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Wheels wanted - Fewer people donate vehicles under new tax law

From the San Francisco Chroniclet
Wednesday, March 30, 2005
By Todd Wallack, Chronicle Staff Writer

Some nonprofit fund-raisers say auto donations have skidded this year after Congress changed the rules for writing off cars and trucks donated to charity.

"An awful lot of people think you can't do it anymore,'' said Pete Palmer Jr., co-founder of the Vehicle Donation Processing Center, a private company in Monrovia (Los Angeles County) that handles auto donations for the Polly Klaas Foundation and other charities. "There's a lot of misapprehension out there."

No one tracks exactly how much donations have dropped nationwide, but several charities and professional fund-raisers say they've seen their donations plummet. Palmer estimated that donations are down by one-third. The Volunteers of America in Alexandria, Va., reported a 40 percent drop. And Car Program LLC in Rancho Cordova (Sacramento County), which handles car donations for 1,700 charities, said gifts dipped by 30 percent.

Petaluma's Polly Klaas Foundation has been hit particularly hard. The nonprofit group, which helps parents of missing children, relies on auto donations for 85 percent of its revenue. And auto donations are down one- fourth.

"We've had to cut some of our services,'' said Paula Skuratowicz, the group's executive director.

Specifically, the foundation recently scrubbed plans to run ads on National Missing Children's Day in May, something it normally does every year. And Skuratowicz said the foundation has also cut back on other discretionary expenses, such as travel, to save a hot line to aid parents of missing kids.

Until this year, donors could claim whatever amount they thought reflected the fair market value of the car, up to $5,000. For greater amounts, they needed an appraisal.

But Congress tightened the rules for cars worth more than $500 after the Government Accountability Office found that some taxpayers appeared to be abusing the rules by claiming thousands of dollars in write-offs for donating worthless junkers.

Officials found that one taxpayer had claimed a 1990 Mercury station wagon was worth $2,915, even though the charity sold it for $30. Another taxpayer claimed a $4,050 deduction for a 1989 Chevrolet Blazer that sold for $300. The charities netted even less after paying for picking up, cleaning and selling the vehicles. Most charities rely on outside fund-raisers to handle auto donations, which claim a cut of the profits.

Under the new rules, however, donors can claim only the actual amount that the car sells for -- even if that's far less than the estimates printed in national price guides like Kelley Blue Book. Most charities sell the cars quickly at auction to reduce their expenses, even though the cars might fetch more on a dealer's lot. Not every nonprofit group has been hurt by the tax change. Only 3 percent of charities rely on auto donations for revenue, the government estimates. And not every charity has seen a decline.

"We're holding steady,'' said Kerry Beuthin, director of development for Volunteers of America Bay Area in Alameda. "We are not closing any programs."

Regional differences

And other experts have noticed regional differences. Mike Thompson of Charity Auction Services, a Pittsburg company that auctions off hundreds of donated cars each month, said donations declined substantially in Northern California after TV stations and newspapers did a series of stories about the change in the tax law. But he said donations have been about the same in Southern California.

Of course, most taxpayers don't bother to itemize their taxes, making the tax deduction irrelevant. And other donors have other priorities, such as getting rid of a dead car in the driveway or helping a charity they care about.

Misti DeGraw, a San Francisco nanny, said she plans to help her mother donate her 1986 Toyota Tercel to the East Bay SPCA this year, despite the tax change. She said they decided to make the donation after the 19-year-old car broke down with transmission problems.

"I suppose it might have made a difference if we really needed a bigger write-off,'' DeGraw said, but the car "is sitting at the auto shop, so my mom is in a hurry to get it out of there."

Still, some charity executives suspect the lower deduction has pushed some people to try to sell the cars themselves or give them to relatives instead of donating them. Others blamed the drop in donations on slower new car sales, which might mean people are keeping their old cars longer.

In addition, charities saw more donations in December, as some donors rushed to donate cars before the tax code changed, which may explain the decline in donations in January and February. Donations could still rebound later in the year.

Wait and see

"It's too early to tell,'' said Barney McKinley, owner of Charity Funding Services in Huntington Beach (Orange County), which handles cars for the American Red Cross in California and the Greater Bay Area Make a Wish Foundation.

But Palmer, the charity fund-raiser, is convinced that some people mistakenly got the impression that Congress eliminated the car-donation programs altogether. He said he frequently runs into people who think he's been put out of business.

"A lot of people are confused," Palmer said.

Palmer has sponsored radio ads on KCBS to let people know that they can still donate their cars to charity and that charities will receive the same amount of money they always have.

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