Car donations to charities seem to be a win-win proposition. A donor gets a hassle free way to dispose of an old car and a big tax deduction, a charity receives money it would not otherwise receive through cash contributions and an intermediary makes a profit well tidy to solicit, tow and sell the car. Unfortunately, the loser is the rest of us. As taxpayers, we subsidize tax deductions on car donations that do not match the benefits received by charities.
A November 2003 United States General Accounting Office (GAO) study, for which the AIP was interviewed and listed as a resource, found that two-thirds of the 54 cases studied received 5% or less of a given car declared on an individual's tax return. Why so little? The car is often auctioned for wholesale, and then the cost of newspaper and radio and Internet advertising is subtracted. After the towing and conditioning costs of the car and the paperwork processing is deducted, little can be left to charity. In addition, some charities may receive a fixed fee for each given car, regardless of value, sometimes as little as $ 25 per vehicle. The GAO could not determine whether the donors inflated the value of the used car. But it would be easy for donors to do so because of the lack of information available on the condition of the car.
Car donations are a popular vehicle for tax deductions. 733,000 of the 129 million forms filed in the tax year under review (2000) claimed $ 654 million in deductions for used cars valued at more than $ 500. About 4,300 charities with incomes over $ 100,000 use car donations. The GAO study found ratings and percentages going to charity: a 1990 Mercury Station Wagon was assessed on an individual's tax return at $ 2915, sold for $ 30 gross and after expenses, the organization charity loses $ 130; a 1991 Ford Crown Victoria was assessed on a person's income tax return of $ 3,100, sold for $ 300 gross and, after deduction of fees, received $ 165; and a 1995 ½ tonne Toyota pickup truck was assessed on a person's income tax return of $ 4,999, sold for $ 1,800 gross, and after the expenses, the charity received $ 1,290.
At a Senate Finance Committee hearing in June 2004, a confidential witness working in the auto industry described the ways in which intermediaries can take advantage of cars offered at the expense of the organization. Charitable. In a practice that the witness describes as "repairing cars," some middlemen deliberately deactivate cars, by simple techniques such as firing a fuse or turning the dispenser lid, so that they can be purchased for few auctions or resold. for what the car was worth originally. The donor is rarely contacted about the condition of the vehicle, according to the witness. The witness gave two examples in which a charity received less than $ 300 for a car worth about $ 4,000.
Some Attorney General's offices have filed lawsuits against operators of car donation programs, according to the GAO report. A for-profit company paraded as a charity that solicited cars before state officials banned it. In 2003, the Attorney General of Connecticut filed a lawsuit against the Animal Health Care Fund, a charity created by the owner of a used car dealership, which retained almost all the donations of the car. The California Attorney General's Office filed a lawsuit against a person who owned a used car and incorporated a non-charitable charity, raising more than $ 1 million.
In response to out-of-control car donation programs, Congress enacted legislation in 2004 to limit taxpayer deductions for donations of cars, trucks, boats or planes to the gross proceeds received by the charity. Persons who donate vehicles valued at $ 500 or more to charities that sell or sell vehicles must receive a written notice from the charity indicating the gross proceeds of the sale and declare that they have been "sold at arm's length". If the charity uses the car given in its programs, the donor will have to receive a written certification from the charity of the intended use or improvements related to the use of the vehicle and the expected duration of use planned. The charity must also certify that it will not sell or trade the vehicle before the scheduled period of planned use or enhancement. See "Top Tips for Donating a Car to Charity".
AIP regularly encourages donors to donate cars to charities that can use the car in its programs, eg. providing meals for home-bound people, taking the elderly or blind to the doctor or shopping, training future car mechanics, etc. By doing this, donors can be sure that the full value of their contribution benefits charity. We recommend that people contact their United Way, Goodwill, Salvation Army, Community College or Vocational School to find programs that require donated vehicles.
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