Issue

Contributions to your institution of works of art could be the “gift that keeps on giving” – in more ways than one.

Situation

Marathon Bible College (MBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and section 170(b)(1)(A)(ii).  They are required to file Form 990 annually.  They have been donated three paintings worth approximately $350,000.  MBC plans to display the paintings, along with several others that they have been given, in a newly renovated room in their Administration building.

Their CFO calls to ask how they need to report the donation to the IRS.  We tell them that they will need to receipt the donor, ensure that they sign a copy of the donor’s Form 8283, report the contribution on Schedule M (Form 990), Part I, Line 1, then – potentially – they will need to report the art “exhibit” each year on Schedule D (Form 990), Part III.

Rules

From the Form 990 Glossary:

Works of art.  Include paintings, sculptures, prints, drawings, ceramics, antiques, decorative arts, textiles, carpets, silver, photography, film, video, installation and multimedia arts, rare books and manuscripts, historical memorabilia, and other similar objects. Art does not include collectibles.

From Form 8283 Instructions:

Art valued at $20,000 or more.  If your total deduction for art is $20,000 or more, you must attach a complete copy of the signed appraisal. For individual objects valued at $20,000 or more, a photograph must be provided upon request. The photograph must be of sufficient quality and size (preferably an 8 x 10-inch color photograph or a color transparency no smaller than 4 x 5 inches) to fully show the object.

Bottom Line

  • Art donations can be a great thing for your institution.
  • Donor receipting for art (and like non-cash items) has distinct elements that you need to be aware of.
  • There are GAAP issues that may need to be navigated with respect to owning works of art (pursuant to ASC 958, there are two methods that organizations can choose from to report collections of works, etc.)
  • For art that exceeds a certain fair value, ensure that you have met the documentation requirements (e.g. color photographs, copies of appraisals, etc.)

Specific questions? Email Dave Moja.

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.