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Matthew Freeman is a Brooklyn based playwright with a BFA from Emerson College. His plays include THE DEATH OF KING ARTHUR, REASONS FOR MOVING, THE GREAT ESCAPE, THE AMERICANS, THE WHITE SWALLOW, AN INTERVIEW WITH THE AUTHOR, THE MOST WONDERFUL LOVE, WHEN IS A CLOCK, GLEE CLUB, THAT OLD SOFT SHOE and BRANDYWINE DISTILLERY FIRE. He served as Assistant Producer and Senior Writer for the live webcast from Times Square on New Year's Eve 2010-2012. As a freelance writer, he has contributed to Gamespy, Premiere, Complex Magazine, Maxim Online, and MTV Magazine. His plays have been published by Playscripts, Inc., New York Theatre Experience, and Samuel French.

Friday, November 21, 2008

Charitable Contribution?

There was a recent podcast on nytheatre.com, hosted by Leonard Jacobs, about performance space from various perspectives. It's an insightful discussion. Near the end, the question of charitable contributions is floated.

The question is essentially: would the donation of a lease or space from a landlord to a theater company be viewed as a charitable contribution... and would the provide the landlord with a charitable deduction?

The discussion there asks the question in a wholesale way. I might wonder aloud, though, if there could be a financial mechanism created (or if one already exists) that wouldn't force landlords to relinquish their space entirely a single time to trigger a charitable event.

My day job is working with split interest agreements. Pooled Income Funds, Charitable Gift Annuities and Charitable Remainder Trusts. These are ways in which a donor can donate their money or securities, see some continuous income, a positive taxable event, and also be generous. So bear with me as I sort of generally muse.

If a donor created a gift annuity with, say, the organization I work with, they would get a fixed annuity rate for their life-time, based on their age, and the amount of the gift. If a single donor at age 65 created a CGA with $10,000, they'd receive a 5.7% annuity rate, or $570 annually. They would also be able to claim a deduction of around 50% of the value of the gift, as half of the value of the gift is charitable, and the other half is a benefit to them.

These mechanisms, often regulated like insurance, exist to create incentives to give. If theater, and the arts, is going to see a reduction in direct giving and corporate sponsorship, perhaps similar incentives could be created for landlords and/or renters.

For example, what if a theater owner or operator could donate half of the rental agreement to a producing theater company, effectively cutting the rental costs in half and then claiming the rest of the value of the rental as a tax deduction. That would mean landlords receive guaranteed write-offs, and companies have reduced bills. It would also reduce stress on landlords: even a deadbeat company that had trouble paying wouldn't be a serious problem, as half the value of the rental would be made up in a tax deduction regardless.

What's more, the value of the rental would not be the actual value the space at which the space was rented, but an appraised value of the rental space based on the market. Essentially, their are art appraisers and appraisers of home values: people whose job it is to assess the value of an asset. Rental space, in New York City, is an asset. So... what if a qualified outside appraiser would have to be employed to set a value on the rental space. That way, a company could write off the appraised value of half the rental, even if they discounted the other half for a theater company they believed in. It would work like this:

The appraised rental value of a space: $2000 a week
Donated amount: $1000
Rental price: $1000
Discounted price to the producer's favorite theater company: $800

Which means that even with a discount, the producer would be guaranteed the full other half of the appraised value. In effect, it would create an incentive to rent space inexpensively, effectively a backdoor donation to theater companies by the government, instead of direct grants and subsidies. It would be more useful, because it would affect everyone, instead of the lucky few with the capability to do extensive grantwriting.

Obviously, this doesn't exist. But at some point, neither did many charitable financial incentives.

Suffice to say, there are likely tons of problems with the wisp of smoke "what if" that I'm describing. But isn't it about time that theater caught up with the sophistication of other industries, when it comes to lobbying for tax incentives and its own economic health?

Wait...do we have lobbyists for theater as an industry at the state and federal level? Who can push for this kind of tax legislation? Who can argue for it?

If not...why not?

1 comment:

abdul said...

I always understood that insurance was protection against something that might or might not happen (e.g. fire, theft), and assurance was protection against something that was bound to happen sooner or later (e.g. death).
landlord contents insurance