Deadline Looms for Art Deductions : Taxes: A temporary law allowing donors to deduct the appreciated value of works given to museums will end Tuesday unless Congress acts.

Federal income-tax breaks on gifts of art have come and gone since the Tax Reform Act of 1986 went into effect, and another change is imminent.

Unless Congress quickly approves pending legislation, a temporary law allowing high-income donors to deduct the appreciated value of artwork given to museums will run out Tuesday. If, on the other hand, new legislation is enacted, donors and museums will benefit from more generous provisions for deductions, effectively reviving the law that existed before 1987.

The probability that the House and Senate will pass the legislation--or even consider it--by Tuesday is “anybody’s guess,” according to Courtney Goodman, legislative associate of the American Arts Alliance, a Washington-based agency that monitors arts legislation. “We’re cautiously optimistic, but we wouldn’t bet the ranch on it,” she said.

Before the Tax Reform Act of 1986, which took effect in 1987, donors to museums were allowed to deduct the appreciated value of a full array of gifts--artworks, securities and property that might be sold by the recipient. The 1986 law abolished such deductions, allowing donors to claim only the purchase price of gifts, with the result that donations plummeted about 50% at most museums.

The current, temporary rule--passed for 1991 and later extended for an additional six months--is a compromise. Under provisions of the current law, donors who are subject to the alternative minimum tax can deduct the full market value of appreciated property specifically related to the purpose of tax-exempt institutions. For example, the donor of a painting to an art museum can deduct the painting’s full market value, but the donor of stocks, real estate or other property that is meant for resale can claim only the purchase price of the gift.

This restricted law has been a bonanza for art museums, which have seen art gifts rise well above pre-1987 levels in the last 18 months--after falling dramatically in 1987-90--but arts advocates have lobbied for a return to the good old days, when all kinds of gifts could be deducted at their appreciated value.

The new legislation would do exactly that, but only for a period of 18 months. In the current economic climate, proponents of the measure believe that their only chance of success is a temporary law, Goodman said. If passed, the legislation would be retroactive to Jan. 1, allowing people who have already given securities and property other than artworks to museums this year to claim the appreciated value on their 1992 tax returns.

Meanwhile, local museums are enjoying a flurry of activity before the current window of opportunity closes. Some potential donors have held off because they can’t predict their year-end financial situation this early in the year. But museum directors and curators are busily reminding collectors of the upcoming deadline, and many patrons have responded with gifts.

The Los Angeles County Museum of Art has received about 350 artworks so far this year, according to press officer Pam Jenkinson. That figure is a dramatic increase over 1991, when about 200 gifts were received during the first six months of the year and a flood of donations arrived in December.

The Laguna Art Museum has had a tenfold increase of art gifts--from 10 to 100--over the same six-month period last year, according to Bolton Coburn, curator of collections. “Last year we made a great effort to step up acquisition activity because of the tax window. When it got extended, we continued along the same lines,” he said.

The Newport Harbor Art Museum also has made a concerted effort to attract gifts early this year. “We’ve operated pretty much since the first of year, that there was a good possibility (the tax legislation) wouldn’t be renewed after June 30,” said Director Michael Botwinick. “We talked to a lot of potential donors who have been thinking long-term. A number of major gifts are tied to June 30 as the probable deadline.”

Times staff writer Cathy Curtis contributed to this story.