On the east fork of Wyoming's Wind River, there lies what officials call a 220-acre tax loophole: Thunderhead Ranch, valued at more than $4 million.

Personal injury lawyer Gerry Spence donated it to a special kind of charity he runs and got a big tax deduction. It's a deduction Senate Finance Committee Chairman Chuck Grassley, R-Iowa, argues should no longer be allowed because Spence continues to control the ranch and no actual money went to the needy.

"We have a regulation that you could drive a Mac truck through to avoid taxation," Grassley said.

Spence says the ranch is legitimately used for seminars he runs for trial lawyers. He would not say how much he took in a tax deduction -- "It's frankly none of your business," he said -- but by law he's entitled to deduct the full value of the ranch.

The loophole is called a "supporting organization." Created 36 years ago as a way of helping charities, supporting organizations are, Grassley says, increasingly misused by the wealthy.

The loophole allows the wealthy to donate expensive assets to these organizations while retaining control of the assets and getting a big tax break. But nothing necessarily goes to the needy.

'Parking Place for Billions of Dollars'

"Quite frankly, [it's] nothing more than a parking place for billions of dollars of assets that are not used for charitable purpose that they were intended to use for," Grassley said.

Senate investigators say the Conrad N. Hilton Fund -- named for socialite Paris Hilton's great-grandfather -- is another example.

While such charitable private foundations are required to give at least 5 percent of their income to charity, supporting organizations have no requirements.

So in 2003, when the Hilton Fund held $467 million worth of Hilton hotel stock, only a minuscule .8 percent of it went to any charitable cause. The Hilton Fund's original charitable tax deduction could have been worth the total value of the stock.

The IRS agrees that the problem is out of control and is launching a new round of audits of supporting organizations.

"We've seen instances where promoters will bring schemes to taxpayers, help them get a deduction, and then the taxpayer controls the money and even uses it to buy a beach house!" said IRS commissioner Mark Everson. "Now, that's not what Congress intended."

"It's very hard to put a figure on," said Grassley of the tax loophole benefits, "but it's billions of dollars."

Spence and the Hiltons both say they are in compliance with the law.

But that law may change. Next month, Grassley will push to close the loophole and ensure tax breaks for charity actually go to charity.