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Proposed legislation may hurt nonprofits

From the Dayton Business Journal

Amy Luttrell said charitable donations are based largely on convenience -- the easier it is to donate, the more likely someone is going to do it.

That's why Luttrell, president of Goodwill Industries of the Miami Valley, and other nonprofits around the country are fearful of proposed federal legislation that would change the rules regarding vehicle donations to nonprofit groups. The added paperwork and legwork the legislation would require most likely would drive away donors looking to quickly and conveniently unload an unwanted vehicle, she said.

However, those fund-raising efforts could be thwarted if Congress passes the legislation that would limit how much the donor could use as a tax deduction.

The Senate version of the Foreign Sales Corporation Tax Bill contains an amendment requiring that donors receive a written receipt citing how much money was raised from auctioning cars valued at more than $500.

The donor's tax deduction then would be limited to the gross proceeds. In the current system, donors can deduct the fair market value of the vehicle if it is worth less than $5,000. Donors need an appraisal to claim vehicles worth more than $5,000.

The General Accounting Office decided to push for the changes after it discovered some donors were claiming more money than the nonprofits raised by auctioning the vehicles.

In late 2003, the General Accounting Office studied 54 donation programs and found auction prices were, on average, 5 percent or less of the value donors claimed on their tax returns. The overall auction price ranged from 1 percent to 70 percent of the amount donors deducted on their taxes.

Harvard "Pete" Palmer Jr., co-founder and vice president of the Vehicle Donation Processing Center, in Oakland, Calif., helped oversee the donation and sale of 118,000 vehicles in 2003.

His company then disperses the proceeds to various charities. But to be profitable, the program needs as many donations as possible, he said.

"It's a volume game," Palmer said. "You have to get a serious number of cars before you get a significant amount of money coming in. This move could make a big disincentive for the donor to give nicer cars."

If the donor has to wait for the receipt, they're not going to know the deduction's value, which could cause them not to donate, he said. This is especially the case for people donating higher-end vehicles, Palmer said.

He said 20 percent of the vehicles donated are the more expensive models, yet they account for 80 percent of the money raised.

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