By Kim Leonard, For The Tribune Review
David Meredith has donated three cars to Goodwill Industries of Pittsburgh, mainly for the convenience.
"You don't have the hassle of trying to sell a used vehicle," said the engineer, who lives in Allegheny Township, Westmoreland County, and commutes to work in Moon. "No people coming to your house or dealers who only want to give you the wholesale price toward a new car."
Meredith's most recent gift -- a 1996 Lincoln Continental -- also gave him an $8,000 tax deduction, the type of incentive that charities have used to build lucrative vehicle-donation programs in recent years.
As many as 1.2 million vehicles ranging from clunkers that won't start to well kept recent models are donated annually to Goodwill, the National Kidney Foundation, the Salvation Army and other organizations nationwide that then sell them, usually at auction.
But there is widespread concern about federal legislation that could pass this fall, setting tougher standards for tax deductions on car donations and possibly curbing interest in giving.
Meredith asked a car dealer to put a value on his Continental, knowing he needed an appraisal to claim a deduction for a vehicle worth $5,000 or more. Owners of less-valuable cars can claim what they believe is the fair market price, usually based on Blue Book standards.
The U.S. House and Senate now are working to reconcile two bills, both designed to correct what some lawmakers see as abuse in the system. Taxpayers are claiming deductions that far outweigh the actual amount charities receive for donated vehicles, they say.
So far, the House has adopted a plan in President Bush's budget that would require each donor to get an independent appraisal of a vehicle, or use a formula the Treasury Department would develop.
The Senate version, passed in May, would require charities to give each donor a receipt listing the sale price. The deduction would be limited to that price, although proof of the sale price wouldn't be needed for vehicles worth $500 or less.
Limiting deductions to the auction price "would be a deterrent for me," said Meredith, whose Continental sold at a Goodwill auction for $3,200. Charities sell cars at around wholesale rates, "and I could get that from a dealer on a trade-in," he said.
Dr. William Poller, an Indiana Township resident and associate director of the Breast Care Center at Allegheny General Hospital, has donated two cars to Goodwill -- including an '87 Jaguar XJ that sold for $4,900.
Drastic limits on deductions would only hurt the cars-for-charities industry, he said. "I'm happy to donate," said Poller, whose writeoff for the Jaguar was $8,600, "but that would be less of a reason to donate."
Salvation Army Major George Hood, of the organization's Washington, D.C., headquarters, said large and small nonprofits are worried that fewer people will donate cars if the tax incentives shrink.
"If that would happen, there would be an impact on charities nationwide. A major revenue source for them would dry up," he said.
Those supporting the change say the idea is simply to prevent people from claiming deductions they don't deserve, said Jill Gerber, press secretary for Senate Finance Committee Chairman Chuck Grassley, R-Iowa, who has questioned a wide range of tax writeoffs for charitable donations.
The Senate provisions to control deductions on vehicles "are just building more accuracy and accountability into the process, so it shouldn't discourage donations at all," Gerber said.
Taxpayers claimed deductions for vehicles given to charities on about 733,000 of the 4.4 million tax returns filed for 2000, lowering their liability by $654 million, according to a 2003 report by the U.S. General Accounting Office.
But the 4,300 charities that operate vehicle donation programs got nowhere near that amount, the report said. In two-thirds of 54 individual donations the GAO examined, the organization got 5 percent or less of the values the taxpayer claimed, because of low auction prices and vehicle processing, fund-raising and other costs.
Charities are quick to supply their own, better numbers.
Goodwill of Pittsburgh, for example, said nearly 90 percent of proceeds from its weekly auction in North Huntingdon, the biggest among 91 branches that hold auctions, go toward career services for people on welfare or with disabilities. Nationwide, Goodwill agencies earn about $12 million each year from vehicle donations.
The National Kidney Foundation took in 73,000 vehicles last year, earning $17.6 million or about a third of its total revenue. More than 67 percent of the proceeds from "Kidney Cars" sales support patient and family services, education and research of kidney disease, the organization said.
The Society of St. Vincent de Paul, Diocese of Pittsburgh, relies less on revenue from donated cars than some other charities and contracts with a Florida firm for pickups and sales. The charity gets half the proceeds from a car sold at auction or for salvage for $400 or less, and 80 percent for bigger sales.
St. Vincent de Paul projected vehicle sale income at $35,000 for its fiscal year, which ends Sept. 30, but its numbers are down and revenue is about three months behind projections, Executive Director Fred Just said. Eighty vehicles were donated from October to December 2002, compared with 30 for the same period last year.
"We would attribute that to the fact that more nonprofits are being encouraged to be more entrepreneurial," he said. "We're noticing much more competition in this area."
Most charities have similar procedures and standards.
Donors must have clear titles to the vehicles and turn over the titles and a keys by pickup time. Tows usually are free, and receipts are provided.
The cars don't have to be in working order, although charities generally insist on whole vehicles -- no front or back end sections, or cars with missing engines.
Goodwill requires tires. "Otherwise, it's very hard to put them up on a flatbed" for towing, said Bob Wagner, director of the North Huntingdon auction. And St. Vincent de Paul sets a 10- or 11-year age limit. "But we try to make exceptions. Sometimes, you find that car that a 75-year-old woman owned, and it's 15 years old, with 30,000 miles and in good shape," Just said.
How can I donate?
Follow these steps when giving a vehicle to a charity and claiming a tax deduction:
- Verify that the charity is tax-exempt and authorized to solicit contributions. The Pennsylvania Department of State, Bureau of Charitable Organizations, answers inquiries at (800) 732-0999.
- Ask how the vehicle will be used. Will it be fixed up and given to the poor? Will it be resold, and if so what share of the proceeds will the charity receive?
- Itemize deductions, in order to benefit from a vehicle donation. But first, decide whether total itemized deductions are greater than the standard deduction.
- Deduct only the fair market value of the vehicle, taking into account its condition. This may differ substantially from the value listed in used-car guides.
- Document the charitable contribution deduction. IRS Publication 526 (available at www.irs.gov) explains the types of receipts taxpayers must obtain, and the forms they must file.
- Make sure the vehicle's title is transferred to the charity and keep a copy of the transfer. In Pennsylvania, the license plate must be removed and returned to the state.
What is my car worth?
Starting points, to help determine a vehicle's value:
- Kelly Blue Book, www.kbb.com
- National Automobile Dealers Association, www.nadaguides.com
- Edmunds.com, www.edmunds.com
Who will accept my car?
Some local and national charities that accept vehicle donations:
- American Diabetes Association, (800) 232-6570
- Catholic Charities, Diocese of Pittsburgh, (412) 456-6969
- Goodwill Industries of Pittsburgh, (888) 304-0227
- National Kidney Foundation, (800) 488-2277
- Salvation Army, (888) 999-2769
- Society of St. Vincent de Paul, Diocese of Pittsburgh, (412) 321-1071
http://www.world-donation.com
http://www.donation-car-us.com
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