During this political campaigning season there has been a lot of talk about tax relief: Obama says blah blah blah, McCain says yack yack yack, and Palin says… well… who knows what Palin is trying to say. But let me mention a very real tax issue that negatively affects all working artists: As the tax code stands now, an artist who donates a piece of art to a nonprofit organization (i.e. a museum) can only write off the value of the materials used to make the work. However, if a collector buys a piece then donates it to a nonprofit; the collector gets to write off the full market value of the piece. Ugh. Doesn’t seem right does it?
From our experience, Laura and I see and hear frequently the number of times artists are asked to donate pieces of their art to nonprofits that in turn include the work in fund raiser auctions. Unless the artist negotiates the receipt of a percentage of the sale of the piece, the only financial benefit to the artist is a tax write off of the cost of the canvas and paint. This could total only $50 even though the market value of the work could be many times that. The collector, on the other hand, who donates art from his/her collection (possibly by the very same living artist) gets to deduct the full market value of the artwork from their tax return
And to make all this even more unfair… although living artists are allowed to deduct only the cost of materials for a given work, upon their death their estates are taxed at the market rate for the same work, and receive a fair-market deduction if that work is donated.
There is hope for this upside down law to be righted. For the last 4 years, there has been a bill kicked around congress aimed at amending this IRS regulation that appears to punish charitable artists (the bill was originally introduced by Patrick Leahy [D-Vt]). Deemed the “Artist-Museum Partnership Act” (introduced most recently as S. 548 in the 110th Congress – also introduced as H.R. 1524 by John Lewis [D-Ga]).
So far, the bill has received bipartisan backing from Democratic Senators, including Barrack Obama, Hillary Clinton, Edward Kennedy, John Kerry, Diane Feinstein, Christopher Dodd and Chuck Schumer, and such Republicans and Independents as Robert Bennett, Joseph Lieberman and John Isakson. Although getting as far as the Committee of Finance, the bill has yet to pass.
So during this campaigning season when we hear about tax relief in abstract terms, let’s hope for a reintroduction of the Artist-Museum Partnership Act in the 111th Congress and a vigorous fight for its passing. This will spell real relief to artists and nonprofits alike without harming philanthropic collectors and donors.