Traipsing among the Toulouses is bringing in museum dollars

Having a party at a museum may shock purists, but more and more museums are allowing just that. Increasingly, these institutions are finding themselves booked in the evenings -- by groups wanting to hold a corporate awards dinner, class reunion, wedding reception, or just wanting to snack next to a Van Gogh.

``Corporate executives think of the museum as a great place to have a party,'' said Suzanne Kalkstein, special-events manager at the Philadelphia Museum of Art. ``We also get calls every day from some well-meaning mothers who say, `My daughter's getting married. . . .' ''

Some institutions have begun to solicit customers through mailers or to include rental information in their about-the-museum catalogs. This, for instance, is how a brochure for Chicago's Field Museum of Natural History describes Stanley Field Hall: ``The magnificent central gallery can accommodate large or small groups for the enjoyment of conversation, refreshments, music, and dancing in a distinctive setting.''

The Carnegie Institute in Pittsburgh claims, in its catalog, that ``Four areas are available for . . . special affairs. The magnificent Baroque Hall Foyer offers a lavish setting for a dinner, cocktail party, or dance. . . .''

Nighttime activities are widely seen as encouraging new members and, with rentals to outside groups, providing additional income for the institution.

Joseph Carper, assistant director of the Smithsonian Museum, in Washington, D.C., says the Smithsonian began ``renting space to various groups 10 years ago when federal funding got tight.''

The Franklin Institute Science Museum in Philadelphia grossed about $200,000 last year through its rentals. Carnegie Institute made $265,000; the American Museum of Natural History, $250,000; and Chicago's Field Museum, between $125,000 and $150,000.

Along with the additional income have come problems as well, however, including theft and damage to museum property and a diversion of museum personnel.

The new money has also made these nonprofit institutions more visible to the Internal Revenue Service. The IRS has been examining the book and gift shops of museums and zoos with an eye toward taxing sales of items that do not reflect the institution's purpose. Space rental is a newer interest.

The government has twice taken tax-exempt arts organizations to court for operating more like businesses than as not-for-profits, but has lost both times.

Larger museums charge between $5,000 and $10,000 for an evening rental, though both the Metropolitan Museum of Art in New York and the Cincinnati Art Museum have asked as much as $25,000.

Charges include a flat fee that covers a certain area in a museum or the entire facility, as well as setup and cleanup, security, and food. More than 9 percent of the Metropolitan Museum's total net income derives from such activities as rentals, parking, and bookstore.

``What's wrong with having a bar mitzvah in a natural history museum?'' asks Larry Reger, executive director of the Washington-based American Association of Museums. ``Is it damaging or detracting from the purpose of the museum? I don't really see what the problem is.''

Others, however, disagree. In mid-1984, the Small Business Administration published a report, entitled ``Unfair Competition by Nonprofit Organizations with Small Business: An Issue for the 1980s,'' which laid the groundwork for the debate.

The House Ways and Means Committee is considering hearings on the issue later this year, and a White House Conference on Small Business is scheduled for August, at which time the issue of unrelated business income of tax-exempt organizations is likely to be raised.

``Passive rental'' charges -- that is, a museum simply leasing a room for an event -- are not considered unrelated business income, but if the institution provides food, drink, or other services, the fees may be taxable.

Many of the nation's largest museums -- including the Boston Museum of Fine Arts, the Art Institute of Chicago, and the Philadelphia Museum of Art -- insist on using their food service for all catered events. Boston charges $20 to 25 per person for sit-down dinners; Chicago, $55 to $65; and Philadelphia, between $45 and $75.

The money is substantial, and a number of institutions have raised their flat fees and other service rates to discourage some of the more marginal rentals, such as bar mitzvahs and class proms. The Natural History Museum of Los Angeles County, for instance, increased its per-evening fee from $2,500 to $6,000 ($8,000 for corporations) last year.

With these kinds of charges, it is mostly corporations that can afford them.

They frequently hold awards dinners and other corporate activities that are not specifically related to the purpose of the museum. Corporate members of the museum are likely to have an easier time renting space than an outside company; many pay a membership fee for the privilege of renting later on. This membership connection may be sufficient to consider the rental income business-related.

Some museums also open gallery rooms during the event as a way of providing an educational component, regardless of the nature of the activity. This, too, may allow the institution to avoid the tax issues.

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