Scan Inside Philanthropy’s arts coverage, and you’ll notice the growing philanthropic footprint of artist-endowed foundations (AEFs).
The Robert Rauschenberg Foundation has taken the lead in framing the arts as a means to address mass incarceration. The Pollock-Krasner Foundation, which has provided $65 million in grants since its inception in 1985, recently announced a new annual award of $50,000, the Pollock Prize for Creativity. And the Andy Warhol Foundation remains a critical financial lifeline to beleaguered small and experimental arts organizations.
These are just three examples in a sprawling field that also includes names like Frankenthaler, Haring, Lichtenstein, Mapplethorpe, and many others. With the global art market surging and artists increasingly concerned about legacy stewardship, expect more AEFs to enter the field in the future.
While a rapidly emerging force in modern arts philanthropy, AEFs are markedly different from other institutional foundations. What’s more, there are different kinds of AEFs, and how these institutions operate is very much a work in progress. AEFs face unique and complex accounting, governance and management challenges that can stymie the best philanthropic intentions.
The Aspen Institute's Artist-Endowed Foundations Initiative (AEFI) seeks to address these challenges through research, publication, leadership convening, professional development, and knowledge sharing.
I had the opportunity to connect with the AEFI’s project director Christine J. Vincent about the growth of AEFs, the “information gap” facing AEF stakeholders, and how the initiative works to plug these gaps.
Here is a recap of our discussion.
A Growing Force in Arts Philanthropy
A perfect storm of market-related and comparatively more arcane forces have conspired to facilitate the growth of AEFs.
To the first, Vincent noted, “The art market, despite its downs over the decades, has/is expanding exponentially both in financial scale and in global scope.”
A recent report from Art Basel found that after two years of decline, the global art market grew about 12 percent in 2017, with about $63.7 billion in sales. Of the total global art sales made in 2017, the U.S. is responsible for about 42 percent of them, while the Chinese market continues its impressive growth.
While there are some dark clouds looming—art dealers worry of a widening gap between premium-priced works and the lower end of the market—“more artists have generated personal wealth through their studio practice,” says Vincent.
Then there is labyrinthine federal tax code. Vincent sets up the issue facing artists accordingly: “During their lifetimes, for the purpose of charitable contribution tax deductions, the art they have produced and still own is valued solely at the cost of the materials required to create it. Upon death, these works step up to market value and suddenly can generate a significant estate tax obligation, all the more problematic because art is not liquid and cannot easily be converted quickly at optimal value to financial assets in order to pay estate taxes.”
Bequeathing the art to an AEF is one solution to this problem.
Federal tax issues notwithstanding, all artists, according to Vincent, “are concerned about creating a mechanism that will oversee the disposition of their works owned at death, manage their IP (which runs for 70 years after date of death), and encourage public access to and knowledge about the artist via scholarship, exhibitions, publications, etc.”
AEFI’s research found that “legacy stewardship” is, according to Vincent, “the most powerful in stimulating foundation creation alongside, for some artists, providing for philanthropic intentions.”
A Strong Connection to the Visual Arts Community
The financial, governance and operational challenges that face AEFs are unique. To understand the breadth of these challenges, it’s important to understand the fundamental differences between AEFs and private foundations.
AEFs are unique “because they typically are endowed with artworks and intellectual property (and oft times real estate, including the artist's home and studio). That in itself makes them distinct from the broader foundation world which, for the most part, is financially endowed,” says Vincent.
In addition, AEFs deploy these non-financial assets in dual roles—as “charitable use assets”; in “direct charitable activities” such as exhibitions, art education programs, scholarly research, operation of study centers and artists’ residencies, etc.; and as “investment assets” to generate funds necessary to support the foundation and its charitable programs.
These differences between traditional funders and AEFs affect the complexion of each entity’s charitable programming.
“Many institutional arts funders operate somewhat at a remove from the field and/or deal with it as one of several areas of focus,” Vincent said. “In contrast, AEFs remain strongly connected to the visual arts community by virtue of the orientation of their charitable purposes, typically reflecting the concerns of the founding artist; the types of individuals on their boards of directors; and their own art exhibition and lending activities.
“As such, you’ll find AEFs involved in emergency grant initiatives responding to natural disasters (Joan Mitchell, Robert Rauschenberg, Andy Warhol, etc.). You’ll also find AEFs willing to place financial need and emergency assistance as criteria for support to individual artists (Pollock-Krasner, Adolph Gottlieb, etc.), whereas few institutional funders committed to strategic approaches to issues deploy ‘charity.’”
These differences can also have profound staffing and management implications. Vincent provides three examples.
First, let’s say a new AEF leader or board member assumes the role after a stint in the art world. They may be in for a rude awakening. “Many typical practices in the art world are not permitted for private foundations, which comes as a shock” to these individuals, Vincent said.
Or let’s say an AEF brings on a board member or hires a professional from the foundation world. Again, they can expect a steep learning curve. “There is little knowledge in the foundation world about the nature of art, IP, etc. as a foundation asset,” Vincent said. “When and how artworks change function from charitable use (with a value not subject to payment requirement) to investment use (with a value subject to payout requirements) is of critical concern to AEFs, but not a concern for the foundation field generally.”
The same logic holds for professionals recruited from the museum world. “Art museums are public charities with more lenient regulations re: conflict of interest and self-dealing as opposed to private foundations, and they do not capitalize their art assets or sell artworks to generate funds for operations.”
Vincent also mentioned that AEF staff and boards are often populated by family members, artists’ former studio managers, the inner circle, etc. This practice brings with it its own set of risks.
An artist’s family member may have the best of intentions, but they may simply be ill-equipped to navigate a highly complex legal and management landscape. Similarly, Vincent noted, “there is a strong risk around conflict of interest and self-dealing for those foundations whose family members serve on the board and may also personally own and sell the artist’s artworks.”
These kinds of issues have prevented some artists or their heirs from starting their own AEFs “to steward their legacy and realize philanthropic intentions.”
Taxonomy of AEFs
Once an artist and his or her heirs (and lawyers!) come to terms with these complex issues, the next step is to select the appropriate type of AEF. Here is AEFI’s taxonomy of artist-endowed foundations:
Grantmaking Foundations. This is a foundation that makes grants to support charitable purposes, organizations, and individual artists. Examples here include the Andy Warhol and Pollock-Krasner Foundations. “The great majority of grants made by AEFs are made to support arts-related purposes,” Vincent noted, “although some add in other issues.” The Robert Mapplethorpe Foundation, for instance, focuses on photography and AIDS/HIV research, while the Keith Haring Foundation focuses on youth services and AIDS/HIV services. Many AEFs also make grants of artworks, typically to museums and educational institutions.
Study and Exhibition Foundations. These foundations fulfill their charitable purpose by conducting activities deploying their charitable use assets, like operating a study center with the artist’s archive, maintaining a collection of the artist’s works for exhibition and loan purposes, and producing scholarly research and publications, such as a catalogue raisonné. Examples include foundations honoring Roy Lichtenstein, Cy Twombly, Irving Penn and Richard Diebenkorn.
Comprehensive Foundations. Comprehensive foundations conduct multiple charitable functions in various combinations—grantmaking, operation of a study center and exhibition collection, artist residency programs, art education classes, etc. This model, according to Vincent, is the predominant form for AEFs today. Examples include the Robert Rauschenberg, Joan Mitchell, Helen Frankenthaler, Dedalus (Robert Motherwell), and Mike Kelley Foundations.
Estate Distribution Foundations. These entities are created to undertake the charitable disposition of the artist’s assets held at death, typically over a 20-year term with no intention of perpetuity. They conduct various charitable activities as above during the distribution period. Examples include the Georgia O’Keeffe, Emilio Sanchez and Mark Rothko Foundations.
"At the Center of Four Bodies of Law"
All of which brings us to AEFI’s role, which, according to Vincent, sits “squarely at the center of four bodies of law—art law, intellectual property law, trust and estates law, and private foundation law.”
Finding qualified legal advice and accounting guidance to put this puzzle together isn’t easy, Vincent notes. “Few art law attorneys are expert in private foundation law, few private foundation attorneys know about the art market, many estate planning attorneys know how to form private foundations as a mechanism in estate settlement, but actually don't know much about operating an ongoing foundation with complex assets and program issues.”
At the same time, “many IP attorneys are not aware of how an AEF’s status as a charitable, tax-exempt entity might influence its reproduction permissions and licensing practices. Prior to AEFI’s work, nobody had looked at this situation—or even recognized it.”
I’d like to call your attention to two pieces of research in particular.
First, artists considering establishing a private foundation during their lifetime will want to read “A Guide for Artists and Their Lifetime Foundations: The Dos and Don’ts.” The guide promotes a “better understanding as to whether a foundation is an appropriate choice for an artist, and if so, how to create and operate a foundation during the artist’s lifetime that will be successful in fulfilling its charitable purposes.”
Second, the National Study of Artist-Endowed Foundations, AEFI’s principle research endeavor, is the first effort to define and describe the field of private foundations created by visual artists in the U.S. The AEFI is currently in the process of preparing the Study Report Update 2018, and will have fresh data pertaining to the number of foundations, their characteristics, assets, and programmatic activities later this year. Stay tuned for that.
Looking ahead, Vincent cites two main challenges facing AEFs as they continue to wield greater influence across arts philanthropy.
One is navigating the complexities with respect to conflict of interest risks, given the roles of artists’ family members in their governing bodies. Another is a lack of diversity among AEFs, an issue that is “understandable in that the current field represents the universe of artists who were successful 50 years ago.” That said, it’s a concerning problem because “to be effective today in the field’s two primary foci—cultural philanthropy and art stewardship—an understanding of diverse artists, diverse scholars, diverse audiences, diverse communities, diverse cultures, diverse bodies of knowledge, etc. is essential.”
Vincent also cited two ways in which AEFs are well positioned to shape the narrative moving forward. First, by “fostering knowledge about and public access to the works of their visual artists” in the realm of art stewardship. And second, by “supporting individual artists and the organizations that support them” across cultural philanthropy.
“The greatest opportunity,” Vincent said, “continues to be the influence the AEF field can wield as a new and growing force for the greater good.”