August 27, 1998 | Read Time: 2 minutes
The California Legislature has passed a bill intended to crack down on donors who take excessive charitable tax deductions for gifts of used cars, boats, and airplanes.
Gov. Pete Wilson now will decide whether to sign or veto the measure, which some observers think may be adopted by lawmakers in other states.
Charities nationwide are increasingly seeking gifts of cars and other property amid increased competition for cash contributions.
But some government and charity officials are concerned that people fudge the value of their non-cash gifts when they determine their tax write-offs and are cheating state and federal treasuries.
The California legislation was sponsored by state Sen. Patrick Johnston, a Democrat who has been concerned that federal and state laws are so loose that they invite tax fraud (The Chronicle, March 26).
Senator Johnston’s bill would require a charity — or a “commercial fund raiser” working for a charity — to provide a receipt to the donor within 90 days of the date the gift was made. The receipt would have to describe a used car in terms of its model, age, level of use (including mileage), and condition. It also would have to state whether a visual inspection of the vehicle showed “any readily apparent defects that would materially reduce the value of the property,” and say whether the car was “operable or inoperable” at the time of the gift.
If the charity sold the car to a dismantler before it issued the receipt, it would have to include in the receipt the amount the dismantler paid for the vehicle.
California donors would not be required to use the sales figure as their charitable-contribution deduction on their state tax returns but would be expected to factor in that information.
The legislation also includes a provision designed to give donors of cars and other property a clearer picture of a gift’s value to the charity and a way to fairly compare claims by charities about that value. Senator Johnston has worried that many charities wind up with only a small portion of the total revenue from car-donation programs and are not candid with the public about that fact.
The bill’s provision would affect charities or their fund raisers that state “in writing or verbally the percentage of a donation that will be available or used for charitable purposes.” Such groups would have to calculate that percentage each year in a specified way.
The text of the bill, SB 1836, can be found on the California Senate’s Web site at http://www.sen.ca.gov.
