An April 29 ruling by the Arizona Department of Revenue is just now getting the attention of many in the art community. The ruling requires artists who install large-scale works to secure a state tax license and become bonded.
The bonding obligation was enacted years ago to prevent fly-by-night contractors from skipping out without paying their taxes.
However, some art officials worry that applying the provision to artists could block the flow of new talent into a field that depends on it.
"It's pretty scary," says Valerie Vadala-Homer, director of Scottsdale's public art program. "This could really prohibit some artists from participating, especially emerging artists and artists who are less experienced."
She and other cultural officials are concerned that many young artists could not post or secure a bond, because they lack either the money or the track record to do it. The cost of the bond depends on the size of the project. The bond on a $100,000 project could be as much as $5,000. Securing a bond through an insurance company would cost less.
However, artist Laurie Lundquist, who has done many public art projects for Valley cities, says that earlier in her career, she looked into getting a bond, only to discover that no one would bond her.
"I think it was for a $50,000 project at the time," she says, "and they looked at my experience and decided I'd never done anything that size before. I just wasn't a safe bet."
In addition to chasing away younger artists, say arts administrators, the bonding requirement also could diminish the range of ideas and projects that artists will be able to carry out.
"If this rule is really enforced," says Rex Gulbranson, a public art coordinator at the City of Tempe, "we could be limited either to well-established artists or to ones who work through companies that are bonded."
"I think we could easily be left with process-oriented projects where artists just work with schools, or design-team projects, where artists basically act as consultants to architects, landscape architects and engineers on projects. Or we might be able to do an occasional project, where you work with a big-league artist who has his own shop and can afford the bond."
He and other public art experts say projects similar in scope to the award-winning Thomas Road Overpass on the Squaw Peak Parkway would be inconceivable under the new rule. Designed by artist Marilyn Zwak and engineer Jerry Cannon, and completed in 1990, the adobe surfaces of its froglike pillars and friezes of its retaining walls were hand-applied by Zwak and a crew that included friends and even neighborhood residents.
Zwak's proposal to use adobe was initially considered preposterous. Adobe has none of the structural integrity that bridges need. But Cannon engineered a structure that made possible the use of the material.
Vadala-Homer says this kind of unlikely solution epitomizes the fresh approach that artists can contribute to public design.
"They're not trained the way even the most creative architects and landscape designers are," she says, "so they can bring a different set of eyes to the table."
That's especially true of younger artists who haven't established a mature bag of tricks.
Says Vadala-Homer, "They're willing to try all sorts of things."
The bonding requirement, she adds, could severely limit the ability of municipalities to involve new talent in the design of public facilities.
Greg Esser, public art program director with the City of Phoenix, is less concerned. The impact of the ruling, he says, hinges on whether it would lead to a requirement that artists secure the kind of performance bond that contractors need. Performance bonds guarantee that somebody else can complete the work.
The problem with that, says Esser, is that "artists are hired to perform work that only they are qualified to do. You can't obtain a performance bond for that."
Jeff Kros, a spokesman for the Department of Revenue, says the ruling could lead other governmental agencies to require artists to get a performance bond for some projects.
"It's still pretty unclear where this is going," says Vadala-Homer.
The uncertainty stems partly from the grayness of the tax statute, says Stephen Newmark, a partner at Brown and Bain who specializes in state and local tax issues and has been working with arts officials to clarify what is and is not taxable when it comes to art.
For the past decade, the state has exempted from sales tax one-of-a-kind works of art that have been commissioned.
"If you hire me to paint a picture of you," says Newmark, "that's a commissioned work and there's no state sales tax. On the other hand, if I see you sitting in a park and paint a picture of you and then put it in a gallery, there clearly is sales tax due on that."
Because most public art is commissioned by arts agencies, it has been thought to qualify for this exemption. The recent ruling muddied that distinction, by declaring that commissioned works become taxable once they are installed or attached to a building or a piece of property.
"It seems pretty goofy," says an artist who prefers not to be named out of fear of being audited. "If I understand this, someone can commission a work from me, and it's exempt from sales tax. But if I bolt it down, it's no longer a work of art. It becomes a piece of construction. And I turn from being an artist into a prime contractor."
Kros says that's exactly right. "People are kind of astounded that you can be a public artist and somehow be called a contractor. It's one of those things that happens when you have a broad statute."
He says that anybody who alters or improves real estate is a contractor.
The ruling was sparked by an inquiry from an artist who had been commissioned to produce a ramada and seating area at a fire station. The artist sought an exemption from having to get a tax license, claiming that the work was a custom-designed commission.
With the state scrambling for every loose tax dime, the Department of Revenue construed the commission, which was to be attached to real property, as a taxable work of prime contracting.
Esser attributes some of the confusion to the fact that the tax code is years behind the artistic times, especially in the realm of public art.
The tax provisions covering art and artists are based on the old identity of an artist who paints a picture and hangs it on a wall.
"We're not hanging it on the wall anymore," says Esser. "What we're doing now in Arizona as well as nationally . . . defies this traditional sense of the production of art."
Artists doing major public projects are often involved with engineers, architects and landscape architects in drawing up plans and shepherding them through the bidding and construction process. Since the birth of the Phoenix public art program in the late 1980s, just about every Valley city has developed public art programs and involved artists in the design of everything from public buildings, parks and streets to playgrounds, freeway sound walls and overpasses.
"Twenty years ago," says Esser, "state tax code authors just weren't thinking that those would be the tremendous range of activities that fall under the category of being an artist."
Lundquist points out that when she and her insurance agent recently assessed the range of her work, they realized that she fell closer to the category of landscaper than to that of an artist.
The bonding requirement would not affect much of the work she performs. That's because she is involved increasingly with other design professionals in teams whose plans are then built by bonded contractors.
"But the moment I want to insert something that really is from the artist's hand, that could become a problem. If I can't afford or get a bond, I might need to have a prime contractor install the work. If I'm imprinting designs into concrete, I would have to actually be there with my hands on my hips pointing and saying stamp it there and there and there."
That's hardly an ideal situation, especially when the quality of the work depends on the artist's touch.
Attorney Newmark says he is preparing a list of scenarios that the new ruling could affect. He plans to meet with the Department of Revenue in the coming months to clarify the meaning of the law.
"It's a delicate situation," says the department's Kros. "I don't think the Legislature would want to quell public art or anything like that. So something like this would have to be brought to their attention if they wanted to act appropriately to help these folks out."
