Charities don't get full worth of cars

By Mary Dalrymple
Associated Press

WASHINGTON — Charities reap less money from the donation of autos than the donors expect, congressional investigators say.

One reason is that charitable organizations sometimes auction donated cars at wholesale prices and receive less than what the donor calculates as the fair market value of the vehicle, the Congressional Budget Office reported.

Charities must also absorb processing costs, including fees they pay to professional fund-raisers that handle arrangements for donations and sales.

Senate Finance Committee Chairman Charles Grassley, R-Iowa, said it's "disturbing" that charities get only pennies for every dollar of value in these vehicles.

But the congressional investigators said charities do not mind getting only a fraction of the proceeds. "They view any proceeds from this program as revenue they otherwise wouldn't have," said GAO investigator Cathleen A. Berrick.

The few charities that accept and process car donations themselves get 100 percent of the proceeds from sale of the car or its parts, less their costs. Charities that rely on for-profit fund-raisers get less because the organizers keep a portion of the returns to pay for advertising, labor and other costs.

California is the only state that keeps track of charity returns on automobile donations managed by professional fund-raisers. In 2000, most of the charities using those services received 40 percent to 59 percent of the proceeds.

In 2000, 733,000 people claimed deductions for donating automobiles. In total, those donors reduced their taxes by $654 million.

Investigators said donors should ask fund-raisers and charities how much their donation will be worth before donating a vehicle.

Donors should also be aware of misleading advertisements that suggest the donor can deduct more than the fair market value of the car, which takes into account the vehicle's condition and mileage.

Taxpayers must itemize their deductions to claim the benefit. Of 147 advertisements reviewed in the study, most said donors could claim a tax deduction but only seven explained that donors must itemize their deductions.