The Art Theater Coop

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By Leigh Stewart Estabrook, President, Board of Directors, Art Theater Coop

The Art Theater Co-op, serving Champaign, Urbana and the surrounding communities, was the inspiration of Sanford Hess, then sole owner of what was the Art Theater, and Ben Galewsky, then president of the board of the Common Ground Food Co-op. In 2011, Galewsky and Hess spearheaded the creation of a co-op able to assume ownership of the theater. In late 2012 the Co-op purchased the business from Hess and assumed his lease.

Cooperative ownership of an art theater is unique. In the U.S., art theaters usually incorporate as “charitable” organizations dedicated to culture and education.

Citizens recognize art theaters as “public goods”—institutions like libraries or schools that benefit all, not just their patrons, even if they cannot sustain themselves in the market. The Art Theater Co-op has been an important experiment for this community: it has changed the way the Theater is perceived and how people engage in its work. But its legal status as a co-op has been frustratingly restrictive.

Most of the capital raised from purchases of shares was used to purchase a necessary new digital projector and make other capital improvements. Only $10,000 of the over $100,000 raised in ownership shares remains, not enough even to cover the remaining debt from purchasing the business. Ticket, concession, and merchandise sales cover basic costs, but are insufficient to provide equipment upgrades, improvements in the building, and special programming. The Art Theater Co-op, unfortunately, cannot operate independent of donations or grants.

Increasingly the Co-op has relied on such things as the annual membership program, sponsorship of the Smart Kids series and the Kickstarter campaign to refurbish the marquee. But as it sought to expand its fund raising, the Theater quickly confronted legal limits to cooperative ownership that affected who could donate and what benefits a donor could receive.

A Brief Technical Aside About the Tax Code and the Co-op

Under the U.S. tax code, the Art Theater Co-op is a not-for-profit, but it is not eligible to receive donations that are tax-deductible to the donor; nor can it receive such status so long as it remains a cooperative. It cannot become a 501(c)(3). Charities like the Champaign Community Foundation can provide grants only to other charities. They cannot support the Art unless it has tax-exempt status of its own.

For the past year, the Art Film Foundation (AFF) has collaborated with the Theater. Founded in 2015 by Dan Schreiber, a former member of the Art Theater Co-op Board, the AFF’s primary purpose is “to promote culture and education through film and cinema, and to foster dialogue through and about film.” It is a 501(c)(3) organization and has been able to support some Art Theater programs from tax-exempt donations; but the AFF can fund programs of the Art, not the Theater as a whole.

Back to the Co-op

After two years of seeking ways to work within the Internal Revenue Service limits, on April 4, 2017, the Board of the Art Theater Co-op in Champaign voted to merge with the Art Film Foundation (AFF). This month Co-op owners will vote on the proposed merger and, if approved, the Co-op will necessarily dissolve: the business will become fully a part of the AFF. Neither one person nor a group of people will own the Art. A not-for-profit, tax-exempt organization will become the owner and thus enable the Theater to become eligible to accept tax-exempt donations directly.

If the merger succeeds, the Art immediately becomes eligible to apply for grants from a wide number of foundations and from the other non-profit organizations. The Art also can hope to raise more substantial donations, both in-kind and monetary, from individuals once those donations are tax-deductible.

The financial challenges for the Art are similar to those faced by other co-ops: the Seminary Coop Bookstore in Chicago and the local Common Ground Food Co-op are but two that have recently sent out letters of distress to their owners. They, like the Art Theater Co-op, need financial support to augment ownership contributions and patronage.

The Art Board has concluded the Co-op must merge with the AFF if it is to keep up with community needs and desires. The Art’s merger with the Art Film Foundation should have little impact on the theater’s day-to-day operations, and General Manager Austin McCann will continue as its gifted programmer and manager.  Because the change can allow increased fund-raising, the Board sees the reorganization leading to more ambitious plans such as major repairs, finding a way to have a second screen or even acquiring its current or another building—little pieces of a better world.

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