Charities that rely on donations of cars from owners seeking tax write-offs are bracing for a legislative change that could cost them millions of dollars.
A little-noticed provision in a corporate tax bill nearing approval in Congress would sharply limit donors' tax write-offs for car donations.
Congressional backers say the provision would halt abuse of the programs, in which some donors vastly overestimate the value of the cars on tax returns.
A coalition of more than 200 charities fighting the provision said it would destroy car donation programs by removing a major incentive for donors. They warn that a wide range of services often paid for by the sale of the cars, such as homeless shelters, soup kitchens, drug treatment programs and help for the disabled, would have to be curtailed or eliminated.
"It will be devastating," said Ron Field, vice president for public policy with Alexandria-based Volunteers of America, which took in $10 million last year from 80,000 cars donated nationwide. He estimates that the number of car donations to his group could fall as much as 80 percent if the bill becomes law.
In the Washington area, an estimated 40,000 people each year give used cars to nonprofit organizations. In return, they can claim a tax deduction for the fair-market value of the car, which most charities will accept in any condition. How they calculate the car's value is up to them, but it must be less than $5,000.
The corporate tax bill approved Wednesday by a Senate-House conference would allow a car donor to write off only the amount the charity gets when it sells the car.
Backers say it won't affect charities at all.
"Without any hassle, the taxpayer can still donate his 1985 Pacer that goes only in reverse, and the charity will get the same amount of money it always gets," Senate Finance Committee Chairman Charles E. Grassley (R-Iowa), the author of the provision, said in a statement. "The only difference is the taxpayer can't claim $5,000 for the car that will sell at auction for $50."
Charities would be required to notify donors of the selling price.
A study last year by the Government Accountability Office discovered wide disparities between what taxpayers were deducting and what charities were receiving. It found that charities received as little as 5 percent of the declared value of the donated cars, while tax bills were reduced by $654 million.
Nonprofits say that because they usually turn over donated cars to an auction house that sells them below retail price, the provision isn't fair to donors.
Last month, 259 charities -- including the American Lung Association, the American Cancer Society and Goodwill Services International -- signed a letter asking Congress to withdraw the provision.
"The bill is a huge disincentive for people to donate vehicles," said Tom Roberts, director of development of Melwood, an Upper Marlboro job-training and residential facility for the mentally and physically disabled that takes in about 15,000 cars a year. Sale of the vehicles brings in about $5 million a year, said Roberts, one of the leaders of the nonprofit effort to stop the provision.
Opponents of the bill accuse congressional backers of using the provision to help pay for the billions of dollars in tax breaks in the bill, including to corporations, NASCAR track owners and gamblers from overseas.
"Congress wants to give us a lecture on the morality of these programs, and they're giving tax breaks for foreign gamblers," Roberts said.
Grassley said: "I'm discouraged that some charities seem to think it's all right for someone to cheat on his taxes to the tune of hundreds of dollars as long as the charity gets $50 out of it. That kind of thinking in the nonprofit world has to stop."
The House passed the bill late last night, and the Senate could vote on it soon. If the bill passes, the White House has said President Bush will sign it.