Domenici & Schumer Renew Efforts To Pass Art And Collectibles Tax Parity Bill
Domenici & Schumer Renew Efforts To Pass Art And Collectibles Tax Parity Bill
U.S. Senators Pete Domenici and Charles Schumer (D-NY) today once again introduced legislation aimed at easing federal tax assessments on art, artists and collectors.
The Senators Wednesday introduced the Art and Collectibles Capital Gains Tax Treatment Parity Act (S.374), which is cosponsored by Senators Larry Craig (R-Idaho), Mike Crapo (R-Idaho), Wayne Allard (R-Colo.) and Hillary Clinton (D-NY).
This marks the third session of Congress in which Domenici and Schumer have introduced the legislation together, which tackles two inconsistencies in the tax code that punish artists and collectors.
"The legislation is meant to correct an inequity in the tax code that punishes artists and collectors in New Mexico and across the country. Everyone understands that art is a valuable commodityexcept for the IRS. By making common sense changes to the tax code, we can encourage artists to make more donations and treat art like the investment it is," said Domenici, a member of the Senate Budget Committee.
"There is no reason why those who choose to invest in art and collectibles should be taxed differently than those who invest in stocks and bonds," said Schumer. "It's a fairness issue that needs to be fixed. In addition, when an artist donates a work to charity, current law only allows for a deduction on the cost of supplies rather than the market value of the work. That makes no sense at all. These disincentives that punish artists and collectors need to be stricken from the tax code."
The bill has also been endorsed by major auction houses such as Sotheby's and Christie's, and many in the art community, including 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.
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