In California, the solicitation of vehicle donations to charity has increased during recent years. These solicitations result primarily in the donation of automobiles, and are administered both by charities in-house and by commercial fundraisers who contract with charities to solicit on their behalf.
Eleven (11) commercial fundraisers who solicit vehicle donations were registered with the Attorney General's Registry of Charitable Trusts s in 1996. According to the financial statements filed by these fundraisers, such donations resulted in approximately $11.1 million in gross proceeds. About 19% of that amount, or $2.1 million, was distributed to the charities. The remaining 80% was retained by the fundraisers for payment of expenses and fees. These results are shown in Table #3, pdf.
The vehicle donation process usually begins when a donor responds to an advertising campaign. In the initial phone conversation, the donor will be asked questions about the vehicle. Usually the vehicle is accepted, unless the cost of towing exceeds the value of the vehicle.
Donors are responsible for notifying the Department of Motor Vehicles of the transfer of registration. Failure to transfer registration has subjected many donors to subsequent penalties and expenses for donated vehicles, most often accrued parking violations.
After the vehicle is picked up from the donor, the fundraiser either arranges for resale of the vehicle to the public or sells it to a parts wholesaler, depending on the condition of the vehicle. A significant problem for purchasers of donated vehicles is the reliability of the resellers in warranting the condition of the vehicles. The majority of vehicles donated to charity are not in good condition. Unscrupulous resellers have sold vehicles which fail to operate soon after they are driven out of the sellers' lots. Because donated vehicles do not need to pass vehicle emissions tests at the time of donation, purchasers of donated vehicles should insist that they receive valid smog certificates from the reseller at time of purchase.
Donors of vehicles usually claim tax deductions for their donations. Advertising campaigns for vehicle donations sometimes explicitly promise "maximum tax donation" and "highest value". The actual amount which can be deducted is determined by the IRS, not the solicitor. According to the IRS, a taxpayer may deduct the fair market value of the donated vehicle. The IRS imposes further reporting and documentation requirements on donations of property. The Attorney General's Office has received complaints about tax deduction promises made by fundraisers and their subsequent failure to provide documentation to donors. Donors are ultimately responsible for the deduction taken and may not rely on the representations contained in solicitations to support their income tax deductions.
The purpose of this report is not to discourage such donations but to present some of the problems associated with vehicle donations and practical information, both for donors of vehicles and the purchasers of the vehicles.