Wednesday, November 22, 2006

"We should be encouraging donations of artwork, not discouraging them" has an excellent piece up about the change in the fractional gift laws -- "Will Democrats Ride To Museums' Rescue?" It's the first news article I can recall seeing that properly conveys the importance of what I've been referring to as the "mismatch" problem:

"An even bigger hit is that the new law locks the artwork's value (for deduction purposes) in at the time of the initial fractional gift. This creates the crazy situation--presumably unintended by Congress--where a collector or his estate could owe gift or estate taxes on a charitable gift. The current market value of the part of the art that hasn't yet been donated is included in the estate. But the estate's charitable deduction for the remainder of the art gift is based on the lower value at the time the fractional gift began. As a result, fractional donations have come to a halt. Even donors who had started giving a work before Aug. 18 [the effective date of the new law] aren't giving additional percentages, for fear that will subject their estates to this extra gotcha tax."

The story notes that a number of museums have written letters to the Senate Finance Committee asking for changes, "[b]ut their best chance for relief is in the next Congress, when New York’s senior senator, Democrat Charles Schumer, should have lots of influence":

"[T]he museums have a friend in Schumer, a Finance Committee member who was just elected the third-ranking member of the Democratic leadership. Last week, Schumer and Sen. Gordon H. Smith, R-Ore., wrote a letter to [outgoing Senate Finance Chairman Charles] Grassley and incoming Senate Finance Committee Chairman Max Baucus, D-Mont., offering to help 'find a middle-ground solution to the fractional gifts issue' in the next Congress."

Back next week. Happy Thanksgiving to all.