Congress restores the tax deduction for donated art

November 04, 1990|By Los Angeles Times

In furious budget negotiations at the close of the 101st Congress last week, lawmakers quietly gave the nation's museums and cultural institutions an early Christmas gift: a one-year restoration of tax deductions for the full market value of donated works of art.

Lawmakers and supporters of the new law say that it will stem the flow overseas of American-owned masterpieces and reverse a trend among collectors to sell their rapidly appreciating artworks rather than donate them to museums. The provision affects the nation's wealthiest taxpayers, who were singled out for restriction of deductions in 1986.

Rich collectors, however, often are the major private holders of museum-quality artworks.

The provision, part of the five-year deficit reduction act that included tax increases for the wealthiest Americans and hiked taxes on a variety of products from wine to gasoline, was pushed through by Sen. Daniel Patrick Moynihan, D-N.Y., in the waning hours of the congressional session.

Under the terms of the new law, wealthy donors will be allowed to deduct the appreciated value of their donated artworks and manuscripts to museums, galleries and libraries. So, for example, a collector who paid $80,000 for an extraordinary Vincent Van Gogh painting 43 years ago (as did the late Joan Whitney Payson for "Irises") could now donate it to a museum and deduct from his or her taxes the $50 million that it would bring at auction today.

Under the 1986 law, there were minimal tax advantages to donors of artworks, who often were reduced to deducting only the original purchase price. As a result, there was a reported 60 percent decline in the volume of paintings, sculptures, photographs and other valuable art donated to cultural institutions across the country.

The trend, which occurred in lock-step with a rush to sell off valuable artworks at auction, prompted museum officials to warn of irreversible flight of the nation's cultural heritage to wealthy collectors overseas.

Although cultural organizations had invested significant time and money in lobbying for return of the artwork deduction, few expected any success this year.

The effect of the congressional action, said Anne Murphy, executive director of the American Arts Alliance, "is a 9.5, even 9.8, on a scale of 10."

The deduction restoration is limited to one year beginning Jan. 1. But museum and arts organization officials say that they will return to Congress early next year to try to get the provision extended.

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