Taxing times: private museums under scrutiny by US government

Who benefits most from tax breaks on private art museums: patrons or the public?

The US government is scrutinising the tax-exempt status of private museums and questioning whether some institutions benefit their wealthy founders more than the general public. The Senate Finance Committee sent a letter to 11 single-donor museums in November requesting information about attendance, opening hours, trustees and grant-making activities.

The inquiry follows a New York Times report last year about the proliferation of private museums, several of which are only a short stroll from their founders’ homes and are difficult for the public to access.

In the letter to the museums, the finance committee’s chairman, Senator Orrin Hatch, expresses concern that certain institutions “offer minimal benefit to the public” while “enabling donors to reap substantial tax advantages”. The letter, a copy of which was provided to The Art Newspaper, also asks the museums about their policies on accepting restricted gifts and whether donors have physical access to the institution when it is closed to the public.

The inquiry is part of a broader effort by the government “to re-examine what tax-exempt status means and who gets it”, says Elizabeth Merritt, the director of the Center for the Future of Museums at the American Alliance of Museums.

Under US law, collectors can deduct the fair-market value of art from their taxes when they donate it to certain charitable entities that have art-related missions. But donors cannot benefit directly from their own organisations’ activities. For example, they “cannot have greater access [to their museum] than the general public unless it’s in the context of the work [they are] doing for the foundation”, says Stephen Urice, a professor at the University of Miami School of Law.

In the letter, Hatch says he hopes the inquiry will give the committee, which helps to enforce the federal tax code, a better “understanding of how private foundation museums operate”. A spokesman declined to comment on what the committee might do with the responses, which are due on 15 December.

The 11 institutions that were sent the letter have little in common beyond their association with private collectors: seven are open by appointment only, three operate artist-residency programmes and only two charge admission ($10 each). Some of the founders are no longer alive.

The sizes of their audiences also vary widely. The Broad, Eli and Edythe Broad’s $140m museum in downtown Los Angeles, received more than 100,000 reservations before it opened last September. But fewer than 2,000 people visited the Hall Art Foundation’s exhibition space in Vermont during its first two years, according to the New York Times.

Attendance is just one way to measure philanthropic impact, however. “Museums also collect, preserve and study,” Stephen Urice says. We contacted the 11 museums for comment; most declined or were unavailable. The few that replied reiterated their commitment to serving the public.

“There is no question that [private museums are] a mushrooming phenomenon, and because this is new, it deserves scrutiny,” says the museum consultant András Szántó. But he points out that “some of the greatest institutions today”, such as the Morgan Library & Museum in New York, were founded by private collectors.

Peter Doroshenko, the author of Private Spaces for Contemporary Art, says the committee’s inquiry is unjustified. “It’s not like these people invented this—they are just playing by the rules. If you happen to have a good tax lawyer who helps you to navigate these waters, then good for you,” he says.

Who was sent the senator’s letter? • The Broad (Los Angeles, California)

• Brant Foundation Art Study Center (Greenwich, Connecticut)

• El Segundo Museum of Art (El Segundo, California)

• Fisher Landau Center for Art (Queens, New York)

• Glenstone (Potomac, Maryland)

• Goss-Michael Foundation (Dallas, Texas)

• Hall Art Foundation (Reading, Vermont)

• Kreeger Museum (Washington, DC)

• Linda Pace Foundation (San Antonio, Texas)

• Pier 24 (San Francisco, California)

• Rubell Family Collection (Miami, Florida)