[Congressional Record Volume 153, Number 157 (Wednesday, October 17, 2007)]
[Extensions of Remarks]
[Page E2163]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                PROMOTION OF ARTISTIC GIVING ACT OF 2007

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                             HON. TOM UDALL

                             of new mexico

                    in the house of representatives

                      Wednesday, October 17, 2007

  Mr. UDALL of New Mexico. Madam Speaker, I rise today with my 
colleague from Pennsylvania, Mr. English, to introduce the Promotion of 
Artistic Giving Act of 2007, legislation that would amend recently 
enacted limitations on the donation of fractional gifts with more 
measured restrictions.
  Fractional gifts are charitable donations to museums and galleries of 
partial interests in art or other collectibles that confer a 
substantial public benefit while permitting a tax benefit over an 
extended period of time. Like all qualified charitable gifts, the 
taxpayer receives an income tax deduction of up to 30 percent of his or 
her adjusted gross income for the donation to the charitable 
institution--in this case, museums. Fractional gifts are a valuable 
tool for many taxpayers due to the value of the art or collectible 
being donated as the value of the gift is far in excess of the amount 
of the available deduction. The benefit of these types of donations is 
that many fractional gifts would never be given to a museum without the 
potential donor being able to participate in an extended gift-giving 
program.
  While well intentioned, the unnecessarily harsh provisions relating 
to fractional giving included in the Pension Protection Act of 2006, 
PPA, have effectively ceased charitable donations of partial interests 
in art to our Nation's museums and galleries. In trying to close a tax 
loophole, the PPA suffocated a time-honored method of giving that has 
made many of our national treasures such as the Hope Diamond and 
Vincent Van Gogh's ``White Roses'' available to the public. By rolling 
back some of the most restrictive provisions of the PPA, this 
legislation strikes the right balance between tax and charitable giving 
policy, addresses concerns about tax evasion, removes fractional giving 
from estate and gift tax provisions, and again encourages lifetime 
donations of art for the enjoyment of the public.
  Since the passage of the PPA, fractional giving has dramatically 
decreased. For instance, a Santa Fe, New Mexico, museum had a potential 
donor of a tribal folk art collection worth approximately $2 million 
withdraw an offer to give the collection to the museum. Similarly, a 
potential fractional gift of an important body of work from a well-
known Pennsylvania artist has been withheld as a result of the change 
in law.
  The PPA made two dramatic changes to the income tax deduction 
benefits available to donors. First, donors of appreciating artwork are 
now limited on all contributions to the fair market value determined at 
the time of the donation of the initial fractional gift. Second, donors 
are now required to complete the fractional gift within a 10-year 
period. Combined, these changes negated much of the tax benefits for 
donating a fractional gift of valuable pieces of artwork and need to be 
modified. This legislation would slightly modify these provisions to 
require taxpayers to get a certified appraisal from the Art Advisory 
Board at IRS for gifts of over $1 million and require gifts be 
completed during the life of the donor. These modest changes will 
address congressional concerns about valuation of gifts and unlimited 
time periods for gifts while providing the necessary incentives for 
these types of charitable donations.

  Unfortunately, the PPA also modified estate and gift tax rules for 
fractional gifts. These rules have proven to be unworkable and 
unnecessary. The abuses of fractional giving involved the income tax 
deduction, not any reduction in estate or gift taxes. Modifying the 
estate and gift tax laws based on valuation and recapture rules applied 
for income tax purposes will result in unfair outcomes for taxpayers. 
Unless these rules are modified taxpayers of completed gifts could have 
estate tax liability on an asset that is no longer in their estate or 
have gift tax liability on gifts that were never made. For these 
reasons, our legislation essentially removes the changes made in PPA to 
estate and gift tax rules for fractional gifts.
  Our Nation has a wealth of culture and creativity. Museums are the 
venue through which individuals can learn from, engage in, and enjoy 
history, culture, and art. Our bill will encourage the transfer of 
museum quality pieces from individuals to public institutions.
  I look forward to working with my colleagues on swift passage of this 
important legislation.

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