IRS again throws a spotlight on car donations to charities

The Internal Revenue Service has called for public comment on a scheduled reevaluation of the rules for charitable contributions of motor vehicles, boats and airplanes. Every three years the IRS reviews how tax codes can be changed to make processes run smoother and more effective.

The last time this code changed was 2005 when the charitable deduction was cut to $500 from up to $5,000. However, if a donor’s car had greater value and is used for an organization’s mission, the contributor could write off the actual market price with proper documentation from the charity.

Written comments can be sent by Nov. 7 to Yvette B. Lawrence, Internal Revenue Service, room 6129, 111 Constitution Avenue, NW., Washington, DC 20224. Requests for additional information or copies of the notice should go to Elaine Christophe, (202) 622-3179 or elaine.h.christophe@irs.gov.

A 2008 study by the Government Accountability Office found that even though the vast majority of car auctions are done by 3rd party, for-profit auction companies, little of the funds raised get back to the charity. After looking at 4,300 cases, the GAO concluded that on average only 35 percent of revenue raised from a car auction actually reached the charity and many nonprofits reported seeing less than 10 percent of the revenue.

Several nonprofits including the American Lung Association have helped draft legislation introduced in March 1 and currently in the House Committee on Ways and Means. It would increase the threshold for a fair-market deduction and “set forth revised acknowledgment requirements for vehicles valued at $2,500 or less and vehicles valued at more than $2,500.” The bill has 174 co-sponsors, 72 Republicans and 92 Democrats.