Additionally, according to a real estate listing from NAI Capital, the building has been put on the market with an asking price of almost $14 million. Although Larry Gagosian’s intentions are unclear, perhaps this is an opportunity for him to test-drive the space before deciding if he wants to take it over from the Marcianos completely?
The response from former MAF employees was mixed. “My initial reaction before any judgement call is that I’m glad that space is going to be put back into play. It’s an unparalleled art space,” Eli Petzold, a former museum visitors services associate and a member of the union organizing committee, told Hyperallergic.
“I hope Gagosian is aware of the context of the space into which they are moving. It’s been interesting to see the coverage ignoring the union story,” he said, alluding to the ArtNet report that did not mention it or the layoffs. “It’s convenient if that part of the story disappears. They have an opportunity to demonstrate how to provide a public good while acknowledging the little guys and workers, people who make art spaces what they are.”
Protestors outside the Marciano Art Foundation in Los Angeles, Friday, November 8, 2019
Another former MAF employee who spoke on condition of anonymity was less positive about the development. “For Larry [Gagosian] to just swoop in and profit off of the space after all the blood, sweat, and tears we poured into making it a public space for the community, it just feels gross,” they told Hyperallergic.
Their comment highlights perhaps a bigger reality that the foundation represents: private museums that showcase collectors’ artworks, like the MAF, receive tax-exempt status for arguable public value.
“Collectors can forgo paying taxes on the acquisition of works by donating them to their namesake nonprofit foundation. That foundation is then exempted from paying taxes,” wrote Carolina Miranda in the Los Angeles Times last November. “In the meantime, the public display of a collector’s art has the potential to make that work — and work the collector may hold privately — much more valuable.”
This was a big enough issue that, in 2015, the US Senate Committee on Finance met to decide “whether the tax-exempt status they [private museums] enjoy provides sufficient public benefit to justify what amounts to a government subsidy,” according to the New York Times.
Furthermore, it is not just the Marcianos’s artwork that is tax-exempt, but they are also exempt from paying property tax on the building that the foundation purchased for $8 million, as long as they maintain their charitable function.
Which raises another question: whose job is it to ensure that these nonprofit foundations actually serve the public? Although the physical museum is closed, the Marciano Art Foundation, a nonprofit founded with a charitable mission, presumably lives on, though what it actually does is a mystery.
“They don’t always have to be an art museum. It could be a grant-making foundation, but they have to do something charitable or educational,” Marcus Owens, a partner with Loeb & Loeb in Washington and former director of the IRS Exempt Organizations Division, told Hyperallergic. “The IRS or the Attorney General inquires what they’re doing in terms of charitable purpose, and the organization could legitimately respond that they’re developing plans to transition.”
According to Owens, a reasonable period of transition could be up to a couple of years, depending on what they’re pivoting to. However, “as more time passes without something emerging, the greater the possibility that their tax-exempt status could be revoked, or the Attorney General could look to the board. Directors have a fiduciary duty to make sure its assets are being used appropriately, and that whatever it has intended to do as a charity is being done.”
The Marciano Art Foundation has no public board listed and its website is now blank. Only Paul and Maurice Marciano are listed as the directors on their 990 tax form.
According to the California Attorney General’s Registry of Charitable Trusts, the Marciano Art Foundation has a delinquent status because its 2018 IRS Form 990 (“Return of Organization Exempt From Income Tax”) was incomplete. In an August 27, 2020 letter from Attorney General Xavier Becerra’s office, the Marcianos are notified of their delinquent status, and that they have 60 days to file a complete form with the registry. Otherwise, “The Franchise Tax Board may revoke the organization’s tax-exempt status at which point the organization will be treated as a taxable corporation.”
In response to an email inquiry from Hyperallergic asking how long a tax-exempt organization has to forge a new direction before it is censured, the Attorney General’s press office replied with the “Corporations code section 6510,” part of which reads that “grounds for involuntary dissolution” include when a “corporation has abandoned its activity for more than one year.”
The one-year anniversary of the museum’s closing is coming up on November 6, 2020.
It is wholly possible that the foundation is working on pivoting to a new charitable function, lending works to other institutions, offering artists grants, or opening its doors to scholars for research. However, given the MAF’s silence, there is no way of knowing. “Currently shuttered, the structure provides no evident public benefit, and the brothers have not said what they intend to do with the property or how it might be used in the future,” wrote Stacy Perman in the Los Angeles Times this past February. Nothing has changed.
Ultimately, it is up to the IRS and the AG’s office to decide if and when this situation warrants scrutiny and further action. For the anonymous former MAF employee, however, they’re skeptical that the foundation’s charitable purpose will be fulfilled.
“These guys figure out ways to get around everything,” they said. “I’m sure they’ll get around this too. “
