Revenue Canada demotes Halifax sculptor to 'hobby artist' and gives him $14K tax bill
Denial of income tax expense deductions chills other working Canadian artists
An established Halifax sculptor says he was shocked and insulted by a Canada Revenue Agency ruling demoting him to the status of "hobby artist" and giving him a $14,500 tax bill.
Installation artist Steve Higgins, also a part-time instructor at the Nova Scotia College of Art and Design, was notified his expense claims from a 2013 art project were rejected because the work was funded by public grants and not sold for profit.
The basis of the ruling has some Canadian arts groups concerned about what they see as a dangerous precedent.
Higgins said he received the reassessment from the CRA in January. His expense claims were rejected and he was informed he owed $14,495.37 in back taxes. Those taxes are due today, the April 30 deadline for Canadians to file their income tax returns.
'A slap in the face'
"When I received the declaration that I was a hobbyist, I was at first disgusted by that and insulted by it. It just seemed like a slap in the face after how many decades of exhibiting that I've been involved with," Higgins said.
"To have to pay the government $14,500 on my limited income is indeed a terrible hardship."
The artist's troubles started with a CRA audit of his 2013 tax return.
At the time, he was not worried.
Higgins said his deductions were routine expenses.
"I've been exhibiting since 1974 in North America, South America, Europe, Japan, Australia. And all of the grant money I received to sponsor those exhibitions are considered income and when I declare expenses against that, then it cancels out the amount of money I received."
Award-winning sculpture project
In 2013, Higgins received more than $20,000 in public grants for a large sculptural installation called Beyond the Terminating Vista, which he exhibited at the Mount Saint Vincent University Art Gallery in the spring of 2013.
The lion's share of the grant money came from the Canada Council for the Arts, which gave Higgins $13,600.
The Arts Council of Nova Scotia and the City of Halifax contributed the rest, including $4,500 for a residency at the art gallery.
The installation work was recognized later that year when Higgins won a $25,000 Lieutenant Governor of Nova Scotia Masterworks Arts Award in recognition of "outstanding artistic contribution."
'Not a business'
However, the CRA rejected his claim that the grant money was business income and denied his claim for expenses against the grants.
"It is the determination of this audit that the taxpayer operates as a personal endeavour (a hobby), not a business," CRA said in its Jan. 26, 2018, reassessment letter to Higgins.
"Most of the income generated is from grants, honorariums and awards, and not the sales of artwork. Therefore, all income and expenses related to the business has been removed."
The CRA declined to answer questions about this case.
Spokesperson Etienne Biram said confidentiality provisions in the Income Tax Act prevent the agency from commenting on specific taxpayers.
Arts groups blast bean-counters
Some observers say the Higgins reassessment reveals a profound misunderstanding about contemporary art in Canada.
"For me, that definition of sale as a key to artwork misses the vast majority of artistic practice in the country, particularly contemporary art, media art, performance art where people rent works," said Ben Donoghue, executive director of the Media Arts Network of Ontario.
"Works are shown in public centres, in artist-run centres and theatres. Artists are paid a contracted fee for that time. That's actually where we see professional arts in Canada."
Donoghue is not alone in his concerns.
"I'm very concerned about CRA's ruling and certainly worried it could set a precedent," said April Britski, executive director of Canadian Artists Representation, a national lobby group for artists.
"Many people don't necessarily have a lot of sales from year to year, but do get money from different public sources, and so then not to be able to write off the expenses would be catastrophic."
CRA at odds with Canada Council
Britski said that in light of the Higgins case, her organization, along with the Media Arts Network and the Canadian Dance Assembly, are collecting the stories of other artists who have been audited in order to lobby the federal government to overturn the CRA interpretation.
Donoghue said he has heard of more and more cases like this in recent years, but the information is anecdotal.
The CRA ruling that Higgins is a hobbyist is an awkward contrast to the assessment of the Canada Council, a primary source of public funding for artists in Canada.
Spokesperson Joly-Anne Ricard said "for artists to be eligible for our funding, they need to meet the Council's definition of a professional artist."
The criteria are: specialized training, recognition from peers, time commitment and a history of presentation or publication.
"Therefore, the Canada Council considers him a professional artist," Ricard said in an email.
Higgins caught in middle
The Canada Council declined to discuss the implications of Higgins's dispute with the CRA.
"We can't comment on their criteria related to business incomes and deductions," Ricard said.
But Donoghue said the CRA should accept the awarding of a Canada Council grant as an arbiter of professional status for an artist or make all grants tax-free.
The situation frustrates Higgins.
"I think what is required is the Canada Council and the Canada Revenue Agency to sit down and have a conversation about what one arm of the government's doing and what one arm of the government is destroying. That's it in a nutshell."
The sculptor has until later this spring to appeal the CRA ruling.
Interest on the back taxes would start to accrue Tuesday.