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A vehicle for change

October 03, 2004|by ANDREW SCHOTZ

andrews@herald-mail.com

Sometimes, charity begins outside the home - in the driveway.

Each year, people nationwide donate extra motor vehicles to nonprofit organizations in the name of tax writeoffs, convenient disposal or pure goodness.

Often, those vehicles are resold, earning money for the organizations - and, likely, private middlemen working for them.

In 2000, an estimated 733,000 tax returns had deductions for donated vehicles worth more than $500, according to a U.S. General Accounting Office report. The total worth of those vehicles was estimated at $654 million.

The American Institute of Philanthropy in Chicago says that about 4,300 charities with revenues of more than $100,000 accept car donations.

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By Taron Reeves' guess, the phenomenon of car donations started growing about eight years ago.

Reeves runs Car Program LLC, which bills itself as America's Car Donation Charities Center.

From Rancho Cordova, Calif., Car Program LLC manages car donations for hundreds of large and small charities across the country, Reeves said.

The list of two dozen charities available to people in Maryland - posted at Car Program LLC's Web site - includes the American Diabetes Association, the Disabled Police Officers Counseling Center and Chesapeake Wildlife Heritage.

Organizations hire his company to take in cars and resell them directly or through an auction.

"I can deal with the vagaries of bureaucratic fiefdoms," said Reeves, a car dealer.

He's not alone in the industry. Reeves said there are more than 100 companies in California alone doing something similar.

Car Program LLC keeps 30 percent of the proceeds of car sales and gives 70 percent to the charity.

Usually, the middleman's cut is higher, said Daniel Borochoff, the president of the American Institute of Philanthropy.

"Even the more reputable charities are satisfied with a 50 percent cut," he said.

About half of the charities with vehicle donation programs in California receive 40 percent to 59 percent of the proceeds from sales, the GAO report says, using data from the state attorney general's office.

To show where the money goes, the GAO report uses as an example a 1983 truck donated to a charity in 2001.

The truck was sold at an auction for $375.

"After deducting fund-raiser and advertising expenses, net proceeds totaled $63.00," the report says. "This amount was divided evenly between the fund-raiser and charity, leaving the charity with $31.50 from the vehicle donation."

To prepare his income tax return, the donor relied on a used-car guidebook's fair market price of $2,400, the report says.

In a column, Borochoff cites other GAO research, such as a 1990 Mercury station wagon that was valued at $2,915 on a tax return.

It was sold for $30 gross. After expenses, the charity lost $130.

Borochoff also refers to a confidential auto sales industry witness who testified at a Senate Finance Committee hearing about "fixing."

Middlemen purposely disable cars by pulling a fuse or turning a distributor cap, driving down both the car's auction price and the charity's share, the witness testified. After the auction, the buyer makes a slight fix and the car again is worth a higher amount.

Borochoff wrote that the Senate has tried to regulate vehicle donation programs by requiring more documentation. For example, donors must receive a written notice of the proceeds of the sale and a promise that the sale was between "unrelated parties."

The GAO report says some charities rely on car donations for as much as 98 percent of their budget.

"One charity reported that starting a vehicle donation program helped it avoid a potential deficit after it had to cancel a major fund-raising event due to the events of September 11, 2001," the report says.

For the Frederick Rescue Mission in Frederick, Md., car sale profits are less important than cars that can benefit clients.

The mission prefers donated cars that can be fixed up and given to graduates of its 12-month life recovery program, said Tom Skaggs, the director of transitional services.

If a car needs major engine work to be rejuvenated, that requires too much effort and money, he said.

Skaggs said the mission recently took in a well-kept 1992 Buick that passed a state inspection. It's scheduled to go to an October graduate of the program.

A 1997 Ford Taurus that needs some emission work also looks promising, he said.

The mission accepts lesser-quality cars that will be sold inexpensively, but "it's not something we've focused a lot of our attention on," Skaggs said. "There's a lot involved."

Money from cars sales is "minimal," he said.

Like the mission, the Lupus Foundation of America in Washington, D.C., uses Car Program LLC to collect and resell vehicles.

"Obviously, we needed someone with a national network," said Duane Peters, the vice president for advocacy & communications.

The foundation started accepting vehicle donations about 18 months ago, Peters said.

Car Program LLC has processed 741 vehicle donations for the Lupus Foundation of America, according to Corey Kusaba, who manages the foundation's account for Car Program LLC.

Of that number, the foundation has received payment for 263 vehicles, Kusaba wrote in an e-mail to the foundation last month.

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