February 22, 2006

Congress is now finalizing a bill that would have a major impact on the arts.  Next week, House and Senate negotiators will start working out a final version of tax legislation that is theoretically designed to promote charitable giving, including giving to the arts.  While the bill is large and complicated, the Senate version includes two provisions of particular importance: one that is very positive, and one that could have a negative effect on the arts and indeed on charities in general. Therefore, it is important for arts advocates to take action now to ensure that Congress includes the first provision and drops the second one.

The first provision would encourage artists to donate their works of art to nonprofit arts, cultural, and educational institutions by allowing them to claim a tax deduction for the true value of the works. The provision would both build collections for public use and give equal tax treatment to artists and non-artists. Currently, artists can write off only the cost of materials, such as paint and canvas, not the actual value of the work, while collectors can deduct the full fair-market value. The provision is important because most museums, libraries, and archives have limited acquisition funds; the primary way to acquire new works is through donations. This type of new tax incentive could make it more financially feasible for artists to donate their works for public enjoyment rather than selling them into private hands.

The second provision, while intended to expand charitable giving, was in fact hastily drafted and could have a negative impact on many taxpayers and indeed on charities themselves. As a recent Wall Street Journal article stated, “A Senate measure designed to expand charitable giving could result in a tax increase for some 37 million taxpayers.”  Here’s how it works:  taxpayers would be allowed to write off gifts only above an annual threshold of $210 ($420 for couples who file jointly). In the short term, anybody who gives to charity and also claims itemized deductions will see their taxes go up, because the first $210 of their charitable contributions were not tax deductible. In the long term, Congress is likely to raise the threshold higher, thereby creating a disincentive for people to give to charities in the future. Charities and the communities they serve will suffer.  Please help us fight this dangerous first step down a long and slippery slope. (We encourage you to read Americans for the Arts' position paper on this issue.)

Again, a House-Senate conference committee is set to craft a final bill starting next week, so now is the time to send a message to both of your Senators and your House Member. We have provided a sample letter to Congress that you can customize to reflect your own concerns.

Thank you for your continued support of the arts.

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We urge you to forward this message to friends or colleagues that may be interested in this important tax issue. If you have any questions, please contact Justin Beland, Government Affairs and Grassroots Manager, at 202-371-2830, or jbeland@artsusa.org.

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