Government Finds Vehicle-Donation Law Has Had Mixed Effect

In a new report, the Government Accountability Office has found that charities have had mixed experiences with vehicle donations after a new law in 2005 altered how much donors could deduct for vehicles.

Before January 1, 2005, donors could claim a tax break equal to the fair market value of a donated vehicle. After that date, donors could deduct only the amount for which the charity later sold the vehicle. The government changed the law because it found examples of large discrepancies between the market value claimed by donors and the actual sales price.

The report — which contains in-depth interviews with 10 charities, but no statistical survey — looks at the effect of the new law on the number of vehicles donated, the quality of the vehicles donated, and the revenue generated by donated vehicles.

The results, while not clear cut, were generally negative: Between 2003 and 2006, six of the 10 charities received fewer vehicles and less revenue from vehicle sales, sometimes millions of dollar less. Only three groups reported increases for each measure. (One did not provide data.) In addition, all the charities reported an increase in paperwork, and some had scaled back their vehicle-collection programs because of the new law.