The Intersection of Giving and Art

Charities and artists have a natural alignment, and both philanthropists and artists are pursuing creative ways to support charities, supported by an increased ease of giving through technology.

After achieving a level of financial stability, some people incorporate charitable giving to round out their concept of success. They want the rewards that come not just from reaching their personal goals, but also making a mark on their community by helping others. This desire is usually accomplished through charitable endeavors–giving assets, cash, or service. The arts has been a significant recipient of such philanthropic motivations. According to Charity Navigator, “Arts, Culture, and Humanities” were the recipients of $19.51 billion in charitable dollars in 2017; 8.7% over 2016; and 5% of the total charitable giving pool.

However, today’s philanthropists are looking at charitable giving in new ways to be more creative in their desire to support the arts. Whether it’s the charity making donating easier, using art and visual fundraising to attract interest, or the donor looking to make supporting the arts a continuous part of his or her everyday life rather than a year-end gift–there are some innovative ways that charities can benefit.

Splitting Royalties

As has traditionally been recognized, some potential donors want to benefit a charity but cannot give up the income stream from a major asset they possess. The Charitable Remainder Trust and the Charitable Gift Annuity have long-established success records in helping that kind of donor. Today, there are several music artists who are exploring ways to share or funnel royalty interests from songs to give back to their communities and valued causes. In the past, if you retained the ownership of the property generating royalties (such as a copyright), you would need to recognize the royalty as income, donate it, and then take a subsequent charitable deduction. Even worse, should the donor choose to donate their art in-kind, the donation was valued at basis, resulting in little or no benefit to the artist.

Today, some musicians and advisors are being imaginative about making a gift of royalties work. By establishing a limited liability company (LLC) to own the underlying intellectual property interest and making a gift of LLC interest, the limit of the gift to basis is avoided and the gift will be valued at the fair-market value of the LLC interest as determined by a qualified appraisal. When the LLC receives royalties, it splits the distribution pro-rata between the artist and the charity. There is some concern about loss of control and long-term income, but advisors are working through these issues with the operating agreement.  

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Impact Investing

There has also been a stronger alignment of socially responsible investors exploring arts- or artist-related companies and utilizing those business interests for charitable purposes. Many are trying to tie their business activity with their charitable or social goals–not keep them separated as donors have in the past.  Such socially conscious investing has been at the grassroots level in the recent past with the advent of online non-profit fundraising tools such as Fundly, Youcaring, and Chuffed. However investors are getting even more sophisticated in their approach. One investor is beginning a startup to help smaller artists get funding, sell their art, and set up events like exhibits, gallery viewings, etc. The company (even at its early stage) has generated a high value and in addition to supporting the art community, the founder is exploring ways to utilize equity in the company to fund additional philanthropic goals. Other environmentally and socially conscious investment funds are giving investors the options to both invest in socially responsible companies, as well as create giving accounts that can donate to non-profits or make a recoverable grant to a non-profit (similar to a loan).

Donor Advised Funds

Donor Advised Funds (DAFs) have been one of the most successful vehicles for charitable giving. The ease of set-up, coupled with the ability to fund the DAF, collect an immediate charitable tax deduction, and make decisions about when or how much to donate later has made DAFs surpass other charitable vehicles in terms of straightforwardness, flexibility, and low cost. As a result, many charities are recognizing DAFs’ easiness and matching that by providing add-ons to their websites that allow direct gifts from a donor’s DAF at the click of a button. Other charities are also establishing direct relationships with DAF providers such as local community foundations to make DAF set-up and donating even easier.

Consuming Rather Than Giving

A trend amongst the younger generations is not to focus solely on giving cash. Coming of age under the shadow of the Great Recession has made Millennials more concentrated on saving and spending carefully than their older counterparts. But, along with that financial mindfulness, they are giving more thought to where they spend their dollars. Many are choosing to purchase goods from companies that have a matching charitable donation, source fair trade materials, and provide a living wage and benefits to their employees, even if the merchandise costs more than competitors. Businesses and charities are stepping up to the challenge by creating goods that still take care of a basic need to buy products, but also have the dual side effect of raising funds for the charity and giving the purchaser the feel good street cred to say, “I am supporting a social cause with this purchase.”

Collaboration Events

For an artist, a collaboration with a nonprofit that has a donor base that aligns with the artist’s work could be a perfect combination. Artists that perform or have artwork to exhibit can have a joint event with the charity. Alternatively, the artist can donate artwork to be used by the charity. For instance an artist can donate artwork as the main illustration for an annual gala that can be purchased on posters, T-shirts, bags, or utilized in an auction. Both the artist and the nonprofit can benefit. The event creates a new audience for the artist with a chance to tell her story and align the artist’s mission with those of the charity.  

In all, philanthropy is still a major part of our culture. Charitable donations have increased every year since 2017 with the exception of 1987, 2008, 2009–years of financial stress. That is a total of $410 billion given to charities each year. The way that charities benefit is evolving along with new giving techniques and ease of giving through technology. Charities and artists have a natural alignment and there are many artists who want to support a favored cause. Just as with their artistic output, artists are pursuing creative ways to support a charity and themselves using their art, know-how, or everyday buying and investing habits.

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