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Tuesday, March 7, 2006

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Legislative Update

NASAA Legislative Counsel Thomas L. Birch

President's Budget Proposes Level Funding for NEA in 2007; Congress Set to Decide Charitable Provisions in Tax Bill

The budget debate opened on February 6 when President Bush President Bush sent his Fiscal Year 2007 spending plan to Congress today proposing level funding for the National Endowment for the Arts in the coming year.

The Administrationas budget request at $124.4 million for the arts endowment is the same amount appropriated by Congress for the federal arts agency for FY06. Although level funding is proposed, the administration seeks an increase of $1.8 million for salaries and administrative expenses, and shifts $1.1 into NEAas direct grants and $500,000 to State and Regional Partnerships. Challenge America funding is cut by $3.5 million. Spending for the American Masterpieces initiative to present the nationas artistic legacy would remain level.

The National Endowment for the Humanities (NEH), with a proposed funding level of $126 million in the FY07 budget, would also continue at its current funding. The Office of Museum Services, however, would fare better in the Administrationas budget request with a proposed increase of $4 million to a new level of $36 million. The State Departmentas program for professional and cultural exchanges, which has garnered special attention with the recognized need to improve Americaas image abroad, would increase from $146 million in 2006 to $160 million in 2007 in the proposed budget.

Overall, the Presidentas $2.77 trillion 2007 spending plan seeks cuts in discretionary spending for nine of the 15 Cabinet-level. Along with an average 2 percent cut in most discretionary spending, the Administrationas budget proposes the elimination or significant scaling back of 141 federal programs, including the U.S. Department of Educationas Arts in Education program. In FY2006 the arts education grants are funded at $35 million. These funds were appropriated by Congress despite the Presidentas request to eliminate that funding.

Tax Bill: Working to finish up the Tax Relief Act left over from 2005, a conference committee begins meeting after February 27 to reconcile the differences between two measures passed by the House and Senate last year.

The Senate bill in particular addresses charitable contributions. Unfortunately, the House-passed bill does not. NASAA has written to the leadership of the tax-writing committees urging support for a provision approved by the Senate which would allow artists to take a fair market value tax deduction for a charitable contribution when they donate their own works of art to museums or library collections.

This is the final step in the legislative process to push for adoption of the artistsa charitable deduction in the tax legislation. Ten Senators have signaled their support as well, signing a letter to the leadership of the two tax writing committees urging adoption of the artistsa provision in the final bill. On the letter are Sens. Pete V. Domenici (R-NM), Charles E. Schumer (D-NY), Robert F. Bennett (R-UT), Patrick J. Leahy (D-VT), John Warner (R-VA), Edward M. Kennedy (D-MA), Joseph I. Lieberman (D-CT), Tim Johnson (D-SD), Thad Cochran (R-MS), and Dianne Feinstein (D-CA). Under current law, artists may deduct only their abasisa value a essentially the cost of materials -- rather than the fair market value. The new provision, which has been long supported by arts organizations, would serve the public interest in spurring the donation of art to collecting and educational organizations whose charitable mission includes the collection, preservation, exhibition and study of artworks. Most museums, libraries, and archives have no acquisition funds. The only way to acquire new works is through donations. Because living artists have no incentive to give their works to a nonprofit institution, many works of local and national significance are sold into private hands and never come into the public domain. The donation of art to museums and other institutions makes the work available to be experienced by all Americans.

The new provision would also address the inequity created by current law in the tax treatment of gifts by artists and other donors. Collectors who own works of art can take the fair-market value deduction when they donate to a nonprofit institution. Artists cannot claim such a deduction. Another item in the Senate bill supported by NASAA would allow for the first time the deduction of charitable contributions made by individuals aged 70 1/2 or older with funds from an Individual Retirement Account, without requiring that the funds first be counted as income to the donor. New charitable incentives such as this which would promote charitable giving have the support of both political parties and the White House.