A Popular Method for Donating Art Draws Increased Scrutiny

Do donations need more transparency?

Auction gavel with money
Turns out donating art to charity can have some loopholes.
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Read about enough art auctions and you might start noticing a trend: affluent art collectors selling off some or all of the work they’ve amassed to benefit a nonprofit (or several). In some cases, this is accomplished via the use of a donor advised fund — a type of fund that has certain tax benefits for the donor. But the use of donor advised funds in the art world is coming under increased scrutiny, as Scott Reyburn and Anny Shaw reported in a recent column for The Art Newspaper.

As Reyburn and Shaw describe it, these funds “allow a wealthy individual to claim tax relief as soon as assets are donated to the fund” but place no constraints on when that money actually goes to charity. Part of the issue, Reyburn and Shaw observe, is that it can be difficult to tell how much money in donor advised funds comes from the sale of art; there isn’t a lot of transparency involved.

That the art world is starting to show concern over this isn’t surprising; some philanthropists have also expressed skepticism when it comes to these funds. In a 2019 interview with Vox, billionaire philanthropist John Arnold explained his own concerns over donor advised funds. Arnold brought up some of the criticism that philanthropists and foundations have received in recent years, and addressed how donor advised funds fit in there.

“This DAF issue is one of the areas where the criticism is valid,” he told Vox. “People are getting a tax advantage today by putting money into the DAFs, and they’re not abiding by the spirit of the regulations about how that money is to be put back into society.”

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Arnold isn’t the only person raising concerns over the lack of transparency surrounding donor advised funds; The Atlantic covered similar issues a year earlier, contrasting the vast sums of money at play in these funds with the needs of various nonprofits that could use the money in the here and now. Time will tell if the art world’s concerns can spark a renewed interest in making this sector more transparent.

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