Lauren and Tim Schrager Collection, Atlanta, courtesy Eleven Rivington, New York

Crunching the numbers is serious work, especially come tax time: Chris Caccamise's enamel-on-paper "Stone Tool" (2008).

Circus Gallery, Los Angeles

Margie Schnibbe's ink-on-paper "Adding Machine" (2008) evokes the columns of figures that members of the Art Advisory Panel must face.

Georgia O'Keeffe Orange County Museum Delays Exhibition Pipilotti Rist Joan Allen to Play Georgia O’Keeffe Deal or No Deal? Fisk Appeals to Share Collection O'Keeffe Museum Says Fisk Should Forfeit Collection Judge Rules Against Fisk's Crystal Bridges Proposal

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When collectors are audited, their fates may rest in the hands of a cadre of art world mandarins who help the IRS scrutinize the values of artworks listed on tax returns. We talk to the powers behind the panel.

A couple of times a year, a big, official-looking box from the Internal Revenue Service arrives on the doorsteps of Ian Kennedy, a curator at the Nelson-Atkins Museum of Art, in Kansas City; David Tunick, an Old Masters print dealer in New York; Brock Jobe, the deputy director of the Winterthur Museum, in Delaware; Gillian Wilson, a retired curator at the J. Paul Getty Museum, in Los Angeles; and 17 other art experts. The recipients aren’t facing tax trouble. They’re all members of the IRS’s Art Advisory Panel, and the packages overflow with files containing pictures of artworks and related documentation.

If you’re a collector donating your holdings to a charity or planning to give them to your heirs, either as gifts or bequests, you or your executors may well run into this posse of calculator-punching connoisseurs—that is, if you or your estate are unlucky enough to be audited. The panel helps the IRS assess any audited return that involves an artwork, antique or piece of cultural property with a claimed value of at least $20,000. 

In 2007—which was a pretty typical year—these experts reviewed 131 cases involving a total of 1,002 items. Taxpayers had valued them at just over $278.9 million, according to IRS records. The panelists—who see their work as a public service, like some kind of überselective, albeit voluntary, jury duty—agreed with only 36 percent of the appraisals. They sent the other two-thirds of the returns back to the filers and their accountants with new valuations, new tax assessments and orders to pay up.

Perhaps not surprisingly, the panelists reduced the charitable deductions by 47 percent. They raised the estate valuations by 58 percent. In addition, they tabled 3 percent of the claims because they wanted more information—most, if not all, of which they no doubt eventually got. All told, between the increased estate valuations and the lowered charitable deductions, the panel changed tax claims by nearly $95 million. Now that’s power.

It’s also lots of work, but panelists aren’t paid. They do receive a modest per diem of up to $265 for hotels and meals in Washington, D.C., where the entire group meets behind closed doors each spring and fall and a subcommittee convenes in winter for decorative-arts items.

Deliberations are confidential, and most never become public. But a few years ago, a dispute broke into the open when Gerald Peters, the owner of art galleries in Santa Fe, New York and Dallas, sued the IRS for $692,000 in taxes he had to pay after what he called an erroneous appraisal was made by the panel and the agency.

Peters and his wife, Kathleen, had donated five Georgia O’Keeffe pictures—one oil, Mount Fuji, to the Georgia O’Keeffe Museum, in Santa Fe, and four watercolors to the Kemper Museum of Contemporary Art and Design, in Kansas City—for which they claimed a $1.13 million deduction. The IRS appraisers disagreed: They valued the oil at $100,000 and put no value on the watercolors, because they had not been authenticated. Peters was forced to pay a hugely increased tax assessment; he took the service to court, but in 2006 a federal judge dismissed the case.

That wasn’t the end, however. Peters began negotiating with IRS agents, showing them records of more than 200 of his own O’Keeffe sales. “We compromised, and I got a good settlement, a significantly higher value [than the experts had determined] for the donated works,” he says now. “Unfortunately, there have been some abuses by taxpayers, but this time [the IRS] was wrong, and I proved it.” The IRS declined to comment on the case.

The Art Advisory Panel was established in 1968, when Congress started looking into deductions for charitable contributions and discovered that the IRS had no mechanism for evaluating claims involving art. Sheldon Cohen, the IRS commissioner at the time, met with representatives of the Art Dealers Association of America and the Association of Art Museum Directors, and together they set up the panel. Ever since, members—deemed “special government employees” who are subject to disclosure rules and FBI background checks—have advised the IRS’s six-member staff of appraisers and art historians, according to Karen E. Carolan, an art historian who began working with the panel in 1974 and is now its chief.