How art gets generated.
The announcement by the Andy Warhol Foundation for the Visual Arts that it has sealed a deal with Christie’s to liquidate its remaining art holdings of reportedly 20,000 works has left many people scratching their heads. The foundation bearing the name of one of the most influential artist of our times intends to own none of his art? Always the most visible member in this small but fast-growing community, the Warhol Foundation has just demonstrated that artist-endowed foundations are not all alike and that it is, as always, among the most distinctive. Indeed, research by The Aspen Institute’s National Study of Artist-Endowed Foundations, the first comprehensive examination of the topic, confirms that we presume one-size-fits-all for these entities at the risk of misunderstanding this important, emerging field.
In some respects, artist-endowed foundations fit uneasily within the regulatory framework for private foundations stipulated by US tax law. Their most substantial assets—works of art—can embody significant economic value yet be profoundly illiquid and at the mercy of cyclical markets. That’s not a particularly comfortable match with the most common form of private foundation, one in which the value of assets is subject to a mandatory, 5% payout requirement to be expended annually on charitable activities, typically grants and associated administrative costs. Yet this was precisely the form chosen for the Andy Warhol Foundation for the Visual Arts in 1988 when it sought recognition of its tax-exempt status by the Internal Revenue Service.
Other choices have been similarly notable. Unlike many artist-endowed foundations, the Warhol Foundation’s intention from its inception has been to fully liquidate art assets in order to build a financial endowment and fund grants. Yes, its art holdings have been exhibited, documented, and conserved, all with scholarly care, as well as selectively contributed to museums. But at heart their primary purpose is as investment assets, committed to supporting the foundation’s charitable purpose—to advance the visual arts—which it pursues by making grants to organisations. Likewise, the substantial expense to care for the foundation’s art assets—insurance, storage, conservation, collection management, and the like—is reported on its tax returns as an investment expense, not a charitable administrative expense attributable to fulfilling the payout requirement.
What does this mean? The Warhol Foundation, like many purely financially endowed foundations, is designed to meet its annual payout requirement exclusively with the value of its grants and the associated cost to administer its grant programme. The foundation’s 2011 tax return reported disbursements for charitable purposes including $13.5m in cash grants and $2.6m in charitable administrative expenses, not including legal fees. This is slightly more than five percent of the $312m in assets subject to the payout requirement, including art assets with an adjusted value of $104m. Over the past six years, the foundation’s assets subject to payout have grown from $250m and cash grants have increased from $8m, in good part owing to art sales.
Many artist-endowed foundations, typically endowed with less numerous works of art than the Warhol Foundation as well as with much narrower markets, use a different private foundation form. In this alternative, works of art are not treated as investment assets but rather as charitable purpose assets—those used in conducting activities such as exhibition programmes, scholarly research and publication initiatives, study centres, and the like. This form does not subject the value of art assets to the payout requirement, but it does mean that they actually must be used in educational and cultural programmes conducted by the foundation. That in itself represents an expense, but one attributable to the payout requirement. In choosing this form, foundations commit to maintaining an exhibition or study collection, even as they selectively and periodically sell art in order to endow programmes and support charitable activities, in many cases including grant-making.
For its part, the Warhol Foundation, as the beneficiary of an estate that included the artist’s works in unprecedented number—some 95,000 pieces, clearly surmised a need to take a different approach. It did so by establishing a completely separate, single-artist museum, which it endowed with the artist’s archive and an inaugural collection of almost 4,000 of his works, reportedly representing one-third of the financial value of its art assets at the time. Accounts of the Andy Warhol Museum’s genesis cite debates within the foundation as to whether or not these works of art, capable of contributing significant heft to the endowment and its grant-making capacity, should be relinquished to the museum. In hindsight, however, the decision can be seen for the astute choice that it was.
That decision produced an internationally recognised cultural institution dedicated to Andy Warhol’s oeuvre, enabling the foundation to secure his artistic legacy in a broadly accessible, public collection. It established a mechanism that continues to help develop the public’s interest in the artist, a factor not unrelated to the strong market for his works. Its independent status, moreover, means that the great majority of the museum’s $3m annual budget, to which the foundation contributes annual assistance as well as special project support, is born by an array of donors rather than absorbing a major portion of the foundation’s grant budget. Lastly, with the museum stewarding a definitive collection of the artist’s works—fostering scholarship, supporting curatorial initiatives, issuing publications, lending to museums, and partnering in exhibition collaborations—the foundation has been free to pursue its art sales straight away, uninhibited by an obligation to trim sales in order to preserve the integrity of an exhibition or study collection.
And that has enabled grant-making of a scope necessary to achieve a significant, generative impact in the visual arts on a national scale. The Warhol Foundation today is unsurpassed as a source sustaining the vital ecosystem of artist-centred organisations found in communities throughout the US. It is unmatched as a donor stimulating curatorial innovation in museums serving audiences on campuses and town centres in all corners of this country. By underwriting core costs for a new model of assistance to individual artists, Creative Capital Foundation, it is attracting a growing cadre of new funders eager to see their support go directly to this important cause. Most recently, it unveiled a fresh strategy working with regional partners to flow its funds to artists at the most grassroots level, breaking down the barrier presented by the usual requirement that grantees have a formal corporate structure. There is no other foundation in the US today, artist-endowed or otherwise, working at this scale in these ways.
Taking a second look at the news, one can see that the significance of the foundation’s recent announcement is not that it is charting a new course. Rather, the news is that it has stayed true to its founder’s intentions and is fulfilling its fiduciary responsibility to optimise assets in support of its charitable purpose. Assuming the new sales strategies open new markets worldwide, a reasonable bet given the proven appetite for Warhol’s works to date, the decision to complete liquidation of its art holdings, even as selective donations are made to museums, will boost the foundation’s financial assets and free up funds used currently to care for works of art. This will translate to an enhanced charitable reach, completing the long-term transformation of a unique bequest into a reliable philanthropic capacity.
Artist-endowed foundations are a bright spot in the flagging cultural philanthropy field in the US. The Warhol Foundation, ever distinctive, as was the artist and as is his global market, continues to be a key force bolstering that field, even though its model is not one that foundations with narrower markets are likely to use. And while it no longer plans to own Andy Warhol’s works, it clearly intends to honour its donor’s intentions and secure his philanthropic legacy—a prinicple to which all foundations aspire.
By Christine J. Vincent, former deputy director for media, arts and culture at the Ford Foundation and is the Study Director of The Aspen Institute’s National Study of Artist-Endowed Foundations. This article draws on research featured in The Artist as Philanthropist: Strengthening the Next Generation of Artist-Endowed Foundations. September 25, 2012. The Art Newspaper.com
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