Interesting article in the Sunday New York Times:  The Man Museums Love to Hate, by Stephanie Strom:

In the Senate, [Charles Grassley] is also known as a tax geek. Over a quarter-century in Congress he has raised the hackles of countless constituencies by closing loopholes, cutting subsidies, curbing what he considers wasteful government spending and increasing protection for whistleblowers who expose it. All the same, this Republican senator is somewhat amused to find himself cast suddenly as the enemy of museums and art collectors. In a clash that pits a wealthy elite against one of Congress’s most zealous populists, powerful arts benefactors and institutions are storming the battlements to protest a provision that may hinder donations of art.

Masterminded by Mr. Grassley as Senate Finance Committee chairman and approved in August, it tightened the rules for “partial gifts,” in which collectors legally “donate” works to museums in increments over a period of years, during which the paintings or sculptures may remain in their living rooms. As the works appreciate in value, the tax deduction for each partial gift does, too.

The idea that a wealthy collector can win a big tax deduction for giving away something that remains on his walls offends Mr. Grassley. “Call it what it is, a subsidy for millionaires to buy art,” he said, with his characteristic bluntness. “Where I come from the word ‘giving’ doesn’t mean keeping.”

In making a partial gift, a donor gives a percentage interest in an artwork to a museum in a given year and gets a tax deduction for an equivalent percentage of the work’s value. The museum gets the right to exhibit the artwork for a period each year equal to the interest it owns, although in practice the art rarely travels back and forth that way.

The old rules allowed collectors to enjoy a work of art for decades. Because each fractional gift resulted in a bigger deduction if an artwork’s value rose, donors had an incentive to delay handing over such a work.

Under the tightened new rules, however, the work must be turned over within 10 years of the first fractional gift. Even more jarring for collectors, the value of the artwork is capped when the first gift is made, preventing them from benefiting from a soaring art market.

(Hat Tip:  Elena Marty-Nelson.)