The Diego Rivera Mural at the Detroit Institute of Arts – photo by Quick fix

Each year, Createquity offers a list of the top ten arts policy stories of the past twelve months. You can read the previous editions here: 2013, 2012, 2011, 2010, and 2009. The list, like Createquity itself, is focused on the United States, but is not oblivious to news from other parts of the world. This year, we distributed creation of this list amongst our editorial team more widely than we ever have before, and this is truly a group effort. Authorship of individual items is noted at the end of each paragraph.

In our annual top 10 list of arts policy stories, we often like to point out the implications that non-arts world events have for the arts. In an unusual twist this year, we had a couple of stories in which the art itself was at the center of significant world events. We always knew that art has the power to inspire wonder, hope, greed, fear and anger; 2014 taught us that we can add bankruptcy negotiations and terrorist threats to the list. –Ian David Moss

10. Trey McIntyre Project disbands

In a move that shocked fans and fellow arts administrators alike, Trey McIntyre announced this January that his celebrated eponymous dance company, known as the Trey McIntyre Project, would disband this season, letting him shift focus to new artistic pursuits involving film production, photography, and less frequently, freelance choreography. Begun as a summer touring company in 2005, TMP launched a full-time dance troupe in 2008-09. TMP had been recognized for its innovative choreography and as a model for audience engagement, but most of all for its unusual relationship to the city of Boise, Idaho, which was selected as the new company’s unlikely home after a nationwide search. This arrangement provided TMP with an affordable and livable community, while Boise in turn embraced the company wholeheartedly, treating the dancers like local celebrities and naming the company as its official ambassador. Drawing national attention and funding from creative placemaking initiatives including the NEA’s Our Town and ArtPlace America, TMP had been hailed by many as a model of engagement for the future. Yet McIntyre has said that ending the company was always part of the plan, which is why he decided to call it a “project.” Speaking to Dance|USA, McIntyre said that “the dance company actually went on longer than I had intended. But things were going on really well and I felt it was important to see it through to its fruition and explore every possibility.” From the outside it might look like plenty of possibility was left on the table, but perhaps even in its demise TMP is still a model for the future – that is to say, a model of an organization that knows how to quit while it’s ahead. –Carlyn Madden

9. Transition and renewal for cultural agencies in New York, LA and Boston

In 2014, three major US cities saw a shift in local government leadership, in each case bringing promise and questions for the arts. New York City’s election of Bill de Blasio as its first Democratic mayor in twenty years coincides with a push by the City Council to undertake the Big Apple’s first ever cultural plan. The proposed law charges the city’s Department of Cultural Affairs, led by newly appointed Commissioner Tom Finkelpearl, with developing recommendations for increasing participation in cultural activities throughout the city. NYC is the only one of the country’s top ten municipalities to not have some sort of cultural plan; this bill will hopefully change that when it comes up for a vote in 2015. In Los Angeles, Mayor Eric Garcetti – the city’s first Jewish mayor, and its youngest in a century – opened the year by reshaping the arts conversation, putting emphasis on the fact that the arts are “a value for the entire city government.” In June, he appointed Danielle Brazell, who had previously headed up the city’s arts advocacy organization Arts for LA, to lead the city’s Cultural Affairs Department. But the greatest excitement belongs to Boston, which elected its first mayor last year following the 21-year reign of Tom Menino. The statewide arts advocacy coalition MassCreative took the transition as an opportunity to put culture at the center of the electoral conversation, and its efforts paid off this year in dramatic fashion. In September, newly elected mayor Marty Walsh appointed Julie Burros as Boston’s first Chief of Arts and Culture in more than 20 years, and tasked her with stewarding the creation of the city’s cultural plan. Adding to the sense of momentum, Boston’s Barr Foundation has taken on a newly assertive role in guiding the future of the arts in Beantown, bringing in former Irvine Foundation president James E. Canales and joining the ArtPlace America coalition. –Clara Inés Schuhmacher

8. State arts councils come back with a vengeance

State arts councils had their best year since the turn of the millennium with a nearly 20% increase in funding for FY2015. Total appropriations for arts agencies reached $367.4 million, the highest total (in nominal terms, don’t get too excited) since 2002. The biggest winner was the Florida Division of Cultural Affairs, which had suffered a crippling 94% budgetary cut over a three-year period ending in 2009. The Sunshine State’s arts council roared back this year with a 433% increase, unseating the New York State Council on the Arts as the most formidable state arts council in the country – and with a conservative governor at the helm, no less. California and Michigan also received significant increases in funding, and South Carolina governor Nikki Haley apparently got tired of trying unsuccessfully to veto funding for the state’s Arts Commission as she had done in each of her previous years in office.  With the improving economy, unplanned midyear cuts to state arts agency budgets saw a marked decrease, down to eight states in 2014 from 41 in FY2009. –Louise Geraghty

7. The landscape for film tax credits gets reshaped

After years of what resembled a high-stakes poker game in the competitive environment for film and TV tax incentives, 2014 saw several significant shifts that involved some states upping the ante and others folding their hand. California led the way, more than tripling its tax credit program to $330 million annually in a bid to reassert dominance and keep Hollywood productions in Hollywood. New Jersey’s state Senate decided to play along too, passing a bill that would raise the annual cap for film tax credits from $10 million to $50 million. States weren’t the only ones in the mix: Austin’s City Council approved reimbursement of up to 0.75% of production companies’ wages. Not everyone is drinking the Kool-Aid, however; as John Carnwath writes in “The Bottom Line on Film Tax Credits,” the benefits of film & TV tax incentives to the state and its citizens are not always clear. This year saw North Carolina, Michigan and New Mexico scaling down their programs, citing “concerns [that] the cost to taxpayers outweighed the economic benefits.” Meanwhile, skeptical lawmakers tried to derail Maryland’s tax credit program, prompting a high-stakes standoff with Media Rights Capital and its Netflix show House of Cards that brought out a lobbying appearance from Kevin Spacey himself. An eventual agreement kept House of Cards filming in the Old Line State, but only at the expense of $2.5 million that was transferred away from the state arts fund (and thus many deserving nonprofits!) in a troubling precedent. And even after all that, a nonpartisan analysis from the state’s legislative staff concluded that every dollar invested in the tax credits brought back only 10 cents in revenue. –CIS

6. Bring on the era of Jane Chu!

With the NEA chairmanship open since Rocco Landesman’s retirement in November 2012, the confirmation of Jane Chu to the post was welcome news this June. Chu established her arts career in Kansas City, where she led a $414 million campaign for the establishment of the Kauffman Center and was a key player in the city’s transformation into an arts leader. With a midwestern background, a track record with the business community as a board member for the Greater Kansas City Chamber of Commerce, and previous fundraising success, Chu seems well-chosen for the task of establishing bipartisan support for the arts and countering the impression that the NEA serves a coastal cultural elite. Nevertheless, some wonder if her limited tenure as result of the administration’s long delay in appointing a new leader will give her much opportunity to drive policy at the agency. Chu has not yet announced any new initiatives in her first six months on the job. Meanwhile, the National Endowment for the Humanities also saw a new chairman confirmed this year. William “Bro” Adams comes from a career in academia, most recently as the president of Colby College in Maine, but he may find himself taking on a similar agenda of garnering broad based support and bolstering funding for the humanities. Adams has already announced a new initiative entitled “The Common Good, Humanities in the Public Square.”  –Katherine Ingersoll

5. The IRS haltingly embraces the 21st century

In July the IRS announced major changes to the process of applying for 501(c)(3) charitable status, including a streamlined three-page 1023EZ form for most organizations with gross receipts under $50,000. This bodes well for the backlog of nearly 60,000 organizations waiting for their applications to be processed who will see a dramatic decrease in wait time. The move is in line with a larger trend towards more streamlined processes for the exempt organizations division at the IRS – and, quite possibly, more relaxed enforcement of the rules. The changes come at a time when budget cuts, staff reductions, and political scandals, have stoked concerns about the agency’s regulatory oversight. Government transparency advocates have noted that the dilemma of providing effective regulation with fewer resources could be solved by offering 990 data in an open, searchable format online, distributing some of the IRS’s watchdog responsibilities to donor advocates and the public. (Currently the forms are only available on CDs; GuideStar offers the documents on its website with a 1-2 year delay.) Will the IRS be able to modernize its operations while protecting the public interest? Will your tax forms become shorter, and will there be any staff left to process them? Only time will tell. –KI

4. Russia and Turkey crack down on free expression

Although Russia’s aggression toward the Ukraine has occupied many a news cycle this year, the oppressive measures that Vladimir Putin’s government has taken to reaffirm authority at home, many of which affect artists, have not been as widely reported. Among the more troubling developments is what appears to be a return to the witch-hunt tactics of the Soviet era, publicly naming (and ostensibly shaming) “subversive” artists in print and on television. In July, Putin signed a law prohibiting swearing in public performances (these are the four main offenders), leaving presenters struggling with how best to present planned repertoire. International tensions have affected programming in the US as well – most notably, in April, Washington DC’s Woolly Mammoth Theatre canceled a months-in-the-making festival of Russian theatre, citing loss of previously committed tour funding from the Moscow Cultural Ministry for the 90 artists slated to appear. Putin is not the only national leader to attempt to bend public expression to his will, of course, and he seemingly is inspiring some copycat behavior by Turkish president Recep Tayyip Erdoğan. Coinciding with a sweeping consolidation of power this year, Erdogan’s government proposed a bill in April that would establish an arts council to centralize the disbursement of state funds for artistic activities, effectively giving the government absolute artistic control. The proposed bill has drawn outrage from both the arts community and Turkish citizens, and though still in draft form, the effects of its line of thinking are already being felt, with world-renowned pianists blocked from national performances, and mysteriously cancelled productions at the State Theater. –CIS

3. Net neutrality hangs in the balance

It’s been yet another rough year for net neutrality. In January, Verizon challenged the Federal Communications Commission (FCC)’s 2011 “Open Internet Order” and its authority to promulgate such rules. Verizon won, effectively overturning regulations that require internet service providers to treat all content equally, and setting off a maelstrom of concern around innovation, democracy, and the idea of America itself. Under fire, the FCC proposed new net neutrality rules in March, then again in April (these critics claimed were unworthy of the name), with yet a third draft presented on May 15th. The May proposal, which garnered a whopping 3.7 million public comments over a five month period (680k of which the FCC recently “lost,”) would allow broadband companies to provide a “fast lane” for content providers willing to pay a “commercially reasonable” fee, similar to those that already exist with tech companies like Netflix, Google, Amazon, and Facebook. In December, President Obama and The White House released a plan recommending that the FCC reclassify Internet broadband as a public utility under Title II of the Telecommunications Act, which proponents argue would give the FCC the increased regulatory power necessary to protect net neutrality. Looming large over the debate is the proposed merger of Time Warner Cable and Comcast – the country’s two largest cable companies – and the access implications if approved (the merger would give the new company a stake in 60% of US broadband households.) For now, it’s wait-and-see. The FCC has said it will implement net neutrality rules as early as February 2015, though that likely won’t bring an end to the debate. Whatever happens, someone is likely to sue. –CIS

2. “The Interview” provokes an international incident

Few arts stories in recent memory have involved as much bizarre spectacle as the recent Sony Pictures hack and subsequent fallout. Hollywood is no stranger to poking fun at North Korea (whose leaders are known film buffs); when Team America: World Police lampooned Kim Jong-il in 2004, life went on without much incident. Ten years later, it’s a different story with Seth Rogen and James Franco’s The Interview, which depicts the assassination of Kim’s son Jong-un. After hackers who may or may not have been aligned with North Korea exposed embarrassing emails and data from Sony Pictures, the producer of the movie, the studio and major movie theaters distanced themselves from the film. When the group claiming responsibility for the cyberattack threatened violence, Sony went further, deciding to delay The Interview’s theatrical release and provoking stern words from President Obama himself in response. Subsequently, Sony reversed its decision and released the film online and in select theaters on schedule. Buoyed by the controversy, it is now the most downloaded Sony Pictures film of all time and earned $15 million in its first three days of digital release (along with $3 million through its limited theatrical run) – and no one has yet been injured in a terrorist attack. Now, some people are even speculating that Sony and other major studios might forego a traditional theatrical release in the future in favor of going directly to online outlets. One thing we’re pretty sure about: never before has a story engaged computer geeks, homeland security experts, celebrity gossip hounds, and arts marketers with such equal intensity. –LG

1. Detroit’s art leads the Motor City out of bankruptcy

News about the Detroit Institute of Arts (DIA) made our “Top Ten” list in 2012 and in 2013. Let’s hope 2014 – as it reaches the dubious honor of No. 1 – marks its last appearance for a while. After two years, Detroit’s long and painful bankruptcy battle finally came to a close in November with a federal ruling in favor of the city’s bankruptcy plan. For this Detroit has, in many ways, the DIA to thank. Under the so-called “Grand Bargain,” an $816 million deal developed by the Ford, Kresge and Knight Foundations, among others, the foundations will provide funding for Detroit’s public pensions – a key component of the negotiations. The only catch? Control of the DIA must be transferred from the City of Detroit (which has owned the museum since 1919) to an independent charitable trust, thus protecting the art from being auctioned off to the highest bidder. Previously, Detroit’s state-appointed emergency manager Kevyn Orr had included the museum’s art collection among city assets available for liquidation, and contracted Christie’s to appraise portions of the 60k+ piece collection. Detroit city creditor Financial Guaranty Insurance Co. even went as far as to solicit bids for the DIA’s entire collection, receiving four separate offers to buy the art outright for as much as $2 billion. That a museum and its art could become the linchpin of a federal bankruptcy negotiation, soliciting intense interest from creditors and rallying outside philanthropic interests to its rescue, is truly remarkable. Would a “Grand Bargain” — and a Detroit with its dignity left intact — have even been possible without the DIA? Luckily, we won’t have to find out. –CIS

Honorable mentions:

• Drama at the Metropolitan Opera, Atlanta Symphony, and San Diego Opera
• The Cultural Data Project’s strategic reboot
• August Wilson Center sold to Pittsburgh foundations
• US Department of Arts and Culture gets up and running

Happy 2015 to all!

Flo & Eddie of the Turtles – by ShellyS, Creative Commons license

In what could be a landmark case in the annals of digital music, a federal judge recently ruled that SiriusXM is liable for copyright infringement for failing to pay royalties to performers on pre-1972 songs. Though federal copyright protection applies only to recordings made on or after February 15, 1972, 1960’s band the Turtles successfully argued that the satellite radio giant has played its songs in violation of protections under California state laws. Artists and music industry executives can’t quite pop those champagne corks yet: the decision is limited to California, SiriusXM plans to appeal, and a separate suit by major labels seemed to contradict the Turtles ruling. Even so, the Turtles are continuing to push the envelope, filing a new suit against internet radio company Pandora. As these cases wind their way through the courts, a potentially clarifying initiative waits in the wings in Congress: the Respect Act would offer pre-1972 artists federal legal protection.

Major Tax News for Artists and Wealthy Collectors: In a victory for artists, the United States Tax Court ruled that even those who don’t make much money from their art still count as “professionals” in the eyes of the IRS. The implication is clear: artists with day jobs that partially fund their artistic careers can deduct art expenses from their taxable incomes. Not all artists may qualify, though – the case in question was brought by Susan Crile, a painter and printmaker whose works are held in several museums, and while she makes most of her income from her job as a professor at Hunter College, she has had a robust career, with an average annual haul of $16,000 from sales of her work. In other IRS news, the U.S. Court of Appeals for the 5th Circuit recently ruled that the estates are eligible for discounts on art that is partially owned among heirs, a ruling with potentially far-reaching implications for wealthy collectors. Michael Rushton and Donn Zaretsky provide additional analysis.

Two National Foundations Reboot their Arts Funding: The Wallace Foundation announced Building Audiences for Sustainability, a six-year, $40 million initiative to help up to 25 performing arts organizations expand their audiences and build knowledge in the field as a whole. The effort is based on insights gained from the foundation’s earlier Wallace Excellence Awards and successful practices highlighted in other research papers. Just a few days later, the $6 billion Andrew W. Mellon Foundation announced the results of its 18-month strategic planning process, which will result in the merger of separate programs for liberal arts colleges and research universities and programs for the performing arts, art history, conservation, and museums.

Los Angeles Board of Supervisors Approves Additional $54 Million for the Arts: Los Angeles County cultural organizations will gain $54 million in new government funding, increasing the originally authorized allocation of $84.7 million by a whopping 63 percent. Part of a “supplemental budget” process to divvy up hundreds of millions of dollars that went unspent in 2013-14, $28.6 million is dedicated to the John Anson Ford Theatres renovation. Other big winners include the Music Center ($6 million), La Plaza de Cultura y Artes ($5 million), and Natural History Museum ($1.7 million), all of which will see capital upgrades as a result of the new cash infusion.

Smithsonian Institution Announces a $1.5 Billion Fundraising Initiative: The Smithsonian has embarked on its first national fundraising campaign since its founding in 1846, partly in response to a decreasing appropriation from the U.S. Congress that now funds only 60 percent of its budget. With $1 billion already in the bank from 60,000 donors (including multimillion-dollar gifts from the Bill and Melinda Gates Foundation, Oprah Winfrey, David Koch, and Boeing), it appears that the Smithsonian has a great shot at raising the remaining $500 million by the campaign’s end in 2017. Major allocations will include $250 million to build the National Museum of African American History and Culture, and millions more to renovate the Renwick Gallery, National Air and Space Museum, and the National Museum of American History. A portion will also be dedicated to educational initiatives, including the digitization of many collections.

MUSICAL CHAIRS/COOL JOBS

• The White House announced Danny Marti as the nominee for “piracy czar” position enforcing trademarks and copyright.
• The NEA selected Ann Meier Baker as its new Director of Music and Opera.
• Edwin Torres, formerly of The Rockefeller Foundation, joins the de Blasio administration in New York City as the Deputy Commissioner of Cultural Affairs.
• The Artist Trust announced Shannon Roach Halberstadt as their new executive director.
• Julie Burros, formerly head of cultural planning at the Chicago Department of Cultural Affairs and Special Events, has joined the City of Boston as its new Chief of Arts and Culture.
• Santa Barbara mayor Helene Schneider announced 19 individuals as the board of directors of the new Bellosguardo Foundation.
• The Greater Philadelphia Cultural Alliance has named Maud Lyon as its new president.
• The Rockefeller Foundation seeks a New York City-based Senior Evaluation Officer. Posted September 18, no closing date.
• The Native Arts and Cultures Foundation is looking for a new Director of Programs. Salary: $115,000-$135,000. Posted October 17, no closing date.
• Two jobs are available at the Los Angeles County Arts Commission Arts for All program: Program Coordinator (Salary: $43,000-$50,000; closing date November 7) and Research Coordinator (Salary: $43,000-$50,000; closing date November 30).
• Fractured Atlas is hiring an Arts & Technology Policy Fellow. Salary: $70,825. Posted on October 8, closing date November 14.

NEW RESEARCH OF NOTE

• Drexel University researchers have been using CultureBlocks data to study the development of arts hubs in Philadelphia.
• Grantmakers in the Arts has proposed new national standards for research on individual artists, with work from our own John Carnwath.
• The NEA and WolfBrown released a report on the potential impact of choir participation on residents in a juvenile detention facility.
• New research from Harvard’s Psychology Department suggests that extraordinary arts experiences can actually lead to feelings of exclusion, not joy.
• The colorfully named “Hard Facts to Swallow” report from the UK finds that geographic disparities continue: London-based arts organizations are projected to receive four times the funding of organizations outside the capital from Arts Council England.

Capitol Hill, Washington DC – by Flickr user KP Tripathi, Creative Commons license

Several policy shifts are underway in Washington that may have significant effects on arts nonprofits and funders. First, the U.S. House of Representatives passed the America Gives More Act, which would 1) make permanent three expired tax deductions – including the important IRA Charitable Rollover provision that allows seniors to donate up to $100k of their retirement disbursements without paying taxes on it – while 2) allowing individuals to credit deductions made before April 15 of one year to the previous tax year, avoiding the Christmas scramble for donations before patrons know their tax situation, and 3) simplifying the excise tax rate paid by foundations to 1% (it can currently rise to 2% in some circumstances). The future of the bill is uncertain: Obama Administration and many Congressional Democrats oppose it because it does not contain any revenue provisions to offset the reductions in tax income. The Senate is not expected to consider the bill before the fall.

Second, the IRS has released form 1023-EZ, a dramatically streamlined application for 501(c)(3) status that will allow applicants to become tax exempt simply by filling out a 3-page form (vs 26), paying $400 (vs $850), and swearing under penalty of perjury that they have less than $50k in annual income and less than $250k in assets. Some 70% of applicants are expected to be eligible for the EZ path, and the IRS won’t even review these applications as a matter of course. Some fear this may open the door to abuse, but aspiring nonprofits eying the 60,000-organization line to be reviewed may feel differently.

Finally, in pre-legislative news, the House Appropriations Committee approved level budgets of $146m for the NEA and NEH, restoring $8m cuts made to each in subcommittee, while the artist resale royalty rights bill is gaining momentum, attracting new Congressional co-sponsors in advance of a potential vote this year or next.

More money, more problems at the DIA: As the City of Detroit’s much-anticipated bankruptcy trial looms – it begins on August 16 – two contending valuations of DIA’s art have emerged. Artvest Partners, hired by the city, placed the total value of the 60k-piece collection at $2.8-4.6B; a creditor’s expert, Victor Weiner Associates, at $8.5B. But that’s in theory: Artvest estimated that the works would fetch only $850m to $1.8B in the current market, accounting for a potential glut of masterpieces if the museum were to deaccession en masse. (Victor Weiner acknowledged the actual haul would be lower but did not venture to say by how much.) Meanwhile, donations continue to flow toward the “Grand Bargain” that could spin DIA off as a separate non-profit, if the courts allow it, with a group of business leaders, companies, and corporate foundations pledging $26.8m toward the $100m DIA must raise. Oh, and there is art happening, too: DIA began installing reproductions of its masterpieces in Michigan communities for the fifth year of its Inside/Out project.

The fate of the Corcoran’s collection hangs in the balance: Back in February, the long-troubled Corcoran Gallery of Art and College of Art and Design announced they would be taken over by the National Gallery of Art and George Washington University. The Corcoran’s 17,000-piece collection would be split up, with the bulk going to the National Gallery and the remainder distributed to museums around the country. Now, a group of advocates — including museum donors and alumni of the college — has filed suit to stop the deal, arguing longtime board mismanagement is to blame for the current state of affairs. At issue is whether the Corcoran’s lawyers can show that the proposed arrangement is the “next best” option to maintain the original intent of the institution. While alternative solutions are bandied about and exhaustive arguments laid out on both sides, the Corcoran’s fate should be decided by the end of August.

Another shakeup at the William Penn Foundation: Philadelphia’s only remaining major arts funder is showing alarming signs of instability. Managing Director Peter Degnan, the foundation’s second leader in less than two years, has resigned after less than six months on the job, citing “personal reasons.” He succeeded Jeremy Nowak, whose tenure ended in 2012. Chief Philanthropy Officer Laura Sparks will take over as leader of the foundation with the new title of executive director. While she will likely have broader authority and responsibility than her predecessor, she is not expected to make major changes in the grantmaker’s strategic areas of focus.

Looking for affordable artist housing? Take a number: In a jarring indication of how bad New York’s affordable housing crisis is, a recent lottery for housing slots in one renovated Harlem building generated a whopping 53,000 applications from artists. The building, El Barrio’s Artspace PS 109, is a former public school that was sold to Artplace two years ago. Foundations, politicians, and local departments of housing and cultural affairs contributed $52.2 million in renovations to create 89 housing units — begging the question of how big an investment would be needed to make a dent in artists’ demand for affordable living spaces.

MUSICAL CHAIRS/COOL JOBS

• Andy Horwitz is leaving New York City to launch a new consultancy called Applied Creativity; though he will continue writing in other venues, Culturebot will go on sabbatical indefinitely from September transition to new leadership.
• Reuben Roqueñi will join Hewlett as a program officer in Performing Arts; he is currently program director at the Native Arts and Culture Foundation in Washington State.
• Laura Packer has become ED of the Howard Gilman Foundation in NYC. She had been Arts Program Director at the Geraldine R. Dodge Foundation in New Jersey.
• The Nathan Cummings Foundation has tapped former Trustee Ernest Tollerson as interim CEO while a search gets underway.
• Longtime National Arts Strategies VP Gail Crider will take over as President and CEO from Russell Taylor at the start of the year.

NEW RESEARCH OF NOTE

• The California Film Commission reports that film and TV projects worth $2 billion relocated their production away from California over the last four years, often when other states offered better tax breaks.
• Another bleak snapshot of the writer’s life: median author income in the UK fell by almost a third over the last decade, to $18.5k per year.
• Meanwhile, on stage: Last year, London’s 241 theatres served 22m patrons, earned $1B, and employed 3,000 performers at a time. This was the first quantitative report of this kind, so the historical trend is unclear.
• More than a third of 18-34-year-old tourists to the UK identified culture as a major draw in a new survey; historical buildings and arts institutions got special mention.

• The IRS has proposed a new Form 1023-EZ, which would allow some smaller organizations to apply for tax-exempt status with much less hassle. The National Association of State Charity Officials has objected out of a belief that completing the longer form is an important educational experience and a fear that applications could skyrocket.
• A report from the R Street Institute argues that copyright terms, which have ballooned while patent terms have barely inflated, are so long that they are not only stifling to creativity but actually unconstitutional.
• With the recent passing of Cornelius Gurlitt, hoarder of over 1,000 works of art suspected to be looted from Nazis, the official investigation into the provenance of the artworks in his collection ended. Unexpectedly, Gurlitt bequeathed his trove to the Kunstmuseum Bern, reopening legal and ethical questions surrounding the new acquisitions.

MUSICAL CHAIRS

• MacArthur President Robert L. Gallucci will step down when his term expires on July 1. Julia Stasch, VP for US programs, will act as interim president while the board searches for a replacement.
• Jarl Mohn, chairman of Southern California Public Media and former MTV executive, is the new head of National Public Radio. Mr. Mohn has the enviable charge of pulling NPR out of its deficit, sowing harmony among member stations, and figuring out how to fundraise in the post-pledge drive era.

ALL ABOUT THE BENJAMINS

• The Knight Foundation has awarded Theaster Gates $3.5 million to transform an office space on the south side of Chicago into an incubator “where neighborhood residents will come together with artists, designers and urban planners to work on revitalization projects through art.”
• Reflecting on the Hewlett Foundation’s recent announcement of the end of its Nonprofit Marketplace Initiative, Tony Proscio wonders whether the funder pulled the plug too soon. Meanwhile, in another frank self-assessment, Hewlett undertook a field scan of evaluation spending and found room for improvement in its own practice, particularly regarding embedding evaluation strategies in the early life of programs. As a result, the foundation plans to up its evaluation spending from roughly 1.2 percent to 2.3 of its overall grant budget.
• Bad news for “cultured professionals” looking to buy art at auctions: the average price for fine art has doubled over just four years, leaving many to settle on prints. And in other art market news, between 2012 and 2013 online art purchases increased 83 percent. Total sales have finally exceeded $1 billion.
• Angie Kim summarizes the origins and history of the 5 percent payout rule for foundations and argues a variable payout rate, based on a foundation’s performance over 25 years, would better ensure that foundations’ wealth does not grow disproportionately to their support of the greater good.

IN THE FIELD

• The San Diego Opera’s financial situation is looking up: in the last two weeks, the organization has raised more than $1 million through a crowdfunding campaign and received a $500,000 matching gift challenge – although, in the other column, the city is expected to cut its funding for the opera by $223,000. The Opera’s new board leadership’s desire to save the company now has the vocal support of the members of the San Diego Opera Association and the solo singers’ union. They aren’t out of the woods yet, though, since a 2015 season will still require about $2.7 million in additional funds.
• After seven years, the Seattle Dance Project is shutting down as artistic director Timothy Lynch moves to Ohio’s BalletMet. And the Green Bay Symphony Orchestra‘s next season will be its last after over 100 years of performances in Wisconsin.
• Say what? The Colorado Symphony Orchestra will host a series of bring-your-own marijuana events in collaboration with Edible Events, a pro-pot company, as a way to be more inclusive and raise money for the orchestra.
• We have no idea how much Comcast and Verizon are charging Netflix for more direct access to users’ homes – and that’s not a good thing.
• Some remarkable numbers from the academic field about the extent to which hiring for administrators has outpaced the hiring of professors. A similar dynamic to arts organizations, perhaps?

BIG IDEAS

• As Piketty-mania continues to drive interest in income inequality, a comparison of the prices of various goods in the United States over the last ten years yields grim insights about its effects. While the cost of education and health care — i.e. services that can’t be outsourced — has risen dramatically, the cost of electronics, clothing, and other personal goods has fallen. One commentator sums things up nicely: “Prices are rising on the very things that are essential to climb out of poverty.”
• Mania being what it is, it’s not surprising that some conversations about income inequality have taken an interesting turn, suggesting that the widening gap between rich and poor may be good for artists. As at least one author has pointed out, that argument fails to demonstrate that the arts are “more dynamic under high inequality than… under conditions of low inequality,” and even if great art has been produced in awful social conditions, that by no means justifies those conditions. Add to that mix confusion about the difference between rising wealth creation and wealth inequality, and you’ve got a growing debate on your hands.
• Design methodology is increasingly used to solve unwieldy social problems at a policy level in the European Union, but the US has been slow to catch on. The National Endowment for the Arts contracted the Design Council to organize a webinar addressing how to use design “to create public services around the people who use them, to introduce new methods into the civil service skill set, and as a tool to aid the process of public policy development” as part of the Learning from Abroad series.
• The National Committee for Responsive Philanthropy has launched Philamplify, a collection of in-depth assessments of the top foundations in the country. Assessments of the Lumina Foundation for Education, William Penn Foundation, and Robert W. Woodruff Foundation are included at the moment, though the site plans to add about one hundred more within the next few months. Website visitors can indicate whether they agree with Philamplify’s recommendations for the foundations and add comments.

RESEARCH CORNER

• Arts marketing specialists LaPlaca Cohen released the sixth edition of their CultureTrack report on participation in cultural events and held a panel discussion about it. The report characterizes American audiences as promiscuous (we range across media) and social (we hate to go alone, and personal recommendations and invitations are among the main drivers of participation). The verdict on attendance is mixed: more people are attending museums, musical theater, and classical music each year (though not straight plays, theater, or opera), but overall they are going less often.
• A new study by researchers at the London School of Economics concludes that engaging in the arts makes people happy – as happy as if you paid them $100-150 per month. Michael Rushton, as is his wont, argues caution.
• The NEA has an update on three current projects that aim to support continuous learning in the field: 1) an assessment of the artistic excellence of grantees’ work products, 2) a pilot survey of grantee organizations’ audiences, meant to measure the extent to which they were engaged and moved by arts experiences, 3) a new evaluation by the Urban Institute of the the NEA’s Arts & Livability Indicators.
• inBloom, a massive educational data collection effort supported by the Gates Foundation, is shutting down following mounting concerns voiced by parents regarding their children’s privacy. Besides serving as a cautionary tale of how philanthropic efforts can stumble when they lack appropriate buy-in, the example may portend a backlash against collecting data on children — and arts audiences of all types.
• Of 7,000 Victorian novels, only a few dozen are read today. How does an author pass the test of time? Salon interviews cultural historian Franco Moretti, who uses big data to analyze bad books.
• Speaking of not getting read today, do you ever feel like posting reports online is adding to a virtual wasteland of PDFs that will never be opened? You’re probably right. The World Bank decided to test that feeling by running analytics on its website and discovered that a whopping one-third of its research reports have never, ever been downloaded. Only 13% were downloaded more than 250 times.

ETC.

• Positive reviews on sites like Yelp and Amazon translate into real money for businesses – even though as many as a third of reviewers may be fake and the real ones may not be representative of customers.
• The Gray Lady suddenly appears to find itself in the business of hiring actors, thanks to a new “Verbatim” series that features “recreations of actual events from the halls of law and government” by “transform[ing]… legal transcripts into dramatic, and often comedic performances.” The first one comes courtesy of a 2010 lawsuit involving photocopying public records. It has to be seen to be believed.

• In a reversal, the FCC has drafted new net neutrality rules that critics claim are unworthy of the name: they would allow broadband companies to provide a “fast lane” for content providers willing to pay a “commercially reasonable” fee. The FCC’s public comment period opens on May 15. Related: if the Comcast-Time Warner merger is approved, “the combined company’s footprint will pass over 60% of US broadband households.”
• A belated tax tip for artists: emigrate to Mexico. Or, for those committed to staying in the US of A, consider launching a worker cooperative as a means of upping income while maintaining time for artistic pursuits. For those on the collector side, there’s always lending your new purchases to a museum in Oregon, Delaware or New Hampshire first.
• Several record companies have filed suit in New York against Pandora to secure royalties under state law for the use of recordings made before 1972, which are not protected by federal copyright. Sirius was targeted by a similar lawsuit last fall.
• Classical musicians may now have a harder time leaving and re-entering the United States thanks to a ban on ivory meant to protect African elephants.

MUSICAL CHAIRS

• Grant Oliphant, former Pittsburgh Foundation leader, will begin a new role as president at Heinz Endowments this June.
• Also in June, the Canada Council for the Arts will welcome its new CEO and president Simon Brault. Brault was previously vice-chair of Canada Council’s board before moving to the National Theatre School Montreal, and will serve in his new position for a five-year term.
• Michael Kaiser, a man who wears many hats, will add another one in co-chairman of IMG Artists, which will also involve managing a new cooperation between IMG Artists and DeVos Institute of Arts Management at the University of Maryland.
• Jonathan Fanton, former president of the MacArthur Foundation and of the New School, has been named President of the American Academy of Arts and Sciences. Former president Leslie Cohen Berlowitz resigned last July in the wake of a scandal over her compensation and qualifications.
• Lorin Dunlop will join the M. J. Murdoch Charitable trust this June as Program Director. Most recently, Dunlop was responsible for public safety grant programs of the Oregon Criminal Justice System.

ALL ABOUT THE BENJAMINS

• PonoMusic, a new high-def digital audio business, raised $6.2 million on Kickstarter to become the third-best-funded project in the site’s history. Neil Young, who started Pono to provide a higher-quality alternative to current digital formats, set the initial goal at $800,000.
• Yet another contender is trying to elbow its way into the crowdfunding game: Crowdrise, a new(ish) platform dedicated exclusively to nonprofits, just received an additional $23 million in financing.
• The Walter & Elise Haas Fund, working together with the Foundation Center and Mission Minded, has developed an open-source, free solution that any grantmaking entity can use to make its grantmaking data searchable, publishable, sharable, and fully accessible. You can see “Open hGrant for WordPress” in action on the Haas site.

IN THE FIELD

• The San Diego Opera has outlined a new fundraising strategy to avert closure and announced a meeting on Monday of its 850-person membership. It’s been a bumpy ride: half of the 58-member board has resigned; a new chair, Carol Lazier, has taken over and personally pledged $1m to save the organization; general and artistic director Ian Campbell has been placed on indefinite leave; and protests by unions and members have added financial and legal complications. The opera’s plan includes a new $1m crowdfunding campaign with a deadline of May 19; it is actually only one of several San Diego cultural institutions that have been shuttered or are imperiled.
• A closer look at the end of the Trey McIntyre Project.
• A bid by a group of philanthropic organizations to buy out Pittsburgh’s failed August Wilson Center for African American Culture was dropped, with the foundations claiming a preference on the part of the Center’s court-appointed receiver for a commercial developer.
• New York City is facing a sudden rash of failing institutions. The Incubator Arts Project is closing, citing — you guessed it — difficulties raising revenue. The Brecht Forum, a Marxist educational and cultural space, is buckling under the weight of a lawsuit for back rent. And Manhattan’s legendary Canal Street art supply store Pearl Paint has shut its doors and is mourned.
• Is an arts-centric Coursera in our future? Barry Hessenius decries the state of professional development in arts administration and calls for a virtual “one stop shop” of on-demand courses, articles, and networking/mentoring opportunities.
• A handful of arts organizations have been experimenting with a lesser-known organizational structure called the “disregarded entity,” which may offer non-profits a more flexible alternative to independence on the one hand and fiscal sponsorship on the other.
• In The Foundation Review, authors Gary Cunningham, Marcia Avner, and Romilda Justilian of the Northwest Area Foundation note declining philanthropic investment in communities of color and make a pointed call for foundation leaders to commit to reducing racial inequality. And across the pond, British comedian Lenny Henry is leading an effort to secure better representation for minorities on the BBC.

BIG IDEAS

• National Arts Strategies’s Sunny Widmann suggests arts organizations create their own Skunk Works® divisions — originally conceived by Lockheed Martin and not as stinky as the name suggests — to nurture innovate programs and practices.
• We hear a lot about the intersection between creative placemaking and gentrification, but is dealing with it just a matter of saying hi to your neighbor and identifying your privileges? At The Atlantic Cities, Daniel Hertz suggests that if we really care about gentrification, we should be paying a lot more attention to housing policy.
• Global inequality of wealth is at a 100-year high, with the infamous 1% owning half of the planet’s wealth, according to a hot new book by French economist Thomas Piketty. One consequence: “professionals have now been priced out of the [art] market and it’s shifted more toward investment bankers.”
• Barry Hessenius is looking for the next set of big ideas – and the people behind them – with another edition of the Arts Dinner-vention. Nominations are due May 15.

RESEARCH CORNER

• A music psychologist found that introducing random repetition into a piece of music makes it more appealing – and makes people think it was more likely to have been composed by a human being.
• Research suggests literary fiction can help short-circuit ethnic stereotypes.
• A new paper examines the intersections of the arts and health via case studies from Cleveland on interventions including art therapy and the artistic design of healthcare facilities.
• The NEA is out with a new report on the Education Leaders Institute Alumni Summit, a five-year effort on the part of the NEA to strengthen arts education policies at the state level. The Endowment’s Arts Education director Ayanna Hudson discusses the report in the context of the agency’s new strategy.
• A new center at Stanford will focus on meta-research in the medical sciences and examine how much publication bias — which raises questions about all research fields, including the arts — really is a problem.
• The Pew Research Center has published a new report on demographic and generational trends in America. The findings themselves are what you might expect – our population is aging, becoming more diverse, and moving away from religion; immigration and interracial marriage are on the rise; and Democrats and Republicans are at odds – but the presentation brings these and other trends to life.
• Seen any good movies at the theater lately? Probably not, according to new data on film reception by month of release as aggregated by Rotten Tomatoes and Metacritic. The numbers show that the summer and holiday seasons have the best pickings. Don’t believe it? You can play around with the data yourself.

• A Federal court has overturned the FCC’s “net neutrality” regulations, which have required internet service providers to treat all content equally. Legal details here; implications for artists and ways to get involved here. Meanwhile, AT&T has announced a plan to exempt selected content from wireless data caps; artists are expressing concern.
• How many foundations does it take to keep Detroit’s art in Detroit? Nine and counting: the ad-hoc alliance of funders has pledged to give $330m to reduce the city’s unfunded pension liability if the city’s creditors will agree to allow the Detroit Institute of Art to become a separate non-profit with its collection intact. In a nod to its origins, the Ford Foundation is the largest single contributor. It’s unclear whether this will fly with the creditors, so additional donors are being sought. (This could be part of an alarming trend: the Annenberg Foundation recently had to spend more than $500k to return sacred Hopi artifacts home.)
• Thinking of applying for nonprofit status? You may need to brace yourself for a longer wait time than usual. The recent federal budget agreement gives the IRS $526 million less than last year and mandates the agency spend more time reporting to Congress.

MUSICAL CHAIRS

• With Bill de Blasio having taken office, speculation builds around the next NYC Commissioner for Cultural Affairs, with names such as actress Cynthia Nixon, former Alliance for the Arts head Randy Bourscheidt, and Tom Finklepearl being floated as potential candidates to run what may be the nation’s largest arts funder. Meanwhile, Michael Kaiser praises outgoing Commissioner Kate Levin – and says we need her at the NEA.
• Karen Hanan, Executive Director of Arts Northwest, is transitioning to lead the Washington State Arts Commission effective March 1.

ALL ABOUT THE BENJAMINS

• How are arts organizations handling ongoing, recession-related budget pressure? Some are experimenting with curtain times, guerilla art, and other innovations; others are embracing an organizational cultural of abundance. Still others ask, “what budget pressure?”
• On the heels of the NEA’s decision to support collective impact projects for arts education, Ken Thompson of the Bill and Melinda Gates Foundation observes that despite the flurry of interest from funders, they display an overall “lack of certainty about what collective impact is” and for the most part remain focused on the programmatic rather than systems level. One source of the problem? For all of funders’ efforts to get grantees to collaborate, they aren’t doing much of it themselves.

IN THE FIELD

• After winning hearts and minds across the nation with its making-it-big-in-Idaho story, come this July, the Trey McIntyre Project will disband as a dance company, focusing instead on “other enterprises involving dance, film production, and photography.” Despite TMP’s throwing in the towel, Sydney Skybetter sees a triumph and not a failure.
• In other dance news, choreographer Gina Gibney’s company will take over the former home of Dance New Amsterdam in downtown Manhattan, preserving the space as a hub for dancers from commercial and non-profit companies at a time when space is scarce.
• After a three year lockout (and, as we reported a few weeks ago, an attempt to form their own nonprofit), musicians from the Minnesota Orchestra will return to their orchestra hall next month thanks to a contract settlement that cuts their pay and benefits by roughly 15 percent.
• A painting by Glenn Brown replicating the cover of Isaac Asimov’s sci-fi novel “The Stars Like Dust” has sold for almost $6 million, causing many techies to suddenly find themselves in the unfamiliar position of advocating for copyright enforcement.
• Nonprofit theater makes way for film and television: Atlanta’s Woodruff Art Center has sold its three-stage 14th Street Playhouse to the Savannah College of Art and Design, which will use the space to house TV and film degree programs. Woodruff, in turn, donated $1.9 million of sale proceeds to the Community Foundation of Greater Atlanta to establish a new grant fund to support local performing arts organizations.

BIG IDEAS

• We nearly missed this end-of-year roundup of “10 trends and 10 predictions” for the nonprofit sector from NonProfit Quarterly. You’ll recognize several of the items, like the emerging national security state and general government incompetence, from our list of the top 10 arts policy stories, but NPQ adds several others to the table (including an emerging progressive agenda at the local government level) and gives arts organizations a special shout-out – for their “struggl[ing]…business models.” Woohoo.
• Over at Barry’s Blog, social media guru and recent Arts Dinner-Vention participant Devon Smith delves into the potential roles of user experience designers, Google glass, and 3D printers in arts organizations, and offers some insights on the need for think tanks (including ours) in the arts.

RESEARCH CORNER

• The National Endowment for the Arts has posted a batch of working papers and reports resulting from the inaugural year of its Research: Art Works program. There’s a range of goodies to dig into, including a study of the racial and ethnic composition of arts boards, and another look at the arts as a driver of economic growth.
• The Brooklyn Commune Project is out with a new report “on the state of the performing arts from the perspective of artists.” Researched and written by volunteers, it includes an impressive and cogent summary of the economic challenges performing artists face, and thoughtful recommendations for the sector. At 50+ pages it’s not a short read, but a worthwhile one. (More from Andy Horwitz here.)
  
• Another report from the UK examines how artists can support the development of socially responsible, sustainable economies, and identifies three “vital practices” that allow them to do so: 1) critical reflection around how artists maintain their livelihoods, 2) opportunities for artists to “pool their risk” when embarking on new endeavors, and 3) opportunities for artists to access unused spaces in urban environments.
• Amid increased calls for states to track student access to arts education comes this welcome reminder that determining access is more complicated than counting which schools offer which courses.
• In the latest distant-reading study, analysts have crunched “various linguistic characteristics” of a slew of old books against their commercial and critical success, then applied the resulting algorithms to contemporary writers to find that Dan Brown, William Faulkner, and Philip Roth aren’t very successful. Points for counter-intuitive results, at least.

• The public has spoken: polling released in late September shows 75% of Detroiters oppose cutting pensions and 78% oppose selling artwork from the Detroit Institute of Arts to ease the city’s financial troubles. Meanwhile, the DIA is pitching a long-shot plan to Michigan Governor Rick Snyder that would direct significant state funding to the museum – possibly in exchange for the city’s relinquishing ownership.
• Is Philly’s status as a world-class cultural city at risk? The Philadelphia Inquirer explores the potential impact of sharp cuts in private and public funding in a city where arts tourists outnumber sports tourists 4:3.
• Washington, DC may be paralyzed over ObamaCare, but you don’t have to to be: Fractured Atlas follows up on its infographic guide to ObamaCare for artists with a similar guide for small business owners. And the Future of Music Coalition has announced a new website designed to be a comprehensive resource on the implications of the Affordable Care Act on artists. There’s even an artist-friendly hotline.
• In an interview in The Atlantic Cities, Austin Mayor Lee Leffingwell talks about how the city benefits from – and has to adapt to – the huge festivals that undergrid its cultural economy.
• “Be A Creator” enters California elementary schools later this year as a pilot program designed to teach K-6 graders that sharing other people’s ideas and artwork without permission is stealing. The Center for Copyright Infringement (CCI) prepared the curriculum in conjunction with the California School Library Association and the Internet Keep Safe Coalition to address online piracy by educating the young. Detractors claim the curriculum is just “thinly disguised corporate propaganda.”
• Meanwhile, voluntary agreements held by the entertainment, advertising and internet industries to address issues of content piracy are apparently going well, according to testimony from a recent Congressional hearing. That’s good news following the controversy over the SOPA and PIPA bills last year. However, notably missing from the hearing were independent labels and the artists themselves.

MUSICAL CHAIRS

• The Kansas Arts Foundation, established after Governor Sam Brownback abolished the Kansas Arts Commission in a controversial and unsuccessful attempt to eliminate state art funding, has named Karen Lane Christilles its first Executive Director.
• Lois Lerner, embattled head of the IRS tax-exempt organizations division, has retired after bearing the brunt of the blame for the recent scandal involving targeted investigation of Tea Party-related organizations. A review board that was about to propose she be fired alluded to “neglect of duties” during her 12-year tenure at the agency, which raises an interesting question: is Lerner just a political scapegoat or has the IRS’s nonprofit unit actually been mismanaged for years?

ALL ABOUT THE BENJAMINS

• Copper heiress Huguette Clark’s will established an arts foundation and bequeathed it her $100m California estate to showcase her art, but other aspirants to Clark’s $400m fortune have taken to the courts.

IN THE FIELD

• New York’s 70-year-old City Opera is closing its doors following a decade of deficits, an unsuccessful campaign to avert bankruptcy and, according to Mayor Bloomberg, “a business model [that] doesn’t appear to be working.” Michael Cooper and Robin Pogrebin provide the most in-depth reporting on the institution’s final days and just how precariously it held on to life up to the final act.
• How many stagehands do you need in a new education space? Carnegie Hall’s opening night gala was abruptly canceled in the wake of a union dispute over jurisdiction of Carnegie’s still-under-construction education wing. The feud is raising eyebrows, particularly given that five of Carnegie’s top ten earners are stagehands, each earning more than $300,000 apiece.
• In an interview with Ellen McSweeney, Cynthia Cyrus of the Blair School of Music discusses the role of MOOCs in music education and the challenges posed by murky copyright law.
• Two great examples of museums keeping pace with changes in the education sector: the Museum of Modern Art recently wrapped up its first MOOC on museum teaching strategies, and reflects on how it went. The American Museum of Natural History, meanwhile, graduated its first class of science teachers, thanks to a federal grant that made it the first (and maybe not the last) museum in the nation to offer a full teacher prep program.
• Perhaps not such a great example of a museum keeping up with the times: New York’s Metropolitan Museum of Art recently offered a Groupon “deal” for an $18 admission voucher. The only problem? Entry to the museum is supposed to be free five days and two nights a week. This bit of deceptive advertising appears to be just another episode in the institution’s shady history of misleading visitors about its pricing structure.
• The now year-long labor dispute at the Minnesota Symphony Orchestra has prompted both celebrated music director Osmo Vänskä and composer Aaron Jay Kernis to resign, dealing a major blow to the future of the organization. The question that remains is whether the board will try to rebuild the 110-year-old orchestra or the musicians will strike out on their own.
• Meanwhile in Germany, the Berlin Philharmonic has led a massive country-wide strike to protest further decreases in job opportunities for orchestral musicians.
• British museums are adjusting to a world with less public funding. The Museums Association recently released its annual review, finding that nearly a third of survey respondents have had to cut staffing, replacing many of the positions with volunteers and interns. Interestingly, museum attendance is at an all time high.

BIG IDEAS

• David B. Pankratz reports out on a few ideas about research generated at Americans for the Arts’s National Convention back in June: better link research to policy, create pathways for young researchers to study the arts, expand the focus of research beyond nonprofit arts, and more speed dating, among others.
• At WorldFuture 2013 (the best-named conference around), Nicholas Negroponte, founder of the One Laptop Per Child project and co-founder of MIT Media Lab, described four different ways to see the future. In this post Elizabeth Merritt applies the theories to attempt to forecast the future of museums.
• Clayton Lord celebrates the recent Arts Dinnervention with a week’s worth of posts from himself and three other participants. Linda Essig joins in the conversation.

RESEARCH CORNER

• Where have all the theater nerds gone? The National Endowment for the Arts’s latest survey of public participation in the arts is out, and reports a nine percent drop in musical theater attendance and twelve percent drop in play attendance since 2008 – but greater participation by the young in arts festivals and by non-white and Hispanic Americans in art performances broadly. 
• Chris Unitt examines a a new report from the UK’s Culture 24  documenting the second phase of its action research project on “understanding and measuring digital engagement” in the cultural sector.
• Also out of the UK, Ticketmaster has released the results of a survey of playgoing among the British, who are more likely to have attended the theatre than a concert or sporting event. Audiences skew younger and more experimental than you might expect – which means audience codes of conduct are shifting, too.
• Last month Capacity Interactive released its Performing Arts Digital Marketing Benchmarking Survey Study with some interesting findings to report. Perhaps not surprisingly, “the biggest obstacle for digital marketing success is lack of budget.”
• Theater Communications Group has released its annual Theater Facts 2012 report, authored by the folks from the National Center for Arts Research. It’s possible to spin the news a few different ways, but what’s clear is that in many key areas, things are starting to look like they did before the recession: revenue is up, subscriptions are up, income from single-ticket sales is up. The full report is here.
• New neuroscience research finds adults with musical training perform better on tricky cognitive tests than those with little to no experience playing an instrument. And creativity in music doesn’t just happen randomly; freedom, flexibility, time and “being in the moment” are the key elements needed, according to a new study led by John Rink, professor of musical performance studies at Cambridge University.

• A lot of people are talking about the news that Detroit’s emergency fiscal manager is exploring whether the city-owned art on display at the Detroit Institute of Arts (which I visited for the first time just a few weeks ago) can be considered an asset in the event of a municipal bankruptcy. I will be shocked if anything like this actually happens, but in the meantime it’s provoking some rare discussion of deaccessioning in mainstream media space. See Tegan Kehoe’s recent piece on Createquity for more on the ethics and debate around deaccessioning.
• Wondering what to make of the IRS nonprofit oversight controversy? The Nonprofit Law Prof Blog has a good overview of commentary and analysis from lawyerly circles.
• A new paper by Roger Colinvaux examines the US tax deduction for charitable giving and comes to many of the same recommendations for reform as John Carnwath in his article on the subject for Createquity. Speaking of charitable giving deductions, countries in Europe that have similar legislation are finding that they have to extend the benefits to other member nations of the European Union, whether they want to or not.
• Next City takes a look at the record when it comes to the subsidies cities pay to Bass Pro retail stores (over $500 million to date!) in hopes that they will generate jobs. (It’s not good.) I’m kind of mystified as to why there isn’t more of this kind of before-and-after analysis of these kinds of policy interventions – it seems like rather fertile ground.
• The NEA Art Works blog has a nice interview with Maryland governor Martin O’Malley.

MUSICAL CHAIRS

• Congratulations to Denise Montgomery, the new executive director of the San Diego Commission for Arts and Culture.
• Joanna Woronkowicz is moving on from the Office of Research and Analysis at the National Endowment for the Arts to become an associate professor in the Indiana University School of Public Affairs working under Michael Rushton, and offers a farewell post in which she touts the idea of an interdisciplinary research cabal focusing on cultural policy.

BIG IDEAS

• Dallas is making a big play to put itself on the world cultural map. Led by Maxwell Anderson, who is the head of both the Dallas Museum of Art and the Dallas Arts District, Dallas officials have launched a new network of “global” cultural districts to be managed by Adrian Ellis of AEA Consulting, assembling an advisory board including representation from New York, Amsterdam, Berlin, and Hong Kong…and lots and lots of people from Dallas.
• Congratulations to Mediuum, a digital marketplace for visual art, which has won the first Creative Arts Competition prize as part of MIT’s $100k Entrepreneurship Competition for student entrepreneurs. The Creative Arts Competition is awarded for the “innovative use of the arts as a core component of business plans.” (h/t Joe Patti)
• Asking funders to be less insular may be a familiar refrain, but no one can articulate the case quite like Arlene Goldbard, and she does so again in a recent doozy of an essay. Meanwhile, Linda Essig has a review of Arlene’s new book, The Culture of Possibility.

ALL ABOUT THE BENJAMINS

• “So, yes, it’s party time in the world of social impact investing.  But it’s a potluck my friends, and you’d better know what dish [you’re] bringing.” Michael Hickey talks turkey about money you have to pay back.
• Corporate giving is back on the rise, according to a new report from the Committee Encouraging Corporate Philanthropy.
• The President/CEO of the New York State Health Foundation offers some perspectives on risk taking at the foundation level.
• Real estate in Detroit is so cheap, it only takes $142,000 to save a historic rock venue from being auctioned and get one of its theaters named after you.

RESEARCH CORNER

• Good rule of thumb for aspiring grad students (especially in the humanities): the more specialized your degree, the more useless it is. Sadly, specialization seems to be the prevailing trend. The University of Nottingham is blazing the trail of single-genre music studies with a two-year course in heavy metal studies. By the way, a study from 2004 indicates a negative correlation between a graduate degree and earnings for jazz players.
• Back when it was super popular, I though Myspace would be an incredible data source for researchers on the music industry. Myspace has largely fallen by the wayside in that regard, but two sociologists from the University of Chicago managed to grab a complete dataset back in 2007 and it’s now showing up in Richard Florida’s blogs.
• According to a new study, people of color tend not to move as much as whites and to stay close to home when they do, which perpetuates spatial inequality.
• A new meta-analysis of studies of art therapy on cancer patients indicates that “the benefits tied to creative arts therapies were small, but similar to those of other complementary techniques such as yoga and acupuncture.” And another study says don’t trust those correlations between music education and SAT scores – smarter students are more likely to take music classes, but that doesn’t mean music classes make you smarter.
• The study of diversity in Bay Area theater that Clayton Lord has been blogging about for a while is finally out; an abbreviated version of the executive summary is here. Five-word version: all the stereotypes are true.
• Sentences to ponder: “Voting is just another survey without individual consequence.”
• First there was Dance Your Ph.D., and now we have JoVE, the Journal of Visualized Experiments – “the first and only PubMed/MEDLINE-indexed, peer-reviewed journal devoted to publishing scientific research in a video format.” ArtScience ascendant!

ART AND THE GOVERNMENT

• Never afraid to speak his mind, Rocco Landesman shares a few more words about his experience as NEA head, this time with the Public Theater’s Public Forum Podcast.

MUSICAL CHAIRS

• Ken Corbin, a 27-year IRS veteran, will take over as acting head of the IRS’s exempt organizations division amid the recent controversies at the agency.

ALL ABOUT THE BENJAMINS

• The Knight and Gates Foundations are now teaming up to fund the Media Impact Project, which will develop tools for measuring the impact of online media.
• Controversy over public-private partnerships is as hot as ever, this time appearing in the provision of public space. The Atlantic discusses the equity, efficiency, and quantity implications.
• Former hedge funder John Arnold and wife Laura have opened a controversial, highly data-driven foundation in Houston with promising results already in the areas of hunger and criminal justice, Philanthropy News Digest reports.
• Andy Warhol’s eponymous foundation is struggling with a serious institutional crisis in which leaders created perverse incentives for their art authenticators and salespeople, according to Richard Dorment’s crackerjack reporting for the New York Review of Books.
• A new fund to help young London theater producers is making a big splash, the Guardian reports.

IN THE FIELD

• Ever wonder how arts therapy works for victims of trauma? ARTSblog has a fantastic pithy explanation in their article on the use of art therapy with members of America’s armed forces. More on arts and the military from Americans for the Arts can be found here.
• In an evolving sharing culture, copyright has become a major challenge for museums attempting to make social connections with audiences. Carolina A. Miranda explains how this works today in a detailed article for ARTnews.
• Curation is an evolving artform. Erin Roos-Brown, a Program Manager for the Creative Campus Initiative at Wesleyan University’s Center for the Arts, argues in her article on the topic that curation used to require an insulated academic and is now quickly becoming a social, entrepreneurial role.
• A fascinating New York Times report on using art to launder money explains how the culture around buying famous artworks makes it one of the best ways to hide your tracks–if you’re a criminal.
• Vancouver theater producer Caleb McMullen is boldly offering a guarantee on the price of the ticket for his company’s production of Proof. The Globe and Mail lays out the whys, hows, and whos.
• A judge has allowed composer Nathan Currier’s lawsuit against the Brooklyn Philharmonic to proceed, thus extending the saga of the most bizarre concert experience ever experienced into its 10th year. -IDM

CONFERENCES AND TALKS

• The Australian breaks down the takeaways from the Aspen Institute’s meeting on the future of museums in a new brief summary.

BIG IDEAS

• Createquity’s Talia Gibas has a brief summary at ARTSBlog covering how to get into the weeds of what the STEM to STEAM movement is really trying to accomplish.
• Fast Company’s always enterprising online outfit FastCoLabs has been experimenting with a new part-long form, part-live blog format that has (thus far) had a remarkably positive impact on their analytics.
• The Atlantic’s Emily Badger challenges the virtues of the advancing personalization of Google Maps in her piece The Potential Problem With Personalized Google Maps. Her argument speaks to the potential for idiosyncratic exposure to reduce quality of life.
• Students all over the country are being told to purse their passion, but what if they don’t have one? Economists try to answer this question in this piece by Planet Money’s Chana-Joffey Walt.
• Artful improvisation is a useful tool for managers. Keith Sawyer explains what leaders should glean from jazz improv in particular in his review of Yes to the Mess by Frank J. Barrett.
• Congratulations to the lucky dozen who made the Barry’s Blog Dinner-vention guest list! The event will be held September 6 at the Djerassi Resident Artist Program, and will be recorded for posterity. -IDM

RESEARCH CORNER

• Arts Education Partnership has released Preparing Students for the Next America, a new report in which they detail how arts education improves work readiness and enriches the lives of community members.
• D5, a coalition of funders, community activists, and thought leaders, have a new report on diversity in the philanthropy sector, how to improve it, and why it matters.
• The Lilly Family School of Philanthropy at Indiana University has a new report out on the use of program-related investments (PRIs) as a philanthropic tool over the past twenty years.
• Foundations still have a long way to go on the road to transparency, according to a new report from the Center for Effective Philanthropy, and the President and CEO of the James Irvine Foundation adds his thoughts on how to make transparency a priority in the boardroom.
• A new model of concert attendance published in the International Journal of Research in Marketing provides evidence for a number of counter-intuitive findings, including an indifference point in terms of attendance between contemporary and less-known romantic-period works.

photo by Martha Soukup

(I first met John Carnwath when he came to a talk of mine at the University of Chicago Cultural Policy Center last year and asked questions that immediately identified him as a smarty-pants. John is currently finishing up his PhD at Northwestern University, where he has studied the development of municipal arts funding in Germany and teaches courses on cultural economics and organizational structures in the performing arts. He serves as the “Dean” of the Chicago Chapter of The Awesome Foundation and was previously a staff researcher for the Chicago Artists Resource. As I was following the federal tax reform negotiations this winter and thinking about what might happen to the charitable tax deduction, John seemed like an obvious choice to lead the investigation on behalf of Createquity. Enjoy! -IDM)

In his most recent budget proposal, President Obama is seeking to impose a cap on itemized deductions in the personal income tax return – which includes the deduction for charitable contributions. This provision, part of  the administration’s strategy to raise revenue to pay for government spending, has been a part of every White House budget proposal since 2009, and every year arts advocacy organizations join the rest of the nonprofit sector in opposing the changes. So far, the cap has been successfully warded off, but there’s growing concern that if Republicans and Democrats ever agree on sweeping tax reforms, the charitable deduction will be on the chopping block. The fear that limiting the tax deduction will lead to reduced donations to charitable organizations is particularly great this year due to the tax increases that were passed at the end of 2012, prompting the Charitable Giving Coalition to step up its resistance with a new website: protectgiving.org.

While it’s become a popular strategy on Capitol Hill to complain about the lack of progress while refusing to budge from one’s own policy positions, a case can be made that the nonprofit sector’s lobbying on behalf of the charitable deduction has neither improved the financial stability of the sector nor created greater legislative security. At best, it has limited the declines in individual giving in recent years. So rather than simply digging our heels as we head into the next round of budget debates, let’s take a moment to explore a broader range of policy options and see which might make the most sense for the arts.

Before we get to that, though, here’s a refresher on the mechanics of the charitable tax deduction for anyone who needs it.

What is the charitable deduction and how does it work?

The tax deduction for charitable donations was established in 1917, just four years after the federal income tax was introduced. While there have been some changes over the years, in its basic form this provision allows taxpayers to deduct donations to nonprofits and charities from their taxable income. So if a taxpayer earns $50,000 and gives $2,000 to charity, she only has to pay taxes on $48,000. The rationale behind this provision was initially that the taxpayer who gives away $2,000 doesn’t have that money available to spend on herself, so it shouldn’t be counted as part of her income. Nowadays, the deduction is more commonly thought of as an incentive dangled before taxpayers to coax them into donating more money to charity. By allowing taxpayers to deduct charitable donations from their taxable income, the government essentially agrees to pay for a portion of the donation.

Think about it this way: If you earn $1,000 and you’re taxed at a rate of 30%, you have to pay $300 to the IRS and you end up with $700 in your pocket. But if you donate $100 to charity, your taxable income is reduced to $900. Your tax bill then comes to $270 ($900 x 30%). In return for giving $100 dollars to charity the government reduces your taxes by $30, so in the grand scheme of things that  $100 check that you write to your favorite opera company really only sets you back $70.

Who benefits from the charitable deduction?

While this all sounds great in principle, there’s a big catch: not all taxpayers benefit from the charitable deduction. Initially the income tax only applied to a rather small number of wealthy Americans, but during World War II it was expanded to affect roughly 75% of the population. Instead of having all of these tax filers list their deductions individually—$42 for prescription medicine here, a $100 donation to a museum there—the IRS introduced the “standard deduction” in 1944. The standard deduction lets all filers lower their taxable income by a fixed amount. For the 2012 tax year that amount is $5,950 for single taxpayers and $11,900 for couples. That means that you only have to keep track of your deductions and itemize them on your income tax return if they exceed $5,950 (or $11,900 if you’re married). That saves a lot of taxpayers (not to mention the IRS) a huge headache, but it also means that the 70% of filers who take the standard deduction don’t get to write off their charitable donations. (One might argue that the non-itemizers benefit from the charitable deduction in a roundabout way, since a typical deduction for charitable donations was factored in when the standard deduction was calculated back in 1944, but the fact remains that the current deduction for charitable contributions and any changes to it are only relevant to about 1/3 of American tax filers.)

For those who do itemize deductions, the amount of the government’s subsidy towards charitable donations depends on the filer’s marginal income tax rate. If you’re in the 35% bracket and you donate $100 to a good cause, the government gives you $35, but if you’re in the 10% bracket you only get $10 back from Uncle Sam. Economists say that the “price of giving” is lower for the individual in the 35% bracket than for the one in the 10% bracket (e.g. note 1 here). Giving $100 to charity “costs” the former (presumably richer) person $65 and the latter $90. While this seems sort of unfair, it’s the result of having a progressive income tax system in which those who earn a lot pay a larger percentage of their incomes into the public purse.

This means wealthy taxpayers not only have more money in their bank accounts to give away, but when they donate to charity the government covers a larger portion of their donations. It is therefore no surprise that the rich are responsible for a large share of charitable giving. Although only 3% of tax filers have annual incomes over $200,000, those households contribute 36% of the money that individuals give to charity every year—a total of $73 billion in 2008. However, the federal government foots the bill for about a third of those donations through the deduction for charitable contributions (assuming that most of the individuals with incomes over $200,000 are in tax brackets with marginal rates over 30%).

One might say, “well it’s all for a good cause, so it doesn’t really matter if the government is paying for a portion of the donations,” but it turns out that taxpayers with high incomes choose to give their money to different causes than those who are less well-off, and the charitable deduction allows them to divert large amounts of government funds to their favorite organizations. The wealthy support educational institutions and the arts to a much greater extent than poor people, who tend to focus their giving on basic needs and religious organizations. The extent to which the arts depend on donors with high incomes for their contributions is quite striking. In 2005, 94% of the funds that arts organizations received through individual contributions came from households with annual incomes over $200,000.

Of course, the donors are not the only ones who benefit from the tax deduction. All of the people who receive services from nonprofits and charities may be considered indirect beneficiaries of this provision in the tax code. However, to determine whether the charitable deduction is the best way for the government to support the work of nonprofits we must take a closer look at the incentives that are created and how people respond to them.

Do donors respond to tax incentives?

The deduction for charitable contributions affects taxpayers in two different ways. On the one hand, we have the “price effect.” As noted above, higher marginal tax rates reduce the price of giving, creating a bigger incentive to contribute to charities. However, high marginal tax rates also mean that people have less money left in their pockets after paying their taxes. In general, if people’s incomes are reduced, one would expect them to become less generous donors. After paying for rent, food, and utilities, they have less money left over for nonessentials like vacations and charitable donations. This is called the “income effect.” Note that the income and price effects work in opposite directions. Higher marginal tax rates incentivize donations through the price effect, but they simultaneously create a disincentive through the income effect.

Several economists have examined donors’ responsiveness to tax incentives over the past few decades, but the results remain inconclusive. Most studies find that donors respond to tax incentives, but the historical record shows that the level of charitable contributions remains relatively constant over time when measured as a proportion of GDP regardless of the available tax incentives. Some studies suggest that higher-earning taxpayers are more responsive to the incentive than those who are less well-off and that there are differences between types of charities (religious, social, educational, etc.) that receive donations. Many policy analyses (CRS, CBO, TPC) therefore calculate the upper and lower limits of a range into which the effects of proposed policy changes are expected to fall rather than a specific estimate.

Considering policy options: goodbye deduction?

To establish the worst-case scenario as a baseline, one might ask what would happen if the charitable deduction were eliminated completely. Independent Sector, an advocacy organization for nonprofits and charities, recently put out a list of FAQs according to which “with no deduction for charitable gifts, itemized charitable giving would drop by between 25 percent and 36 percent total.” This assertion is rather misleading. The study from which Independent Sector gets these numbers states that a taxpayer in the 30% income tax bracket might reduce his contributions by 25-36% if the deduction were eliminated. Since the incentive to donate depends on the filer’s marginal tax rate and 98% of households face rates under 30%, the reduction in the total amount of individual contributions is likely to be much smaller than Independent Sector suggests.

The truth is, we have no idea what would happen if the tax deduction were eliminated. Not only have studies of the price and income effects been inconclusive, but they are all based on observations of how donors have reacted to incremental changes in tax rates and deductibility in the past. These estimates may be useful in predicting the effect of small changes within the range of what’s been observed in the past, but there’s no reason to be believe that the response would be the same once the government’s incentive approaches zero. In fact, economic theory would predict that it’s not the same.

For example, if the deduction were eliminated completely, one might expect some donors to dig deeper into their pockets to keep their favorite charities afloat. However, some wealthy Republicans might cease all charitable donations to protest the fact that they’re having to pay more taxes, secretly hoping to blame the financial hardships of the charitable sector on the Democrats in the next elections. These types of reactions are difficult to predict. One thing is certain: if the indirect subsidy that the government provides through the charitable deduction were eliminated in order to reduce the deficit, individual donors would have to dig deeper into their pockets to sustain nonprofits at their current level of activity. And if the entire nonprofit sector were in severe financial distress, one can easily imagine that some donors would reallocate their gifts towards hospitals and basic social services, compounding the impact on the arts.

Capping the deduction

The good news is that no one has proposed eliminating the deduction altogether. Obama’s 28% cap on deductions, on the other hand, remains a very real possibility.

Obama suggests that the government could increase its revenue by capping deductions at 28% of the donor’s AGI. As mentioned above, the size of the tax incentive is generally determined by the marginal tax rate that taxpayers incur, but Obama’s proposal sets 28% as the maximum anyone can claim. For the vast majority of households, this would be of no consequence. If you’re in the 10%, 15%, or 28% tax brackets, you still get your deduction as normal. But the 2% of filers who itemize their deductions and face marginal tax rates over 28% would no longer be able to reduce the tax on their donations to zero. People in the 30% bracket, for example, would still have to pay a 2% tax on their charitable gifts. They owe 30% according to their tax bracket and they only get 28% back on the donated amount (due to the cap), so the IRS gets to keep the 2% difference.

How might this cap affect contributions to charitable causes? The short answer is that it will most likely result in a minor, but noticeable reduction in contributions. Here’s what people are saying:

• The Center on Philanthropy at Indiana University estimates that the cap will lead to an $820 million (0.4%) reduction in charitable giving in the first year of implementation, increasing to $1.31 billion (0.7%) in the second year.
• In 2010 the Congressional Research Service put the decline in charitable giving in the 0.16 – 1.28% range.
• In a back-of-an-envelope calculation for the Washington Post, Harvard economist Martin Feldstein estimates that the 28% cap could reduce charitable giving from individuals by $7 billion, which amounts to a 3% decline (relative to the $230 billion in charitable contributions from individuals reported in Giving USA 2009).
• Len Burman of the Tax Policy Center and the Center on Budget and Policy Priorities came up with similar figures in 2009.

Taking all of this together, it seems we’re talking about a 0.5% to 3% decline in gifts from individuals.

The impact on arts nonprofits is likely to be a little bit higher than that, since the cap will primarily affect the wealthy taxpayers who contribute most to the arts. The 2010 study by the Congressional Research Service includes an analysis of how the 28% cap would affect different segments of the nonprofit sector. It estimates the reduction in individual giving to the arts to be around 2.4% (compared to 0.16-1.28% overall).

The figures above were calculated based on the tax rates that applied between 2003 and 2012, but as we know, the tax rate for the highest income bracket was increased from 35% to 39.6% at the beginning of this year. How does that change things? If charitable contributions remain fully deductable, we would expect the higher marginal tax rates to increase donations due to the price effect. However, if Obama’s proposal to cap total deductions goes through, the reverse is to be expected—the higher tax rates actually exacerbate the decline in charitable giving caused by the cap. That’s because the higher tax rates reduce the taxpayers’ disposable income, bringing the income effect into play, while the cap on deductions holds the price of giving constant.

The Congressional Research Service estimates that the combined effect of the 28% cap on deductions and the higher marginal rates that Obama sought to impose on taxpayers earning more than $200,000 would reduce giving by 0.28% to 2.27%. That’s almost double the decline that they estimated for the cap on deductions alone (see above). The Center on Philanthropy arrives at similar figures when including Obama’s proposed tax hikes. Those projections still fall within the 0.5% to 3% range mentioned above. If we take the worst-case scenarios for the 28% cap and the largest estimates for the impact of the of the higher tax rates, we might be looking at a 5 or 6% decline in charitable giving.

So it looks like we don’t need to fear that individual contributions will drop by a quarter if the 28% cap were introduced, with or without increases in the top marginal tax rates. Nonetheless, a 5-6% decline is nothing to take lightly, and for organizations that are already reeling from the recent recession even a modest reduction in individual contributions could be the final straw. Moreover, the estimates apply to total charitable donations nationwide, but individual organizations could be unlucky and find that several of their major benefactors scale back their contributions more drastically than the national average, leaving gaping holes in their budgets.

Other options: expanding to non-itemizers and adding “floors”

Faced with this uncertainty, the response from arts advocacy organizations has been to dig in their heels and demand that the deduction for charitable contributions remain intact. However, as Michael Rushton notes, there’s little reason to believe that there’s anything magical about our current tax code; in fact, the charitable deduction has been criticized in the past for several reasons (notably for being inefficient, regressive, and having an unclear theoretical justification). So instead of clinging to the status quo as our only hope for survival, we might ask: what changes to the current system would lead to the best outcomes for arts organizations? How might we incentivize charitable donations while supporting the government’s goal of reducing the federal deficit?

In 2011 the Congressional Budget Office came up with 11 different policy scenarios and estimated their likely impact on tax revenue and charitable giving. These included:

• allowing all taxpayers to write off charitable gifts on their tax returns, rather than just those who itemize deductions
• creating a minimum donation (either a fixed dollar amount or a percentage of the donor’s AGI) which would have to be exceeded to qualify for the deduction
• converting the deduction into a tax credit (which would give all taxpayers the same 15 or 25% tax break on charitable contributions instead of linking it to the donor’s marginal tax rate)

This study found that by extending the deduction to all filers and simultaneously establishing $500 ($1,000 for couples) as the minimum donation required to qualify for the deduction the government would be able to increase revenues by $2.5 billion annually, while boosting contributions to charitable causes by $800 million. Or even better, by replacing the deduction with a 25% tax credit for all taxpayers, the government would save almost the same amount, while driving up donations by 1.5%.

Since the government’s objective right now is to reduce the deficit, presumably without harming the nonprofit sector unnecessarily, Eugene Steuerle of the Tax Policy Center has advocated for expanding the tax deduction to all filers, with a minimum contribution of 1.7% of the donor’s AGI required to qualify. This would net the government between $10.4 billion and $11 billion per year without reducing charitable donations by a dime. The argument for establishing a minimum contribution to qualify (often referred to as a “floor”) is that people are likely to give a small amount of money to charity regardless of whether they receive a tax break or not. It’s therefore not necessary for the government to forgo any revenue for that portion of their contributions. Further, at a certain point the administrative costs of tracking small donations—acknowledging their receipt, submitting documentation to the IRS, checking for fraud—is not worthwhile. For those who object that a $1,000 donation is a far bigger sacrifice for a couple that only earns $20,000 a year than for a millionaire, a floor that is linked to the taxpayer’s AGI might pose an attractive alternative. With a 2% floor, someone earning $20,000 could claim the deduction by making a $400 donation, while someone earning $500,000 would have to donate $10,000 to qualify.

Beyond the bottom line

Reforming the charitable tax deduction might offer other benefits as well. For example, it could provide an opportunity to change the composition of our donor lists. By giving those in lower income categories greater incentives to support our work and allowing them to leverage some of the indirect subsidy that the government provides through its tax breaks, arts organizations might be able to diversify the ranks of their donors, so as to be less dependent on a small wealthy elite. Based on the CBO’s estimates, by replacing the tax deduction with a 25% credit that is subject to a low floor (say 1% of AGI), it should be possible to maintain charitable donations at their current levels or even increase them slightly while saving the government several billions of dollars annually and allowing donors from lower income categories to acquire a bigger stake in nonprofit arts organizations. A more diverse pool of donors, both in terms of their economic status and their tastes, would reduce the financial risk of artistic experimentation and could allow companies to diversify their programming in ways that their current (predominantly wealthy) donors might not support.

All in all, reforming the deduction on charitable contributions isn’t necessarily a bad thing for the arts. There are ways of changing the tax code that could actually increase revenues and diversify the sources of income for arts organizations, even while helping to reduce the federal deficit. Since any change creates uncertainty and will likely produce losers as well as winners, I can understand arts administrators and advocates who would rather stick with an imperfect status quo than commit their careers and their organizations to an uncertain future. However, I believe that participating in the discussion and shaping the outcomes to fit our sector’s interests will ultimately prove more productive than trying to block change from the start.