Christie’s and Sotheby’s have joined forces with the Art Dealers Association of America (ADAA), New York, to lobby Congress for changes in the tax code that would benefit collectors and artists. Richard Solomon, president of both Pace Prints gallery, Manhattan, and the ADAA, reports that the consortium has pooled resources to hire two Washington, D.C.,
NEW YORK—Christie’s and Sotheby’s have joined forces with the Art Dealers Association of America (ADAA), New York, to lobby Congress for changes in the tax code that would benefit collectors and artists. Richard Solomon, president of both Pace Prints gallery, Manhattan, and the ADAA, reports that the consortium has pooled resources to hire two Washington, D.C., lobbying firms—“a Democratic one and a Republican one,” he told ARTnewsletter—to convince members of Congress to support legislation cosponsored by Sen. Pete Domenici (R-N.Mex.) and Sen. Charles Schumer (D-NY) that was introduced in early June.
Says Christie’s spokeswoman Bendetta Roux: “Christie’s, together with the [ADAA] and Sotheby’s, has formed the American Visual Arts Association” in order to meet the “perceived need for the industry to have a voice on important common issues.”
For collectors this bill would lower the capital gains tax on art and collectibles from 28 percent to 20 percent, the same level that is applied to the sale of stocks, bonds, real estate and other appreciating assets. “Art has become an important asset for a growing number of people,” Solomon points out. “Capital gains has proven to be discriminatory against this class of assets.”
Gerald Peters, an art dealer with galleries in both Santa Fe, N.Mex., and New York, has long called for reducing the capital gains rate on sales of artworks. Many collectors have told him, Peters relates, that “they would sell, but that the 28 percent tax rate is a huge deterrent. A huge number of collectors are just waiting for the rate to change before they do sell.” Any losses incurred by the federal government in decreasing the tax rate, Peters claims, would be offset by the rising number of sales emanating from a tax break.
“Everyone in the art world believes that the higher tax rate on art chattels is very unfair,” says Nick Maclean, senior vice-president of Christie’s. “It is perceived that changing the tax rate for art sales only benefits the rich, but a lot of people sell because they need the money, just as people who sell stocks often do so because they need the money. Art may be the only assets they have.”
Changing the tax rate might prove to be a boon to the art market, MacLean suggests, adding that “plenty of people” have told him that they would be interested in selling their artworks but will not because of the capital gains rate. Some have said that the combination of the high capital gains tax and an inheritance tax also keeps them from selling.
The Domenici-Schumer bill would benefit contemporary artists who might consider donating their work to museums and other nonprofit institutions but for the fact that since 1969 the Internal Revenue Service has permitted them to deduct only the cost of the materials used rather than the full fair market value.
Amending the tax law with respect to artists’ donations has long been supported by the American Association of Museums and the Association of Art Museum Directors, which view tax incentives to artists as a means of increasing their own holdings in contemporary art.
Before 1969 artists had been allowed to take these deductions, to the benefit of museums. For instance, between 1967-69 New York’s Museum of Modern Art received 321 works of art (drawings, paintings, prints and sculpture) as gifts from the 97 artists who had created them. During the next three-year period, 1970 through 1972, only 15 artists donated 28 works, most of them prints.
Among others who have campaigned for passage of the Domenici-Schumer bill are the American Library Association, the Research Library Association and the Authors Guild, since writers and composers, like artists, would be entitled to deduct the market value of their donations.
Members of the museum community have been advocating this change for years. Peter Marzio, director of the Museum of Fine Arts, Houston, has said that encouraging donations from living artists “would enrich the collections and lead to generous rotations of the works offered.” And Malcolm Rogers, director of the Museum of Fine Arts, Boston, has expressed eagerness “to accommodate a significant growth in the contemporary area” through donations from artists.
Three other House and Senate members have introduced bills in the current legislative session that similarly would allow artists to deduct the full fair market value. They are Rep. Jim Ramstad (D-Minn.), Rep. Thomas Reynolds (D-N.Y.) and Sen. Patrick Leahy (D-Vt.).