Artists can’t take tax deductions for their donated work. Will that change?
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A Fitz Hugh Lane Day in Camden,12X9, oil on canvasboard, Carol L. Douglas
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Anyone who works in the arts is regularly asked by non-profits for donations of work. These organizations will often naively include a letter saying the donation is “tax-exempt.” That’s flat-out wrong. The deductibility of a created work is generally limited to the value of the canvas, paints and frame (which are so imprecisely measured that they have already been deducted as business expenses).
I learned this the hard way. I took a deduction for a painting I’d donated to the fine conservation group, Ducks Unlimited. A kindly IRS auditor explained the facts to me—right before she struck out the deduction and totted up the interest I owed.
It hasn’t always been this way. Before 1970, creators could deduct the fair-market value of the work they donated. According to a fascinating opinion piece by Michael Rips in the New York Times, the deduction was eliminated because former presidents were inflating the fair-market value of their papers.
Unlike Presidents Lyndon Johnson and Richard Nixon, I can document the value of my artwork with a track record of sales. The paintings used to illustrate this post, for example, are among the hundreds I’ve sold in my career.
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Drying Sails, 10X8, oil on canvasboard, , Carol L. Douglas
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This anomaly of the tax code, which punishes artists for the sins of their social betters, is regularly discussed in Congress. Nothing ever happens, and nothing ever will happen. Artists don’t have the social muscle to force that change.
But according to Rips, help may be on the way from a deliciously ironic source, the challenge of campaign spending laws by the conservative group Citizens United. That’s the case that has liberals’ panties in a twist about corporations being given the rights of people.
More precisely, it held that our First Amendment freedom of speech rights prohibited the government from restricting independent political expenditures by a nonprofit corporation. Citizens United attempted to air a film critical of Hillary Clinton before the 2008 Democratic primary. This violated a Federal statute that prohibited corporations and unions from engaging in politicking.
“Donations are a protected form of ‘symbolic speech’ (such as gifts of money, and flag-burning), and the withdrawal of the fair market tax deduction from the creators of those works is — under the precedent of Citizens United — a prohibited form of speaker discrimination,” wrote Rips, who, as a lawyer and novelist, is uniquely qualified to speak to the question. “The government would have to demonstrate a ‘compelling state interest’ for removing the deduction — nearly impossible when attempting to justify the denial of the fair market value deduction to those who donate their own work to cultural institutions.”
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Big Boned (Heritage), 16X12, oil on canvas, , Carol L. Douglas
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Rips and his pals are interested because of the negative effect this has had on new collections in American museums. I’m more interested in the ability of my fellow painters to support organizations in which they believe.
I sincerely hope Michael Rips is right, but I’m not changing my strategy just yet.
Give if you support the organization’s goals, and if they can get a fair-market price for your painting. Give if the fund drive is chaired by your Great Aunt Helga. Just don’t give under the mistaken notion that you’ll get a tax deduction.