Deserve Is Not Part of the Equation

Yesterday I speculated on the possibility of an arts education tax credit in the U.S. that mirrored one being proposed in Canada. Someone commented anonymously asking why the arts don’t just produce a product people will pay to see and support themselves.

Well, I hate to break it to you, but whether you can or should support yourself is not a primary criteria for tax credits and subsidies. Taxes and subsidies are a matter of politics and policy. The United States provides subsidies to every segment of the energy industry- oil, coal, gas, nuclear, ethanol, wind and solar. Now I just paid over $4.00/gallon for gas. Exxon/Mobile earned $30 billion in 2010 and paid $19 billion to their shareholders during that year. So why are subsidies needed? They cost the government over $20 billion a year and 70% of it goes to oil, gas and coal. Less than 5% of that goes to solar, wind and geothermal. I read a piece a few months back suggesting getting rid of the subsidies so that the renewables can operate on a more level playing field.

The same is true for farm subsidies, which also total $20 billion a year. Most of that goes to large corporations rather than supporting the small farmer.

No one would claim that energy and food producers aren’t generating products that people won’t pay for so why is it that the arts keep getting held up to this criteria? Why is no one squawking about these big expenditures to fuel and food producers? Granted, President Obama has proposed cutting about $4 billion in fuel subsidies and $2 billion in agriculture subsidies in 2012, but there is still a lot of money left on the table. A lot of it was put on the table in the first place and complaints about it were generally muted as a result of strong lobbying efforts and political pressure. The arts lack this and end up repeatedly demonized even though the benefits they realize are eclipsed by those of these other industries.

Tax credits are also a matter of policy. I did my taxes yesterday and among the tax credits available on the state and federal level were solar heating, film production and first time home buyers. Now given the big mortgage crisis only a few years ago, is it responsible for the government to continue to encourage people to buy homes? And doesn’t that discriminate against renters like myself? The production of Lost was successful enough that didn’t need tax credits, but they were available.

Hawaii, like many other states, wanted to attract productions and provide employment to residents. (Though it is something of a zero sum game.) Home ownership is seen as a sign of economic health and so the government encourages their purchase.

It will be the first to admit that it is rather cynical to say that it doesn’t matter whether you deserve a subsidy or not, it matters whether you have the political clout to get it and political will to pursue it. Like it or not, that is the fact of the matter.

Saying that there are worse things to have subsidized than your child’s piano lessons, tuition at arts summer camp, or trip to the museum, is a pretty weak rationalization to encourage people to advocate for such a subsidy. But you know, even outside the context of everything else that is subsidized, that is kinda true too.

Looking North: Tax Credits For Arts Education

Americans for the Arts blog has just finished up a week long blog salon on arts education. On the last day of discussion, AFTA staffer Tim Mikulski reported that Canada’s Prime Minister Stephen Harper announced that the government would provide a tax credit to parents whose children participate in some form of arts education. I tried looked around the web trying to find out more details, but there really isn’t much more than what Mikulski notes. There was a similar tax credit passed for children’s fitness programs in 2007 and that the arts education tax credit was promised during the 2008 election campaigns but hadn’t manifested.

Mikulski wonders what would happen if the President introduced a bill like this to Congress at the close of his entry. Actually, off the top of my head, I would say it shouldn’t be too contentious. Tax credits and rebates seem to be a tool Congress likes to use at the moment. The culture wars have always been about having tax monies spent on things that one finds offensive. In this case, one is making their own choices. The arts have always received a bigger subsidy via tax deductible donations than through grants from the NEA and NEH. In this situation, unlike with most donations, you would receive a deduction even though you had received a service in return and presumably, it would not matter if the money was spent at a non-profit or for-profit entity. If the NEA is suggesting that people’s arts experiences outside of a formal setting should be regarded as participation, then it only seems fair that all educational efforts be eligible regardless of the vendor’s tax status.

While making any arts education expenditure deductible might mean all that money won’t get directed to non-profits, it has the potential for increasing audiences for the non-profit sector if purchase of tickets to performances and museums count toward the credit. And it gets younger people in the doors. It could even increase demand for the arts in K-12 schools if purchase of supplies for art class, make up and costumes for drama, shoes and clothes for dance and instruments for music were all eligible.

What I think would be most important is the way the tax credit was structured. As one of the commenters to this story on the CTV website points out, this type of policy can tend to favor those with the money to provide their children with lessons. Just as there are those who don’t make enough to ever qualify for a tax rebate, there are going to be people in the lower end of the income bracket who will never be able to provide their children with an art experience. On the other end of the spectrum are those who will provide for their children in the absence of any sort of tax credit.

A well designed program would target those who can do so, but aren’t, or are doing so but would certainly be able to afford it better with a credit. A good sized credit and a low enough threshold to earn it, (need to spend at least $100, but you get $30 credit, for the sake of an example), that makes it easy to decide to arrange for some classes can help eliminate the perception that this is a policy that rewards an elite class. At a certain level of expenditure, the credit would cease to be applicable.

While it would be great to have parents required to expose their children to a diversity of experiences rather than spending $300/ticket to see Spiderman on Broadway and earning a big credit for a single experience, there really is no way to legislate people’s choices.

Info You Can Use: What Is Lobbying and Can I Do It?

I wasnʻt looking for it, but I fortuitously stumbled across a post from last year on Charity Lawyer Blog regarding lobbying and what sort of activities constitute lobbying and what doesn’t. There are a number of activities that don’t constitute lobbying, many of which are obvious such as sending your season brochure to people or efforts made with one’s own resources and time. There are other nebulous areas which may leave one wondering if they qualify as lobbying or not that are addressed by writer, Ellis Carter. I have only included a short list of the permitted activities.

# Some communications with executive or administrative officials. Communications with executive or administrative officials or their staff where (i) there is no reference to a specific legislative proposal; (ii) no view is expressed on such a proposal; or (iii) the official or staff person will not participate in the formulation of the legislation are not lobbying.

# Attempts to influence regulations or other administrative or executive action. Attempts to influence regulations or other administrative or executive action (including those that are implementing legislation) are not considered lobbying, even if the recipient of the communication is a legislator. This is because the action sought is not itself legislation.
[…]

# Responses to legislators asking for technical advice. Responding to written requests from a legislative body, committee or subdivision (not a single legislator or informal group of legislators) for technical advice or assistance on pending or potential legislation is not lobbying.

# Nonpartisan analysis, study or research on legislative issue. Making available the results of nonpartisan analysis, study or research on a legislative issue (with no direct call to action if it is communicated to the general public) is not considered lobbying. This must constitute an objective, educational presentation but may express an opinion or conclusion as to the desirability of legislation.

# Discussions on broad policy issues. Discussions of broad policy issues requiring a legislative solution are not lobbying, so long as the merits of the specific legislation are not discussed.

While I knew that 501 (c) 3 organizations could lobby, I didn’t know that the amount they could expend was determined on a scaled percentage of the organization’s total exempt purpose expenditures. This gets a little complicated because there are different percentages for direct lobbying and grassroots lobbying and what sort of funds those percentages apply to so I will direct you to the Charity Lawyer blog entry for more detailed information.

The definitions of direct and grassroots lobbying, according to the blog are:

* Direct lobbying. Direct lobbying is a communication with a legislator, an employee of a legislative body, or any other government employee who may participate in the formulation of the legislation that both (1) refers to a specific legislative proposal and (2) reflects a view on that proposal.

* Grass-roots lobbying. Grass roots lobbying is a communication with one or more members of the general public that: (1) refers to a specific legislative proposal, (2) reflects a view on that proposal, and (3) includes a “call to action”, directly or indirectly encouraging the recipient of the communication to engage in direct lobbying.

Carter points to the Alliance for Justice website as a resource for more information on lobbying and advocacy.

Info You Can Use: Board Minutes

Emily Chan over at Non-Profit Law Blog has written a two part series on board minutes. Both entries comprise a fantastic resource for anyone who has questions about the format and content of board minutes and the laws surrounding them. I was fortunate enough to be working on my most recent board minutes when part 1 was published and made some changes in response to the suggestions she makes. I am also a big arts administration geek and excitedly awaited the second installation of the series so I could post about it.

Part One is mostly about the format and content of the minutes. In it, she enumerates some common mistakes that are made.

* Failing to document a quorum was present;
* Failing to document or provide a clear description about a board action taken;
* Drafting a transcript of everything said at the meeting, including information that might be harmful to the organization if read by someone with access to the minutes (e.g., employees or members) or by a court reviewing a board action;
* Drafting and distributing minutes to directors after a lengthy period of time has passed;
* Waiting to approve minutes from past meetings until a substantial period of time has passed, decreasing the likelihood that mistakes will be caught and corrected; and
* Failing to maintain a reasonable document management system, resulting in the loss of minutes from past meetings.

The format of the minutes can vary, but a person unfamiliar with the organization and the issues it faces should be able to easily understand what happened in a meeting and what decisions were reached. Chan outlines what specific information that should appear in the minutes. She also discusses what information should be kept confidential, how a board should proceed into executive session to keep that information confidential, how the minutes should reference the executive session and how the minutes of the executive session should be kept.

The format should be standard from meeting to meeting, including the detail in which decisions are recorded. Minutes should be issued before the next meeting or within 60 days of the last meeting and kept forever. I always wondered about that last part. Minutes are among the items the IRS advises a non-profit keep for ever.

Which provides a segue to Part 2 of the series which deals with the legal aspect of board minutes. Directors and members both have a right to access the board minutes. The rules relating to access vary from state to state, Chan deals with California’ laws.

The IRS also has an interest in seeing the minutes. The bulk of the entry is devoted to discussing what practices are important to stay in compliance with rules and regulations for non-profits related to governance, tax code and audits.

Different agencies of your local and state government may also want access to minutes, especially if the organization is involved with legal actions associated with decisions made by the board. In the course of the merger my presenters consortium is seeking to pursue with a sister organization, the secretary of state requires copies of board minutes where different decisions and resolutions were discussed and passed.