IRS Issues Publications for Charities and Individuals on Automobile Donations

IRS Issues Publications for Charities and Individuals on Automobile Donations

News story posted in Information Release on 30 June 2004| 4 comments
audience: National Publication | last updated: 18 May 2011
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Summary

The IRS has released two new publications to help donors and charities avoid the pitfalls and properly comply with the rules regarding vehicle donations. Publication 4302, "A Charity's Guide to Car Donations," and Publication 4303, "A Donor's Guide to Car Donations" contain information on the tax responsibilities of individuals and charities involved in the car donation process.
IR-2004-84

Full Text:

New Publications Focus on Car Donations


June 29, 2004

[1] WASHINGTON -- Internal Revenue Service officials today announced the release of two new publications dealing with car donations as part of an effort to help taxpayers avoid potential pitfalls when they donate automobiles to charities.

[2] The first publication, Publication 4302, "A Charity's Guide to Car Donations," addresses issues that charities need to know to properly operate car donation programs. The second publication, Publication 4303, "A Donor's Guide to Car Donations," is focused on individuals who make such donations.

[3] "We want people and the charities to make sure they are taking the proper steps involving vehicle donations," said IRS Commissioner Mark W. Everson. "Supporting charitable activities through tax deductible contributions is an important element of tax law and serves the national interest. But we encourage people to proceed carefully when donating vehicles. There are instances where the donations may provide little benefit to the charity."

[4] For a taxpayer, the appeal of a car donation is simple: Unload an old car, help a worthy cause and take advantage of tax provisions designed to support the generosity of Americans. Taxpayers who itemize their deductions may be able to claim a charitable contribution for the cars they donate to charity. The deduction may not exceed the fair market value of the car.

[5] In recent years, the number of car donation programs has increased dramatically. This growth, however, has taken place without taxpayers and charities always understanding their obligations under tax law.

[6] Both publications were written in conjunction with state charity officials, as part of an ongoing effort by state and federal officials to work together to educate taxpayers and charities.

[7] Publication 4302, "A Charity's Guide to Car Donations," provides descriptions of several different car donation programs, filing and disclosure requirements for charities operating these programs and related information. Included among the description of vehicle donation programs is an example of an arrangement that would fail to preserve the deductibility of a contribution.

[8] Publication 4303, "A Donor's Guide to Car Donations," reminds taxpayer that they need to make sure they are donating their vehicle to a qualified organization, receive a written acknowledgement from the charity, keep records and properly assess the fair market value of their vehicle.

[9] Both publications are intended to assist individual taxpayers and those operating car donation programs to comply with tax law. Both publications are available at IRS.gov.

Download Pub. 4302 - "A Charity's Guide to Car Donations" - [PDF]

Download Pub. 4303 - "A Donor's Guide to Car Donations" - [PDF]

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where is a charity to get "fair" value for donated autos?

With respect to valuation, keep in mind the obligation to value the donation is the donor's, not your organization's. For example, when your organization signs the donor's Form 8283, it is affirming only that it received the property, that it is a qualified charity, and that it will file Form 8282 if it sells the contributed property within two years of the gift. Form 8283 also states with respect to the charity's acknowledgement, "This acknowledgement does not represent agreement with the claimed fair market value." With respect to your contemporaneous written acknowledgement, your organization will state that it received, for example, one 1999 Ford Mustang, VIN#xxxxxxxx, and that the donor received no valuable goods or services in exchange; however, you will not attach any value to the vehicle. From a donor relations standpoint, I believe it is wise to remind the donor that your organization must file Form 8282 if it sells the vehicle within two years and that a wide valuation disparity may trigger an audit. I would also tell the donor that vehicle donations are receiving increased scrutiny by IRS because of abuses, and advise them to follow the letter of the law. I would have copies of the new IRS publication available. They will thank you later. For further reading regarding abuses, refer to the PGDC news story entitled, "When Charity Begins at Home: GAO Investigates Vehicle Donations to Charities," published 12/15/03. Hope this helps.

Tattletale Form

It is my understanding that charities aren't required to file Form 8282 when they sell donated property valued at less than $5,000 at the time of contribution. If this is correct, I would guess that the threat of the tattletale form would not be a factor for most donors because the deduction claimed is usually $4,999 or less.

where is a charity to get "fair" value for donated autos?

I just read over both the "for charities" and the "for donors" IRS documents on auto donation. What I did not find there was where our organization is to find the "fair market value" for the cars donated to us. We've always gone by blue book, which the IRS now says is an overvaluation. However, I'm not certain where else to look for the value. We've never taken in a car worth (blue book) more than $5,000, so paying for an appraisal is not legally required. Your thoughts?

Valuation

It's my opinion that the IRS is communicating through these publications that the valuation of these charitable contributions is an individual or singular event and should be considered individually. The "Blue Book" is used as a resource and a guide and the actual value may vary considerably from the norm or standard listed in the guide for a variety of reasons. For example, I live in the Northeast where the price of convertibles is never better (for the buyer) than in January and February when anyone trying to sell a convertible is willing to make a deal. The Fair Market value is lower in winter than in summer. The "Blue Book" value has no seasonal modifier to my knowledge. It seems to me that there must have been some aggressive valuations used for car donations, creating a perception at the IRS of abuse, and prompting action on the part of the IRS resulting in the publication of these two brochures. When advising clients who either donate or receive auto donations, I will advise them that the central issue in this transaction is the determination of fair market value. This valuation should be carefully considered on a case by case basis and is subject to review and challenge by the Service.

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