Orrin Hatch (Republican-Utah), Chairman of the Senate Finance Committee recently concluded a review into private, non-profit museums that enjoy tax-exempt status. His finding were summarised in a letter he sent to the IRS (the letter is available here).
To meet the tax-exemption standards, private museums must perform work that benefits the public. Founders of tax-exempt private museums can deduct from their taxes the fair-market value of the art they buy as well as the value of cash and stocks they donate. They can also deduct the cost of insurance, conservation and storage of donated works. However, in the letter Mr. Hatch noted that some of the museums he investigated did not deserve the tax benefits they were getting. He noted that some of the museums were not readily accessible to the general public, requiring reservations sometimes months in advance. In the letter Mr. Hatch mentioned that some of the museums were open to the public as little as 20 hours a week. Furthermore, many of the founding donors continued to play an active role in the management and operation of the museums.
Although the factors listed in the letter do not amount to revocation of the tax-exempt status of private museums, Mr. Hatch has urged the IRS to conduct further reviews into this matter.
