Tips on donating Cars
NOTE:
Effective January 1, 2005, new IRS rules regarding the deductibility of
car donations came into effect. If your claimed car donation is in
excess of $500, please review the following IRS publications for
information on the rule changes:
• www.irs.gov/newsroom/article/0,,id=136939,00.html
• www.irs.gov/pub/irs-pdf/p4303.pdf
The solicitation of used vehicles has become an increasingly popular
means of raising funds, especially for local or regional organizations.
On the surface, it seems like a win-win situation for the donor and the
charity: a convenient and easy way of disposing of an unwanted car
while helping a cause. Before handing over those keys, however, there
are some things that you should know.
A radio, television or newspaper promotion that welcomes car donations
may mention a charity name that sounds like an organization working in
your community, but that may not be the case. In fact, it may actually
be located many states away. If you are not familiar with the charity,
its location, and its programs take the time to check it out to avoid
being disappointed later.
In addition, since so many organizations now accept donated cars, with
a few calls and a little research, you can probably find a group that
closely matches the needs or charitable concerns you would most like to
support. Don't confine your potential donated car recipients to the one
or two charity promotions you recently heard in an advertisement.
Not long ago, only a handful of charities were known for accepting
these types of donations. In recent years, these contribution requests
seem to be everywhere. While this reflects the competition for the
charitable dollar among a growing number of organizations, this growth
is also due to the emergence of third-party brokers. These are
for-profit firms that may sign up a number of different charity clients
located in different parts of the country, solicit for donated cars on
their behalf, sell and/or auction the cars, and then provide the
charity with some portion of the dollars raised.
The donated car benefit to the charity can vary quite considerably
depending on the arrangements. In some cases, the full amount of the
donation goes to the organization if the charity sells the car itself
or uses the vehicle to help fulfill some program services need (for
example, delivering meals to homebound individuals). If a third-party
broker is involved, however, the charity may receive only a percentage
of the resale price of the car (such as less than 20%) or it may
receive a portion of what is left after all the expenses have been paid
by the broker, which can result in even smaller amounts going to the
charitable cause.
In some situations, the amount the charity receives from a third-party
broker has no relationship to the re-sale price of the used car. The
organization may receive a flat fee (such as $100 per used vehicle) or
a monthly agreed upon amount (such as $2,000 per month) that is not
dependent on the total dollar value of sales incurred by the used car
fund raising company. Finding out the nature of the charity's financial
relationship to the resale of the car is important, since a flat fee
situation may result in making your used car donation ineligible for a
tax deduction.
In order to take a tax deduction for donating a car, boat or other
vehicle, there are a number of other things you should keep in mind.
First verify that the recipient organization is tax exempt as a charity
under section 501(c)(3) of the Internal Revenue Code. To verify that a
charity is eligible to receive contributions deductible as charitable
gifts, you can do one or more of the following. See if the organization
is listed in IRS Publication 78, the Cumulative List of Organizations,
which is likely to be available at most large public libraries. Visit
the online version of IRS Publication 78 at www.irs.gov/charities/article/0,,id=96136,00.html.
Or, ask the organization for a copy of its tax exempt status
determination letter. (Note that churches are not required to apply for
exempt status, and may not have such a letter or be included in the
mentioned IRS publication. A car donation to a church, however, would
still be deductible.)
If the organization is a charity, you can deduct only the fair market
value of your car donation. In other words, this is the price the car
would sell for today in its current condition. If the used car is not
in good condition and needs significant repairs, don't believe
promotional promises that claim you will be able to get "top value" for
your car donation based on one of the latest published guides that show
the average regional prices for various used cars. If you are claiming
that the car is worth $5,000 or more, you will need to get an official
outside appraisal in order to substantiate the claimed value for the
IRS.
Also, if you are claiming a car donation of $500 or above, you will
need to complete and attach IRS Form 8283 to your tax return. For your
records, you also will need proof that you made a charitable gift. The
best evidence is to transfer the title of the car to the charity and
keep a copy of this document. This title change also will help you
avoid potential problems that can occur if the car is somehow parked
illegally by the organization or is involved in an accident or other
mishap before the charity is able to resell the vehicle.
Why all the fuss? For some households, a car donation may be the single
largest charitable gift made during the year, or ever. This is all the
more reason to make sure that the donation is being used for the
greatest charitable benefit and that you can take full advantage of any
potential tax deduction. The BBB Wise Giving Alliance welcomes readers
to contact us about their experiences with car donations.
Vehicle Donation Checklist
- Verify that the recipient organization is tax exempt as a charity.
- Make sure the title of the car is transferred to the charity's name and keep a copy of this record.
- Find out how the charity financially benefits from the resale of the car.
- For tax records, take a photo of the car and keep
copies of current classified ads or guide value estimates for similar
vehicles. (For more deductibility information, get a copy of IRS
Publication 561, Determining the Value of Donated Property.)
- If the car is worth more than $5,000, get a written professional appraisal.
- Check out the charity with the Better Business Bureau serving your area.
-
Find out if the charity is properly registered with the government
agency in your state that regulates charities (usually a division of
the state’s office of the attorney general).
Disaster Relief: Get your donation to Victims in Need
It
seems that all too often, we see or hear reports of the latest human
calamity, whether it be refugee situations in need of humanitarian aid,
or natural disasters such as treacherous flooding, widespread fires,
earthquakes, hurricanes, mudslides or any other imaginable disaster
situation. Dramatic images of these situations, and of the plight of
those affected by them, often elicit the best of human responses,
inspiring compassion and generosity in many who feel they are in a
position to help.
In many cases, disaster
relief agencies respond to the situation. Emergency response operations
are implemented, and the agencies and organizations deliver much needed
aid to the victims. Disaster relief agencies provide such things as
emergency food and medical aid, temporary shelter, infrastructure
support, crisis counseling, disaster help for farmers and ranchers,
disaster unemployment and re-employment assistance as well as a host of
needed services. It is very important for the agencies to have the
resources available to be able to provide such services. Many emergency
response organizations require public support to be able to provide
immediate aid. Because of the urgency of such situations, it is not
uncommon to see requests for support immediately following a disaster.
The
preferred donation in most disaster situations is donated funds. Even
in those situations where food and supplies are needed, donations of
money avoid the costly process of collecting, sorting, packaging and
transporting unsolicited goods. For example, the American Red Cross
never solicits food and supplies. Mark Silverstein, Director of
Corporate and Foundation Relations at the American Red Cross explains
that particularly in international disaster situations, they strive to
deliver culturally sensitive food. They do not import food or items
from the United States, as these items may have affects on local
agriculture and American goods may influence the local economy.
Occasionally, disaster relief organizations have been forced to destroy
or redeploy unsolicited items. Effective disaster relief efforts work
with local forces to deliver needed aid, and cash is often most
effective in allowing them to do this.
While
many requests for support to assist relief efforts are genuine and
carried out with the best of intentions, there are unfortunate
incidents in which well intended funds end up in the hands of con
artists and profiteers who use disaster situations as an opportunity to
defraud well intended donors for their own gain. It is the reliance on
donations of funds that allow disingenuous operators to spring up
around disaster situations. Recent figures reveal that an estimated
$1.43 billion in donations a year are misused or stolen. Because of the
urgency of disaster situations, scam operators can develop quickly, and
disappear just as quickly. It is very difficult to monitor these
"charities."
The best protection that
donors have against fraudulent disaster relief solicitations is to know
who they are giving to, and the ways in which they deliver aid. The
Federal Emergency Management Agency (FEMA) is the national government
agency responsible for orchestrating and dispatching disaster relief
efforts in response to major domestic situations. Ben Curran, Director
of Response and Recovery from FEMA, encourages donors to contact
National Voluntary Organizations Active in Disaster (NVOAD). NVOAD,
while not itself a service delivery organization, strives to streamline
planning efforts by many voluntary organizations who respond to
disaster. The goal is for member organizations to provide more
effective and less duplicated services by coordinating volunteers and
services before disaster strikes.
In
international crisis situations, it is often advisable to contact the
embassy of the country in which the disaster occurred. Often times, the
embassy receives donations of cash, food and supplies directly. In
almost all cases, they are able to inform donors of the most beneficial
way to contribute.
In addition, the
American Red Cross is very quick to respond in disaster situations, and
has worldwide networks that allow them to reach victims in the most
effective ways possible. The American Red Cross has 1250 domestic
chapters, as well as a presence in more than 175 countries. These local
chapters know precisely what the victims‚ needs are and how best to
deliver aid.
Solicitations for donations
come in many forms. Telephone solicitations, mail appeals and
increasingly email appeals are common. Low cost Internet solicitations
can be very effective for charities, but disingenuous operators also
have access to the Internet as a resource. Potential contributors
should be aware that websites and Internet solicitations do not ensure
an organization‚s legitimacy.
When
considering a donation in response to a solicitation for emergency
relief efforts, donors should take the following precautions:
- Ask
for specific information on how the organization will use your
donation. If approached by a small or local organization, inquire as to
how the funds it collects will be provided to those in need. Ask if the
organization is working with a recognized relief agency "on the ground"
in the area of need.
- Most relief
organizations prefer monetary donations. If asked to supply goods, ask
the organization how the donated items will be transported and
distributed to those in need.
- Don‚t let anyone pressure you into making donations on the
spot. Take time to investigate the organization.
- Check
out the charity. Make sure that you are comfortable with its mission
and activities, and that its philosophy matches your own. The PAS
program of your local Better Business Bureau maintains reports on many
area charities and national organizations.
The following websites are useful in providing further information on
disaster relief efforts and charitable giving:
www.newyork.bbb.org
www.bbb.org
www.redcross.org
www.nvoad.org
Think the Internet is the Future of Fundraising? Get On Line!
For-profit intermediaries seek to merge on line shopping with charitable
giving
with catchy names like "Mycharity.com" and
"iGive.com,"
a handful of new Internet companies are trying to launch a new form of
cause related marketing by making shopping on line more appealing to
those with a philanthropic nature. By visiting these intermediary sites
before you shop on line, you might be able to provide your favorite
charity with a donation of some percent of the price of your on line
purchase. While the funds raised to date have been comparatively small,
many feel that internet cause marketing may become a big boon for the
non-profit sector as consumers become more comfortable shopping on
line. However, before we all sign-up, there are a few things that both
donors and charities should know about these sites and their policies.
By
beginning an on line shopping session by stopping at one of the more
than half-dozen intermediary sites, a shopper may name a charity to
which he or she wishes to contribute. Each site has its own policy on
what organizations qualify for donations. Certain sites, such as 4charity.com and Greatergood.com, have a restricted list of eligible
charities. Other sites, like MyCause.com and Shop2Give.com, allow shoppers to designate any
tax-deductible organization registered with the IRS. CharityWeb.com
combines these options by dividing any funds raised among a group of 20
causes, unless otherwise instructed by the shopper. At iGive.com, a
person can designate any organization as a recipient - iGive.com only
requires that an organization affirm that it is a nonprofit and engaged
in good works. As pointed out by Reed Ableson in a recent New York
Times article (Give and Take, 3/31/99), such a wishy-washy
policy allows for unregistered groups, such as the "Broken Nose Fund"
in Portland, to raise money through unsuspecting shoppers. (The Broken
Nose Fund, by the way, was set up by one man to raise the $15,000 he
needs to fix his own nose for the third time!!)
Once
shoppers designate a specific group and make their purchases, a varying
percentage of the price of items purchased from select on line vendors
will be forwarded to the intermediary site. The site then distributes
all, or a portion, of that percentage to the designated charity. Most
sites keep part of the percentage as a commission. For example,
stopping at iGive.com
allows a visitor to shop at more than two dozen affiliated retailers
who, in turn, give between 5% and 25% of their profit margin to iGive.com.
(NOTE: "Profit Margin" is not equal to "Purchase Price", and in some
cases, the profit margin on an item may be quite small. Therefore, the
donation made as a result of an on line purchase may often be only a
few cents.) iGive.com
keeps half of this fee and disperses the remaining funds to the
selected charity. Other sites, which pass the entire percentage onto
the designated organization, often make their money by selling
advertising, product placement or information about shoppers‚ on line
habits to market researchers.
Most sites
have a minimum amount that must first be reached before they will
forward a check to the charity for what the organization has been
designated. With some, the amount is as little as $10, but with others,
it can be as high as $75. Others may make disbursement payments only a
few times per year. 4charity.com,
for example, only pays out to charities 4 times a year. In addition,
the on line vendor may have restrictions and requirements that might
delay your charity from getting its due. J. Crew, for
example, requires a site to meet a certain commission threshold before
it will cut a check. Typically, the threshold is $250.
The
sites encourage the listed charities to notify their employees and
potential donors of the sites‚ existence and encourage their use. By
attracting more potential shoppers, measured in visits to their site,
the sites can increase their appeal to potential advertisers, on line
vendors and market research partners.
Charities
should be aware that they may be "listed" on some of these sites
without their knowing. Unbeknownst to the charity, a concerned shopper
may have already designated the organization as the recipient of any
donation resulting from their on line purchases. Most sites do not
notify the charity that they have been designated until it is time to
cut a check, and if the organization can‚t be found the money may not
be distributed.
So, before you get on the Internet giving line, make sure you do your
homework:
If you are a donor:
- Know
the percentage your on line intermediary site gives to charity and what
other restrictions are placed on donations. Shop around for the best
terms and the philosophies that match your own.
- Make
sure the organization you designate is a charity and that you are
familiar with both its activities and its ethics. NYPAS maintains
reports on many New York area charities and the Council of Better
Business Bureaus‚ PAS program has information on national organizations
from around the country.
- Check out
the vendors just as you would any other; just because they say that
they will give money to charity doesn‚t mean they have a good
reputation or quality product. Check the company out with the BBB in
the company's home area.
- Verify
that your charity of choice wants to receive donations in this manner -
some may have policies against it or be unaware that they are eligible
for these on line donations.
If you are a charity:
- Read
any contract or terms of participation carefully. Make sure you know
the amount to which you are entitled, when checks are mailed and if
there is a minimum threshold.
- Check
with those sites that let donors designate any organization to verify
whether or not you have money coming to you that you haven‚t received.
- If
you decide to advertise your listing on these sites to potential donors
and/or employees, make sure you are clear about the for-profit nature
of the sites and the percentages your organization receives. What the
site does reflects upon you!
Some Sites to Check Out
4Charity.com
CharityMall.com
CharityWeb.com
iGive.com
MyCause.com
Shop2Give.com
How to Read a Charity Report
To learn more about how to read a charity report, please go (link to publications>for giving>how to read...)
BBB Standards for Charity Accountability
To learn more about the BBB Standards for Charity Accountability go
here.