoma. Transue is surgically
implanted. When the litter is whelped,
Tracy calls Tom and tells him that there
is a marvelous bitch who everyone raves
about. Since she no longer has the time
to give to her birds, she sells them
for $600.00. When the litter is 14 weeks
old, Tracy ships the pick bitch to Tom.
Tom receives her, but sells her to his
handler's sister who wants a bitch out
of Trigger. Tom gets a co-ownership.
Tom and Tracy have both
become dealers under PAWS and are subject
to federal regulation. Tom breeds four
litters in 2006. So far, so good. However,
when Tom takes the puppy back and resells
her, when she has neither been bred
nor raised on his premises, he loses
the breeder exemption. His sale of the
pick puppy to his handler's sister is
the 26th sale of the year. Tom must
register for a federal animal dealer
license.
Tracy only whelped one
litter in 2006 - Transue's litter. The
litter was not bred on her premises,
because the surgical implant, which
constitutes the breeding, occurred at
her veterinarian's office. However,
the puppy was raised at Tracy's house.
So far, so good. Unfortunately, she
sells the puppy bitch to Tom. It constitutes
a sale, because the consideration for
the transfer is the semen that Trigger
produced. Tom did not purchase the bitch
for his own use and enjoyment. He resold
her. Tracy does not get the breeder
exemption. Even if she did, Tracy sold
her "other animals" for more
than the $500 exemption amount. Tracy
must register for a federal animal dealer
license.
The point has been raised
by the German Shorthaired Pointer Club
of America (among others) in its official
opposition to PAWS that the breeder
exemption is unavailable for people
who breed on co-ownerships. To be under
the breeder exemption, you must comply
with two things: (1) whelp not more
than 6 litters and (2) sell
only dogs or cats bred
or raised on the premises directly
at retail to persons who purchase for
their own use and enjoyment and not
for resale. Since a co-owner, by
definition, has not bred nor raised
the litter on their premises, the breeder
exemption is unavailable to them. The
German Shorthaired Pointer Club of America
is correct.
What is more, to be eligible
for this exemption a person must regulate
the conduct of the buyer. If the buyer
does not purchase for their own use
and enjoyment, the exemption is violated.
Supposing the buyer immediately issues
a co-ownership to someone else. Is the
exemption violated?
It may be that a contract
with a provision that prevents resale
of the dog or cat would suffice to prevent
the seller from losing the breeder exemption.
On the other hand, it may not. There
are other federal statutes that require
buyers to hold pro erty for two years
after the transaction or the seller
will incur substantial economic loss.
26
These questions will only
be handled effectively by new USDA regulations.
However, it was the fact that we were
subject to the "choice" by
the USDA to exempt hobby breeders that
prompted Dr. Holt to argue that we should
codify an exemption in the statute.
Even were PAWS to pass, we would still
be subject in large measure to the "choices"
that USDA will make.
Once a person becomes
subject to federal regulation as a dealer
in a particular year, two questions
are raised: (1) How does USDA learn
that the person is subject to regulation,
and (2) what happens in the next year?
Does he start over at non-regulation,
or does he continue to be regulated?
If the burden is upon
the person who is subject to regulation
to register, how is that to be enforced?
This is more than a mere rhetorical
exercise. If the USDA promulgates regulations
under PAWS designed to ensure compliance,
what is to ensure that they do not require
pure-bred registration bodies to provide
them with the litter registration statistics
necessary to learn whether a given breeder
has met the thresholds? Since both the
25 sales exemption and the breeder exemption
statistics include both dogs and cats
in the totals, would USDA not need registration
statistics from multiple registries?
If, on the other hand,
USDA does not request such information
from registry bodies, how will USDA
know if a particular person subject
to regulation has registered? Might
the USDA implement a regulation that
all dog and cat sales must
be reported to USDA, so that they will
know when the threshold of 25 sales
and 6 litters have been reached (although
the breeder exemption is violated upon
the first litter if the breeder sells
a dog or a cat not bred or raised on
his premises or to someone who re-sells
the dog or cat, at least USDA will have
some ability to catch many people who
are subject to regulation).
Dr. Holt argues that
AKC will be there to give input to USDA
when any new PAWS regulations are being
drafted, and "it is likely
that our own standards will be a model
the USDA will look to." If the
AKC has so much authority with USDA,
why is it that Dr. Holt argues that
PAWS is necessary, in part, because
of the USDA's whim that they have "chosen"
to exempt us? Could not that influence
be better exerted by keeping the retail/wholesale
distinction in place?
Suppose that the regulated
hobby breeder is licensed in 2006. What
happens on New Year's Day, 2007? Must
he re-license? Suppose he does not meet
the 6 litter threshold until September,
2007. Must he be subjected to inspections
from January through August?
The camel has just passed
his forequarters under the tent.
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25 E-mail forwarded to me
by several sources.
26 26 USC § 1031(f).
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