MUSEUMLAW
A Guide for Officers,
Directors and Counsel
2nd Edition
Marilyn E. Phelan, J.D., Ph.D., C.P.A.
Robert H. Bean Professor of Law and
Professor of Museum Science
Texas Tech University
Kalos Kapp Press
TABLE OF CONTENTS
CHAPTERI. ORGANIZATIONAL STRUCTURES FOR MUSEUMS AND RELATED
ENTITIES
§1:01.
Definition of a Museum.
1
§ 1:02.
Organizational Structure.
3
§1:03.
- Trust. : :
5
§1:04.
- AssocIatIon........
7
§1:05.
- Nonprofit Corporation.
8
§1:06.
Obtaining Tax Exempt Status.
12
§1:07.
Summary of Procedures to Incorporate a Nonprofit Corporation
12
FORMS.
§1:08.
Form - Sample Articles ofIncorporation.
14
§1:09.
Form - Sample Bylaws
18
§ 1: 10.
Form - Corporate Minutes
28
§1: 11.
Form - Application for Certificate of Authority.................................... 30
CHAPTER II.
§2:01.
§2:02.
§2:03.
§2:04.
§2:05.
§2:06.
§2:07.
§2:08.
§2:09.
§2:1O.
§2: 11.
§2:12.
§2:13.
§2:14.
§2:15.
§2:16.
§2:17.
§2:18.
§2:19.
§2:20.
§2:21.
§2:22.
§2:23.
§2:24.
LAWS RELATING TO CONTRACTS, TORTS, AND ARTISTS' RIGHTS
Overview
33
Basic PrinCIples of Contract Law
33
- Application of the Uniform Commercial Code
36
- Terms of Sales Agreements.
36
- Statute of Frauds
37
- Rejection of Goods
37
- Risk of Loss
38
- Warranties
38
- Licensing Agreements
38
Basic Principles Relating to Tort Liability
39
- Negligence
40
- Vicarious Liability
42
- Defenses
44
- I1nmunity.
46
- Strict Liability
48
- Animals.
48
- Food and Drink
48
- Workers' Compensation
49
- Special Liability Rules for Owners of Land.
50
- Trespasser.
50
- Trespassing Children.
51
- Licensee.
51
- Invitee.
52
- Leased Property
;
52
MUSEUM LAW
§2:25.
- Abolition of Categories
§2:26.
- False Imprisomnent and Use of Guards
§2:27.
- Use of Volunteers
§2:28.
- Prevention of Liability
§2:29.
- Intentional Torts
§2:30.
- Libel and Slander.
§2:31.
- Unfair Competition or Tortious Interference with a Contract.
§2:32.
- Invasion of Privacy
§2:33.
-Right of Publicity
§2:34.
- Distortion of a Work as Unfair Competition
§2:35.
Artists' Rights
§2:36.
- Moral Right.
§2:37.
- Property Rights
§2:38.
- Freedom of Expression
FORMS.
§2:39.
Sample Licensing Agreement.
§2:40.
Sample Agreement to Hold Harmless
52
52
55
56
57
57
59
60
61
63
64
65
67
68
75
78
CHAPTER III. LAWS RELATING TO COPYRIGHTS
§3:01.
Overview
§3 :02.
Extent of Copyright Protection
§3:03.
"Original" Work of Authorship
§3 :04.
Sources of Copyright Ownership.
§3:05.
Means to Secure Copyright Protection
§3 :06.
Fair Use of Copyrighted Works
§3:07.
Liability for Infringing Copyrighted Works
§3:08.
Artists' Moral Right.
§3:09.
Effectiveness of Copyright Laws in a Digital Enviromnent.
§3: 1O.
Protection and Liability Outside Copyright Laws.
§3: 11.
Licensing of Digital Images.
FORMS.
Forms - Copyright Applications
§3: 12.
109
CHAPTER IV. LAWS RELATING TO MUSEUM COLLECTIONS
§4:0 1.
Overview
§4:02.
Purchases
§4:03.
- Forgeries
§4:04.
- Acquiring Good Title to Acquisitions
§4:05.
Funding for Museums
§4:06.
Gifts.................................
§4:07.
- Legal Requirements
§4:08.
- Cy Pres Doctrine
§4:09.
- Charitable Contribution Deduction
117
117
118
121
128
131
131
132
134
VIII
79
79
82
86
89
93
96
97
100
103
107
TABLE OF CONTENTS
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135
144
146
147
151
152
153
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157
158
161
163
164
167
170
175
CHAPTER V. LAWS PROTECTING CULTURAL PROPERTY
Overview
§5:01.
Antiquities Acts.
§5:02.
Historic Sites Act.
§5:03.
National Trust for Historical Preservation.
§5:04.
National Historic Preservation Act.
§5:05.
§5:06.
National Environmental Policy Act.
§5:07.
Architectural Works Copyright Protection Act.
§5:08.
National Film Preservation Act.
§5:09.
Support and Protection for the Arts.
§5:10.
State Preservation Laws.
§5:11.
Preservation of America's Heritage Abroad.
§5:12.
Tax Incentives for Historical Preservation
§5: 13.
Sunken Treasures
§5:14.
- Law of Finds and Law of Salvage.
§5: 15.
- Abandoned Shipwreck Act.
§5:16.
Native American Artifacts
§5:17.
- American Indian Religious Act.
§5: 18.
- Archaeological Resources Protection Act.........................................
§5:19.
- NatIve American Graves Protection and Repatriation Act.
§5:20.
International Agreements Protecting Cultural Property
§5:21.
Repatriation Issues.
§5:22.
U. S. Legislation Protecting Cultural Property.
§5:23.
- PreColumbian Art Act.
§5:24.
- Convention on Cultural Property Implementation Act.
§5:25.
- National Historic Preservation Act.
§5:26.
- National Stolen Property Act.
177
178
181
182
183
185
187
187
188
189
191
191
193
193
195
201
201
203
203
205
212
214
214
215
218
219
§4: 10.
- Deferred Giving
§4:11.
-Valuation
§4:12.
- Disclosure Requirements
§4:13.
Loans
§4:14.
- International Loans of Artistic Treasures
§4: 15.
- Exemption of Loans from Seizure
§4: 16.
Deaccessioning
FORMS.
§4: 17.
Form - Gift of Personalty
§4: 18.
Form - Artifacts Loan Agreement.
§4: 19.
Form 8283 - Noncash Charitable Contribution
§4:20.
Form 8282 - Donee Information Return
§4:21.
Form for Charitable Remainder Annuity Trust.
§4:22.
Form for Unitrust.
§4:23.
Form for Declaration for Pooled Income Fund
§4:24.
Form for Instrument of Transfer to Pooled Income Fund
ix
MUSEUM LAW
§5:27.
Ethical Considerations
INTERNATIONAL CONVENTIONS.
§5 :28.
1954 Hague Convention for the Protection of Cultural Property
in the Event of Armed Conflict..............................................................
§5:29.
UNESCO Convention on the Means of Prohibiting and Preventing
the Illicit Import, Export and Transfer of Ownership of Cultural
Property.
§5:30.
UNESCO Convention for the Protection of the World Cultural and
Natural Heritage.
§5 :31.
UNIDROIT Convention on the International Return of Stolen or
Illegally Exported Cultural Objects.
221
224
237
244
254
CHAPTER VI. LAWS PROTECTING NATURAL RESOURCES AND WILDLIFE
261
§6:01.
Overview
§6:02.
Lacey Act.
261
§6:03.
Endangered Species Act..
262
§6:04.
Marine Mammal Protection Act.
265
§6:05.
American Eagle Protection Act.
266
§6:06.
Free-Roaming Horse and Burro Act.
268
§6:07.
Migratory Bird Treaty Act.
269
§6:08.
Required Permits
269
FORMS.
§6:09.
Form 3-200-40 - Fish and Wildlife Import/Export Permit.
273
§6: 10.
Form 3-177 - Fish and Wildlife Collection Permit.
276
CHAPTER VII. ACCOUNTING FOR MUSEUMS
§7:0l.
Reporting Requirements
§7:02.
Objectives of Financial Statements
§7:03.
Statement of Financial Position
§7:04.
- Fund Accounting
§7:05.
- Museum Collections
§7:06.
Statement of Activity
§7:07.
- Donated Services and Materials
§7:08.
- Expenses-Functional Reporting
§7:09.
Statement of Cash Flows
§7: 10.
Governmental Reporting Requirements
§7: 11.
- Form 990
- Other Required Return Fonns.
§7: 12.
FORMS.
§7:13.
Sample Statement of Financial Position for a Museum
§7:14.
Statement of Activity for a Museum
§7:15.
Statement of Cash Flows for a Museum
x
279
280
281
281
282
283
284
284
285
285
285
285
287
288
289
TABLE OF CONTENTS
CHAPTER VIII. LAWS RELATING TO OBTAINING AND MAINTAINING TAX EXEMPT
STATUS
291
Overview
§8:01.
Organizational
Test.
292
§8:02.
Operational Test..................................................................................... 293
§8:03.
Inurement.
294
§8:04.
Commercial
Activities.
295
§8:05.
296
- Involvement in a Partnership. ..
§8:06.
Shareholder
in
a
For-Profit
Corporation
297
§8:07.
Lobbying Activities. '"
298
§8:08.
299
- Definition of "Lobbying."
§8:09.
Electing
Organization.
299
§8:10.
- Nonelecting Organization
303
§8: 11.
- Exceptions to Lobbying.
303
§8:12.
Penalty
Taxes.
304
§8:13.
Standing of the Public to Challenge Tax-Exempt Status
305
§8:14.
CHAPTER IX. LAWS REGULATING PUBLIC CHARITIES
§9:01.
Overview
§9:02.
Disqualified Persons
§9:03.
Section 509(a)(l) Public Charity
§9:04.
- Support Test.
§9:05.
- Facts and Circumstances Test.
§9:06.
- Unusual Grants
§9:07.
Section 509(a)(2) Public Charity
§9:08.
- Support Test.
- Investment Income Test.
§9:09.
§9: 10.
Section 509(a)(3) Public Charity
§9: 11.
- Organizational Test.
§9: 12.
- Operational Test.
§9: 13.
- Relationship with Publicly Supported Charities
§9: 14.
Procedures to Obtain Public Charity Status
§9: 15.
Annual Reporting Requirements
§9: 16.
Involvement in Excess Benefit Transactions
§9: 17.
- Disqualified Persons under Section 4958
§9: 18.
- Excess Benefit Transactions
FORMS.
§9: 19.
Form 1023 - Application for Recognition of Tax Exemption
§9:20.
Form 990 - Annual Return
CHAPTER X. LAWS REGULATING PRIVATE FOUNDATIONS
§10:01.
Overview
§10:02.
Classification as a Private Foundation
xi
307
308
308
309
311
313
314
314
316
316
317
318
318
320
320
321
322
323
326
341
359
359
MUSEUM LAW
§10:03.
Charitable Contribution Deduction
§10:04.
Excise Tax
§10:05.
Penalty Taxes
§10:06.
- Self-Dealing
§10:07.
- Failure to Distribute Income
§10:08.
- Excess Business Holdings
§10:09.
- Jeopardizing Investments
§10:10.
-Taxable Expenditures
§10: 11 .
Private Operating Foundations.
§10:12.
-Income Test.
§10: 13 .
- Assets Test.
§10:14.
-EndowlnentTest.
§10: 15.
- Support Test.
§10: 16.
Termination of Private Foundation Status.
§10: 17.
- Termination Tax
§10:18.
- Voluntary Terrnination
§10:19.
- Qualification as a §509(a)(3) Public Charity
§10:20
Annual Returns
FORMS.
§10:21.
Form 990PF - Private Foundation Return
§10:22.
Form 4720 - Form to Report Liability for Penalty Taxes
360
360
361
362
366
368
369
370
372
373
374
374
374
375
376
376
377
378
CHAPTER XI. LAWS REGULATING TAXATION OF UNRELATED BUSINESS
§11:01.
Overview
Income from an Unrelated Trade or Business
§11:02.
- Not Substantially Related to Museum's Charitable Purposes
§11 :03.
- Regularly Carried On
§11:04.
- Exploitation of a Museum's Exempt Function
§11:05.
§11 :06.
- Specific Exclusions from Unrelated Trade or Business..........
§11 :07.
- Gift Shops.
- Snack Bar and Cafeteria....................................................................
§11 :08.
- Parking Lot........................................................................................
§11:09.
- Travel Tours....................
§11:10.
- Sale of Art Works.
§11:11.
- Fund Raising Activities.
§11:12.
- Income from Advertising.
§11:13.
- Income from Sponsorships.
§11:14.
Income from Investments.
§11:15.
- Rental Income
§11:16.
- Royalty Income
§11:17.
Income from a Controlled Organization.
§11:18.
Income from Unrelated Debt-Financed Property
§11:19.
Average Acquisition Indebtedness....................................................
§11:20.
- Average Adjusted Basis
§11:21.
INCOME
399
399
400
400
401
402
402
404
404
405
407
408
408
408
409
409
410
411
412
412
414
XII
379
393
TABLE OF CONTENTS
FORMS.
Form 990T - Unrelated Business Income Tax Return
§11 :22.
415
CHAPTER XII. LAWS RELATING TO EMPLOYEES
Overview..
§12:01.
At-Will Employment.
§12:02.
Civil Rights Act of 1964 (Title VII)
§12:03.
Equal Pay Act.
§12:04.
Age Discrimination in Employment Act.
§12:05.
Vocational Rehabilitation Act.
§12:06.
Vietnam Era Veterans' Readjustment Assistance Act.
§12:07.
Americans with Disabilities Act.
§12:08.
Fifth and Fourteenth Amendment Requirements
§12:09.
- Property Interest.
§12:10.
- Liberty Interest.
§12:11.
- Procedural Due Process
§12:12.
Safety Requirements
§12:13.
National Labor Relations Act.
§12:14.
- Selection of a Labor Representative.
§12:15.
- Duty to Bargain in Good Faith
§12:16.
§12:17.
- Subject Matter of Bargaining
§12:18.
- Unfair Labor Practices
§12:19.
- Strikes.
§12:20.
- Agency or Union Shops and Right to Work Laws
§12.21.
- How Labor Laws Affect a Museum
423
423
424
429
430
431
432
433
435
436
436
437
438
439
440
442
443
443
444
446
447
CHAPTER XIII. LAWS DEFINING DUTIES AND LIABILITIES OF DIRECTORS OF
MUSEUMS
§13:01.
Overview
449
§13 :02.
General Duties of Trustees
449
§13:03.
General Duties of Corporate Directors
451
§13:04.
- Duty of Loyalty
452
§13:05.
-Duty of Care
455
§13 :06.
Standards Applicable to Nonprofit Organizations
456
§13:07.
Immunity from Liability
459
§13 :08.
Ethical Considerations
460
§13:09.
- Codes of Ethics
460
§13: 1O.
- Methods to Remedy Conflict-of-Interest Problems
462
§13: 11.
Suggested Conduct to Avoid Legal and Tax Liabilities
462
XIII