Las Vegas Sun

March 28, 2024

New law driving down car donations

Charity doesn't begin at home, it begins with a tax break.

A year-old federal law, limiting tax write-offs on donated cars, has resulted in about 30 percent fewer automobiles being donated to Las Vegas nonprofit groups this year.

Sharon Mann, spokeswoman for Catholic Charities of Las Vegas, said many people want to give the charity their cars until the new law is explained to them in detail.

"We're down 25 (percent) to 30 percent on car donations this year, and no question it is because of the new law," she said. "When we explain the law (to potential donors) some say they will go some other way."

Charles Desiderio, spokesman for the Clark County chapter of the Salvation Army, says car donations are off by 30 percent.

Still, Desiderio said, many people who have contacted him about donating a car aren't that worried about the tax break.

"The motivation for many, without question, is about giving," he said. "In many cases, we later get calls from those donors saying, 'Oh by the way, is there a tax break involved with that donation that I made?'

"They just want to give to help others."

Keith Schwer, UNLV Center for Business and Economic Development director, said the "simple bottom line from this is economics still works."

"If you give me a big enough tax break, I'll say, 'Take my old car. It's yours,' " he said. "But if the tax break is not big enough, I will find another use for that car rather than give it away."

Under the new law, auto donors can no longer get huge tax breaks in the form of "fair market value" as they previously did. Now donors receive a write-off based on how much the donated car actually sells for at auction.

Schwer said the law was changed "because the Internal Revenue Service felt people were overstating the value of the cars they were donating."

"The IRS, in effect, was saying that a piece of junk is junk and that people were taking undo advantage of the loophole in the tax code," Schwer said.

The decline in car donations came in a year in which local charities were stretched to their limits, helping not only the local homeless and otherwise poor, but also victims of Gulf hurricanes, the Pakistan earthquake and the late December 2004 Indian Ocean tsunami.

Local charities didn't seem concerned about the fiscal effect.

Desiderio said Christmas donation figures for his organization have not yet been finalized. But preliminary findings are that the donations via the kettle drive appear to be off from last year while mail donations "are a hair more" than the previous year.

Mann said Christmas donations to Catholic Charities locally were up 12 percent from last year, "which was shocking to us with so much happening in the world."

Desiderio said, "With all of the challenges we have had with Katrina, the tsunami and with the fact this year the (Clark County) Salvation Army gave presents to a record 17,000 children, we still managed to accomplish so many of our goals."

The donation of cars is treated as just "another form of revenue for us to support our programs," Mann said.

"We have thrift stores, community donations, et cetera. This is one of the ways for us to earn extra income.

"We are still getting cars donated to us, the numbers are just down from last year," she said. "We're not going to scrap the program just yet."

Mann said the appeal of giving to a charity, for many, is not the tax break but rather the convenience because charities take the cars whether they run or not.

"We eliminate the hassle of people having to sell it," she said. "We pick it up and tow it away to the auction house."

As for the future fallout from the car donation law, Schwer said there likely will be "secondary impacts."

"One of the secondary impacts could be environmental improvement as many of these cars were headed for the junk pile anyway, and that is probably what happened to a number of them that could not return a sizeable tax break or be sold," Schewer said.

Schwer said on the other side of the coin, new car sales could go down somewhat as donors, who would have received larger tax returns as a result of having overstated the value of the cars they donated to charity will not get such windfalls, and thus not buy new cars.

And, likely, the nonprofit groups will further feel the pinch from the law.

"It's yet another hurdle in such organizations' efforts to respond to the public's needs," Schwer said.

Ed Koch can be reached at 259-4090 or at [email protected].

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