As more folks donate unwanted cars for a nice writeoff, some charities - and the federal government - take a harder look at the gifts.
By DAVE SCHEIBER
Published February 5, 2004
[Times files]
[Times files ]
Still stylin’
Some cars from the 1970s, including, from top, the Pontiac Trans-Am, Cadillac Eldorado and Plymouth Volare, can go for double or more the values listed in used-car guides.
PINELLAS PARK - Used car dealerships with splashy signs abound on 66th Street N. But you might easily miss the little lot near the corner of 58th Avenue, in the shadow of the sprawling Salvation Army Adult Rehabilitation Center.
The reason: It's run by the Salvation Army.
Set off by a few fluttering streamers and a small sign out front, the place doesn't have any high-energy sales folks slapping car hoods or driving a hard bargain. The operation is overseen by a gentle, white-haired grandmother who answers to a Salvation Army minister with the rank of major.
The Army's lot does a steady business selling donated vehicles, averaging $50,000 per month, with an average sale of $1,380 per vehicle at the end of 2003. On a recent day, the lot was packed with typical deals: a 1991 silver Lincoln Town Car for $2,500, a 1990 white Buick Century for $1,500, a 1995 green Saturn for $3,900 and much more.
But like many charities across the country, the organization has had to contend with its share of bad deals along the way: donated cars that were such a mess they couldn't even interest the junkyard.
What were these cars, often dropped off by people as a tax write-off, really worth?
Neither the Army nor similar operations such as Goodwill and Purple Cross have any idea what value people give their donated vehicles. But the U.S. government does. And in many cases, government officials are not at all pleased with what they are seeing: a substantial discrepancy between what some donors claim their vehicle is worth and the meager amount it may actually bring the charity.
According to a recent report by the General Accounting Office, in a story by the New York Times, donated vehicles have become a money-losing proposition for the government.
Specifically, it lost $654-million in taxes in 2000 because of overly generous tax deductions taken by many vehicle donors. Further, a study of 54 donations to four charities revealed a big problem. Charities received less than 5 percent of the claimed vehicle value in two of three instances.
Several times, the charities even wound up in the hole, having to pay middlemen hired to sell the virtually useless cars. The state of affairs has drawn the attention of the Senate Finance Committee, which may consider making sure the amount donors claim cannot exceed the price the charity gets. That would not apply only to vehicles, but other in-kind gifts such as donated boats, land, art, even patents.
The Salvation Army was well-aware of the issue before the GAO report.
"Every now and then we get cars that won't start," says Maj. Charles Nowell of the Salvation Army's center on 66th Street. "Maybe they started when we picked them up, or they have some transmission problem or something. But whatever the case, it didn't seem fair to me that people might be taking deductions for a car that they knew, and we knew, wasn't going to sell for very much money. And we were getting stuck with clunkers."
After taking over the program in 1998, Nowell made his lot an official state-licensed dealership in 2000. But he was often in a no-win situation.
"We'd wind up with a number of cars left over that didn't sell on the lot, so we'd set them in the back and have our own auctions," he says. "Well, then it got to where we wound up with cars we couldn't even sell in the auctions. And we couldn't get the scrap-metal people to take them. We couldn't get the junk yard to take them. We were just stuck."
So about six months ago, after finally getting the last dud off the lot, Nowell and car lot manager Iva Morrall implemented a new no-clunker policy for his lot.
"The first thing we ask people who call in and want to donate a vehicle is, "Does it run? Can you drive it to us?' " Nowell says. "Now, sometimes people take the insurance off the vehicle and don't want to drive it in. So we have dealer tags and a trailer, and we can go out to pick the vehicle up."
Another key change: Nowell's lot would no longer take any vehicle older than a 1990, unless it's a car that his mechanics examine and approve ahead of time or it's a classic (and in fact, he has a donated 1924 Ford Huckster priced at $14,000 and a 1930 Ford Model A expected to appraise in that range).
Other Salvation Army rehabilitation centers in Tampa, Miami and Fort Lauderdale became part of Nowell's dealership, serving as supplemental Salvation Army car lots. The biggest Salvation Army lot is in the Washington, D.C. area, where several thousand cars are donated weekly.
Nowell and Morrall price their donated cars by checking the Kelley Blue Book or the National Automobile Dealers Association guidebook. "We normally take the high and low retail value and wholesale value and come up with a number somewhere in between," Nowell says. "We're not trying to compete with car lots. We're just trying to get the best price we can for people shopping for bargains."
The new policy has meant fewer cars move through Nowell's lot. He typically has about 30 vehicles, compared with 80 or 90 previously. But the average price is now more than double the $500 to $600 for those cars that he managed to sell before. Starting this month, Nowell is experimenting with an auction (one per month) to sell the vehicles, hoping that better, newer cars will make auctions more lucrative than in the past.
Meanwhile, Morrall keeps the office running, occasionally confusing customers looking for a prototypical salesperson: "They look at me and they're looking for a man, and I say, "I'm here, can I help you?"'
She makes sure donors receive a receipt that they can fill out for taxes. Federal regulations prohibit not-for-profit groups from setting prices on donations. So people can fill in any price they wish. However, if a donor intends to claim the vehicle is worth $5,000 or more, the donor needs to fill out a special form and provide a professional appraisal so the sale can be tracked by the Internal Revenue Service.
If the sale brings considerably less than $5,000, the government can wind up readjusting the tax deduction filed by a donor.
"You betcha," says Patsy French, who oversees the vehicle donation program for Goodwill Industries Manasota in Sarasota, the group's only one in the Tampa Bay area. "That's true for any substantial donation, works of art, whatever."
Like the Salvation Army, French discounts donated cars by half their Blue Book value. But Goodwill accepts a vehicle in any condition.
"We pick up cars whether they're running or not," she says. "We have a towing service and some of the cars go directly to the junk yard for parts, and we still make money on those. We're grateful for the donation, whether a car is running and may never run again. We still make money, just not a heck of a lot."
French realizes that some donors may overinflate the value of their cars. "But that really is between a donor, their accountant if they have one, their conscience and the tax man," she says. "I'm sure there are many more instances where people pretty much nail (the value). They're looking to do the right thing."
She says many of her donors don't request a receipt because they file the short tax form, which doesn't itemize deductions.
Purple Heart, a national veterans charity, operates its only car donation program in Florida out of Lutz. Like Goodwill, the organization accepts vehicles in any condition.
"We sell either through auctions or salvage yards, and it's almost always a positive for us," says Muriel Dakers, head of the program. "We might make as much money on a car that drives as one that doesn't. Three-hundred dollars is better than nothing."
Dakers has two stipulations: vehicles must have titles, and can't be too far out of the area for Purple Heart staffers to tow nonworking cars to Lutz.
She says the issue of deductions rarely comes up. "I think people truly do this because they want to help veterans," she says. "We send them the (tax) form, but they say, "You don't need to do that."'
Several car donors contacted by the St. Petersburg Times said they consult the Blue Book and their accountant when determining their deduction.
"We try to be very fair about it, and the woman who does our taxes is very meticulous," says June Wumkes, who, along with husband, Richard, recently donated a '91 Town Car to the Salvation Army they had named Bluie. Last year, they gave the Army their '83 Town Car named Brownie, with June taking pictures and crying as the car was hauled away.
"We just feel that the Salvation Army does really good things," she says. "We could have sold the car and used the cash, of course. But this seemed like a way to do something good."
