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Tax Bill Aims to Broaden Donation Benefits for Artists

Legislation allowing artists to take a full fair-market deduction for works they donate to museums and other nonprofit institutions took a step closer to passage on Nov. 18: The Senate voted to include this bill as an amendment to its version of the Tax Relief Act of 2005, a tax-cutting measure that would cost the

NEW YORK—Legislation allowing artists to take a full fair-market deduction for works they donate to museums and other nonprofit institutions took a step closer to passage on Nov. 18: The Senate voted to include this bill as an amendment to its version of the Tax Relief Act of 2005, a tax-cutting measure that would cost the U.S. Treasury $60 billion. It includes provisions allowing non-itemizing taxpayers to deduct charitable gifts (setting a floor of $210 for single filers, $420 for joint filers). However, it also increases the penalties for taxpayers and appraisers who overstate the value of donated property. The House of Representatives plans to take up its version of the tax bill sometime this month.

Sponsored chiefly by Senators Patrick Leahy (D-Vt.), Pete Domenici (R-N.Mex.) and Charles Schumer (D-N.Y.), the fair-market-deduction bill would allow artists to deduct the appraised value of their artworks, rather than just the cost of materials used to create that art, which has proven “a disincentive for artists to make donations,” according to a spokesman for Senator Domenici.

As safeguards against cheating, he told ARTnewsetter, the amendment requires that a donated artwork be related in purpose or function to the institution receiving the gift, that it have been created at least 18 months before donation—in order to prohibit artists from “painting themselves a deduction”—and that the artwork be independently appraised. The bill’s total cost to the Treasury is estimated at $50 million over a ten-year period.

Good for Museums

The principal beneficiaries of the measure are museums, many of which cannot purchase much contemporary art owing to budgetary constraints. The institutions retain the right to reject any donations of artwork. “There has been uniform support for this measure among museums,” says Mimi Gaudieri, executive director of the Association of Art Museum Directors, New York, who adds that varied groups and associations—including the American Association of Museums, the American Library Association and Americans for the Arts—have been lobbying for it.

The Senate has shown support for this measure in the past, as it did in its version of the tax-reduction bill of 2001. Nonetheless, the artist’s fair-market deduction was jettisoned from the final legislation emerging from the House- Senate conference committee meeting in order to reconcile their respective bills.

The Senate included the fair-market deduction in the 2003 Care Act—which never met the House’s version (the Faith-Based Initiatives Act) because congressional Democrats and Republicans failed to agree on how conferences should take place. A spokesman for Senator Leahy explains that provisions for charitable giving “fit better in this bill” than in the 2001 legislation, adding that “we’ve encountered no opposition to it.”

Still, advocacy groups for the arts point out that common ground may be no easier to find this year than in 2003, and that the House bill under consideration does not currently contain a number of key points found in the Senate version.

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