[MSN] Law could hang up donations of artworks. Museums are worried that a recent tax change could hamper valuable gifts.

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Last update: November 01, 2006 - 10:30 PM

Law could hang up donations of artworks
Museums are worried that a recent tax change could hamper valuable gifts.
Mary Abbe, Star Tribune

Lawmakers are in a standoff with art collectors, and Twin Cities museums are
worried.
A recent change in federal tax law that was intended to curb abuses by the
wealthy has Twin Cities museum officials grumbling that priceless art gifts
could dry up.

Although the law just went into effect in August, a spokesman for Sen. Norm
Coleman, R-Minn., said the senator is already working with colleagues on
"some minor legislative changes" to protect art gifts. 

"We are working with Senator [Charles E.] Schumer [D-N.Y.] and Senator
[Gordon] Smith [R-Ore.] to bring the issue to the attention of the Finance
Committee and hopefully find a solution there," said spokesman Luke
Friedrich.

The law changed the terms under which donors can make what are known as
fractional gifts of art to a museum. 

The old law allowed a collector to donate a percentage of an art object,
take a tax write-off for the gift, and yet retain physical possession of the
piece, often for many years. The new law caps the value of the donation, the
time span of the gift and how the museum and private owner will share it. 

Museums say the original law enriched public art collections, cemented
relationships with donors and cost taxpayers little compared with its
benefits.

"What the donor gets is such a small thing in terms of a tax break, whereas
the public gets an incredibly important work of art," said Anita Difanis,
director of government affairs for the Association of Art Museum Directors,
which hopes to modify the new law.

Critics object that wealthy donors got tax deductions for art to which the
public had no access.

"This is a question of fairness," Sen. Charles E. Grassley told the New York
Times. The Iowa Republican is chairman of the Senate Finance Committee,
which drafted the new rules. "It isn't right for a donor to get a big tax
break for supposedly donating a painting that hangs in his living room, not
the museum, all year. A painting in a private living room doesn't benefit
the public."

Collectors disagree. "I think the rule before was a win-win, great for the
museums and for a young collector who wasn't ready to totally part with her
piece but wanted to give back to the community," said art collector Susan
White, a board member at Walker Art Center, where she has served on the
art-acquisition committee for 13 years. 

A Chicago native, White recently used a fractional donation to give the
Walker an important drawing by Gordon Matta Clark.

Nationally, art donations make up less than 3 percent of non-cash gifts for
which tax donations are claimed, according to a recent Internal Revenue
Service study, said Difanis. "The IRS said this is not a high enough
occurrence to worry about," she said.

Fractional gifts enrich Walker 

The number of fractional gifts varies greatly at Twin Cities museums. Over
the years, Walker Art Center, which has a 10,000-piece collection, has
received 23 fractionals, including paintings by Joan Mitchell and Willem de
Kooning; sculpture by Ellsworth Kelly, and photos by Shirin Neshat and
Thomas Struth. 

Museums "really depend on collectors to pass works on to them," said
Christopher Stevens, the Walker's development director. "Making fractional
gifts not work any more is going to take some incredibly choice pieces out
of the public purview." 

Having a fractional gift option even enabled St. Paul collectors Carolyn and
Kim Bemis to acquire the Struth photo that they donated to the Walker. The
artist's New York dealer wanted to place all of Struth's large-scale photos
in museums rather than with private collectors, Kim Bemis said, so they
bought their photo in consultation with Richard Flood, then the Walker's
chief curator.

The Bemises gave the Struth over seven years and are now in the midst of
giving the Walker a Shirin Neshat photo over 10 years. 

"Right now [the Neshat] is still in our house," Bemis said. "Fractional
gifts work for both the museum and the collector in that the collector gets
to enjoy the piece for a period of time, and the museum saves on storage and
makes the collector happy."

Provisions then and now

The Bemises began their fractional donations before President Bush signed
the new law into effect in August as part of a larger Pension Protection
Act. The old law allowed donors, their tax advisers and museums to set the
terms of gift contracts including the number of years spanned and when the
museum would take possession. Some museums got the art immediately; others
would get it periodically for special shows.

It also allowed donors to take larger tax deductions if the appraised value
of the object increased during the donation period. 

Under the new law, gifts must be completed within 10 years, the appraised
value is capped at the time of the first donation but goes down if the value
declines, and museums must take possession of the art for a time equal to
the percentage they own.

The University of Minnesota's Weisman Art Museum has no fractional gifts,
and the Minneapolis Institute of Arts has just "a handful," but they include
a multimillion-dollar Impressionist painting by Claude Monet from the late
Twin Cities aesthete Anne Pierce Rogers. She bought the painting
specifically for the museum, delivered it immediately in 1984 and never took
it home. She took deductions periodically over the next 21 years and the
gift was completed, by bequest, after her death in 2005. By then the
painting was valued at $5 million. 

Museum officials are troubled by the new law's requirement that they take
possession each year. If they own 20 percent of a sculpture, that means they
must have it at the museum for 73 days each year. That appears reasonable,
but is often inconvenient or worse, experts say. Museums usually install
their collections thematically for months or years at a time and don't have
gaps to plug. And the frequent moving of very large or fragile pieces can be
costly and dangerous.

"If there's a fractional gift of a Richard Serra steel sculpture that
weights 120 tons and it's going from a West Coast collector to an East Coast
museum, you wouldn't want to move it until you had it permanently," said
Difanis of the art museum directors association.


Mary Abbe . 612-673-4431 . mabbe at startribune.com