James Undercofler

Perhaps the most significant and radical departure from the traditional 501(c)(3) (NFP) are the direct to consumer internet businesses, such as artistShare , Etsy, etc. In addition, philanthropy/investor sites such as Kickstarter are revolutionizing giving.

The direct to consumer businesses are organized either as limited liability corporations (LLCs) or individually-organized entities (individuals file IRS, Section C, 1040). Assessment of risk determines whether to form an LLC or not. What’s particularly interesting about these sites is their range: from those that involve “audience” in the artistic process, to those that aggregate artistic products in an almost social network sort of way. From my limited knowledge of their net revenue, I do know that some of these sites are producing significant profits to their owners/creators.

Some assert that the “new investors/donors” resulted from Hurricane Katrina and the massive earthquake in Haiti, that technology that made it easy to give small amounts through one’s cell phone. 

This is possible, although I would argue that the new investor/donor was waiting to be awakened. The ignition could have been any number of other factors.

My students give small amounts to a number of causes, both NFP, commercial, and political. They do not predetermine that they will only give to NFPs. They give according to their personal motivations.

I would deduce that none of them itemize their deductions on their 1040s, so they take the standard deduction. As such, there’s no tax incentive to them to give, either to a NFP, a commercial or political entity. They seem to relish the fact that their sheer numbers can produce dramatic effects (Of course the prime example of this is the 2008 Obama Campaign).

With the likely reduction of tax deductibility for charitable purposes for individuals making more than $250,000 per year (the FY 2012 Obama budget calls for a reduction, and I would think that one or both houses of Congress will concur), contributed revenue sought in the “old fashioned” way will ebb, and the new philanthropy as described above will play a much more significant role in the life of arts organizations.