In 1973, Avery Fisher donated $10.5 million to Lincoln Center in New York to be put toward the renovation of the New York Philharmonic's concert hall, which was renamed Avery Fisher Hall. On November 13, 2014, Lincoln Center reached an agreement with the Fisher family under which the arts venue will pay $15 million for the family's consent to the auctioning of the rights to rename the building. The deal raises many legal and practical issues, including the following:
- Do "naming rights" have value, and are they enforceable? The only IRS or Treasury Department guidance, which is decades old, suggests naming rights have no monetary value; and it is general practice to take a deduction for the full value of a charitable gift entitling the donor to a naming right. If that were proper, then the donor would not be able to enforce the portion of the pledge agreement creating the naming right for lack of consideration. On the other hand, if the naming right were enforceable, then a portion of the donation would be in return for something of value (at the least, the legally enforceable naming right, in addition to the more nebulous public recognition or reputational boon). And if that were correct, then the original full-value deduction would have been improper. Absent new guidance from the government, therefore, the enforceability of a donor's expectation of a perpetual, "valueless" naming right is questionable.
- What is a donor's expectation regarding naming rights, and who should enforce that expectation? It is the state attorney general's obligation to ensure exempt organizations are acting properly and adhering to the terms of donations. If an organization desires to use funds in a manner arguably adverse to a donor's expectations -- but one otherwise charitable and proper and in the public's interest, and to which the donor consents -- how aggressively should the attorney general scrutinize the use? Donors' expectations seem to be more personal than public issues.
- Should donor expectations regarding naming rights be respected if a contradictory use provides the organization with a substantial net gain of charitable assets? Here, Lincoln Center is paying $15 million to obtain well over $100 million in expected new donations at a time when arts organizations nationwide are in dire need of funding. All this funding will be used to renovate the Philharmonic's theater. This was the exact purpose of Fisher's original 1973 gift. If this result requires removal of Fisher's name from the building, is that consistent or inconsistent with Fisher's donative expectation?
An interesting twist to the Fisher deal is that "Avery Fisher
Hall" was not Fisher's desire. Fisher apparently quipped
-- perhaps witty only to New Yorkers -- "Who's Major
Deegan?" In fact, Lincoln Center had to convince Fisher to
permit the use of his name on the building. It was a right "in
perpetuity" that Fisher granted Lincoln Center under his
pledge, not an obligation demanded by Fisher of Lincoln Center.
Fisher's original donation, therefore, is not a good test of
naming rights' value or enforceability. Lincoln Center's
current solicitation, however, might better probe the issue.
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