MUSEUMLAW
A Guide for Officers,
Directors and Counsel
3 rd Edition
Marilyn E. Phelan, J.D., Ph.D., C.P.A.
Paul Whitfield Horn Professor of Law and
Professor of Museum Science
Texas Tech University
Kalos Kapp Press
TABLE OF CONTENTS
CHAPTER I. ORGANIZATIONAL STRUCTURES FOR MUSEUMS AND RELATED
ENTITIES
§1:01.
Definition of a Museum........
1
§1:02.
Organizational Structure......
2
§1:03.
- Trust.
4
§1:04.
- Association.....................
6
§1:05.
- Nonprofit Corporation.
7
§1:06.
Obtaining Tax Exempt Status.
9
§1:07.
Summary of Procedures to Incorporate a Nonprofit Corporation...
10
FORMS.
'§ 1:08.
Form - Sample Articles ofIncorporation.
11
i§I :09.
Form - Sample Bylaws
14
;*1: 1O.
Form - Corporate Minutes...........................
22
'§1: 11.
Form - Application for Certificate of Authority.
24
·:i>~:
"..,
i~HAPTER II. LAWS RELATING TO CONTRACTS, TORTS, AND ARTISTS' RIGHTS
, :01.
:02.
":03.
:04.
:05.
:06.
.07.
:08.
:09.
10.
11.
12.
,
:13.
'4.
5.
6.
7.
8.
9.
O.
1.
2.
3.
4.
5.
6.
Overview...........
Basic Principles of Contract Law.........
- Application ofthe Uniform Commercial Code
- Terms of Sales Agreements.
- Statute of Frauds
- Rejection of Goods.
- Risk of Loss.
- Warranties.
- Licensing Agreements
Basic Principles Relating to Tort Liability
- Negligence.
- Vicarious Liability...........................................................................
- Defenses
- Immunity
- Strict Liability
- Animals.
- Food and Drink
- Workers' Compensation
- Special Liability Rules for Owners of Land. .
- T respasser.
.
- Trespassing Children.
- Licensee.
- Invitee.
..
- Leased Property.
- Abolition of Categories....................................................................
- False Imprisonment and Use of Guards............................................
25
25
27
27
28
28
28
29
29
30
30
32
33
35
36
36
36
37
38
38
38
39
39
39
39
39
MUSEUM LAW
§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
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 Environment..........
§3: 10.
Protection and Liability Outside Copyright Laws.
§3: 11.
Licensing of Digital Images.....
FORMS.
§3: 12.
Forms - Copyright Applications
41
42
43
43
45
45
46
48
49
50
51
52
58
61
63
63
65
69
71
74
77
78
81
83
86
88
CHAPTER IV. LAWS RELATING TO MUSEUM COLLECTIONS
§4:01.
Overview.............................................................................................. 95
§4:02.
Purchases. ;
95
§4:03.
- Forgeries
95
§4:04.
- Acquiring Good Title to Acquisitions.
98
§4:05.
Funding for Museums
105
§4:06.
Gifts.
107
§4:07.
- Legal Requirements.
107
108
§4:08.
- Cy Pres Doctrine.
§4:09.
- Charitable Contribution Deduction
109
§4: 1O.
- Deferred Giving............................................................................. 111
§4: 11.
- Valuation.
118
§4:12.
- Disclosure Requirements
121
viii
TABLE OF CONTENTS
§4:13.
Loans
§4:14.
- International Loans of Artistic Treasures
§4:15.
- Exemption of Loans from Seizure
§4:16.
Deaccessioning
FORMS.
Form-Gift of Personalty
§4:17.
§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
129
130
132
134
135
138
141
145
CHAPTER V. LAWS PROTECTING CULTURAL PROPERTY
Overview............................................................................................
Antiquities Acts..................................................................................
Historic Sites Act.
National Trust for Historical Preservation...........
National Historic Preservation Act.
National Environmental Policy Act.
Architectural Works Copyright Protection Act.
National Film Preservation Act...........................................................
Support and Protection for the Arts.............................................. .......
State Preservation Laws......................................................................
Preservation of America's Heritage Abroad........................................
Tax Incentives for Historical Preservation.
Sunken Treasures.
- Law of Finds and Law of Salvage.......
- Abandoned Shipwreck Act.
Native American Artifacts.
- American Indian Religious Act......................................................
- Archaeological Resources Protection Act.
- Native American Graves Protection and Repatriation Act.
International Agreements Protecting Cultural Property.
Repatriation Issues.
U.S. Legislation Protecting Cultural Property.
- Pre-Columbian Art Act.........
- Convention on Cultural Property Implementation Act....................
- National Historic Preservation Act.................................................
- National Stolen Property Act.
Ethical Considerations........................................................................
147
147
150
151
151
153
155
ISS
156
156
158
158
159
160
161
166
166
168
168
170
176
177
177
178
181
182
184
ix
121
124
125
126
MUSEUM LAW
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, EXpOli 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......
§5:32.
UNESCO Convention on the Protection ofthe Underwater
Cultural Heritage.
186
200
207
217
225
CHAPTER VI. LAWS PROTECTING NATURAL RESOURCES AND WILDLIFE
§6:01.
Overview
241
§6:02.
Lacey Act............
241
§6:03.
Endangered Species Act.
241
§6:04.
Marine Mammal Protection Act.
244
§6:05.
American Eagle Protection Act........................................................... 245
§6:06.
Free-Roaming Horse and Burro Act.
246
§6:07.
Migratory Bird Treaty Act.
247
§6:08.
Convention on International Trade in Endangered Species.
248
§6:09.
Required Permits.
248
FORMS.
§6: 10.
Form 3-200-40 - Fish and Wildlife Import/Export Permit.
251
§6: 11.
Form 3-177 - Fish and Wildlife Collection Permit............................ 256
CHAPTER VII. ACCOUNTING FOR MUSEUMS
§7:01.
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
§7:12.
- Other Required Return Forms
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
257
257
258
258
259
260
260
260
261
261
261
261
262
263
264
TABLE OF CONTENTS
(2HAPTER VIII. LAWS RELATING TO OBTAINING AND MAINTAINING TAX EXEMPT
STATUS
Overview.........
265
Organizational Test.
266
Operational Test.
266
Inurement.
267
Commercial Activities...............
268
- Involvement in a Partnership.
269
- Shareholder in a For-Profit Corporation
270
Lobbying Activities.
271
- Definition of "Lobbying."
271
- Electing Organization
272
- Nonelecting Organization.
274
- Exceptions to Lobbying
275
- Penalty Taxes
275
Standing of the Public to Challenge Tax-Exempt Status
276
~APTER
IX. LAWS REGULATING PUBLIC CHARITIES
Overview
Disqualified Persons...........................................................................
Section 509(a)( 1) Public Charity.
- Support Test.
- Facts and Circumstances Test.
- Unusual Grants..........................................
~~i07.
Section 509(a)(2) Public Charity.
§~;08.
- Support Test.
~9;;09.
- Investment Income Test.
§9,~1O.
Section 509(a)(3) Public Charity.
§9':11.
- Organizational Test.
~9p2.
- Operational Test.
§9H3.
- Relationship with Publicly Supported Charities
§9:J 4.
Procedures to Obtain Public Charity Status....
§9:J5.
AlIDual Report'lng R
'
ts
equlremen
..
§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 RetufIl..................................................................
'T01.
02.
§9: 3.
§9:04.
§9;05.
§9:06.
XI
279
279
280
280
282
284
285
285
286
286
287
287
287
289
289
290
291
292
294
311
MUSEUM LAW
CHAPTER X. LAWS REGULATING PRIVATE FOUNDATIONS
§10:01.
Overview
§10:02.
Classification as a Private Foundation
§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.....
- Taxable Expenditures.
§10: 1O.
Private Operating Foundations............................................................
§10: 11.
§10:12.
- Income Test.
-Assets Test.
§10:13.
§10:14.
- Endowment Test.
§10:15.
- Support Test.
§1O:16.
Termination of Private Foundation Status
- Termination Tax.
§10: 17.
§10:18.
-Voluntary Termination
§1O: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
321
321
321
322
323
323
326
328
329
329
331
332
333
333
333
334
334
334
335
336
337
351
CHAPTER XI. LAWS REGULATING TAXATION OF UNRELATED BUSINESS INCOME
§11:01.
361
Overview
§11 :02.
Income from an Unrelated Trade or Business.
361
§11:03.
- Not Substantially Related to Museum's Charitable Purposes
361
§11:04.
- Regularly Carried On..
362
§11 :05.
362
- Exploitation of a Museum's Exempt Function
§11:06.
- Specific Exclusions from Unrelated Trade or Business.
363
§11:07.
- Gift Shops.
363
§11:08.
- Snack Bar and Cafeteria.
365
- Parking Lot.................................................................................... 365
§11:09.
§11:10.
- Travel Tours.
365
§11:11.
367
- Sale of Art Works
§11:12.
- Fundraising Activities...
367
§11:13.
- Income from Advertising.
368
§11:14.
- Income from Sponsorships.
368
§11:15.
Income from Investments.
368
§11:16.
- Rental Income.
368
§11:17.
- Royalty Income.
369
§11:18.
Income from a Controlled Organization.............................................. 370
§11:19.
371
Income from Unrelated Debt-Financed Property
xii
-
TABLE OF CONTENTS
§11:20.
- Average Ac~uisition I~debtedness
371
§11 :21.
- Average Ad] usted BasIs................................................................. 372
FORMS.
§11:22.
Form 990T - Unrelated Business Income Tax Return
374
CHAPTER XII. LAWS RELATING TO EMPLOYEES
Over~iew
§12:01.
§12:02.
A~-:VII~ Employment..
:
§12:03.
CIVIl RIghts Act of 1964 (TltleVIJ)
§12:04.
Equal Pay Act.....................
§12:05.
Age Discrimination in Employment Act.
§12:06.
Vocational Rehabilitation Act.
§12:07.
Vietnam Era Veterans' Readjustment Assistance Act.
§12:08.
Americans with Disabilities Act.
§12:09.
Fifth and Fourteenth Amendment Requirements
§12:10.
- Property Interest.
§12:11.
- Liberty Interest
§12:12.
- Procedural Due Process
§12:13.
Safety Requirements
§12:14.
National Labor Relations Act.
§12: 15.
- Selection of a Labor Representative.
§12:16.
- Duty to Bargain in Good Faith
§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
381
381
382
386
387
388
389
389
391
391
392
393
393
395
395
397
397
398
398
400
400
CHAPTER XIII. LAWS DEFINING DUTIES AND LIABILITIES OF DIRECTORS OF
MUSEUMS
§13:01.
Overview
403
403
§13:02.
General Duties of Trustees
§13 :03.
General Duties of Corporate Directors.................
404
-Duty of Loyalty
405
§13:04.
408
§13:05.
- Duty of Care
Standards Applicable to Nonprofit Organizations. .
408
§13 :06.
§13:07.
Immunity from Liability
410
§13 :08.
Ethical Considerations.
411
§13:09.
- Codes of Ethics
412
§13:10.
- Methods to Remedy Conflict-of-Interest Problems
414
414
§13:11.
Suggested Conduct to Avoid Legal and Tax Liabilities
XIII