Private Museums and the IRS

While most private museums are a benefit to owners, donors and visitors, there is a potential for abuse. If the museum is mainly a tax dodge for owners, it could affect unknowing donors as well.

Private Museums may be poorly signed or difficult to find or have limited hours, thereby making visits by the public difficult.

While private museums open to the public seem to be a good thing—they provide more opportunities to see art—not everyone thinks it is the public who are benefiting.

This is because the founders of a private museum can deduct the full value of their donations to their personal private institutions. Obviously, this is an advantage to them. But, what of the public?

If private museums have restricted hours for the community, it could well be that the creators of the museum are receiving undue advantage, more than the very people they were formed to serve.

Republican senator Orrin Hatch of Utah has recently brought this issue from the shadow into the light. In order to investigate objectively, he formed a committee to implement a survey. Its objective was to compare the benefits a private museum offers to its founders versus the public.

Eleven private museums were questioned. Four of them (roughly 40%) had fewer than 6,000 visitors per year. One of them was open to the public only twenty hours per week. Others were difficult to find or signage was lacking.

While the majority of private museums, like the Eli and Edythe Broad Museum in downtown Los Angeles might be exemplary, apparently, some others are not. This means the future of private American museums should be interesting. They will no doubt be monitored more stringently by the legislative and judicial arms of the government as abuses or perceived abuses occur. Those that do not meet standards will lose or never gain a 501 (3) (C) classification. Sadly, for a generous donor, giving these museums gifts will be totally selfless. A tax deduction cannot be forthcoming without the 501 (3) (C) designation.

Some Interesting Facts from the Private Art Museum Report:

  • Only 18% of private museums worldwide are founded by women.
  • To date there are 317 privately founded contemporary art museums in the world.
  • The top 5 ranks by number of museums are held by South Korea, the United States, and Germany, followed by China and Italy.
  • The South Korean city of Seoul leads the ranking with 13 museums followed by Berlin and Beijing with 9 each.
  • The average size of a private museum is about 3,400 m2.
  • More than one third (35%) of private museums have over 20,000 visitors per year.
  • The average age of a private museum founder is 65 years.