Museum Pieces? : Some Worry That Tax Reforms Are Making Dinosaurs of Donors

“A little too enthusiastic about pictures, but not enough to hurt” was how an early credit report described the industrialist and eminent art collector Henry Clay Frick.

Visitors to the Frick Collection, a private museum in New York City that holds the products of this enthusiasm, appreciate Frick’s energy to acquire art and share it with the public. Today’s museum directors and curators wish they could bottle and preserve that impulse, the lifeblood of their museum collections.

Enthusiasm for pictures may be at an all-time high among private collectors, as witnessed by the explosive art market, but museums are no longer seen as the natural and obvious destination for these purchases. As dramatically as prices for art have risen in recent years, incentives to donate to museums have tumbled to new depths, putting the growth of museum collections in serious jeopardy.

A recent American Assn. of Museum Directors survey of more than 100 museums found that gifts of art to institutions dropped nearly 50% between 1985 and 1987, a decrease the group attributed primarily to a series of 1986 tax reforms affecting the deductibility of works of art.

The new laws are both confusing and discouraging potential donors, said Peter Marzio, director of the Museum of Fine Arts in Houston.

“It’s labyrinthine,” agreed San Diego Museum of Art director Steven Brezzo. “I don’t think there’s a museum director in the country that really understands it. . . . We certainly know that we’re getting far fewer works of art.”

Brezzo said that, before the tax reforms, the proportion of gifts to purchases at the museum was “hugely tilted” in favor of gifts. Now, the meter is shifting back,” he said.

The specifics of the reforms vary depending on the donor’s tax bracket, but, across the board, the changes make it far more difficult and far less rewarding to deduct the appreciated value of a work of art.

“There’s no question, both in appearance and reality, that the incentives to give have been dramatically reduced,” said Hugh Davies, director of the La Jolla Museum of Contemporary Art, which depends on gifts for roughly half its acquisitions.

Davies said one of the museum’s past collector/contributors told him that last year was the first in two decades that he has not given art to museums.

“His accountant had forbidden him doing it, since the tax laws are horrendously bad right now,” Davies said.

How important is the tax deduction to potential donors?

“It’s a tremendous incentive,” Davies said. For many people, giving art to a museum “is not largess on their part. It’s a very practical decision.”

Danah Fayman, a local arts patron and a generous donor to the La Jolla Museum since the early 1960s, said the recent changes in the tax laws have not slowed down either her collecting or her patronage. Although she enjoys the tax benefits afforded by such donations, she downplays their influence on her decision to give.

The advantages “help you do it, but it’s never been the reason to do it,” she said. “I can think of other ways to get tax write-offs.”

“My experience is that it’s a combination,” said Marzio, of the Houston museum. “People give because they like the cause, but some people can’t give without that added tax incentive.”

In exchange for donating art to a museum, however, a collector receives much more than just tax credits. Name recognition and a flurry of attention from the museum and the media are seductive impulses for some. Out of a sense of responsibility to the art itself, most collectors also feel reassured that their donation will receive the best possible care and conservation in a museum, probably extending its life beyond that possible if kept in the private sector.

“The inner glow of having supported a cultural institution” spurs many to give, Davies said, citing Fayman as “a terrific role model.”

Contributing to a permanent cultural bank whose dividends can be shared is often more fulfilling than simply making a deposit into one’s own personal account. It raises the level of culture in the community, not just in one’s living room.

“I just like to live someplace where some of the best art and performances are available,” Fayman said, “and, if you don’t help do it, it’s not going to happen.”

Feeling a part of aesthetic history and sharing in the timelessness of art and the museum also play a part in a collector’s motivation to give, other museum directors said. But these sound like hopelessly esoteric qualities in an era when the fluctuating value of a work of art can be tracked daily by computer.

Records for prices of art bought at auction have fallen like dominoes in recent months. The eight highest-priced paintings ever sold at auction came on the block just since 1987. The overheated art market has consumed most other concerns of the art world and captivated the attention of the public.

Museums, designed to withstand the pressure of such cycles and trends while promoting standards of quality, are having trouble coping with the forces of glamour and profit that are putting many collectors and works of art beyond their reach.

Brezzo said the nature of the San Diego Museum of Art’s collection, which he described as “modestly encyclopedic” but focusing on European art and American art of the past, constitutes a financial quandary “because the art market has priced us out of general participation on an ongoing basis.”

The museum’s limited acquisition funds don’t go as far as they once did, requiring Brezzo to be more strategic than he might have been in the past.

“It’s an obscene use of extra money running around loose,” said Henry Hopkins, director of the Frederick Weisman Collection in Los Angeles and former director of the San Francisco Museum of Modern Art. “The new art market is causing nothing but trouble for museums. It’s causing only inferior works of art to be available to museums, because others are being bought by European collections and private collectors. The marketplace is determining what’s available.”

The art market has always influenced buying patterns, however, and, for Davies, its current inflamed state poses only a challenge, not an insurmountable problem.

“Most of the truly aggressive contemporary collectors tend to buy paintings, and they tend to buy hot names and less cumbersome works,” he said. “It’s not hard to buy effectively against the grain of a market like that.”

By favoring artists who have not yet basked in market hype and art that may be too “domestically unwieldy” for the private collector, Davies steers the museum’s collection around trends, into quieter pockets where he feels he can get the most for his money. Like any museum director, however, he covets much that he can’t afford, and is willing to wait, hoping that private collectors of such work become museum donors. That strategy, he said, is actually a relief.

“In a funny way, I think it takes us off the hook to have to compete in that arena,” Davies said. “It forces us to be infinitely more creative about our shopping.”

Although rapidly escalating prices for art are sending museum directors and curators away with migraines, they are luring a growing sector of private collectors ever closer. For them, art is an investment, and one that boasts an impressive amount of social cachet.

Specialized firms have blossomed in the past few years to advise clients on the risks and rewards of their purchases, and a recent newspaper article listed art along with stocks, bonds and other portfolio items in a discussion of investment strategies for 1989.

For investment-minded collectors, donating art to museums becomes a more and more remote option as profits to be made on the sale of art further outdistance the tax advantages of giving it away. In the past five years, two estates that were originally pledged to the San Diego Museum of Art “basically went right by us,” Brezzo said, “and I see them at Sotheby’s and Christie’s (auction houses) now.”

Brezzo said the situation is crucial for San Diego.

“A lot of the treasures of the community, a lot of the wealth, is in a much older generation that is at the age of estate probate right now,” he said. “That’s a big issue with us. Some of the big, big estates are simply not coming to the museums, but going over to the auction houses. And it’s happening more and more.”

Nevertheless, Brezzo said he is encouraged by the rise in collecting activity locally.

“You go to Sotheby’s and Christie’s in New York, in London, in the Orient, and you’re bumping into San Diegans left and right,” he said. “Now, that doesn’t mean those works are coming to the museum. They’re buying as investments, but the museum is running right behind them, trying to teach them and lobby them about the relationship between the museum and the community, and the long-term nature of art and the public.

“So our role has changed very dramatically, from simply sitting back and being the recipient of these legendary truckloads of gifts to one of actively having to go out and court donors.”

The courtship process is a sensitive one, in which delicacy and diplomacy dictate the museum director’s relationship with a potential donor. John Walker, former curator and director of the National Gallery of Art in Washington, put it bluntly in his autobiography: “A museum director is a little like one of those donors in primitive paintings. He is always on his knees with his hands together in prayer!”

The relationship between museum and collector is not always so obsequious, however. Collectors are often as eager to benefit from a museum staff’s knowledge of art as the museum is hungry for the collectors’ support. More and more museums are offering educational opportunities to their supporters--through lectures, special group trips to galleries, art fairs and artists’ studios.

Dues paid by members of the La Jolla Museum’s Contemporary Collectors group, for instance, help bolster the museum’s acquisitions budget, while the activities of the group aim toward cultivating a greater awareness of current art and encourage more informed private collecting.

Such groups also go far in nurturing the personal rapport between museum and donor that is often a major factor in the decision to give. The risk of desertion and heartbreak looms over this kind of courtship just like any other, however, and museums are advised by the American Assn. of Museums to devise clearly written policies to protect themselves from being victimized.

A high percentage of gifts to the San Diego Museum of Art, for instance, start out as long-term loans, promised to the museum but not bound by a signed deed of gift. Legendary cases of such collections being withdrawn after long and expensive stays at museums have prompted the SDMA’s policy of housing such collections only at the expense of the lender.

“We’re not a garage, we’re a museum,” Brezzo said. “We’re impacted by the cost of housing works of art here. That’s very clear to the donors at the outset.”

It’s all above board, he added, with the costs of insurance, conservation and often exhibition and catalogue put on paper at the start.

Securing a gift, whether it begins as a loan or not, is harder to prescribe. No standard procedures exist, and the director’s approach, according to Brezzo, depends on the individual collector’s experience and knowledge.

“In a lot of cases, it’s an educational experience for them, but I think we’re very honest. The integrity of those relationships is really what pays off, and the fact that everyone knows what to expect. There are no hidden agendas and no surprises.”

Written documents are useless in such a relationship, Davies believes: “I would much rather operate in the area of good faith.”

A museum can’t protect itself through contracts binding a donor to a future gift, he said, because “no institution is going to call the collector on the mat and say, ‘You defected, you defaulted on this commitment.’ ”

In the sophisticated and subtle courtship ritual, such an agreement would never be enforced, he said.

Collectors who have backed out of such agreements do not always do so in order to sell their work. Recently, many have chosen to establish “boutique” or “vanity” museums to house their collections on their own terms, at their own expense. Armand Hammer, for instance, has announced the establishment of such a museum in Westwood, after years of unsatisfying negotiations to give his collection to the Los Angeles County Museum of Art. Whether driven by personal pride or a desire to keep their collections intact, collectors increasingly have chosen this route.

With boutique museums on the rise, the art market at its seductive best and tax incentives lagging behind, the alternatives to giving art to museums are growing healthier and healthier at the expense of the growth of museum collections. Though the situation is threatening now, Davies feels optimistic that incentives to give will improve as the Reagan era gives way to the Bush Administration.

Marzio also anticipates a change in tone from the “mixed and contradictory signals” emitted during the Reagan years.

“The Reagan Administration said they were not going to be putting more money into the arts, that they wanted the private sector to put it in,” he said. “But what they did is reduce the incentives for private donors to be involved, by decreasing the deductibility of donations, so it’s costing more to give.”

Though the changing conditions of the art world in the 1980s have made museum collecting more complex than ever, the real challenge, according to Brezzo, is the same as it has always been: “To find museum-quality works and to pursue them and acquire them by whatever ethical and professional means are at our disposal, to get them for the museum and the community.”

To do so means wading into a maze of “quality and value and price and ethics and interest and patron sensitivity.”

“It’s strategically involved,” he said, “Machiavellian at its worst and heroic at its best.”