The People v. Creative Capital

A look at the IRS complaint filed by the American Alliance for Equal Rights against the Creative Capital Foundation.

IRS Building in DC. (source)

One of the most awkward conversations I’ve had with my progressive friends concerned California Proposition 16 of 2020, shortly before Californians voted on it. Prop 16, in summary, would have removed a clause from the California state constitution that affirms “that the government and public institutions cannot discriminate against or grant preferential treatment to persons on the basis of race, sex, color, ethnicity, or national origin in public employment, public education, and public contracting.” My friend assumed, more or less reasonably, that the people supporting Prop 16 were conservative racists. I had to explain to him that, on the contrary, California progressives wanted this to pass. The clause, and Affirmative Action more broadly, stand in the way of efforts to rain favors upon various darling identity cohorts. The Fourteenth Amendment, which forbids the state to “deny to any person within its jurisdiction the equal protection of the laws,” requires the legal code in this country concerning racial discrimination to apply to all races, including whites. Certain progressives view that as a tragedy. Colorblind law is now a conservative position.

Prop 16 was defeated. I wonder how many voters looked at the language on the ballot and assumed, like my friend, that the abject racists pushing this thing needed to be told to take a hike. But the abject racists in this case were progressives. The friendship, I’m sorry to report, did not survive that and subsequent conversations that similarly obliged me to explain that progressivism often collides with itself.¹

That brings us to a recent New Yorker item, “The Show Can’t Go On” by Helen Shaw.

In the past half decade, whole strata of this intricate New York support system [for the arts] have been smashed. First, there was a drip-drip-drip of crisis: as costs everywhere rose, city, state, and federal monies faded away once COVID-era bailout efforts came to an end. …we’ve lost directing labs, nearby retreat centers for theatre and dance, and support spaces dedicated to new writing. There has been less ferment, less activity, less art. Already, financially strapped venues are producing far fewer shows… And then, when the need seemed greatest, several private philanthropic foundations pulled out the rug. Three of the largest arts funders in the United States—the Andrew W. Mellon Foundation, the Doris Duke Foundation, and the Ford Foundation—stopped supporting many components of the arts infrastructure in New York that they helped create. Their reasons were various, but the upshot was the same: extreme turbulence, which has affected organizations big and small.

The upshot was, in fact, that these enormous philanthropic bodies are questioning whether they ought to serve as permanent funding sources. “The notion that if you fund something for, you know, a period of time, you are then obligated to fund it forever, really isn’t a reasonable idea,” a program officer at Duke told Shaw.

One of the hard-hit organizations is Creative Capital.

Organizations did have warning. In 2023, Duke told around two dozen of its longtime beneficiaries—including MAP, Creative Capital, Theatre Communications Group, National Institute for Directing & Ensemble Creation, and the National Association of Latino Arts and Cultures—that it would begin “sunsetting” its support throughout the next few years. The defunding in December still came as a shock, however, since many were still hoping for some reprieve. “Grantees were basically cut off at the knees,” as one operative at a smaller foundation put it.

Shaw notes that “In the U.S., private philanthropic foundations… have not only long provided the scaffolding of the arts system but have also been a bulwark against politicization.” She cites Jesse Helms and the NEA. Without appreciating the irony, she observes further,

As devastating as recent philanthropic shifts have been, the funding changes of the past few years reflect, in many cases, an attempt on the foundations’ part to create greater equity. … Such a rationale can be hard to argue with. And it’s not just the private foundations. Con Edison, after being a mainstay donor to the arts in New York, announced in late 2023 that it would be “re-aligning” its mission to combat climate change and advance social justice. These are both admirable goals. But creativity without the prerequisite of social efficacy was once touted by these same funders as being crucial to the common good. Certain benefits of the arts (like better community health outcomes) take decades to manifest, while others (like beauty and collective expression) remain stubbornly unquantifiable.

Which is to say, the former bulwark against politicization is now its source. They who find that flavor of politicization agreeable don’t see it as such, but as a kind of neutral, softly beneficent normalcy that is now under assault. Not all of us share that view. I noted last September at the Substack for FAIR that

Demographic studies have consistently found that whites comprise about 80% of American artists and arts professionals. Creative Capital gives its $50,000 awards to an artist pool that is 80% non-white, a fact they announce proudly.

Moreover, most of these “artists of color” are working on projects that highlight their identities. The smattering of exceptions to this pattern are projects addressing climate change, colonialism, or another acute concern of progressive politics. It’s not clear to me that there’s a single cissexual straight white male recipient on the fifty-item 2024 Creative Capital award slate. It’s likewise not clear that any of the included artists are making something simply because it would look good. It all serves a non-art agenda that requires both a progressive-favored identity and ideological subservience.

But Shaw frames the shakeup of the philanthropic order as connected to a zeitgeist of chaos and regression personified, if not actually caused, by Donald Trump.

Private foundations are largely beholden only to themselves, and so, at any time, they could turn all these taps back on. But will they? It doesn’t seem likely. The Trump Administration has added yet more volatility to the situation. Earlier this year, in response to executive orders 14173 and 14168, the N.E.A. issued new compliance language, asserting that “the applicant will not operate any programs promoting ‘diversity, equity, and inclusion’ ” and that “federal funds shall not be used to promote gender ideology”—an echo of Helms’s not-so-long-ago efforts. Court injunctions and legal actions have momentarily left those directives up in the air, but federal funds now seem particularly precarious. Executive order 14173, in particular, takes aim at “foundations with assets of 500 million dollars or more,” threatening “civil compliance investigations” of the same type that have been levelled against institutions of higher education.

She then lets slip this tidbit.

Attacks on granting foundations have already begun. Creative Capital, a twenty-five-year-old granting organization that describes itself as “the gold standard in artist support,” is now facing a public complaint from the activist lawyer Edward Blum’s American Alliance for Equal Rights asking the I.R.S. to “examine racial practices” at the organization.

For all the links provided in the article, this paragraph contains none. It is a basic tenet of contemporary media criticism that information that an article makes difficult to find is worth reading. So I sought the germane announcement at AAER. They have filed an interesting series of complaints at the IRS against the Gates Foundation, the Lagrant Foundation, and the Creative Capital Foundation. It turns out that the IRS has a Form 13909, “Tax-Exempt Organization Complaint (Referral),” expressly for private citizens to communicate to the IRS that a given tax-exempt organization is breaking the law. Creative Capital arguably did. Quoth AAER:

…AAER asserts the Creative Capital Foundation’s “Creative Capital Forward Fund” provided up to $700,000 in grants and extensive career support solely to Asian, Black, Indigenous, and Latinx creators—explicitly excluding white artists. AAER’s letter asserts that this race-based exclusion also runs afoul of IRS rules and federal civil-rights laws. …

Edward Blum, president of AAER said, “These organizations are free to operate as they wish—but not with the public subsidy that tax-exempt status provides. Racial discrimination—whether in scholarships, professional development, or artistic grants—violates public policy and must not be underwritten by American taxpayers.”

Blum added, “Organizations that discriminate based on race—whether their intentions are benevolent or not—are not eligible for public subsidies through the tax code. The IRS must act to uphold the law.”

Key to AAER’s complaint against Creative Capital is a 1983 ruling, Bob Jones University v. United States. BJU, for a long time, admitted no black applicants, then only admitted them if they were married, and then only admitted them if they were married to other blacks. The Court held that the university had no First Amendment right to enjoy its tax-exempt status while engaging in this bigoted nonsense. Bob Jones, as AAER explains in its letter to the IRS (PDF), was cited in 1987 when “the IRS rejected a tax-exempt application from a white supremacist organization called the Nationalist Movement because it concluded that the group’s ‘membership policies [were] invidiously discriminatory and thus contrary to public policy.’” They also mention that the same ruling was used to deny tax-exempt status to an organization promoting jihad.

If AAER’s filing is an attack, as Shaw characterizes it, it is an attack on racism. Once you understand why Creative Capital’s activities are in the same fiscal category as anti-miscegenation, white nationalism, and Islamofascism, you will break the spell that The New Yorker may hold over you. It’s not just a magazine where the humor bleeds out of conceptually wounded single-panel cartoons.² It’s the source of encyclicals concerning how New York progressives are to think about themselves. Keep on being a progressive if you feel so inclined, but free yourself from that conformity.

Creative Capital possibly flouted the law far in excess of the Forward Fund, but smart lawyers know how to pursue this kind of thing. As AAER points out to the IRS,

Supreme Court precedent has long recognized that the presence of a single unlawful policy or purpose under 501(c)(3) renders the entire organization ineligible for tax-exempt status. That is because the law emphasizes tax-exempt organizations must be “operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes.” §501(c)(3) (emphasis added). Thus, “[t]he presence of a single substantial purpose that is not described in section 501(c)(3) precludes exemption from tax under section 501(a) regardless of the number or the importance” of the organization’s other purposes.

The Forward Fund is a clear case of a phenomenon which has been observed anecdotally to typify the organization. The Biden-era IRS would have let this continue forever at Creative Capital and beyond. The Trump-era IRS, perhaps not. But it bears mentioning that not only is the former bulwark against politicization now its source, but the former source is now the bulwark.

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1. Conservatism and libertarianism also collide with themselves, but they do not suffer under an omertà. Consequently the tensions can be worked out at much lower social costs.

2. I except the magnificent Roz Chast from that characterization. To everyone else, the Lavoie Rule applies.