Congress Passes New Restrictions on Donations of Cars and Other Noncash Gifts to Charities

By Elizabeth Schwinn

The provisions were included in a package of corporate tax breaks (HR 4520) that the Senate approved today by a vote of 69-17. The House passed the measure on Thursday night. President Bush has said he will sign the bill.

Charities that rely on donations of cars said they were outraged by the measure.

"Congress is turning its back on the very service organizations it claims to support through faith-based and community initiatives, while providing billions of dollars in new tax breaks to wealthy corporations," Ron Field, vice president of public policy at Volunteers of America, said in a statement. "It is utterly shameful that this vital source of private giving for charities has become a political sacrificial lamb to pay for corporate tax cuts."

The bill would limit a donor's income-tax deduction for a donated car to the amount a charity received after selling it. Charities would be required to supply receipts to donors reflecting the actual selling price of a vehicle.

Under current law, donors are allowed to deduct a car's fair market value based on estimates in used-car price guides, as long as the car is valued at less than $5,000. Donors who give cars worth more than that are required to obtain appraisals.

The provisions that change donation rules for noncash gifts are estimated to produce an additional $6-billion in revenue over the next decade by limiting the charitable deductions donors of such gifts can claim.

Members of Congress have said the changes are needed to rein in donors who deduct too much for their old cars, as well as intermediaries -- companies that run car-donation programs for charities --  that keep what Congress considers to be too large a percentage of the profits.

But many charities have expressed concern about the provisions, especially the one involving car donations. The provision "will virtually eliminate car donations to charities," said a statement released by a coalition of charities that lobbied against the bill.

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