The Issue: Charitable Tax Deduction
Tax reform debates and mounting federal deficits have put charitable tax deductions onto the chopping block as possible way to increase revenue for the federal government. This would negatively impact nonprofits who rely on the deductions as an incentive for donors to give generously. Similarly, artists and writers have lost their ability to claim the full value of works of arts donated which has resulted in a sharp decline in such donations. Proposed legislation is tracked closely to rally for the prevention of further loss in deductions and the re-instatement of artists and writers ability to claim deductions for donated works of art.
Focus Forward Toward Solutions
Keeping Charitable Tax Deductions
Since 1917, contributions made to 501(c)(3) nonprofits have been tax-deductible, in part as result of wide recognition of nonprofits’ benefit to the public good. As the momentum for tax reform increases and the federal deficit mounts, there have been proposals to curtail or eliminate the income tax deduction for gifts to 501(c)(3) organizations, including the nonprofit arts, in order to increase revenue for the federal government. Such proposals are short-sighted and are often made on the basis of false assumptions, helping fuel the deduction as a key topic in tax policy discussions.
For instance, for the eighth consecutive year, President Obama's annual budget proposal sent to Congress on February 9, 2016 includes a 28-percent cap on all itemized deductions for individuals in the top three tax brackets. There has been little support in Congress for this proposal.
In June 2016, House Ways and Means Chairman Kevin Brady (R-TX) released a 35-page tax reform blueprint. The blueprint supports continued tax incentives to encourage charitable giving. As a blueprint, it is light on the details, but prior proposals have included imposing a two-percent floor of an individual’s Adjusted Gross Income (AGI) in order to take deductions for charitable giving.
Tax reform continues to be an item of consideration in the current Congress. Comprehensive tax reform hasn't occurred since 1986!
Regaining Fair Deductions for Artists and Writers Making Gifts
Prior to 1969, artists, writers, and composers were allowed to take a fair-market value deduction for their works donated to a museum, library, or archive. In 1969, Congress changed the law, and artists could only deduct the cost of materials used. The number of works donated by artists dramatically declined. The impact was immediate and drastic:
- The Museum of Modern Art in New York received 321 gifts from artists in the three years prior to 1969; in the three years after 1969 the museum received 28 works of art from artists—a decrease of more than 90 percent.
- The biggest loser was the Library of Congress, which annually received 15–20 large gifts of manuscripts from authors. In the four years after 1969, it received one gift.
The Senate has passed artists deduction legislation five times in previous years to allow taxpayers who create literary, musical, artistic, and scholarly compositions or similar property a fair-market value tax deduction for contributions to certain tax-exempt organizations, if such properties are properly appraised and are donated no sooner than 18 months after their creation.
In 2017, Rep. John Lewis (D-GA) reintroduced the Artist-Museum Partnership Act (HR 1830), which would allow artists to take an income tax deduction for the fair market value of their work when they donate it to charitable collecting institutions.
Preparing for Federal Overtime Rule Change
Related to payroll, the U.S. Department of Labor finalized changes to the rules governing eligibility for overtime pay. The change will more than double the salary threshold (from $23,660 to $47,476 per year) under which employees can receive overtime pay. It is expected to bring millions more workers under overtime protections.
However, eight days prior to its scheduled date to take effect, U.S. District Court Judge Amos L. Mazzant III issued a temporary injunction. His injunction prevents the rule from going into effect for now, nationwide. The delay buys time for further legal consideration of the rule. For more background on the rule change prior to the court action, read this memo to the field.
- Find more details in the Tax Policy (pdf) and Artist-Museum Partnership Act (pdf) Issue Briefs in the 2017 Congressional Arts Handbook.
- Key Senate and House Committees for tax reform
- Read recent coalition letters delivered to congressional tax policy working groups: Independent Sector and Charitable Giving Coalition. Americans for the Arts is a member of these organizations.