For both ACB and its affiliates, much of the revenue that keeps us running comes from individual donors. In recent years, one of the easiest ways in which individuals could help a non-profit organization such as ACB, or one of its affiliates, has been by donating an automobile to that organization. The car can then be sold and the proceeds of the sale used to keep the organization’s work going. The donor can claim a tax deduction for the donation to charity.
In 2004, Congress became concerned about stories circulating in both the media and within government agencies that seemed to indicate that some people were claiming more in tax deductions than the cars they donated to charity were actually worth. In an effort to address these concerns, Congress passed legislation that limited tax deductions for car donations over $500 to the amount the car was actually sold for by the charity.
While this measure may appear reasonable on its face, its practical effect is that vehicle donation is now a huge gamble for everyone concerned. The donor has no idea at the time a donation is made of the amount he or she is actually donating, or the amount of the deduction that will be allowable. Charities have no means of determining how much revenue a vehicle will produce. Neither party will be able to find out anything about the value of the vehicle until it is actually sold, which often takes several months and sometimes a year or more. In short, vehicle donation is now an unattractive proposition for donors, and a very uncertain revenue source for charities.
Recent reports issued by the IRS and the Government Accountability Office, as well as the experiences of ACB and its affiliates, have shown this to be true. Since the new rules took effect in 2005, ACB and many of its affiliates who receive donated vehicles have seen major drops in both the number of vehicles donated and the revenues derived from the sale of those vehicles. Non-profits all across the country are reporting similar decreases.
This is not what Congress intended. The intent of the tax law amendments was to curb abuse, but not to destroy a valid revenue source for non-profits. In order to bring some balance to the situation and encourage the public to donate cars and other vehicles to charities once again, Rep. William Delahunt (D-Mass.) has introduced H.R. 571. This bill would amend the Internal Revenue Code to allow donors to deduct the “fair market value” of vehicles donated to charity up to $2,500. Those who donate vehicles appraised prior to donation at more than $2,500 would be allowed a deduction at the time of donation equal to the appraised value of the vehicle. The bill keeps in place requirements that both taxpayers and charities report the details of their transactions to the IRS, and imposes penalties for false reporting.
We believe H.R. 571 takes a much more reasonable approach to the problems Congress needed to address than its predecessor did. Its enactment would provide a deterrent to those who might otherwise try to defraud the IRS, but without discouraging the vast majority of potential vehicle donors from making honest contributions to organizations whose work they want to support.
H.R. 571 now has 35 co-sponsors, but that is a long way from the number who would be needed to move this legislation forward. Many of the state and special-interest affiliates to which readers of "The Braille Forum" belong would benefit, along with ACB, if this legislation is passed by Congress and the IRS changes its rules. Therefore, I urge all Forum readers to contact their members of Congress and ask them to support H.R. 571.
If you have questions about this bill, feel free to contact me, or Eric Bridges, in the ACB national office. We will keep you posted on the progress of this bill both here and on the Washington Connection.