The Artist-Museum Partnership Act of 2011
on April 29th, 2011H.R. 1190, “The Artist-Museum Partnership Act of 2011″, has been introduced again, this time sponsored by Rep. John Lewis [D-GA]: “To amend the Internal Revenue Code of 1986 to provide that a deduction equal to fair market value shall be allowed for charitable contributions of literary, musical, artistic, or scholarly compositions created by the donor.”
The Graphic Artists Guild wholeheartedly supports this legislation, and has supported all nine previous versions in the House and Senate since its first introduction in 1999.
The bill has been referred to the House Committee on Ways & Means on 3/17/2011. The Guild urges artists to write to Committee Chairman Rep. Dave Camp, [R-MI] and ask him to move the Committee to approve this bill.
There is no email address for the House Committee on Ways & Means. You’ll need to fax a letter to the Committee’s office 202-225-2610. We’ve provided a letter for you to copy and personalize; the link to the letter is below.
Also go to POPVOX and vote your support of this bill. (This is separate from writing to the House Committee.) You’ll need to set up an account with POPVOX to have your vote registered but it’s well worth it: “Congressional staff and lawmakers log into POPVOX to measure the pulse of their district, while members of the press will use POPVOX to research stories and hold Congress accountable.”
Before 1969 artists, composers and writers could donate self-generated works to a non-profit institution and receive a fair-market-value deduction. Subsequent to 1969, as part of broad tax reform, we can deduct only the cost of materials.
Currently, artists making a charitable contribution to a museum or cultural institution are only allowed to deduct the cost of their raw materials instead of the fair market value of the art donated. This creates a huge incentive for an artist to wait until after they die to donate something to a museum, because it’s valued at fair market value in their estate, but if they donate while alive, they get only a deduction for the costs of their materials.
As a result of the 1969 legislation, many works of art, which would have been contributed to American institutions, have been sold into private collections or abroad, in effect depriving the public of these works. (For example, Igor Stravkinsky planned to donate his papers to the Music Division of the Library of Congress the month the Tax Reform Act of 1969 was signed into law. Instead, the papers were sold to a private foundation in Switzerland.)
If the widow(er) of an artist donates a work of art created by his/her deceased spouse, the widow(er) can take a fair-market-value deduction, as can the collector of the artist’s work. In addition, the artist’s estate is taxed at fair-market value. Finally, a patent holder, who contributes his/her patent, can take a fair-market-value deduction for the contribution.
The benefit to the nation, when artists are encouraged to contribute their work during their lifetime cannot be overemphasized. It allows the public, historians, scholars and others to learn from the artist his/her aesthetic intention for the work, how it was intended to be displayed, performed or interpreted and what influences affected the artist.
1. Most nonprofit institutions have no acquisition funds to purchase creative works and must rely on donations. Thus, increasing incentives to donate will improve public collections.
2. As federal support for arts and cultural institutions is cut, the tax code should encourage donations from our most creative citizens for future generations to enjoy.
3. The tax code strives for “horizontal tax equity” — equal treatment to all similarly situated taxpayers. Artists should be treated as any other taxpayer donating a work of appreciated property.
4. Encouraging donations directly from artists will make more art accessible to the general public more quickly than if their works first had to pass through the hands of collectors.
We wholeheartedly support this legislation, and have supported all previous versions since its first introduction in 1999.
The Graphic Artists Guild is a 501 (c)(5) not-for-profit national labor union founded in 1967, representing graphic artists working in all aspects of commercial art and design including illustrators, graphic designers, animators, cartoonists, web designers, surface/package designers, textile designers, storyboard artists, and exhibit and display designers. We produce the Graphic Artists Guild Handbook: Pricing & Ethical Guidelines, now in its 13th edition and considered the “industry bible.”
All material in this post courtesy the Graphic Artists Guild.
I wonder what would constitute “fair market value”? Some auctions recently have fetched record-breaking prices. However, with art being subjective, some pieces which look like just a bunch of paint smears are going for some major $$$ whereas others go unsold. Who would judge the merits of the piece so as to constitute a “fair market value”?
To review:
A person who creates a work and donates it to a museum can only deduct the actual cost of materials of that donation. So, if you spent $100 on the creation of the art, that’s your deduction.
If someone buys the art for $2500, they get to deduct $2500.
This bill seeks to remedy the inequity.
Fair market value would be determined by the catalog of an artist’s work.
If I get between $250 and $5000 for a painting, then a donation of a painting of mine to a museum would be for a sum that would reflect the market’s willingness to pay that much money for my work.
A Spider-Man page generally goes for a couple hundred dollars. So I would deduct $200.
Of course, there is the possibility of fraud here, but that goes for any donation deduction. And I think it can be fairly argued that an artist is more likely to have records of the fair market value of their work than someone who bought a painting and gave it away.
Yet a person who buys a painting and donates it can take it’s market value deduction while an artist cannot.
This is a major reason why I rarely donate art to charities or charity auctions. What I prefer to do is to sell the art and then donate the money.
Not only do charity auctions often drive prices down by glutting the market with art for sale, but I can’t take a deduction for the art.
If I want to support a charity, I am better off with a direct cash donation. With few exceptions, I simply don’t donate art anymore.
Last summer’s donation of the Neil Gaiman script I doodled on was handled in a way to keep me from having to declare the sale on my taxes. I ran the auction for the work, but all monies were paid directly to the Hero Initiative.
I logged into POPVOX and registered my support for the bill.
As far as fair market value, the bill states
“a qualified appraisal of the fair market value of such property in accordance with the regulations under this section”.
Insurance companies currently use appraisals for insuring art so this is very fair.
There is one thing in the text that seems a bit limiting –
” such property was created by the personal efforts of the taxpayer making such contribution no earlier than 18 months prior to such contribution ”
This appears to mean that you don’t get the deduction if the piece was created more than 18 months prior to the contribution.
Still half a loaf is better than none.
Wow, good eye, Miki!
Considering older art often has more value than new art, that’s an odd limitation.
That really is a nearly crippling limitation, that 18 month thing. After all, if the point is donating a piece to a museum, it would usually be because the piece has acquired recognition, noteriety, or high standing of some sort (yes, being redundant there for emphasis) with the audience to the degree that placing it in a museum is a benefit to the community, not just a “tax deduction” for the artist. And of course, such a piece will have higher value than something created “within 18 months of the donation”.
It’s as if the desire is still to keep the artist financially crippled from getting ANY financial benefit from the act of creating art!
What kind of thinking goes into all that?
Artists are bad, bad, awful spoiled children who need to be punished for playing all day and expecting to get paid for it.
Note also that this would not change your issue with charity auctions. This clause:
(iv) the use of such property by the donee is related to the purpose or function constituting the basis for the donee’s exemption under section 501 (or, in the case of a governmental unit, to any purpose or function described under subsection (c))
would seem to apply only to a donation to an organization that actually exhibits the art, not one that sells it to raise money. This is somewhat analogous to the latest rules for donating a car to charity. If the charity just sells the car to raise money, your deduction is limited to what the charity actually realizes. But if the charity actually uses the vehicle for its charitable purpose, either to serve as transportation for the charitable activity or for a charity that helps poor people get or keep a job by providing them with commuting transportation they could not otherwise afford (at least one such exists), then the deduction is still fair market value. (They used to allow Blue Book for all donations, but too many people were abusing that by donating total junkers and pretending they were worth just as much as one in the average condition the Blue Book value was meant to represent.)
For the other categories, I suppose it would mean a library that will hold the literary work in its collection, or an orchestra that will play the work it would otherwise have commissioned from the composer.
I can think of a sneaky way around the 18-month limitation. Just make a very tiny modification to the art just prior to donation. Voila! “Honest, Mr. IRS Agent, it was only _mostly_ finished three years ago. But something was missing, and I only _just_ realized what it was! That microscopic blue dot in the lower left corner – why, it makes all the difference in the world! If you can’t see that, you’re just a philistine.”
@scribblerworks – I can speculate on the kind of thinking that goes into the limitation. I suspect it’s to prevent the donation of a work the artist has been unable to sell (which makes the fair market value open to question, even for an artist with a track record of sales), and is now trying to salvage some value from via the tax deduction. I can think of some refinements to the law to get around this problem, but there is still potential for abuse.
Note also that according to IRS Pub. 526, even someone who buys a painting that appreciates in value can only deduct their original cost if the painting is donated to an organization that does not use it in a way related to the charitable purpose of the organization (and as mentioned above, selling it to raise funds does not count as a related use).
Great post, mstein. Thank you so much for this valuable input.