By VICTORIA D. ALEXANDER
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Extra resources for Art and the State: The Visual Arts in Comparative Perspective
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An important exception to the market value deduction was created Alexander 25 by the Tax Reform Act of 1969, which eliminated the ability of artists to claim the market value of their own works given to charity. Instead, artists were allowed to deduct only the cost of materials used to create the piece. This change in incentives dramatically reduced the number of gifts to museums of artworks by the donating artist. Similarly, the Tax Reform Act of 1986 changed the in-kind deduction rules for all individuals, eliminating the loophole that allowed donors to avoid capital gains taxes.
Individual visual artists (who are not folk artists) are no longer supported by the federal government. Programs, such as the Comprehensive Employment and Training Act (CETA), which directly aided individual artists have been eliminated. Direct grants and fellowships to visual artists were curtailed in recent years as a direct result of arts controversies. State arts councils are prevented by statute from using any monies devolved from the NEA to support artists directly through grants or fellowships.
In this way, the federal government and those states which also allow similar deductions forego tax income and are thereby said to provide indirect support to charities in the amount of the foregone tax. Furthermore, the federal government allows tax benefits to nonprofit organizations under Section 501(c)(3) of the tax code. Most art museums and arts centers are constituted so that donations made to them are tax deductible. They also receive certain tax concessions, by both national and state governments.