Art bonus, donations to foundations at risk

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Over the past year, the Internal Revenue Service has been called upon several times to rule on the art bonus linked to foundations, concluding to deny the relief. A direction that runs counter to what the public administration has expressed. How to untangle a thicket of conflicting resolutions and opinions? One solution could come from extending the benefit
According to data released last July by the Ministry of Culture, donations for the protection of cultural heritage have almost reached 700 million euros (694 million euros) since the art bonus came into effect in 2014. As many as 28,000 patrons have contributed to the success of this measure, which has allowed for a total of 5,276 interventions for more than 2,275 beneficiary entities and 2,975 goods or cultural institutions subject to disbursement.

The results achieved are also and above all due to the tax benefits to which the liberal disbursement entitles. The art bonus is, in fact, a tax measure in the form of a tax credit currently equal to 65 percent of the liberal disbursement made. The benefit is granted to individuals and noncommercial entities within the limits of 15 percent of taxable income while to businesses within the limits of 5 percent of annual revenues with a division into three equal annual installments. The limitation that the measure now encounters, however, is that it is restricted in favor of interventions on assets that are publicly owned or otherwise have a direct connection with the public sector. However, it can be challenging to identify whether the intervention falls within the public rather than the private sector, especially when the recipients of the donations are foundations.

Concerning the requirement of "public ownership," it is considered to be satisfied not only by the fact that the asset being intervened belongs to the state, regions, and other territorial entities but also by the recurrence of other characteristics of the recipient of the donations. By way of example, this is the case when the recipient institution is established on the initiative of public entities and maintains a public majority of members and participants, is financed exclusively with public resources, or manages a cultural heritage belonging to the public, conferred for use to the same entity; or if it is subject, in the performance of its activities, to certain rules proper to the public administration, such as transparency obligations or compliance with public procurement regulations, or when it is subject to similar control by a public administration (Resolution No. 136/E of November 7, 2017). Therefore, in the presence of one or more of these characteristics, publicly owned institutes and places of culture that have legal personality under private law-for example, because they are established in the form of a foundation-have been deemed to have a substantial public nature and can therefore receive liberal disbursements, for the support of their activities, that benefit from the tax credit.

Over the past year, the Internal Revenue Agency has been called upon several times to rule on the art bonus linked to foundations, concluding to deny the relief. In response to No. 526/2022, for example, the administration denied the tax credit for liberal disbursements intended to finance the construction work of a theater made in favor of a private-law foundation established as a third-sector entity. The administration reached the same conclusion in the case of response No. 546/2022, in which it excluded the right to the tax credit for donations made in favor of a nonprofit foundation established to preserve, promote and enhance the cultural, ideal, and material heritage consisting of a "historical collection" of award-winning design objects and as a whole recognized as "of exceptional artistic and historical interest." In the reasons for the exclusion, emphasis was placed on the "private nature of the collection owned by the foundation," which "does not constitute a public cultural asset." With No. 250/2019, it was clarified that donations of money to the museum belonging to a private foundation that promotes and disseminates culture and art are not eligible for the art bonus.

Conversely, in response to No. 464/2020, the art bonus was recognized for a foundation established as a public-law entity and later transformed into a private-law foundation that was granted a concession by the MEF's Department of the Territory for the historic building in which it resides and the adjoining museum, for restoration and maintenance work carried out on the same building. Same conclusion for the foundation that is in charge of the protection and enhancement of the monumental complex of public interest (Answer No. 176/2020). It is, therefore, challenging to disentangle the variables that foundations can present with apparent repercussions on the right of patrons to benefit from the tax credit on the donation made. The prior application for an interpellation to the tax agency is the obligatory way to resolve the most complex cases. This is pending the extension of the tax credit to private foundations. Indeed, in the intentions of the leading party of the coalition that leads the government, there is the extension of the measure to the private sector (cultural institutions, foundations, and businesses) by expanding the tax credit space beyond the current 65 percent.
Author's personal opinion
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