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Testimony:



Before the Committee on Finance, U.S. Senate:



For Release on Delivery 

Expected at 

10:00 a.m. EST 

Tuesday, April 1, 2003:



VEHICLE DONATIONS:



Taxpayer Considerations When Donating Vehicles To Charities:



Statement of Cathleen A. Berrick

Acting Director, Homeland Security and Justice:



GAO-03-608T:



GAO Highlights:



Highlights of GAO-03-608T, testimony before the Senate Finance 

Committee.



Why GAO Did This Study:



According to the Internal Revenue Service (IRS), charities are 

increasingly turning to vehicle donation programs as a fund-raising 

activity, resulting in increased solicitations for donated vehicles. 

Therefore, to make informed decisions about donating their vehicles, 

taxpayers should be aware of how vehicle donation programs operate, the 

role of fund-raisers and charities in the vehicle donation process, and 

IRS rules and regulations regarding allowable tax deductions. Due to 

the increased use of vehicle donation programs, GAO was asked to 

describe (1) the vehicle donation process, (2) the amount of proceeds 

received by charities and fund-raisers, (3) donor tax deductions, and 

(4) taxpayer cautions and guidance.



What GAO Found:



Revenue from donated vehicles is a welcomed, and sometimes crucial, 

source of income for a number of charities. Donors, by following 

available guidance and making careful selection of charities for their 

donations, can provide charity support while benefiting themselves 

through tax deductions or disposing of unwanted vehicles. 



Taxpayers generally first learn about vehicle donation programs through 

advertisements. Interested donors call the advertised number and either 

reach a charity that operates its program in-house, or a third-party 

fund-raiser acting on the charity’s behalf. The charity or fund-raiser 

asks questions of the potential donor regarding the vehicle, and then 

collects and sells the vehicle for proceeds.



The proceeds a charity receives from a vehicle donation may be less 

than what a donor expects. Two factors contribute to this difference. 

First, charities often sell vehicles at auto auctions for wholesale 

prices rather than the prices donors may receive if they sold their 

vehicles themselves. Second, vehicle processing costs—whether the 

charity’s or the fund-raiser’s---as well as the fund-raiser’s portion 

of net proceeds further reduces the amount of proceeds a charity 

receives.



Of the 129 million individual returns filed for tax year 2000, an 

estimated 0.6 percent, or 733,000 returns, had tax deductions for 

vehicle donations. These deductions lowered taxpayers’ income tax 

liability by an estimated $654 million of the $1 trillion tax liability 

reported on returns. To assist donors in making decisions regarding 

vehicle donations, IRS and other organizations have issued guidance on 

steps potential donors should take before making vehicle donations. 

These steps include verifying that the recipient organization is 

tax-exempt, asking questions about vehicle donation proceeds, and 

deducting only the fair market value of the vehicle on tax returns.



What GAO Recommends:



GAO is not recommending executive action. However, based on guidance 

issued by the IRS and other sources, GAO identified several steps that 

taxpayers should take before donating their vehicles and claiming tax 

deductions. These steps include 

*verifying that the recipient organization is tax-exempt,

*asking questions about vehicle donation proceeds,

*deducting only the fair market value of the vehicle, and

*following state laws regarding title transfer for vehicles.



www.gao.gov/cgi-bin/getrpt?GAO-03-608T.

To view the full testimony, click on the link above. For more 

information, contact Cathleen A. Berrick at (202) 512-3404, or 

berrickc@gao.gov.



[End of section]



Mr. Chairman and Members of the Committee:



I am pleased to be here today to discuss our ongoing work on vehicle 

donation programs. According to the Internal Revenue Service (IRS), an 

increasing number of charities are turning to vehicle donations as an 

effective way to raise money. In order to make informed decisions about 

these donations, however, taxpayers should be aware of how vehicle 

donation programs operate, the role of charities and third-party fund-

raisers in the vehicle donation process, and IRS rules and regulations 

regarding allowable tax deductions.



The tax code generally allows taxpayers to deduct vehicle donations and 

other noncash contributions from their federal taxes if the donations 

go to certain qualified organizations such as churches and most 

nonprofit charitable, educational, and medical organizations. There is 

no national data identifying the percentage of charities that operate 

vehicle donation programs,[Footnote 1] or the number of third-party 

fund-raisers that solicit donated vehicles on charities’ behalf.



The proceeds from vehicle donations can be an important, and sometimes 

crucial, source of support for charities. One charity reported that 

starting a vehicle donation program helped it avoid a potential deficit 

after it had to cancel a major fund-raising event due to the events of 

September 11, 2001. Other charities we spoke with estimated that 

vehicle donations made up from less than 1 percent to about 98 percent 

of their respective budgets. We plan to conduct a nation-wide survey of 

charities to determine their use of vehicle donation programs, and the 

importance of the programs to their operations.



Because charities have increasingly turned to vehicle donation programs 

to raise funds, interest has been raised regarding how these programs 

operate. Accordingly, you asked us to describe how vehicle donation 

programs work, as well as information taxpayers should be aware of when 

donating their vehicles. Today, I will discuss (1) the vehicle donation 

process, (2) the amount of proceeds received by selected charities and 

commercial fund-raisers, (3) donor tax deductions, and (4) taxpayer 

guidance and cautions.



For my statement today, we relied on several sources, including an 

analysis of donor surveys regarding vehicle donations conducted by two 

charities, vehicle donation advertisements, and a sample of tax returns 

where taxpayers claimed deductions for donated vehicles. To determine 

how vehicle donation programs work, we also interviewed officials of 

IRS, 10 states, 17 charities, 4 fund-raisers, and 5 related interest 

groups. We began our review in October 2002, and plan to issue a final 

report in September 2003.



In summary, our work to date shows the following.



* There are two basic types of vehicle donation programs: those 

operated in-house by charities and those operated by third-party fund-

raisers. For in-house programs, charities advertise for donated 

vehicles, pick up the vehicles, and sell the vehicles, generally at 

auto auctions or they salvage the vehicles for parts. For fund-raiser 

programs, fund-raisers generally perform the advertising, pick up, and 

selling functions, and also retain a portion of the net vehicle 

proceeds, after expenses. Individuals generally learn about vehicle 

donation programs through advertisements. A small percentage of the 

advertisements we reviewed could potentially mislead donors regarding 

allowable tax deductions.



* Charities operating in-house vehicle donation programs, and those 

using the services of third-party fund-raisers, consider proceeds 

received from vehicle donations as a welcome source of revenue. 

However, the total proceeds a charity receives from a vehicle donation 

may be less than what a donor expects. We identified two factors that 

contribute to this difference. First, charities and fund-raisers often 

sell vehicles at auto auctions and receive wholesale prices rather than 

the prices donors might receive if they sold their vehicles to private 

parties. Second, vehicle processing and fund-raising costs are 

subtracted from vehicle revenue, further reducing proceeds. Although 

charity proceeds may be less than what a donor expects, results of 

donor surveys identified that in addition to supporting charitable 

causes, individuals most often donated their vehicles in order to claim 

a tax deduction, or to dispose of an unwanted vehicle.



* Of the 129 million individual returns filed for tax year 2000, an 

estimated 0.6 percent, or 733,000 returns, had tax deductions for 

vehicle donations. The vehicle donation deductions totaled an estimated 

$2.5 billion of the $47 billion in noncash contributions claimed. The 

vehicle donations deductions lowered taxpayers’ income tax liability by 

an estimated $654 million of the $1 trillion tax liability reported on 

returns.



* Because of the number of charities that are involved in vehicle 

donation programs, IRS and other organizations have issued guidance on 

steps potential donors should consider before donating their vehicles 

to charity and claiming associated tax deductions. These steps include 

verifying that the recipient organization is a tax-exempt charity, 

asking questions about vehicle donation proceeds, deducting only the 

fair market value of the vehicle, and following state laws regarding 

title transfers for vehicles. In addition, in 2001IRS created a cross-

functional Donated Property Task Force to study issues surrounding 

donated property, including vehicle donation programs, and identify 

methods to monitor this area.



I would now like to discuss these areas in more detail.



The Vehicle Donation Process:



Individuals often first learn about vehicle donation programs through 

advertisements. Vehicle donation advertisements can be found on 

billboards, truck banners, and television, as well as in newsletters 

and even on small paper bags. Some of the most common mediums for 

vehicle donation advertisements include the radio, newspapers, and the 

Internet.



Based on a sample of advertisements we reviewed,[Footnote 2] we found 

that advertisements for vehicle donations often identified that 

individuals could claim tax deductions for the donations, the donations 

served charitable purposes, and the donors’ vehicles would be towed 

free of charge. Figure 1 identifies the most common claims made in the 

newspaper, radio, and Internet advertisements we reviewed.



Figure 1: Most Common Claims in Newspaper, Radio, and Internet 

Advertisements Reviewed:



[See PDF for image] 



Note: GAO analysis of 147 vehicle donation advertisements. Claims 

classified as “other” included promises that vehicles would be picked 

up in 24 hours, title transfer would be handled, or contributions would 

be used locally.



[End of figure] 



IRS has expressed concern about some vehicle donation 

advertisements.[Footnote 3] According to an official from IRS’s Tax 

Exempt Division, tax deduction claims are potentially deceptive when 

they do not specify that taxpayers must itemize their deductions to 

claim a vehicle donation, since many taxpayers do not itemize. Of the 

147 advertisements we reviewed, 117 identified that taxpayers could 

claim a tax deduction, but only 7 advertisements specified that donors 

must itemize in order to claim a deduction.



IRS also expressed concern when advertisements claim donors can value 

their vehicles at full, or maximum, market value when claiming a tax 

deduction. IRS does not define full or maximum value, but believes 

these claims may be misleading since vehicles are required to be valued 

at fair market value. IRS stated that these advertisements may be 

particularly misleading when they also claim that vehicles will be 

accepted whether they are running or not. Fair market value equals what 

a vehicle would sell for on the market, and takes into account a 

vehicle’s condition and mileage, among other factors. Of the 117 

advertisements we reviewed that mention tax deductions, 38 specified 

that donors could claim fair market value on their tax returns when 

donating their vehicles; while 8 identified that a donor could claim 

full or maximum market value. Other advertisements referred potential 

donors to the IRS Web site, an accountant, used car guides such as the 

Kelley Blue Book,[Footnote 4] or other sources for guidance on claiming 

a tax deduction.



After deciding to donate a vehicle to charity, a donor will generally 

encounter one of two types of vehicle donation programs: those operated 

by charities (in-house) and those operated by a for-profit or not-for 

profit fund-raiser (fund-raiser). Donors may not know whether they are 

donating vehicles directly to charities or through fund-

raisers.[Footnote 5] Figure 2 identifies the vehicle donation process 

for both in-house and fund-raiser vehicle donation programs.



Figure 2: Vehicle Donation Process:



[See PDF for image] 



[End of figure] 



For in-house programs, charities, typically larger ones, advertise for 

vehicle donations, and respond to donor’s initial call inquiring about 

a donation. After the charity determines that it will accept the 

vehicle,[Footnote 6] it arranges to have the vehicle picked up, often 

towed, and delivered to wherever it will be stored until it is 

liquidated. The charity provides the donor with a receipt when the 

vehicle is picked up, or at a later time to document the donation for 

tax purposes. At the time the vehicle is picked up, the charity obtains 

the title of the vehicle from the donor, and some charities may provide 

donors with state-required forms (e.g., release of liability) or 

references for establishing the tax deductible value of their donated 

vehicles (e.g., Kelley Blue Book or IRS guidance). Charities we spoke 

with stated that it is up to the donor to establish the vehicle’s 

value. Once the donated vehicles are collected, they are generally sold 

at auto auctions or salvaged for parts, but may also be sold to auto 

dealers or to the general public. Charities with in-house programs keep 

100 percent of the net proceeds after deducting costs associated with 

processing the vehicles.



For fund-raiser programs,[Footnote 7] fund-raisers generally perform 

some or all of the tasks associated with advertising, vehicle pick up, 

and vehicle disposal. After deducting expenses, fund-raisers keep a 

portion of the net proceeds from the vehicle sale or salvage, providing 

the remainder of the proceeds to the specified charity. A charity 

working with a fund-raiser may have no oversight of the process, 

leaving the operation of the program, and distribution of proceeds, up 

to the fund-raiser.



The relationship between charities and fund-raisers varies, depending 

on the agreements they have established. Some commercial fund-raisers 

may handle vehicle donation programs for many charities. For example, 

one national fund-raiser has contracts with about 140 charities, and 

another works with about 200 charities. Charities may also contract 

with multiple fund-raisers. Fund-raisers often support smaller 

charities that would not otherwise be able to participate in vehicle 

donation programs. For example, at one California charity, a staff 

person spent half her time working with two vehicle donation fund-

raisers, which together generated about $110,000 for the first six 

months of the current year (approximately 

8 - 10 percent of its annual budget).



In addition to the in-house and fund-raiser programs described above, 

we identified some variations in how vehicle donation programs operate. 

For example, see the following.



* Some charities refurbish donated vehicles for their own program 

services or clients, rather than for sale or salvage.



* One state consortium of 14 charities jointly runs a vehicle donation 

program in conjunction with a wrecking yard. The charities share in 

oversight of the operations, such as inspecting donated vehicles and 

monitoring vehicle donation reports. Donors can select one charity to 

receive the proceeds, or proceeds are split among members of the 

consortium equally if no charity is designated.



* One large charity runs a national vehicle donation program and serves 

regional offices as a fund-raiser would, charging its regions vehicle 

processing costs. Some of the charity’s affiliates choose other fund-

raisers and do not participate in the national program.



* Another large charity runs a national program and serves charity 

affiliates but also has a nonprofit vehicle donation program for other 

smaller charities.



Vehicle Donation Proceeds:



The total proceeds a charity receives from a vehicle donation may be 

less than what a donor expects. We identified two factors that 

contribute to this difference. First, charities and fund-raisers often 

sell vehicles at auto auctions for wholesale or liquidation prices or 

to salvage yards for parts, rather than obtaining the amount they would 

receive if vehicles were sold to private parties. Second, vehicle 

processing and fund-raising costs are subtracted from vehicle revenue, 

further lowering proceeds.



According to a survey of year 2001 charitable donors commissioned by 

the Wise Giving Alliance, donors expect at least 70 to 80 percent of a 

charity’s funds to be used for charitable purposes rather than fund-

raising or administrative costs. Actual charity receipts reported to 

state officials for charity fund-raising are less. For example, in New 

York telemarketing fund-raisers (not specifically vehicle donations) 

returned 32 percent of funds raised for charities in 2000. Although 

donors are often motivated by serving a charitable cause when donating 

their vehicle, the results of donor surveys identified that individuals 

are also motivated by the ability to claim a tax deduction and to 

dispose of an unwanted vehicle.[Footnote 8]



Figure 3 provides an example of the amount a charity received from an 

actual vehicle donation. In this case, a 1983 truck was donated in 2001 

to a charity whose vehicle donation program is operated through a fund-

raiser. The gross sale price for the truck (sold at an auction) was 

$375. After deducting fund-raiser and advertising expenses, net 

proceeds totaled $63.00. This amount was divided evenly between the 

fund-raiser and charity, leaving the charity with $31.50 from the 

vehicle donation. The donor claimed a deduction of $2,400 on his or her 

tax return, based on the fair market value of the vehicle as identified 

in a used car guidebook.



Figure 3: Example of Vehicle Donation:



[See PDF for image] 



[End of figure] 



Note: GAO analysis of an actual vehicle donation.



Charities operating in-house vehicle donation programs incur costs 

associated with processing vehicles for sale or salvage, but do not 

incur additional fees generally associated with fund-raiser programs. 

Processing costs cannot be compared among in-house programs because 

charities may record their costs differently. One of the few in-house 

charities we spoke with reported that it earned a net average of 42 to 

44 percent of the sales price of donated vehicles. Another charity 

operating a national program for local affiliates reported a range of 

13 to 32 percent net proceeds for programs operating for over 2 years, 

and a deficit to slightly in excess of breakeven for newer programs.



Proceeds received by charities participating in vehicle donation 

programs run by fund-raisers also varied, in part due to the different 

processing costs deducted by fund-raisers, as well as different 

agreements between charities and fund-raisers for splitting net 

proceeds. Some charities receive a percentage of the net proceeds, 

after the fund-raisers costs are deducted. Other charities receive the 

net proceeds remaining after the fund-raiser deducts a flat fee for 

expenses.



California is the only state that systematically captures information 

on the percentage of proceeds received by charities through vehicle 

donation programs.[Footnote 9] However, California only captures 

information related to programs run by fund-raisers, and cannot 

separately identify the number of charities that operate in-house 

programs. According to a report from the California State Attorney 

General’s Office, less than 1 percent of registered charities in 

California have vehicle donation programs that are managed by 

commercial fund-raisers. In 2000, these fund-raisers generated 

approximately $36.8 million in sales revenue, with about $11.3 million 

(31 percent on average) being returned to the charities. As shown in 

figure 4, California charities received proceeds from fund-raiser 

programs ranging from less than 20 percent to over 80 percent of the 

net proceeds from vehicles, but most were in the 40 - 59 percent range.



Figure 4: Vehicle Donation Proceeds to California Charities Using Fund-

raisers:



[See PDF for image] 



[End of figure] 



Issues relating to charity proceeds from fund-raising reached the 

Supreme Court on March 3, 2003, in arguments related to “Ryan v. 

Telemarketing Associates”. The Attorney General of Illinois is 

appealing a decision of the Illinois Supreme Court[Footnote 10] to 

dismiss fraud charges against Telemarketing Associates. At issue were 

solicitations implying that cash donations would go to a charity to buy 

food baskets and blankets for needy veterans, while only 15 percent of 

the funds raised actually went to the charity. As part of the case, 

donor affidavits were reviewed stating that some individuals would not 

have donated if they knew the percentage of proceeds the charity would 

actually receive. The Supreme Court has ruled in three previous cases 

that percentage-based limitations on charitable solicitations were 

unconstitutional. The Supreme Court decision in this case is not 

expected until July 2003.



We plan to conduct a national survey of charities to further review 

vehicle donation proceeds received by charities and fund-raisers. We 

will identify any concerns regarding the amount of net proceeds fund-

raisers keep from vehicle donations and the significance of vehicle 

donation programs to charity operations. Charities may consider 

proceeds from vehicle donations to be a welcomed, if not crucial, 

source of revenue to support their operations. For example, one charity 

stated that vehicle donations are “just keeping their heads above 

water.”:



Donor Tax Deductions:



The results of donor surveys we reviewed indicated that the ability to 

claim a tax deduction is one of the most important reasons individuals 

donate vehicles to charity. However, we found that a small percentage 

of Americans claim tax deductions for vehicle donations. Specifically, 

we reviewed a representative sample of taxpayer returns that claimed 

noncash contributions for the tax year 2000. Of the 129 million returns 

filed that year, a projected 0.6 percent, or an estimated 733,000 

returns[Footnote 11], had tax deductions for vehicle donations.



We also found that deductions for vehicle donations accounted for a 

small fraction of forgone tax revenue. Based on the sample we reviewed, 

vehicle donation deductions totaled an estimated $2.5 billion[Footnote 

12] of the $47 billion in noncash contributions claimed.[Footnote 13] 

Stocks and thrift store donations accounted for most of the tax dollars 

deducted for noncash charitable contributions. We estimate that in 

2000, vehicle donations deductions lowered taxpayers’ income tax 

liability by an estimated $654 million[Footnote 14] of the $1 trillion 

tax liability reported on returns.



IRS guidance limits the amount of an allowable deduction to the 

vehicle’s fair market value, or the amount a willing, knowledgeable 

buyer would pay for the vehicle. We reviewed each deduction for vehicle 

donations in our sample to determine the average value claimed for 

donated vehicles in 2000, and whether these values fell within the 

ranges identified in a nationally recognized blue book. We estimated 

that the average value claimed for donated vehicles in 2000 was 

$3,370,[Footnote 15] and that the amounts claimed for almost all of 

these vehicles fell within the blue book. However, since we did not 

have additional information regarding the vehicles’ condition and 

mileage, we could not determine whether reported values accurately 

reflected fair market value.



For a donor to claim a vehicle tax deduction, the contribution must be 

made to a qualified organization. Churches and most nonprofit 

charitable, educational, and medical organizations are 

qualified.[Footnote 16] We submitted the names of charities from our 

sample that taxpayers reported on their returns to IRS to verify 

whether the recipient organization was qualified to receive tax 

deductible donations. Of the 22 charities IRS reviewed, it was able to 

verify that 10 of the charities were qualified to receive tax-

deductible donations. IRS could not determine whether the remaining 12 

charities were qualified organizations because it needed more 

information than taxpayers reported on their tax returns, such as the 

organizations’ full names and addresses and employer identification 

numbers.



IRS has a compliance program to review noncash donations, including 

vehicle donations generating revenue over $5,000, which compares the 

amounts received by a charity upon the sale of a donated item with the 

amount claimed by the taxpayer as the fair market value of the 

item.[Footnote 17] Although differences exist between fair market 

values and the proceeds from items sold at wholesale prices, this 

program gives IRS an indication of whether a particular donation should 

be further scrutinized. However, IRS has no data identifying whether 

cases referred for further review by this program are ever pursued.



IRS is also in the process of implementing a National Research Program, 

which may provide data on compliance issues dealing with vehicle 

donations and other noncash contributions. Under the program, officials 

will randomly select about 49,000 tax year 2001 returns to determine 

whether taxpayers complied with statutory income, expense, and tax 

reporting requirements. Returns with noncash contributions, including 

donated vehicles, could be subject to audit to verify donation claims. 

Once this project is completed, IRS plans to assess individuals’ 

compliance related to deductions for noncash contributions, and 

determine whether more enforcement is needed to help ensure proper 

reporting in this area.



Taxpayer Guidance and Cautions:



IRS and other organizations, including the National Association of 

State Charity Officials and the Better Business Bureau, have issued 

guidance on steps potential donors should take before donating their 

vehicles to charity and claiming associated tax deductions. These steps 

include the following.



* Verify that the recipient organization is a tax-exempt charity. 

Potential donors can search IRS’s Publication 78, which is an annual 

cumulative list of most organizations that are qualified to receive 

deductible contributions.



* Determine whether the charity is properly registered with the state 

government agency that regulates charities. The state regulatory agency 

is generally the state attorney general’s office or the secretary of 

state.



* Ask questions about how the donated vehicle will be used to determine 

whether it will be used as intended. Such questions include the 

following: Will the vehicle be fixed up and given to the needy? Will it 

be resold, and if so, what share of the proceeds will the charity 

receive?



* Itemize deductions in order to receive a tax benefit from the 

donation. The decision to itemize is determined by whether total 

itemized deductions are greater than the standard deduction.



* Deduct only the fair market value of the vehicle. The fair market 

value takes into account many factors, including the vehicle’s 

condition, and can be substantially different from the blue book value. 

IRS Publication 526, “Charitable Deductions,” and IRS Publication 561, 

“Determining the Value of Donated Property,” provide instructions on 

how to calculate the fair market value of donated property.



* Document the charitable contribution deduction. IRS Publication 526 

identifies requirements for the types of receipts taxpayers must obtain 

and the forms they must file.



* Follow state law regarding the car title and license plates. 

Generally, the donor should ensure that the title of the vehicle is 

transferred to the charity’s name, by contacting the state department 

of motor vehicles, and keep a copy of the title transfer. Donors are 

also advised to remove the license plates, if allowed by the state.



The IRS and the states have identified few significant occurrences of 

abuse by charities and fund-raisers operating vehicle donation 

programs. However, the guidance above may help potential donors avoid 

donating vehicles to organizations that have not complied with laws or 

regulations related to vehicle donation activities, and prevent 

problems sometimes encountered with vehicle title transfers. For 

example, see the following.



* IRS revoked the charity status for one Florida organization that 

solicited boat donations after finding that its charitable activities 

were insubstantial, and that proceeds were kept for personal gain.



* California charity officials prosecuted and jailed the owner of a 

used car lot soliciting vehicles for charity. The organization raised 

an estimated $1 million, none of which benefited charity.



* In Massachusetts, a for-profit company solicited cars through 

newspaper ads, and led potential donors to believe that the 

organization was a charity and that all, or a substantial portion of, 

proceeds would go to a charitable purpose. In May 2002, Massachusetts 

brought an enforcement action in which the company’s president agreed 

to cease all further activity related to the car donation operation and 

dissolve.



* According to state agency officials, they often receive complaints 

from donors when charities do not transfer vehicle titles as promised. 

Donors found themselves responsible for parking violations, penalties, 

and in some cases damages when donated vehicles were subsequently 

involved in accidents.



In addition to noncash contributions guidance found in various IRS 

publications and news releases, the IRS has publicized guidance 

regarding vehicle donations, and developed a training video for state 

and IRS compliance regulators. In 2001 IRS also created a cross-

functional Donated Property Task Force to study issues surrounding 

donated property and identify methods to monitor this area. The task 

force, in cooperation with the National Association of State Charity 

Officials, is also surveying state charity officials to identify 

information that states collect on charity fund-raising, and on vehicle 

donations in particular. As of March 2003, only California reported 

having data available on vehicle donation handled by fund-raisers.



Mr. Chairman, this completes my prepared statement. I would be happy to 

respond to any question you or other Members of the Committee may have 

at this time.



(440167):



FOOTNOTES



[1] We use the term “vehicle donation” to refer to vehicles, boats, and 

farm equipment donated to a charity, although vehicles are most 

commonly donated. The term “vehicle donation program” refers to 

situations wherein a charity officially solicits donated vehicles, 

rather than occasionally accepting unsolicited vehicles. 



[2] We analyzed 147 advertisements for vehicle donations, including 69 

newsprint advertisements from a sample of 50 newspapers nationwide, 33 

radio advertisements from 19 radio stations in the top 10 U.S. markets, 

and 45 Internet advertisements. Our results cannot be projected to all 

vehicle donation advertisements.



[3] Responsibility for oversight of advertisements is diffused. The 

Federal Communications Commission defers regulatory authority 

regarding false advertising on radio or television to the Federal Trade 

Commission (FTC). FTC is charged with taking action against unfair or 

deceptive acts that affect commerce. FTC does not have specific 

jurisdiction over charities, but may become involved in cases of fraud. 

State officials are primarily responsible for false advertising by 

charitable organizations. Officials we interviewed from two states said 

that limited resources prevent them from providing broad oversight over 

advertisements, and that they generally review advertisements in 

response to consumer complaints, or when they discover that charities 

or fundraisers are soliciting in their state without being registered. 



[4] The Kelley Blue Book is one of several guides listing values for 

various models of used vehicles based on their condition and mileage. 



[5] This may not be a factor for donors if their primary motivation is 

disposing of their vehicle.



[6] When a charity or commercial fundraiser receives the initial call 

from a potential donor, the donor is asked questions about the vehicle, 

including the vehicle’s make, year, and condition, and whether the 

donor has the title. Some programs will only accept vehicles expected 

to produce a profit after towing and other expenses. Charities 

sometimes will accept vehicles regardless of condition, because, as one 

charity stated, they view accepting vehicles with little value as 

generating goodwill for future donations. 



[7] Some charities perform vehicle donation fund-raising for other 

charities, but most of the vehicle donation fund-raisers we identified 

were for-profit businesses. 



[8] Two charities shared voluntary feedback provided by vehicle donors. 

Over 3,000 donors responded in one survey and about 400 responded in 

the other. We did not review the methodology for the surveys and 

consider the results to be illustrative. 



[9] National data on the proceeds charities receive from vehicle 

donation fund-raising do not exist. Although IRS’s Form 990 collects 

information from charities on fund-raising costs, it does not identify 

the portion, if any, related to vehicle donations. 



[10] The Illinois Supreme Court held that the fund-raiser’s conduct was 

protected under the First Amendment and the Attorney General’s 

complaint was not legally sufficient because it was an attempt to 

impose a constitutionally impermissible percentage-based limitation on 

the fund-raiser’s ability to engage in a protected activity.



[11] Ninety-five percent confidence intervals:0.6 percent +/-0.2 

percent, and 733,000 returns +/-520,000 returns.



[12] Ninety-five percent confidence interval: $2.5 billion +/-$2.0 

billion.



[13] Our estimates are based on taxpayers who were required to file 

Form 8283, “Noncash Charitable Contributions,” for noncash 

contributions exceeding $500. Some of these taxpayers may have claimed 

tax deductions for vehicle donations, but they were not required to 

list these transactions on their returns. 



[14] Ninety-five percent confidence interval: $654 million +/-$480 

million.



[15] Ninety-five percent confidence interval: $3,370 +/-$790. 



[16] Other types of organizations that qualify for donations include 

war veteran organizations, domestic fraternal societies, certain 

nonprofit cemetery companies or corporations, and the United States and 

any state or local government.



[17] Charities file Form 8282 when donated property valued at over 

$5,000 is disposed of within 2 years of receiving it.