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Talking with the taxman about poetry — and deductions

MinnPost photo by Jim Walsh
Lynette Reini-Grandell and Venus DeMars find themselves in the middle of an arduous and perplexing audit.

“Talking With The Taxman About Poetry” is the whimsically named 1986 album by Billy Bragg and 1926 poem by Russian and Soviet poet Vladimir Vladimirovichbut there’s nothing whimsical about the wringer that Venus DeMars and Lynette Reini-Grandell have been put through since November, when the couple received a letter from the Minnesota Department of Revenue notifying them that their income-tax filings from Jan. 1, 2009, through Dec. 31, 2011, are being audited.

The married couple, who were the subject of the 2004 documentary “Venus of Mars,” say the state is auditing their Schedule C deductions (the couple file as a married couple, but file separate Schedule C forms) and will demand payment of back taxes upwards of $100,000 – all due to the state’s specious definition of what constitutes professional artist and musician status.

“We’ve had several meetings with the auditor since November, and at the last one he said a preliminary determination had been made that we were hobbyists, not artists, and therefore could not write off our expenses,” said Venus, a visual artist, songwriter, bandleader and performer. “This has been unbelievably demoralizing. He basically is saying that if we really knew what we were doing, we should have been more profitable by now, and should have known to give up.”

“They’re arguing that we’re not intending to make a profit on art, that we’re just pretending to be artists so we can indulge in our hobbies and go on vacations,” said Reini-Grandell, a poet and English professor at Normandale Community College who co-hosts KFAI-FM’S Write-On! Radio. “That’s why they don’t want us to be able to subtract any expenses from our profits. They want us to pay back, with penalties and interest, the refunds we’ve gotten previously. Also, they seem to have put a ton of time into our case. They must be thinking they will make a lot of money from this somehow.”

In honor of National Poetry Month, MinnPost sat down for interviews via email and in-person with DeMars and Reini-Grandell to talk about the taxman and poetry.

MinnPost: Did you see this coming?

Lynette Reini-Grandell: No. We were a little nervous about it because we knew it would involve searching through a lot of files for a lot of small bits of paper, many of which are thermal receipts that are barely readable when they’re less than a year old. We contacted our accountant immediately. We’ve been using the same one since the mid-1990s. We had been doing our own taxes up to that point and were afraid of making errors, so we hardly wrote anything off. A colleague recommended our accountant. He was very pleasant, helpful, and very clear about what we could and couldn’t write off. He assured us that although it would be time-consuming, it would all be fine in the end. Part of his contract with clients is to represent them in case of an audit, so this came with what we’d already paid for all those years. He told us how to assemble the receipts, and said that it’s common for the accountant to meet with the auditor and go over the receipts without the clients present. That sounded like an efficient and less stressful way of doing things, so we said yes and gave him power of attorney to do that.

Venus DeMars: Let me state first that I am not at all upset by being audited. I get it. What I’m upset with is the way this audit has gone. It’s been as if the auditor never intended to listen to us at all. As if the Minnesota Department of Revenue had already decided, and only used the audit interview process to collect up additional statements from us so they could turn what we said in such a way as to support their already decided determination on us. It’s not been any sort of normal audit, ever, at any point in the process.

MP: What are your options? Set up a payment plan? Fight it in court? Where is it all at, now?

Reini-Grandell: We’ve got one more meeting that needs to be scheduled the first week of May, and we have no confidence that the Department of Revenue will listen to us or our accountant or look at our evidence. So we’ve retained a lawyer at considerable cost who will represent us at that meeting. We are anticipating the worst. If they decide against us, then it goes to Appeals Court and we have to pay the lawyers a lot more money. And it’s apparently a very slow process, so the stress will continue. I don’t know about payment plans. We don’t even have $100,000 equity in our house, and we’ve been here slightly over 25 years.

MP: Venus, you told me the other day that you’re obviously being made an example of. Why would that be? Why you, and what message is the State of Minnesota sending the rest of us if they nail you?

DeMars: I don’t have a clue, but I have theories. As our accountant told me the other day over the phone, “I don’t know who you pissed off over there, but …” Yeah. They’re throwing the book at us, and with assertions that make absolutely no sense in the music world. Things like the fact that I’d ‘allowed’ – their words – my music to be played on The Current as an example that I’m not interested in making a profit. The Current, they say, is part of Minnesota Public Radio, and MPR, they say, doesn’t pay royalties. A songwriter can only get royalties if they’re associated with a registered publisher, which I have been (with ASCAP) since 1996. I publish my own work so they can pay me. I am set up for being paid royalties. If I was really not interested in making any profit, why would I have done that?

They also really don’t like that I tour. They say I tour way too much and that really, my name is already out there enough, after all this time in the business, there is now no need to do any promotional touring. I have this statement in writing. I attempted to show them, and tell them that this was the industry standard, approved, well-documented, way to build one’s fan base, to expand on it, to inspire interest in one’s work because of the direct contact one has with an audience. They replied that there’s no reason to return to the same cities and venues, and that I’m wrong, that I’m really touring only for pleasure and recreational reasons.

Touring is hard [bleeping] work, and I think they know it. They’re just trying to misrepresent me, so they can dissolve my business and collect back taxes which they can say I deducted wrongly because if they win, they can say I was never running a business. And I’m an easy target. I’m an artist. Artists are easy targets.

I’ve spent a lot on my career, I’ve financed it with credit cards because I was transgender and out in the early days, and way too controversial for others to feel comfortable in investing in me. I invested a great deal, and I still owe a large amount of credit debt. We’re not rich people who pretend to run a vanity business, finance it out of their large savings resources, and claim deductions on everything so they can avoid paying taxes. I’ve sweat blood to keep my art going because people tell me how important it is to them. And because, yes, it’s my calling.

They’re trying to go after the easiest targets, the ones who can’t afford to fight, the ones who have had a hard struggle and which is reflected on their tax returns. So they can build an easy case. So they can win. So they can claim money. So they can maybe then say, “Look at all these artists, these government freeloaders. Why are we supporting these tax abusers?” That’s why they’re making an example of me by this audit.

MP: What is the taxman’s definition of success?

DeMars: The tax guy said that by this point in my career I needed to be signed by a major label, that I should have been signed to a major label by now, that I needed to be signed to a major label to establish myself. [He said that] there was no evidence that I was actively sending my records to major record labels, so therefore I must not be interested in profit, and not running a for-profit business. I told him that as an independent artist I get 100 percent of all records sold, and that I intend to run my own label, and stay independent.

Now he says I have not promoted myself in any way that is appropriate enough to result in any substantial sales as an artist, and that there is no documentation that I ever self-promoted myself. I [offered up] a bag of magazine articles spanning those 10 years, and prints of reviews and previews, my Playboy magazine interview, my U.K. Powerplay Music Magazine three-page feature after we’d first toured England. Tons of documents about how effective I’d been with self-promotion. This was at the very start of the first meeting. When I was taking these documents out of the bag, he stopped me and said, and I’ll quote him as close as I can: “I know, I know. Big transgender rock star. I’ve seen all your videos online. Very talented. I’m over it! I don’t need any of that. I’m a numbers guy. Let’s talk numbers.”

MP: How has it been, dealing with the taxman? Has he been pleasant, ornery, professional, sympathetic, what?

Reini-Grandell: He has behaved pleasantly at the beginnings of meetings, but I think he has been just pretending to be friendly. I found it a little creepy that one of the first things he said to me was that he wondered what kind of an English professor I was and looked me up on He said things like Venus should have just given up his artistic career because after all that time it clearly wasn’t going anywhere. The written materials we have gotten after the meetings, questions, conclusions, etc., seem like negative propaganda. Also, I contacted the Taxpayer Rights Advocate and once she looked me up in their database, she pretty much told me to give up. She seemed like an advocate for the Department of Revenue, not the taxpayer.

MP: From what you’ve learned from this experience, has this been going on for a while? Has the government always been in the business of determining what, exactly, entails who and who is not a professional musician, poet, or artist?

Reini-Grandell: Our accountant has said he’s never seen anything like this, but a few of our friends in the literary world have heard that artists are getting audited more by the state of Minnesota, not the IRS. They are hearing this from each other and also from their accountants. One acquaintance was advised to not fill out a Schedule C [form] with a loss because it might attract attention. Some people in my circle of friends think that people who have gotten Arts Board grants are getting targeted for audits. I personally am beginning to think it’s part of an attempt by one branch of the state government to discredit arts spending and take back the Legacy money

It would be interesting to see if they are doing this to the other areas funded by Legacy money.

MP: What is your definition of a working professional musician?

DeMars: A working musician is someone willing to go the distance despite crud, to keep putting out music in a polished, or at least well-received way, that a fan base buys. If we go into what defines a business, the government’s already done that. It’s someone working in a manner through an owned business with intent to profit.

MP: What is the taxman’s definition of a working professional musician?

DeMars: I’m actually not at all sure. I can’t make heads or tails of him. He, or someone above him, is acting like there’s some sort of vendetta. Like I’m some sort of ‘enemy of the state’ that they’ve just got to take down.

MP: You’ve had a crash-course in tax law and the arts. As you’ve been going along in this process, are there any similar tax law-artist stories that have reminded you of your case?

Reini-Grandell: Kafka’s “The Trial.” It’s been distracting and depressing, in a clinical-depression way. We feel like we’ve been forced to justify our right to exist. We really didn’t have a Christmas. We both feel as if we’ve been in hell since November, and there doesn’t seem to be any end to it. I’ve hardly been able to create anything or send out anything for publication. I’ve had to give up on a lot of stuff, and I’ve been a really crappy teacher this semester because I can’t sleep.

At the second meeting, I really felt as if Venus might still have problems, but my case was totally solid. I’d made a profit as a poet in one of the three years they were auditing, so I didn’t even fit their definition of what might flag concern. I had just had a poem nominated for a Pushcart Prize

I was wrong. Their assessment of my income boost from the State Arts Board grant for poetry in the April 15, 2013 determination was, “The profit in 2011 is not the result of commercial activity. There was no documentation provided that could substantiate that relying on grant income is a viable business strategy.”

The tone of all these proceedings have been completely anti-art. There has been an emphasis on creating a product, advertising it for sale, and then selling it. That’s not how it works on the creative end of literature. Writers need to spend a long time writing, getting feedback, moving up the levels of critique, and then they participate in the publishing industry by sending things out to publishers. One tries for the prominent ones first, gets rejected many, many times, and eventually finds a press and an audience.

Writers do not write a few lines and then advertise they have a poem for sale, making sure that the poem sells at a break-even point of what it cost monetarily to produce it. But this is what the Minnesota Department of Revenue insists I should be doing. It sickens me to have to participate in this because I know it is deeply wrong.

Art is spiritual. However, we all live in a capitalistic society. I can’t buy a loaf of bread with a poem. So we try to come up with ways of making the two worlds articulate with each other so art continues to be art, and nobody has to starve just because they are creating something “priceless.”

The flipside of this is that we also feel funny paying for art, because it seems spiritual, and seems like it should be free. How motivated are you to put money in the collection plate at a church? You’re probably even offended by being reminded of money when you’re feeling all pleasant and spiritual. But the building needs to be maintained, and the staff needs to be given a living wage. So people get paid for making art, sometimes – not as often as they should. By the way, I feel that teaching is also spiritual and undervalued in this culture. Lucky me.

MP: How has this made you feel? You’re both very sensitive artists and people who’ve chosen a path and work that makes sense to you, adds beauty and meaning to the world, you don’t hurt anyone, you give back to the community, you constantly do gigs – benefits and otherwise – and radio for free. Do you feel like criminals, and if so, how does it feel to have your government make you feel like criminals?

Reini-Grandell: Yes, it feels horrible. I’m one of those goody-two-shoes who has always tried to do things right. That’s why we’ve used an accountant for so long. This has been mortifying – for a long time I didn’t want to tell anyone it was happening because the presumption from the general public’s perspective is that you got caught trying to pull a fast one on the government.

But the stress from this has been affecting my work as a teacher, so I’ve begun to tell my colleagues who need some kind of explanation as to why I have no time or energy to do the things I usually do. I’ve really been trying to get a poetry manuscript published, and I think the stress from this has fried my brain so much that I’m just not able to edit and send things out the way I need to, so I’m trying to mentally prepare myself for how to deal with that.

I recently saw a panel on trauma and literature – the idea was that writing about your own trauma could make good literature – and I thought, “What the hell, I feel traumatized, but how can I write a poem about persecution by [former governor Tim] Pawlenty appointees? How can I write a poem about feeling no good as an artist?”

DeMars: Just so it’s on the record, I have been willing to do benefits, for free, when it’s something I truly believe in. I’ve done benefits to help pay medical costs for friends of mine, for example. But, to be exact in a tax audit way, I don’t go out of my way to do these. I try to make a profit. And now I feel awful icky for even having to say that. But yes, I try and keep doing things for free down to just the things I really believe in. But I believe I am a very generous, kind person, and I’ve always tried to live my life in an honest, open way, and I’ve tried to help whenever I can, and to try to make life a better place for all of us. Everywhere. I do this with my art, my music, when I write my lyrics, when I form the words, when I push them from my mouth with a kind of emotion that sometimes can cause me to become transported. Like I’m gone. Like I’m somewhere else. Like I’ve dissolved into nothingness, and everything all at once. I do feel passionate in pursuing my art. Does that all make me a criminal? Hmm. Gotta think on that one.

Comments (11)

  1. Submitted by Clyde Hanson on 04/23/2013 - 01:05 pm.

    Government Grant as a business model

    The state Department of Economic Development has a program to help tech companies apply for federal research grants. I know firms in MSP whose business model is to get and execute government grants. Yet the MN Dept. of Revenue agent says grants are not a business model? They need to get out in the business world. These artists are being treated unfairly.

  2. Submitted by Emily Roiphe on 04/24/2013 - 07:10 am.

    really? really?

    It seems to me the state’s saying “your work is losing money, therefore it is not work, so you owe us money”.
    It also seems they are being arbitrary in their definitions of “work” vs. ‘”hobby”.
    I am not informed enough to know whether this is actually a “vendetta” or not.
    I do know, though, that Venus and Lynette are two of the most dedicated and hardworking people I have ever met. They live their lives with integrity and I have been proud to be among their many good friends. I hope these friends will also voice their support publicly.
    These are people who have been making art steadily for years, contributing to the community through volunteer work and community organizing. Lynette drove and hour and a half to get to her job when I first met her. Now her commute is shorter, allowing time for her to run and do an hour long public radio show, grade papers, write poems, attend benefits, sing in the choir, and participate in board meetings, that is when she is not attending a conference or a reading, or filling out grant applications.
    The ONLY way for a poet to earn is to teach and the best way to keep teaching is to publish, not perish. So the poems are part of her work life.
    Venus tries to make a profit every time he plays.
    I won’t elaborate on the obvious hypocrisy and double standards involved vis a vis corporate welfare etc but I hope their story gets out and that there’s some kind of action we can take to support these two people whose impeccable work ethic puts your average tax man to shame.

  3. Submitted by Karen Sandness on 04/24/2013 - 05:24 pm.

    I’m wracking my brain trying to think of

    1) A professional musician in any genre, at any level of success, who never tours.

    2) A poet who can afford to quit his/her day job.

    (I know Lynette and Venus, and they don’t deserve this harassment.)

    • Submitted by Tim Walker on 04/25/2013 - 08:05 am.

      Amen, Karen. This is indeed harassment.

      And Lynette and Venus don’t deserve this at all.

      The ignorance of the MN Dept. of Revenue accountant is astounding.

      He actually chastised Venus for not signing with a record company? What the %^#$!&!$ is up with that?

      I guess being an independent entrepreneur is being officially discouraged by the state.

      And saying that touring to promote your music is simply a vacation in disguise just makes my blood boil. (Ignorant people with authority tends to do that to me.)

      And as Clyde Hanson pointed out in his comment above, the auditor actually chastised the couple for relying on grants as a business model, when this is common practice for large and small corporations here in the state.

      Simply amazing. Amazingly stupid and hypocritical of the MN Dept. of Revenue.

      Someone in management needs to give this auditor a talking to. Unless, of course, the management is just as ignorant as the low-level auditors (a proposition that is, unfortunately, quite likely to be true).

  4. Submitted by Mike Finley on 04/26/2013 - 09:49 am.

    It would be nice …

    if artists were exempt from taxation, but it’s probably best that they are not. What would happen is that overnight, we would all become artists, in order to obtain the exemption. And the state would be in the terrible position of deciding who is a real artist.

    My guess is that, like many other Minnesotans, this couple will suffer a lot of pain, perhaps lose their home, perhaps be forced into Chapter 7, conceivably even spending some time in jail. But — in no other realm is ignorance of the law a legitimate excuse.

    We all know the tax laws of Minnesota. How could they not know them, after all these years? Or maybe they are exactly what they are accused of being — people who don’t pay their taxes. We don;t like when rich people do that, why should we like artists doing it?

    Also, from a standpoint of art, it is not good for artists to be set apart. How can our opinions on the economy and politics and other issues have weight if we are not affected by them? It would be like a member of Congress, who gets quality healthcare (free), begrudging the rest of us wanting the same (for a price).

    An artist once asked poet d.a. levy how much he was paid for his poetry. levy responded, “About seven cents per poem.” The judge responded, “You should charge more.”

    Finally, a question I used to pose to draft resisters who were sent to prison. “If you were trying to call attention to the unfairness of the draft, isn’t this a good thing?” The very best of them agreed.

    • Submitted by Pat Thompson on 04/29/2013 - 08:37 pm.

      What are you talking about?

      Mike, what are you talking about? You seem to be making a lot of assumptions about their financial info that is not in the article. It sounds to me as though they have receipts to support legitimate business expenses that are being disallowed, as from touring — they are not asking for tax exemption as if they are a nonprofit.

  5. Submitted by Andrew Ash on 04/30/2013 - 12:05 am.

    What if they’re not competent to assess & tax this area?

    This sounds like a wretched experience. Yech.
    One caveat first: There’s no information here on what they actually deducted, and how reasonable those deductions are. They say “there are two sides to every story”, so for example, it would be unfair to other taxpayers if a person were to pay no taxes for many years, because some of their deductions were unreasonable, or even greedy.

    o.k. That said, here’s what I really think about this:
    The article mentions that her accountant thinks “they must be trying to make an example” out of her. That may be true, but I think it equally likely they simply have no clue how industry norms are changing for music artists. When they apply a standard for “success” like “you must be signed by a major record label within 3 years”, they show they’re uninformed about some basic disruptive changes within an industry they claim to be compentent to assess & tax. They may not actually be competent to do so.

    I wonder if that could even be a viable legal strategy (except that people don’t usually respond well when told they’re ignorant about something, especially when they suspect that might be true).

    The taxman’s standard of success here is not anywhere near as successful a business strategy as it was previously (i.e. far fewer people get signed by labels). If you started a music business with the taxman’s key strategy, it seems to me that your music business would actually be *more likely* to fail.

    You’re better off trying more innovative & flexible approaches to being a music artist – and more likely to stay afloat. Except, I suppose, in one case: if the ‘taxman’ goes after you for not meeting their arbitrary standard of success! Ouch. I wish them good luck, and hope a just solution gets worked out as details emerge.

  6. Submitted by mike schoonover on 04/30/2013 - 07:10 am.

    six of one,half a dozen of the other.

    if you substitute(any legal form of financing a regular bussiness) with the
    term grant money i think you can see where all this is headed.

    i assume they were not incorperated.
    this will affect anyone who has tried to start a bussiness by
    mortgating his home,borrowing from friends,using your plastic,etc.. .


  7. Submitted by Sheila Epstein on 04/30/2013 - 04:21 pm.

    Harassment by authorities with a secret agenda?

    When there is little money at stake, a tax auditor is usually pursuing a person to make an example of that person and so terrify others into not claiming what they are entitled to by law. What I find most baffling is that there is no mention in this article that the IRS does not accept these tax returns to be correct. It appears that the state of Minnesota has decided to make up its own narrow definition of what conducting a business is, and to tell people that if they don’t conduct it exactly the way this particular state likes, they are not in business. And also to tell them so only after many years of accepting their tax returns as correct.

    This is absurd. People start legitimate businesses all the time that lose money, and most new businesses fail. If businesses can’t write off their losses, no one will risk starting new businesses. Is JC Penney suddenly not really a business (in the state of Minnesota) because lately it has lost money?

    I worry also that this tax auditor is acting out a vendetta against these artists, possibly because of gender issues, possibly because some people think artists are all poseurs. Perhaps the ACLU ought to be talked to about this situation.

  8. Submitted by Catherine Conlan on 05/18/2013 - 04:50 pm.

    Talking With the Taxman About Poetry

    The poem is by Vladimir Mayakovsky. “Vladimir Vladimirovich” is simply his first name and patronymic.

  9. Submitted by Jeff Horwich on 07/19/2013 - 05:35 pm.

    Just a *little* off…

    Whoa: Presuming the MPR story I just heard is even close to correct ( this one is vastly inaccurate — and it makes a world of difference in the implications for this story.

    MinnPost says here in the second paragraph that the couple is on the hook for $100,000 in unpaid taxes.

    MPR: $3,535

    $100,000 is almost unfathomable — no wonder people were up in arms. But it also suggests expenses (and lack of profit) on an unfathomable scale — no wonder the Revenue Dept. would be up in arms. Something seriously messed up would have been going on.

    At $3,500, the story actually gets more interesting. I have more sympathy for the artist — at the same time as this becomes a less life-destroying moment.

    Beyond the fact that MinnPost needs to correct this story, what I find so interesting and bothersome is this: the state expects artists to pay tax on any income they bring in — full-time (“professional”), part-time, one-gig-a-year — doesn’t matter; the “amateur or professional” dichotomy that’s been set up by the MPR story is misleading, since the state expects tax payments even from amateurs.

    How, then, can they object to incorporating the expenses artists incur in earning that income? If they want to treat income-earners/small business-people fairly (as the Rev. Dept. says in the MPR story), allowing artists of all sizes to operate as a Schedule C seems essential.

    On the other hand, no other business would survive for years on end — as many artists do — if it lost money most of the time. It does pose a particular danger as a tax-avoidance scheme. This is why it seems critically important that Dept. of Revenue consider the revenue side of the ledger: the “profitable three-out-of-five years” thumbnail is useful, but it’s also important to look at the gaps in any given year. Did expenses happen to exceed revenue by a small margin, or is this a business that looks like it’s deliberately running a loss to offset other household income?

    It ain’t simple, and despite the coverage of it I don’t think I could comfortably render my own verdict in this case. But I do think there’s a way to be fair, let artists earn (and spend) to support their art — while also making sure art isn’t used as a tool to abuse the tax system.

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