The federal government is promising to protect the tax credits enjoyed by donors who give important property to museums, public art galleries, libraries and archives. The 2019 budget unveiled Tuesday will tweak the law that covers such donations to address the effect of a recent court decision that placed a chill on gifts of art and artifacts.
Public cultural institutions rely heavily on donations of private property to build their collections, but a 2018 court decision had greatly narrowed the definition of what things might qualify. Last June, Federal Court ruled that the Canadian government could not block the export of a painting by the 19th-century French artist Gustave Caillebotte because the foreign art work could not reasonably be deemed of “national importance” to Canada. The difficulty with the decision was that the system for blocking exports of art and artifacts and the one for awarding tax credits for donated pieces are intertwined: Suddenly museums discovered they would no longer be able to give donors the tax credits for any international art they donated.
While the Attorney-General is still awaiting the results of his appeal of that Federal Court decision, the government has now moved to fix the problem another way: by simply deleting the term “national importance” from the Cultural Property Export and Import Act.
“They have effectively removed the pesky national importance aspect that has caused such problems in recent months,” said Alex Herman, a Canadian who works as assistant director of the Britain-based Institute of Art and Law. “It removes the mirrored system that has been in place since the 1970s.”
Under that system, the be Canadian Cultural Property Export Review Board (CCPERB) was asked to evaluate both the “outstanding significance” and “national importance” of art and artifacts for two reasons. One was to judge if a work was so important it could not be allowed to leave Canada; the other was to judge if a work was so important its owner might get an enhanced tax credit for donating it.
That system ran into trouble when a British gallery bought the 1892 Caillebotte painting, Iris bleus, jardin du Petit Gennevilliers, at a 2016 auction held by Heffel Fine Art in Toronto, and sought permission to export it to Britain. When the CCPERB refused the painting an export permit, Heffel sued and a judge agreed that the French painting could not be considered central to Canadian cultural heritage. However, the decision sideswiped the donation process, causing consternation amongst museum directors who said all gifts of foreign art and artifacts would dry up if they were no longer eligible for the tax credits. The Montreal Museum of Fine Arts (MMFA), for example, said it was going to lose the gift of a Rembrandt print because of the change.
“The Heffel decision reduced the definition of national importance. We will no longer be constrained by that narrow definition,” said Moira McCaffrey, executive director of the Canadian Art Museum Directors Organization. “We are very pleased that … we can go back to receiving donations and applying for tax credits the way we did in the past.”
The MMFA, which lead the charge against the Heffel decision, also reacted positively to the government’s intervention.
“We welcome the proposed legislative changes,” Émilie Cayer, assistant director of planned giving at the MMFA Foundation, said “This will again allow more international works to be certified as cultural property, which is a strong incentive for donations of works to museums.”
Herman said removing the “national importance” aspect on the tax side is a quick fix suited to a budget document, but it does create a lopsided system where the CCPERB considers one set of criteria for tax credits and another set for export permits. What “national importance” means on the export side will be defined by the pending ruling from the Federal Court of Appeal in the Heffel case, and that court can now disregard the museums’ argument that the original decision was constraining their ability to attract donations.
However, if the original decision does stand, only important Canadian art will be blocked from export, creating an unusually narrow type of cultural export control. The British system, on which the Canadian system is based, has been used to keep everything from Italian Renaissance paintings to rare British furniture in the country.