Saturday, February 23, 2008

Artist Deduction Bill

There is a bill currently before congress that is not only of interest to artists but also to non profit galleries and arts organization. House bill S. 548 or H.R.1524, will allow artist to deduct fair market value for the art that they donate. The benefits of this bill should be clear to any arts organization that has ever hosted an arts auction, so please take the time to voice your support. Click this link to voice your support.

Urge Members of Congress to co-sponsor bipartisan legislation, S. 548 or H.R.1524, which would allow artists to take a fair-market value deduction for works given to and retained by nonprofit institutions. The U.S. tax system accords unequal treatment to creators and collectors who donate tangible works (e.g., paintings or manuscripts) to museums, libraries, educational or other collecting institutions. A collector may take a tax deduction for the fair-market value of the work, but creators may deduct only their "basis" value—essentially the cost of materials such as paint and canvas.


ed said...

You say the current tax code is unfair to artists. Not so. Artists are treated the same as everyone else.

Let's say I'm a plumber, and I want to help the local art museum. I have two ways to do it. (1) I can do 5 hours of work for John Q. Public, who pays me (say) $300. Then I can take that $300 and donate it to the museum. Since I am able to deduct the $300 from my taxable income, the value I create by working for John escapes taxation. (2) I can spend 5 hours down at the museum installing their new drinking fountain for them, saving them from having to pay another plumber $300. The value I create by doing so also goes to the museum, and it also escapes taxation.

The artist is in exactly the same boat. She can spend her time making art to sell, and then donate the proceeds to the museum, taking a deduction on her taxes. Or, she can create art and give it to the museum directly. Either way, the value she creates for the museum escapes taxation. Allowing her to ADDITIONALLY deduct the presumed "value" of the art she donates directly would give her a special advantage that the plumber and others don't enjoy. It would amount to a subsidy.

Center on Contemporary Art said...

Your example does not reflect the reality for working artists.

As an art collector I would be able to deduct the "fair market" value of a painting I bought at auction. IF I paid $800 for the painting but its appraised value is $1,200. As a collector I get to deduct $1,200.

As the artist that painting the artwork I only get to deduct the cost of the canvas, paint and any other misc. material I used to create the art.

Do you consider that fair? Many people do, which is why we support the passage of the bill.

ed said...

I don't think I understand your objection.

Nobody who donates their own work gets to deduct it's value, not a plumber, not an accountant, not a doctor. Why should an artist?

Center on Contemporary Art said...

I'm beginning to believe your a plumber, since you use the as an example so much, regardless. Plumbers, accountants, and doctors provide a service. They do not provide a tangible end product. A plumber installs a water fountain, he does not manufacture it. So whereas the plumber would not be able to deduct the value of the installation of a water fountain, the manufacturer of the water fountain can deduct the value of the water fountain. And the value of that fountain exceeds the value of the metal chassis and the plumbing it contains in order to make it work.

Using your plumber’s logic…I could go into Home Depot buy a water fountain and donate it and have the ability to write it off. But the manufacture of the water fountain can only deduct the cost of the metal and pipe fittings used to construct it. So if the bill of material for the fountain (excluding labor-just parts) is $20 but it retails of $80. Joe consumer writes off the retail value of $80, the manufacture can only deduct $20? Under current laws both the consumer and the manufacturer can write off the full retain value of the water fountain.

If an art collector can deduct the market value of the work of art then why shouldn't the artist that created it? Why is the ability to deduct the value of art solely based on the ability to purchase it and not to the ability to create it?

Ed, if you don't understand its because your not the one getting screwed by the current law.
The bill before congress simply makes the deduction more equitable. If you compelled to object to tax breaks, may I suggest focusing your energies on tax breaks for the oil companies?

ed said...

I'm actually not a plumber, but an economist with an advanced degree. I assure you I have the ability to understand these issues.

The plumber example was about the value ADDED by the plumber's labor, not about the cost of the water fountain. Assume for the example that the water fountain is already at the museum, and the plumber is merely installing it. He doesn't get to deduct the market value of his output.

The situation is the same if you're a carpenter. A carpenter makes a tangible product. But if you go to the museum and put up a shelf, you don't get to deduct the value of your output (other than the wood and other supplies you use). Likewise if the carpenter builds a table and gives it to the museum.

The tangibility of the output isn't at issue. It's whether you are able to deduct the value of your services. Why do you think tangible outputs should be treated differently from intangible ones? Why do you think an artist should be able to deduct the value of his services, but not a plumber or accountant?

ed said...

To be more clear: the value of an artists services is the difference between what he started with (the value of the canvas, paints, etc.) and what he finished with (a painting).