How to Donate to a Museum
By Bobbie Leigh
You give, the museum gets. Museums count on donations, and donors count on a tax deduction. It should be simple, but like all things, the devil is in the details. Charitable giving is an art in itself. For example, when a collector offered a group of Inuit carvings to the Speed Art Museum in Louisville, Kentucky, director Peter Morrin recalls, "We respectfully declined as we had no context for that type of art." But when Steven Block of Louisville offered Morrin a collection of 87 Whistler lithographs, the museum was thrilled to add to its Whistler holdings. "The Block Collection helped us in an area where we needed bolstering," he says.
It was an ideal arrangement. The gift positioned the Speed as a major center for the study of Whistler, and Block was delighted to give his collection to his hometown museum. By networking with dealers, curators and museum directors, as well as consulting with financial managers or attorneys, you can find the best fit for your donation, streamline the process, earn a tax deduction and give your art to an institution where it can be most appreciated. Through your gift to a museum, you reaffirm that art plays an important role in strengthening a civil society.
Selecting a Museum
Like many dealers, Ted Cooper, owner of the Adams-Davidson Galleries in Washington, D.C., advises collectors about donations to museums. "We prepared an appraisal for a client in Washington who had some major German Expressionist paintings," says Cooper. "He wanted to contribute locally, and we advised him to donate to the Phillips Collection because his paintings were a good fit with that museum’s other German Expressionist paintings." In other words, context is crucial.
In deciding where to give, the donor needs expertise and an awareness of the art market. You may, for example, have a particularly charming John Marin watercolor of Deer Isle, Maine, that you would like to give to the National Gallery, which happens to have more than 1,000 John Marins. If the gallery already had a good example of that image from the same year, it would most likely decline your donation since it would not add depth to its collection. In contrast, a local or regional museum just starting to build its collection of American Modernists or marine watercolors might be delighted with your gift.
The Curator’s Role
Typically, donors have relationships with museum curators who perhaps have assisted with the formation of their collections or, at the very least, offered some advice about a piece at auction. When it comes to giving art to a museum, the curator’s role is crucial. Charles L. Venable, deputy director for collections and programs at the Cleveland Museum of Art, says that curators use many different criteria for assessing the quality and suitability of a gift. Here are some general curatorial concerns:
— Is the work consistent with the mission of the museum?
— Is the work of the same or better quality than the museum already has?
— Does it fill a gap in the collection?
— Does the museum have space to display it most of the time?
— Is the donor requesting a special gallery?
— If the work is to go into storage, is there space?
— Will the work require conservation?
— Are there too many restrictions on the gift, such as the work must always be on display, can’t travel, be loaned or sold?
Provenance
Along with quality, the issue of provenance is paramount. "We are extremely cautious about works that might have been acquired from archaeological excavations," Venable says. "We also check on European paintings that might have been confiscated illegally during the war years and need to be returned to their owners," he says, adding that these are going to be hot issues for a very long time. Legal, ethical and security considerations influence curators’ selections.
Committee Decisions
As a rule, once a curator says that the work could be a wonderful addition to a museum’s collection, a selection or acquisitions committee or perhaps a standing committee of the board of trustees passes judgment. In smaller museums, it’s often the director’s decision in consultation with curators whether to accept or decline a gift. Most museums don’t have major acquisitions funds, so they rely on gifts. Turning down a gift from a collector who has yet to decide about other works that the museum would love to have is tricky, especially if there’s a possibility of insulting the potential donor.
Establishing Value
Perhaps the most important component of the process is the appraisal. About 45 years ago, art appraisal practices were so fraudulent that the U.S. government was seriously considering eliminating tax deductions for art. Had that happened, museums would have lost their major source for acquisitions. The Art Dealers Association of America jumped into the fray and established its highly regarded appraisal service. Auction houses, dealers and museum curators also can provide information about getting an independent, qualified appraisal.
The IRS
The IRS determines whether the value indicated on a tax return reflects the true, fair market value of a work of art. Because art values are so subjective, the IRS has established strict rules regarding art appraisals. The IRS looks at the value in the specific marketplace where the item is most commonly sold at retail. According to the tax code: "The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts."
Deductions
"You can deduct up to 30 percent of your adjusted gross income," explains Philip J. Michaels, a trusts and estates attorney with Fulbright & Jaworski in New York. Assuming a donor’s income is $200,000, the allowable charitable deduction is 30 percent of that donor’s adjusted gross income, or $60,000, in that particular year.
"But if the donor’s income is $100,000, the donor has the option of taking $20,000 in one year and deducting the rest over the next five years," he says, noting that many of his clients prefer to roll forward their deductions rather than take them all at once. Whoever prepares the donor’s tax return needs to provide the IRS with various forms, written appraisals, visuals and other materials to obtain the deduction.
Partial Ownership
When donors aren’t quite ready to part with a much-loved work, they may choose to transfer partial ownership to a museum. The donors receive a partial charitable deduction but still own the painting, perhaps taking possession in the winter months when they are home and lending it to a museum during the summer and fall. David Rockefeller’s 1890 portrait of Felix Fénéon by Paul Signac is such a fractional gift. It is on display now on the new fifth floor of the Museum of Modern Art and will be returned to Rockefeller in six months.
When There’s an Audit
The IRS has a little-known Art Advisory Panel made up of unpaid top art experts (dealers, curators and academics) who meet twice a year to review art appraisals of $20,000 or more in audited tax cases. The process is extremely thorough, with the panel checking provenance, authenticity and determining value. It’s tricky. For example, as the panel might have to determine what makes one John Marin work worth more than another. Inaccurate appraisals and over-reported values can result in stiff fines and penalties.
In one case that ended in court, a donor contributed some Korean ceramics to a museum and claimed a $125,000 deduction. The panel said the fair market value was $21,650 and upped the person’s income tax by more than $52,000, plus penalties. In 2003, 75 percent of the donated items reviewed were adjusted, resulting in a 40 percent reduction on the charitable contribution—a reduction from $77 million to $30 million.
Collectors Doug and Dale Anderson, who have been contributing art to museums for 20 years, say the way to avoid an audit is to have superb documentation. "We spend a ton of money on appraisals and submit full-blown appraisals, images and provenance," says Dale. "In effect, we hand the IRS everything it might need. It’s a system that works."
For more information
—Adams Davidson Galleries, Washington, D.C. (202) 965-3800. www.adgal.com.
—American Association of Museums, Washington, D.C. (202) 289-1818. www.aam-us.org.
—Art Dealers Association of America, New York. (212) 940-8590. www.artdealers.org.
—Associate of Art Museum Directors, New York. (212) 249-4423. www.aamd.org.
—Fulbright & Jaworski (Philip J. Michaels), New York. (212) 318-3179.