Domenici Reintroduces Bill on Easing Capital Gains Tax on Art Donations

Domenici Reintroduces Bill on Easing Capital Gains Tax on Art Donations

News story posted in Legislative on 9 June 2005| comments
audience: National Publication | last updated: 18 May 2011


The Art and Collectibles Capital Gains Tax Treatment Parity Act would lower the tax rate for art investments and give broader charitable deductions to artists for donations of their work, Sen. Pete V. Domenici, R-N.M., said in a release about his introducing the bill with Finance Committee member Charles E. Schumer, D-N.Y.
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WASHINGTON -- At a Capitol Hill News conference today, U.S. Senator Pete Domenici renewed his efforts to gain Senate passage of the Art and Collectibles Capital Gains Tax Treatment Parity Act.

Domenici was joined by Senator Charles Schumer (D-N.Y.), a member of the Senate Finance Committee and the lead Democrat sponsoring the bill.

The legislation aims to ease federal tax assessments on art, artists and collectors. Domenici had introduced the bill during the last two sessions of Congress. This year, the Senate Finance Committee is undertaking a $70 billion tax reconciliation bill, which likely will include an extention of the existing capital gains tax provision, making a discussion of the disparate capital gains tax treatment for arts and collectibles particularly timely.

"Artists and collectors in New Mexico and across the country face a tax code which essentially punishes them. This bill will eliminate penalties for artists and collectors and make the IRS code more consistent," Domenici said.

Domenici was joined at the news conference by artists, including well known sculptor Joel Shapiro, and representatives from Sotheby's and Christie's, two major auction houses. The bill has also been endorsed by New Mexico gallery owners such as Gerald Peters and Nedra Matteucci.

The legislation aims to fix two inconsistencies in the tax code: 1. the capital gains tax on the sale of art and collectibles, and 2. tax deductions for donations of arts and collectibles by artists. Under current law, individuals who invest in art or collectibles are now taxed at 28 percent, compared to the top capital gains tax rate on investment securities of 15 percent.

Since works of art are investments like stocks and bonds, the bill would lower the tax rate for arts and collectibles to 15 percent. Art plays a major role in the economy, particularly in Santa Fe, which is the third largest art market in the country. Art sales in New Mexico have been estimated to be between $500 million and $1 billion per year.

The second inconsistency the bill will fix involves charitable deductions for artists donating their work to a museum or other charitable cause. Currently, an artist or creator can only receive a tax deduction equal to the cost of the art supplies.

Since pieces of art have significantly more value than the supplies used to create them, this legislation will allow a fair market deduction for the artist. It applies to literary, musical, artistic, and scholarly compositions if the work was created at least 18 months before the donation has been appraised, and is related to the purpose or function of the charitable organization receiving the donation.

"The current tax code punishes artists and galleries by discouraging donations. It makes no sense to not treat art like the valuable commodity it is. This bill will make things fair for artists, for collectors, and for the public who will benefit from having access to more works of art," Domenici said.

1. Long Term Capital Gains Treatment of Investments in Art and Collectibles

  • Lowers the capital gains tax rate for investments in art and collectibles so they would be the same as an investment in stocks and bonds.
  • Currently the top capital gains rate for art and collectibles is 28 percent while top rate for stocks and bonds is 15 percent.

2. Charitable Deductions of Donated Artwork by Artists

  • Currently, artists making a charitable contribution are allowed only a charitable deduction equal to the cost of their materials instead of the fair market value.
  • The bill would give artists a deduction equal to fair market value subject to the work being created at least 18 months prior to the donation and a professional appraisal.

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