The Pittsburgh Post-Gazette discusses emerging efforts to review in-kind contributions to nonprofits and their restrictions within the IRS tax code. It sounds like a deadly dull conversation, far less interesting than the NEA budget advances, but alert managers should take careful note. As the conversation is forming, arts and culture organizations are looming large in the sights of the review committee — with suggestions that they are poster children for the need for reform.
Sen. Charles Grassley, R-Iowa, head of the Senate Finance Committee, is leading the charge for change, suggesting that the values of in-kind gifts are often wildly inflated by donors, and represent inappropriate tax shelters.
Just for background, ‘in-kind’ contributions are goods and services donated to a nonprofit that would have otherwise cost money…legal services, printing services, computers, even art works, artifacts, musical instruments, and the like. For most of these in-kind gifts, the cash value is fairly easy to calculate for both the contributor and the recipient: they just look to what those same goods and services would have cost if they were being paid for, or how they are valued on the contributors books. Attorneys know exactly what they would charge a paying client; companies contributing computers or office equipment already have some record for that equipment and its residual value.
The problem comes when the contributed item or service is difficult to value — like a rare book or a ‘priceless’ heirloom. You can guess at the value of such things, but since they are often rare and unique, and are NOT being sold but contributed, you can’t know for sure what they would have earned on the open market.
That’s where Sen. Grassley is most concerned, and that’s where arts organizations are perfect for the public pillory. According to the story:
….Grassley is expected to zero in on the much-ballyhooed case of Herbert Axelrod, a wealthy New Jersey businessman who made a fortune publishing pet-care books. In 1998, Axelrod donated four antique Stradivarius instruments to the Smithsonian Institution and, last year, sold several dozen more to the New Jersey Symphony Orchestra at what he claimed was a greatly reduced price — and in both cases, insisted the instruments were worth $50 million.
It doesn’t help matters that Axelrod was indicted earlier this year for tax evasion, fled to Havana, and was arrested last week in Berlin. Not your favorite profile of a major donor.
There’s clearly a balance in here somewhere, and one that will be hard to come by in election rhetoric. Of course contributions should be valued carefully for tax purposes. And for most in-kind gifts, this is fairly easily done. The danger is in defining policy for the anomoly rather than the norm, which will leave arts organizations with much more legal fees and paperwork, and leave potential donors wondering if they should even bother.
More fun stuff to watch in Congress. If only I had cable.
