The NY Times published an interesting article which looks at the creation and tax benefits of private museums. The article notes the growing popularity of private museums as well as the continued movement and acceptance of art as an asset class.
The NY Times was rather long, and I did not feel comfortable in posting it in its entirety. Follow the source link below to read the full article. I will say the article is of interest to personal property appraisers, and there may be potential assignments for appraisers as high net worth individuals donate art to their foundations and open museums. The article notes "Once a nonprofit foundation is set up, it can write off the cost of conserving, caring for and insuring the art, as well as designing and building exhibition and storage facilities." Int continues "The nonprofit’s art purchases are also exempt from state and local sales taxes.It is well worth the time to read."
The NY Times reports
Source: The NY TimesThe growing popularity of private museums is related to the dizzying art market. Record-setting bids that run into tens of millions of dollars have prompted sustained applause in auction houses around the world. In the United States alone, average fine-art auction prices doubled from 2009 to 2013, according to the European Fine Art Foundation.
“There’s been a seismic shift in the past 10 to 15 years,” said Tom Eccles, executive director of the curatorial studies program at Bard College. “Art is seen today as an equal asset class to stocks, boats, houses and jewelry, and people don’t want to give their assets away.”
That’s where tax strategists come in. Collectors used to be able to donate works to a museum while keeping the art in their own homes while they were still alive. But a change in the tax law in 2006 outlawed the practice.
Although there are no verifiable figures on the precise number of private art museums and foundations in the United States, art advisers and tax experts who deal with wealthy collectors say the total is growing. “There’s definitely been a major uptick in this area,” said Adam von Poblitz, head of estate planning at Citi Private Bank and a tax expert. He said he was currently in discussions with a half-dozen families about creating private museums or private operating foundations for their art collections.
In 2013, a Private Museum Summit was held in London, the first of its kind and a sign of the rapid increase in the museums’ numbers worldwide, particularly in Asia. In the United States, Suzanne Gyorgy, head of art advisory and finance at Citi Private Bank, said that in the past decade she had “seen more and more warehouse spaces being developed into private museums or people building museums on their private property.”
Donating to established museums, which also earns a tax break, is still common, but most institutions are selective about what they accept. Many don’t specialize in the contemporary art that now attracts some of the highest prices at auction. Moreover, giving away an artwork means fully relinquishing power over a once-prized possession. As the two-volume “Art Law” guide advises, private operating foundations can be a good option “for a collector who wants the tax benefits of donating his art collection yet cannot cope with losing total control over the collection.”
Mr. Lerner, the guide’s co-author, helped popularize private museums in the mid-1980s, he said, by applying the tax code “in a creative manner.” The practice, he said, “gives the ability to have your cake and eat it too.”
Continue reading the main storyContinue reading the main storyContinue reading the main story
Dorothy Kosinski, director of the Phillips Collection in Washington, said that public funding for the arts was minuscule. “Why not give these people credit,” she said, “if they’re going to spend their time and money in supporting artists and making their facilities open to the public?”
While art donated to a charity or foundation ceases to be an owner’s private property, the donor can still control it through the foundation and be eligible for tax deductions. According to Glenstone’s 2012 tax return, Mr. Rales donated $149 million worth of stock, mostly from Danaher, potentially saving him tens of millions of dollars in capital gains taxes. His partner and brother, Steven M. Rales, donated an additional $26 million in stock to Glenstone from the Janalia Corporation, a holding company that the brothers own.
Once a nonprofit foundation is set up, it can write off the cost of conserving, caring for and insuring the art, as well as designing and building exhibition and storage facilities. The Raleses are now planning a second, 150,000-square-foot museum, designed by the architect Thomas Phifer. The nonprofit’s art purchases are also exempt from state and local sales taxes.
Not all private collections that exhibit art take advantage of a tax exemption. Howard Rachofsky and Vernon Faulconer, two Dallas collectors, and Rosa and Carlos de la Cruz, who is chairman of the CC1 Companies, in Miami, have opened small museums with limited hours and access, but neither gallery space is registered as a foundation or charity.
In an email, Ms. de la Cruz said her museum was “our way to contribute to society and support education in the visual arts,” and questioned whether individuals deserve an exemption when they still maintain tight control over the art.
The Brant Foundation, which operates the art study center and was created in 1996, has more than $93 million in total assets, according to its 2012 federal tax return.
(In an I.R.S. civil action unrelated to his foundation, Mr. Brant contributed to a $9.1 million settlement in 2004 of a case involving him and others in what prosecutors had said were unpaid taxes on the sale of 58 artworks.)
Mr. Brant declined to comment about his foundation, but Tisha Kresler, a spokeswoman for him, said it engages in much charitable work, citing a free arts day for homeless children from New York City last year and partnerships with the Greenwich Y.M.C.A. to hold workshops and tours for children. The Brant Foundation also lends art and organizes traveling exhibits. A show at the Greenwich center can attract 8,000 to 10,000 people, she said.
That number includes hundreds of gallery owners, artists and celebrities like Leonardo DiCaprio, Christopher Walken and ChloĆ« Sevigny who have attended the center’s opening galas. Fortified by Champagne and barbecue served under an enormous tent on the expansive green, guests have viewed art by some of Mr. Brant’s favorite artists, like Andy Warhol, Cady Noland and Richard Prince. A Julian Schnabel exhibition that ran from November 2013 through March 2014 included several portraits that Mr. Brant had commissioned of his own family.
Mr. Lerner, the “Art Law” co-author, suggested that even those collectors who set up museums by their homes serve a long-term public good.
“I don’t think that’s something that’s abusive,” he said. After collectors die, their art can become more firmly situated in the public realm, he said, mentioning the Frick and the Isabella Stewart Gardner Museum in Boston. “If you take the long view, I think it’s good for the arts.”
No comments:
Post a Comment