Related Articles:
Clunker donations to charity stall out
IRS deduction rules get stricter
Wayne Tompkins
Anna Portman had a 1991 Honda Civic she could no longer use, so last week she donated it to the Society of St. Vincent de Paul charity in Louisville.
"The head gasket cracked, and it just wasn't conducive for me to put more money into it," Portman said. "They tow it and take care of it and do all of the paperwork."
She is among the thousands of people nationwide who donate old vehicles to charities. It used to be that donors could also look forward to a healthy deduction of the vehicle's market value on their federal income tax return.
But things have changed, and Portman has a lot less company.
Donations of used vehicles to local charities were down dramatically in 2005 as new Internal Revenue Service rules have gotten stricter about how much donors can deduct.
"We've seen about a 60 percent drop" in vehicle donations, said Mark Erickson, director of thrift stores for the Salvation Army in Louisville.
He said the thrift stores, which rely on donated vehicle sales for about 10 percent of their annual revenue, were counting on raising $180,000 from those proceeds in 2005.
The shortfall likely will exceed $100,000, Erickson said.
Under the IRS rules started in 2005, donors who give cars, trucks, boats or airplanes to qualified charities can deduct only the amount of money the vehicle sells for.
For example, a donor giving a car with a fair market value of $3,500 -- which the charity sells for $1,000 -- now can deduct only the latter amount.
The IRS said the rules better reflect the true monetary benefit that the charity gets from the donor, improves accountability and is less susceptible to fraud and abuse.
The drop in vehicle donations comes as charities already are struggling with "donor fatigue" following five years of natural and man-made disasters, beginning with the Sept. 11, 2001, terrorist attacks and continuing through the Asian tsunami and hurricanes Katrina and Rita.
At the Salvation Army's Louisville command, Erickson said, both staff and programs have been cut back.
Other area charities also are feeling the effects.
"We're down. I'll bet we're probably down 40 percent," Joe Stevenson, president and CEO of Volunteers of America of Kentucky Inc., said of vehicle donations. "The consensus is that it's the tax issue."
Charities have been taking advantage of vehicle donation programs for years, and many have found them to be big moneymakers.
Stevenson said that in past years his organization could expect to raise $1 million from an average of 2,000 donated cars each year in Louisville and Lexington combined.
"Some people, when you explain the tax changes, they say it doesn't really matter to them, and others, you never hear from them again," he said.
St. Vincent's will sell Portman's car "as is" at auction, said Richard Dixon, who has been running the donated vehicle program there for 11 years. Full Article
Houston charity gives more than it receives
Jason Whitely
There are just a few days left to take advantage of tax deductions for 2005.
Car donations used to be among the popular ones until this year when the IRS changed the rules. They're more strict now and fewer people are willing to give up vehicles to charities. Except for one.
In his mechanic's shop off Gessner in northwest Houston, Juan Medina stays busy. A lot of it has to do with the amount of work Tom Taggart brings in.
This charity gives back more than it receives when cars are donated.
"I have a lot of respect for mechanics and car salesmen!," Taggart said laughing outside Medina's garage.
But it's no joke. Taggart does something rather unique.
He works for a charity called Giving Heart of America. Like many similar ones, Giving Heart gets people to donate old cars. But unlike many charities, it rarely sells them "as is" at auto auctions.
Instead, the Houston based organization gets them repaired, detailed, and then top dollar at a car dealer.
"We want to raise as much money as we possibly can for charity. That's what it's all about," said George McLure, Giving Heart of America's president. "And in addition to that give our donors a maximum tax deduction because for a lot of people that's an important consideration."
For example, the charity was given a maroon 1998 Ford Taurus in November. It was hardly perfect. The car had front end damage apparently from a wreck. A local body shops gave Giving Heart a discount to fix the car. A detail shop did the same thing to make it shine. Now it's going up for sale.
"There's no way it would have gone for more than $500 or $600 max," McLure said. "We do expect now to get $5,295. I would be surprised it it goes for less than that."
Also online
Car donations decreased nationwide after the IRS tightened tax rules this year, no longer letting people deduct the Blue Book value but only what a charity can sell it for. Just the opposite has happened with Giving Heart of America. It says donations have tripled. That has helped its ability to provide goods and services for those in need, too.
Donors gave Giving Heart about 400 vehicles in 2005. McLure said his staff was able to refurbish about sixty percent of them. The rest, he said, are often not worth the expense of repairing. They end up at auctions.
About fifty vehicles are either under repair or up for sale by Giving Heart of America right now.
Source: http://www.khou.com/news/local/houstonmetro/stories/khou051229_cd_cardonations.274673c0.html
Dropoff seen in donated vehicles
MEGAN MYERS
12/30/05
Nearly a year after the government changed tax laws for those who donate vehicles to charitable organizations, some charities are seeing a drop in donations.
But at least one charity that ramped up marketing campaigns and awareness of vehicle donations is busier than before the changes took effect.
“We make it very easy,” said Kathleen Sweere, executive director of the American Lung Association of South Dakota.
Many charities and nonprofits accept donated vehicles, which are then either auctioned off, used by the organization for its own
purposes or sold to those needing a cheap car.
According to federal statistics, about 780,000 vehicles were donated in 2002, racking up $654 million in tax deductions.
A federal tax law that went into effect Jan. 1 no longer lets people deduct the vehicle’s “fair market value,” but rather the amount the vehicle fetches at auction.
If the claimed value of the car exceeds $500, and it is sold by the charity, taxpayers can deduct only the gross proceeds the organization receives from the sale.
Charities have 30 days from the date of the sale to notify the consumer of the amount. If the charity keeps the car for use in its operations or makes improvements to the vehicle, the charity must tell the donor, who then may deduct the vehicle’s market value.
So if a donated car is auctioned by a charity for $300, the donor can deduct only $300, no matter the car’s actual worth.
The law is meant to deter people who take advantage of the system by claiming a large deduction on a decrepit vehicle that barely runs.
But it’s scaring off some potential donors who feel they could get a better price elsewhere... Full Article
