Act May Allow Artists Higher Deductions to Donated Artworks

On April 14, Patrick Leahy, senator of Vermont, again proposed the Artist-Museum Partnership Act, which would allow artists to deduct the fair market value of artworks donated to museums, libraries, or other educational institutions. Under current law, 26 U.S. Code § 170(e)(1)(A), artists may only deduct the cost of supplies in making the artwork, whereas a collector who donates the same work can deduct its full fair market value. The Act seeks to encourage artists to give their art to public institutions, a practice which virtually ceased following the introduction of this provision in the tax code in 1969, by creating a financial benefit.

The current provision was intended to prevent abuses of the tax code, where artists would be able to deduct more than the actual value of the work, because of the difficulty of valuing art objects prior to market sale.  However, the Act requires that the donation be limited by “artistic adjusted gross income,” income from the work, and also requires the artist to obtain a qualified appraisal of the fair market value of the work, as is currently required for collectors intending to deduct the value of a donated work. Additionally, the work must be donated to a qualified organization, where the donated item is related to the institution’s tax exempt purpose, and museums are often selective in determining which works will be accepted.

Supporters include the Association of Art Museum Directors, American Alliance of Museums, Americans for the Arts, League of American Orchestras, OPERA America, Dance/USA, National Assembly of State Arts Agencies, the Vermont Arts Counsel, and the Shelburne Museum. However, Senator Leahy has proposed this bill every legislative session since 2000 and it has not passed. The current political climate and stagnation of the U.S. Congress only decrease the chance that it will succeed this time around.

More via The Art Newspaper.

Tags: art, Art Law, artlaw, deduction, estate, Property, tax, valuation, visual art