As discussed presviously in this forum, if we donate our artwork to a non-profit organization we can only deduct the cost of materials. However, the times, they are a' changin'.
There are currently identical, bi-partisan bills pending in the US House and Senate to amend the Internal Revenue Code and allow artists to deduct the fair-market value of works donated to non-profits. Although there are a few requirements and restrictions, I see these bills as a step in the right direction. They may not be exactly what we'd like to see but, if passed, the tax situation would be better than it is currently.
If you would like to support this legislation, then go to Advocate for the Arts and fill out the form that sends an email or letter (your choice) to your Senators and Congressman.
The full text of the bill (surprisingly short! ), can be found here.
Always in support of tax breaks ,
CAZ
Posted by Todd Caudle on April 22, 2007 at 4:06 PM
Posted by Scott Borger on April 22, 2007 at 6:38 PM
I took a brief look at the proposed bill and it seems like an interesting concept for artists. I don’t have any opinion on it at this time, but I did notice a few things about the bill that seemed to beg the following questions:
1. “(ii) the taxpayer--(I) has received a qualified appraisal of the fair market value of such property in accordance with the regulations under this section…"
This could be interesting. Who is going to be issuing these “qualified appraisals?” Also, how is someone going to be able to give a “fair-market” appraisal for something that is not sold on the secondary market? Anyone can put any price on a given piece of “art.” Obviously, preset appraisal values (pair of socks = $2) will not work for art, because not all artistic works of the same genre carry the same fair-market value.
2. …“Special rule for certain contributions of literary, musical, or artistic compositions…”
What is an “artistic composition.” This is an extremely vague concept. While I don’t see this bill adding any more “vagueness” to this question, I do see a tendency for people to widen their view of “artistic compositions” since the tax benefits would be much greater.
3. (i)… “shall not exceed the artistic adjusted gross income…”
Nothing new here, but the implications could be different under the new tax structure. Your tax benefits from this new tax structure could potentially be more profitable than selling the art at the retail price. For example, if your profit margins were less than your tax deduction, it would be more profitable to give away your art than to sell it. If you’re in a reasonably high tax bracket and you consider your time costs, this isn’t all that unlikely (especially for amateur photographers that don’t get pro rates on materials and make $ via another job). I’m not saying that this is necessarily bad, but it could turn 501c3 organizations into "art" museums??
4. Finally, “artists” will have to pay close attention to the tax code that “charitable organizations” are operating under. This isn’t really adding anything new to the tax code, but it would be a pain to get audited by the IRS and find out that a “charitable organization” was not actually a 501cX organization. The tax benefits will increase significantly with a move from “materials value” to “fair-market value.” Perhaps the IRS will scrutinize more heavily because of this??
Just my thoughts,
Scott
Posted by Amy Lindsey on April 24, 2007 at 2:14 PM
Discussion
3 repliesThere are currently identical, bi-partisan bills pending in the US House and Senate to amend the Internal Revenue Code and allow artists to deduct the fair-market value of works donated to non-profits.
If you would like to support this legislation, then go to Advocate for the Arts and fill out the form that sends an email or letter (your choice) to your Senators and Congressman.
The full text of the bill (surprisingly short!
Always in support of tax breaks
CAZ
1. “(ii) the taxpayer--(I) has received a qualified appraisal of the fair market value of such property in accordance with the regulations under this section…"
This could be interesting. Who is going to be issuing these “qualified appraisals?” Also, how is someone going to be able to give a “fair-market” appraisal for something that is not sold on the secondary market? Anyone can put any price on a given piece of “art.” Obviously, preset appraisal values (pair of socks = $2) will not work for art, because not all artistic works of the same genre carry the same fair-market value.
2. …“Special rule for certain contributions of literary, musical, or artistic compositions…”
What is an “artistic composition.” This is an extremely vague concept. While I don’t see this bill adding any more “vagueness” to this question, I do see a tendency for people to widen their view of “artistic compositions” since the tax benefits would be much greater.
3. (i)… “shall not exceed the artistic adjusted gross income…”
Nothing new here, but the implications could be different under the new tax structure. Your tax benefits from this new tax structure could potentially be more profitable than selling the art at the retail price. For example, if your profit margins were less than your tax deduction, it would be more profitable to give away your art than to sell it. If you’re in a reasonably high tax bracket and you consider your time costs, this isn’t all that unlikely (especially for amateur photographers that don’t get pro rates on materials and make $ via another job). I’m not saying that this is necessarily bad, but it could turn 501c3 organizations into "art" museums??
4. Finally, “artists” will have to pay close attention to the tax code that “charitable organizations” are operating under. This isn’t really adding anything new to the tax code, but it would be a pain to get audited by the IRS and find out that a “charitable organization” was not actually a 501cX organization. The tax benefits will increase significantly with a move from “materials value” to “fair-market value.” Perhaps the IRS will scrutinize more heavily because of this??
Just my thoughts,
Scott