Jones, Rehabilitating the Nonprofit Arts Sector

Americans celebrate the arts and how they increase our economic and collective well-being. Nonprofit arts and culture organizations are the primary vehicle by which individuals create art, attend events, and support millions of jobs in the industry. This has led to a perception that arts organizations have an effective framework for productivity and efficiency. Yet, the COVID-19 pandemic uncovered tumultuous relationships between artists, staff, Board members, and executive leadership within several nonprofit arts organizations.

Although Americans regularly celebrate, support, and engage with the arts, the nonprofit arts industry is fraught with disconnected leaders, disgruntled staff and artists, and ineffective work environments. This Note explores why those issues persist and what can be done. First, I argue that the failures of nonprofit arts organizations’ Boards of Directors to uphold their responsibilities and manage stakeholder relationships are a key cause of the current destabilization of the nonprofit arts sector. Against that backdrop, I examine the current federal and state regulatory frameworks for tax-exempt organizations and highlight why certain mechanisms are ineffective in supporting accountability and transparency. Finally, as a solution, the Internal Revenue Service (IRS) should enumerate a category for arts and culture in the Internal Revenue Code (IRC). With this newfound designation, I then argue that the IRS should establish minimum governance standards for the boards of nonprofit arts organizations and tie those standards to an organization’s ability to receive and maintain its tax-exempt status.

Because of the immense economic and respected social value of arts and culture in the United States, nonprofit arts organizations must be held to a high standard to maintain public confidence. This Note believes that creating greater standards for nonprofit arts entities to receive federal tax-exemption status will improve organizational accountability and help such organizations in the United States remain the cultural beacon we believe them to be.