For forty-seven years there has been some piece of legislation on the docket in Congress to change the law that limits how much an artist may deduct on his or her tax returns if the artist donates an artwork to a museum, and for forty-seven years the proposal has been thwarted, never even getting a vote. Proponents claim it is unfair that art collectors are permitted to deduct the fair market value of art works they donate, while artists are only permitted to deduct the cost of the materials they used in making them. Supporters of the provision also assert, from a public policy standpoint, that this disincentive for artists to donate their art work has deprived the public of the opportunity to see contemporary art.
Sentimentally these arguments work, but logically they do not.
The analogy between a collector and an artist who both donate a painting is far from exact; one person paid for it—establishing a market and a value—while the other can only assert value. A better analogy, and the one that the IRS uses, is between an artist making a donation and someone, say a $500-per-hour lawyer, who volunteers ten hours per month at a legal clinic. That lawyer is not permitted to deduct five thousand dollars for the month, even though his time may be worth every penny. In fact, unless there is extensive travel involved or the (unlikely) purchase of a uniform, no deduction of any sort is permitted to that lawyer.
While wanting to do something to help artists, proponents of allowing artists to deduct the fair market value of works they donate to museums ultimately seek to alter the tax law in favor of a small, successful, and generally wealthy group of artists who are at the top of every art museum’s wish list.
Providing a substantial tax incentive to artists might well result in more artworks being donated to museums, which of course explains why almost every museum director is in favor of a change in the law. The public policy argument was more persuasive back in 1970, when major art museums—the MoMA, the Met, the Art Institute of Chicago, the Los Angeles County Museum of Art, and so many others—showed a limited (at best) interest in pursuing the acquisition of contemporary art. The same cannot be said now. Today, there is no category of accessions at major art museums greater than works of contemporary art.
Many recent acquisitions have come directly from individual artists: the painter Robert Ryman, for instance, just donated twenty-one works to the Dia Art Foundation, and last year painter Ed Ruscha donated thirteen of his own pieces to the Fred Jones Jr. Museum of Art at the University of Oklahoma. Most acquisitions are purchased by the institutions, but nearly all of these are bought from private collectors.
Artists are well aware of the value to their markets and legacy of having their work in public institutions, and for a growing number of the A-list artists whose work is sought after by museums, the purchase-and-sale agreements that collectors sign when purchasing their work from dealers or galleries prohibits them from selling. They are only permitted to donate such works to museums, and often a particular museum is granted exclusive acquisition rights.
At the end of the day, allowing artists a fair-market deduction for donating their work to museums would address a problem that doesn’t exist—and with a decidedly unfair solution. If our aim is to help artists, or the arts in general, there are many far better ways.