Thursday, March 20, 2008

GAO Report on Vehicle Donations to Charities

In February 2008, the General Accounting Office released a Report to House Ways and Means on vehicle donations by charities entitled "Selected Charities Reported Mixed Experiences after Changes in Vehicle Donation Donation Rules."  Here is an excerpt from the report:

Selected charities reported mixed experiences after the rules related to the amount taxpayers could claim as a deduction for donating a vehicle to a charity changed.5 We interviewed officials from 10 of the 65 charities we previously interviewed in 2003 who still operate a vehicle donation program. They reported varied experiences in the number of, quality of, and revenue from donated vehicles; some changes in their business operations; and mixed experiences with administering the changes in the rules. Some charities experienced a substantial decline in the number of vehicles donated from 2003 to 2006. For those same years, of the 10 charities covered in our in-depth interviews, 6 reported decreases in the number of vehicles donated, 3 reported increases, and 1 did not provide data. However, when comparing years 2005 to 2006, 4 of the 5 charities that reported using one of the exceptions to the gross proceeds of sale rule also reported an increase in the number of vehicles donated. Charity experiences with the quality of donated vehicles varied. Three of the 10 charities reported an increase in quality, 3 reported a decrease, and 4 reported no change.

In terms of vehicle donation revenue, officials from 6 of the 10 charities reported a decrease from 2003 to 2006, 3 reported an increase, and 1 did not provide data but reported that the rule changes had no effect on the number of vehicle donations or revenue. We did not find a consistent pattern when comparing the number of vehicles donated with the revenue from the vehicle donation program or the charity’s overall revenue. To deal with the decrease, some charities changed their fund-raising activities and some decreased services, such as reducing the number of hours services would be provided. Examples of changing business operations include using minimum bids at auctions, selling vehicles online, and selling vehicles directly to the public rather than to wholesalers. Finally, all 10 of the charities reported that they had experienced an increase in administrative burden because of the increase in reporting requirements, but the charities were able to accommodate the increase in paperwork.

For the entire report, see "VEHICLE DONATIONS: Selected Charities Reported Mixed Experiences after Changes in Vehicle Donation Rules" at the GAO website. (Hat Tip: TaxProf Blog)


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