[Congressional Record Volume 151, Number 15 (Monday, February 14, 2005)]
[Senate]
[Pages S1346-S1347]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LEAHY (for himself, Mr. Bennett, Mr. Bingaman, Ms. 
        Cantwell, Mr. Cochran, Mr. Conrad, Mr. Dodd, Mr. Durbin, Mr. 
        Jeffords, Mr. Kennedy, Mr. Kerry, Mr. Lieberman, Mr. Lugar, Mr. 
        Stevens, and Mr. Warner):
  S. 372. A bill to amend the Internal Revenue Code of 1986 to provide 
that a deduction equal to fair market value shall be allowed for 
charitable contributions of literary, musical, artistic, or scholarly 
compositions created by the donor; to the Committee on Finance.
  Mr. LEAHY. Mr. President, I rise today again with Senator Bennett to 
introduce the ``Artist-Museum Partnership Act.'' This bipartisan 
legislation will enable our country to keep cherished art works in the 
United States and to preserve them in our public institutions, while 
erasing an inequity in our tax code that currently serves as a 
disincentive for artists to donate their works to museums and 
libraries. This is the same bill we introduced the past three 
Congresses. It was also included in the Senate-passed version of the 
President's 2001 tax cut bill, and in the Senate-passed version of the 
2003 Charity Aid, Recovery, and Empowerment, CARE, Act. I would like to 
thank Senators Bingaman, Cantwell, Cochran, Conrad, Dodd, Durbin, 
Jeffords, Kennedy, Kerry, Lieberman, Lugar, Stevens and Warner for 
cosponsoring this bipartisan bill.
  Our bill is sensible and straightforward. It would allow artists, 
writers, and composers who donate works to museums and libraries to 
take a tax deduction equal to the fair market value of the work. This 
is something that collectors who make similar donations are already 
able to do. Under current law, artists who donate self-created works 
are only able to deduct the cost of supplies such as canvas, pen, paper 
and ink, which does not even come close to their true value. This is 
unfair to artists and it hurts museums and libraries--large and small--
that are dedicated to preserving works for posterity. If we as a nation 
want to ensure that art works created by living artists are available 
to the public in the future--for study or for pleasure--this is 
something that artists should be allowed to do.
  In my State of Vermont, we are incredibly proud of the great works 
produced by hundreds of local artists who choose to live and work in 
the Green Mountain State. Displaying their creations in museums and 
libraries helps

[[Page S1347]]

develop a sense of pride among Vermonters and strengthens a bond with 
Vermont, its landscape, its beauty, and its cultural heritage. Anyone 
who has contemplated a painting in a museum or examined an original 
manuscript or composition, and has gained a greater understanding of 
both the artist and the subject as a result, knows the tremendous value 
of these works. I would like to see more of them, not fewer, preserved 
in Vermont and across the country.
  Prior to 1969, artists and collectors alike were able to take a 
deduction equivalent to the fair market value of a work, but Congress 
changed the law with respect to artists in the Tax Reform Act of 1969. 
Since then, fewer and fewer artists have donated their works to museums 
and cultural institutions. The sharp decline in donations to the 
Library of Congress clearly illustrates this point. Until 1969, the 
Library of Congress received 15 to 20 large gifts of manuscripts from 
authors each year. In the four years following the elimination of the 
deduction, the Library received only one such gift. Instead, many of 
these works have been sold to private collectors and are no longer 
available to the general public.
  For example, prior to the enactment of the 1969 law, Igor Stravinsky 
planned to donate his papers to the Music Division of the Library of 
Congress. But after the law passed, his papers were sold instead to a 
private foundation in Switzerland. We can no longer afford this massive 
loss to our cultural heritage. Losses like this are an unintended 
consequence of the 1969 tax bill that should now be corrected.
  Congress changed the law for artists more than 30 years ago in 
response to the perception that some taxpayers were taking advantage of 
the law by inflating the market value of self-created works. Since that 
time, however, the government has cut down significantly on the abuse 
of fair market value determinations. Under this legislation, artists 
who donate their own paintings, manuscripts, compositions, or scholarly 
compositions would be subject to the same new rules that all taxpayer/
collectors who donate such works must now follow. This includes 
providing relevant information as to the value of the gift, providing 
appraisals by qualified appraisers, and, in some cases, subjecting them 
to review by the Internal Revenue Service's Art Advisory Panel.
  In addition, donated works must be accepted by museums and libraries, 
which often have strict criteria in place for works they intend to 
display. The institution must certify that it intends to put the work 
to a use that is related to the institution's tax exempt status. For 
example, a painting contributed to an educational institution must be 
used by that organization for educational purposes and could not be 
sold by the institution for profit. Similarly, a work could not be 
donated to a hospital or other charitable institution that did not 
intend to use the work in a manner related to the function constituting 
the recipient's exemption under Section 501 of the tax code. Finally, 
the fair market value of the work could only be deducted from the 
portion of the artist's income that has come from the sale of similar 
works or related activities.
  This bill would also correct another disparity in the tax treatment 
of self-created works--how the same work is treated before and after an 
artist's death. While living artists may only deduct the material costs 
of donations, donations of those same works after death are deductible 
from estate taxes at the fair market value of the work. In addition, 
when an artist dies, works that are part of his or her estate are taxed 
on the fair market value.
  The Joint Committee on Taxation has previously estimated that our 
bill would cost $50 million over 10 years. This is a moderate price to 
pay for our education and the preservation of our cultural heritage.
  I want to thank my colleagues again for cosponsoring this bipartisan 
legislation. The time has come for us to correct an unintended 
consequence of the 1969 law and encourage rather than discourage the 
donations of art works by their creators. This bill will make a 
critical difference in an artist's decision to donate his or her work, 
rather than sell it to a private party where it may become lost to the 
public forever. Mr. President, I ask unanimous consent that the text of 
the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 372

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled, 

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Artist-Museum Partnership 
     Act''.

     SEC. 2. CHARITABLE CONTRIBUTIONS OF CERTAIN ITEMS CREATED BY 
                   THE TAXPAYER.

       (a) In General.--Subsection (e) of section 170 of the 
     Internal Revenue Code of 1986 (relating to certain 
     contributions of ordinary income and capital gain property) 
     is amended by adding at the end the following new paragraph:
       ``(7) Special rule for certain contributions of literary, 
     musical, or artistic compositions.--
       ``(A) In general.--In the case of a qualified artistic 
     charitable contribution--
       ``(i) the amount of such contribution shall be the fair 
     market value of the property contributed (determined at the 
     time of such contribution), and
       ``(ii) no reduction in the amount of such contribution 
     shall be made under paragraph (1).
       ``(B) Qualified artistic charitable contribution.--For 
     purposes of this paragraph, the term `qualified artistic 
     charitable contribution' means a charitable contribution of 
     any literary, musical, artistic, or scholarly composition, or 
     similar property, or the copyright thereon (or both), but 
     only if--
       ``(i) such property was created by the personal efforts of 
     the taxpayer making such contribution no less than 18 months 
     prior to such contribution,
       ``(ii) the taxpayer--

       ``(I) has received a qualified appraisal of the fair market 
     value of such property in accordance with the regulations 
     under this section, and
       ``(II) attaches to the taxpayer's income tax return for the 
     taxable year in which such contribution was made a copy of 
     such appraisal,

       ``(iii) the donee is an organization described in 
     subsection (b)(1)(A),
       ``(iv) the use of such property by the donee is related to 
     the purpose or function constituting the basis for the 
     donee's exemption under section 501 (or, in the case of a 
     governmental unit, to any purpose or function described under 
     subsection (c)),
       ``(v) the taxpayer receives from the donee a written 
     statement representing that the donee's use of the property 
     will be in accordance with the provisions of clause (iv), and
       ``(vi) the written appraisal referred to in clause (ii) 
     includes evidence of the extent (if any) to which property 
     created by the personal efforts of the taxpayer and of the 
     same type as the donated property is or has been--

       ``(I) owned, maintained, and displayed by organizations 
     described in subsection (b)(1)(A), and
       ``(II) sold to or exchanged by persons other than the 
     taxpayer, donee, or any related person (as defined in section 
     465(b)(3)(C)).

       ``(C) Maximum dollar limitation; no carryover of increased 
     deduction.--The increase in the deduction under this section 
     by reason of this paragraph for any taxable year--
       ``(i) shall not exceed the artistic adjusted gross income 
     of the taxpayer for such taxable year, and
       ``(ii) shall not be taken into account in determining the 
     amount which may be carried from such taxable year under 
     subsection (d).
       ``(D) Artistic adjusted gross income.--For purposes of this 
     paragraph, the term `artistic adjusted gross income' means 
     that portion of the adjusted gross income of the taxpayer for 
     the taxable year attributable to--
       ``(i) income from the sale or use of property created by 
     the personal efforts of the taxpayer which is of the same 
     type as the donated property, and
       ``(ii) income from teaching, lecturing, performing, or 
     similar activity with respect to property described in clause 
     (i).
       ``(E) Paragraph not to apply to certain contributions.--
     Subparagraph (A) shall not apply to any charitable 
     contribution of any letter, memorandum, or similar property 
     which was written, prepared, or produced by or for an 
     individual while the individual is an officer or employee of 
     any person (including any government agency or 
     instrumentality) unless such letter, memorandum, or similar 
     property is entirely personal.
       ``(F) Copyright treated as separate property for partial 
     interest rule.--In the case of a qualified artistic 
     charitable contribution, the tangible literary, musical, 
     artistic, or scholarly composition, or similar property and 
     the copyright on such work shall be treated as separate 
     properties for purposes of this paragraph and subsection 
     (f)(3).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made after the date of the 
     enactment of this Act in taxable years ending after such 
     date.
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