GAO

United States General Accounting Office

A

Testimony

Before the Committee on Finance, U.S. Senate

For Release on Delivery 

Expected at 

10:00 a.m. EST 

Tuesday, April 1, 2003

VEHICLE DONATIONS 

Taxpayer Considerations 

When Donating Vehicles to 

Charities

Statement of Cathleen A. Berrick

Acting Director, Homeland Security and Justice

GAO-03-608T
Revenue from donated vehicles is a welcomed, and sometimes crucial, 

source of income for a number of charities. Donors, by following 

available guidance and making careful selection of charities for their 

donations, can provide charity support while benefiting themselves 

through tax deductions or disposing of unwanted vehicles. 

Taxpayers generally first learn about vehicle donation programs through 

advertisements. Interested donors call the advertised number and either 

reach a charity that operates its program in-house, or a third-party fundraiser acting on the charity’s behalf. The charity or fund-raiser asks 

questions of the potential donor regarding the vehicle, and then collects 

and sells the vehicle for proceeds. 

The proceeds a charity receives from a vehicle donation may be less than 

what a donor expects. Two factors contribute to this difference. First, 

charities often sell vehicles at auto auctions for wholesale prices rather 

than the prices donors may receive if they sold their vehicles themselves. 

Second, vehicle processing costs—whether the charity’s or the fundraiser’s---as well as the fund-raiser’s portion of net proceeds further 

reduces the amount of proceeds a charity receives. 

Of the 129 million individual returns filed for tax year 2000, an estimated 

733,000 returns had tax deductions for vehicle donations that lowered 

taxpayers’ tax liability by an estimated $654 million. No data exist on 

whether these deductions were appropriately claimed. 

To assist donors in making decisions regarding vehicle donations, IRS 

and other organizations have issued guidance on steps potential donors 

should take before making vehicle donations. These steps include 

verifying that the recipient organization is tax-exempt, asking questions 

about vehicle donation proceeds, and deducting only the fair market 

value of the vehicle on tax returns. 

The Vehicle Donation Process 

Advertisement

solicits donors

$ Revenue $

$ Revenue $

Auto auction /

dealers

Parts 

Reclaimer

Vehicles

are

donated

$ Net $

Proceeds

 

 

Charity or fundraiser

arranges

vehicle pickup

Autos

sold

Source: GAO.

According to the Internal Revenue 

Service (IRS), charities are 

increasingly turning to vehicle 

donation programs as a fundraising activity, resulting in 

increased solicitations for donated 

vehicles. Therefore, to make 

informed decisions about donating 

their vehicles, taxpayers should be 

aware of how vehicle donation 

programs operate, the role of fundraisers and charities in the vehicle 

donation process, and IRS rules 

and regulations regarding 

allowable tax deductions. Due to 

the increased use of vehicle 

donation programs, GAO was 

asked to describe (1) the vehicle 

donation process, (2) the amount 

of proceeds received by charities 

and fund-raisers, (3) donor tax 

deductions, and (4) taxpayer 

cautions and guidance. 

GAO is not recommending 

executive action. However, based 

on guidance issued by the IRS and 

other sources, GAO identified 

several steps that taxpayers should 

take before donating their vehicles 

and claiming tax deductions. 

These steps include 

• verifying that the recipient 

organization is tax-exempt, 

• asking questions about 

vehicle donation proceeds, 

• deducting only the fair 

market value of the vehicle, 

and 

• following state laws 

regarding title transfer for 

vehicles. 

www.gao.gov/cgi-bin/getrpt?GAO-03-608T.

To view the full testimony, click on the link 

above. For more information, contact 

Cathleen A. Berrick at (202) 512-3404, or 

berrickc@gao.gov. 

Highlights of GAO-03-608T, testimony 

before the Senate Finance Committee. 

April 1, 2003

VEHICLE DONATIONS

Taxpayer Considerations When Donating 

Vehicles to Charities 
Page 1 GAO-03-608T 

Mr. Chairman and Members of the Committee: 

I am pleased to be here today to discuss our ongoing work on vehicle 

donation programs. According to the Internal Revenue Service (IRS), an 

increasing number of charities are turning to vehicle donations as an 

effective way to raise money. In order to make informed decisions about 

these donations, however, taxpayers should be aware of how vehicle 

donation programs operate, the role of charities and third-party fundraisers in the vehicle donation process, and IRS rules and regulations 

regarding allowable tax deductions. 

The tax code generally allows taxpayers to deduct vehicle donations and 

other noncash contributions from their federal taxes if the donations go to 

certain qualified organizations such as churches and most nonprofit 

charitable, educational, and medical organizations. There is no national 

data identifying the percentage of charities that operate vehicle donation 

programs,1

 or the number of third-party fund-raisers that solicit donated 

vehicles on charities’ behalf. 

The proceeds from vehicle donations can be an important, and sometimes 

crucial, source of support for charities. 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. 

Other charities we spoke with estimated that vehicle donations made up 

from less than 1 percent to about 98 percent of their respective budgets. 

We plan to conduct a nation-wide survey of charities to determine their use 

of vehicle donation programs, and the importance of the programs to their 

operations. 

Because charities have increasingly turned to vehicle donation programs to 

raise funds, interest has been raised regarding how these programs 

operate. Accordingly, you asked us to describe how vehicle donation 

programs work, as well as information taxpayers should be aware of when 

donating their vehicles. Today, I will discuss (1) the vehicle donation 

process, (2) the amount of proceeds received by selected charities and 

1

 We use the term “vehicle donation” to refer to vehicles, boats, and farm equipment donated 

to a charity, although vehicles are most commonly donated. The term “vehicle donation 

program” refers to situations wherein a charity officially solicits donated vehicles, rather 

than occasionally accepting unsolicited vehicles. 
Page 2 GAO-03-608T 

commercial fund-raisers, (3) donor tax deductions, and (4) taxpayer 

guidance and cautions.

For my statement today, we relied on several sources, including an analysis 

of donor surveys regarding vehicle donations conducted by two charities, 

vehicle donation advertisements, and a sample of tax returns where 

taxpayers claimed deductions for donated vehicles. To determine how 

vehicle donation programs work, we also interviewed officials of IRS, 10 

states, 17 charities, 4 fund-raisers, and 5 related interest groups. We began 

our review in October 2002, and plan to issue a final report in September 

2003. 

In summary, our work to date shows the following: 

• There are two basic types of vehicle donation programs: those operated 

in-house by charities and those operated by third-party fund-raisers. For 

in-house programs, charities advertise for donated vehicles, pick up the 

vehicles, and sell the vehicles, generally at auto auctions or they salvage 

the vehicles for parts. For fund-raiser programs, fund-raisers generally 

perform the advertising, pick up, and selling functions, and also retain a 

portion of the net vehicle proceeds, after expenses. Individuals 

generally learn about vehicle donation programs through 

advertisements. A small percentage of the advertisements we reviewed 

could potentially mislead donors regarding allowable tax deductions. 

• Charities operating in-house vehicle donation programs, and those using 

the services of third-party fund-raisers, consider proceeds received from 

vehicle donations as a welcome source of revenue. However, the total 

proceeds a charity receives from a vehicle donation may be less than 

what a donor expects. We identified two factors that contribute to this 

difference. First, charities and fund-raisers often sell vehicles at auto 

auctions and receive wholesale prices rather than the prices donors 

might receive if they sold their vehicles to private parties. Second, 

vehicle processing and fund-raising costs are subtracted from vehicle 

revenue, further reducing proceeds. Although charity proceeds may be 

less than what a donor expects, results of donor surveys identified that 

in addition to supporting charitable causes, individuals most often 

donated their vehicles in order to claim a tax deduction, or to dispose of 

an unwanted vehicle. 

• Of the 129 million individual returns filed for tax year 2000, an estimated 

0.6 percent, or 733,000 returns, had tax deductions for vehicle 
Page 3 GAO-03-608T 

donations. The vehicle donation deductions totaled an estimated $2.5 

billion of the $47 billion in noncash contributions claimed. The vehicle 

donations deductions lowered taxpayers’ income tax liability by an 

estimated $654 million of the $1 trillion tax liability reported on returns. 

• Because of the number of charities that are involved in vehicle donation 

programs, IRS and other organizations have issued guidance on steps 

potential donors should consider before donating their vehicles to 

charity and claiming associated tax deductions. These steps include 

verifying that the recipient organization is a tax-exempt charity, asking 

questions about vehicle donation proceeds, deducting only the fair 

market value of the vehicle, and following state laws regarding title 

transfers for vehicles. In addition, in 2001 IRS created a cross-functional 

Donated Property Task Force to study issues surrounding donated 

property, including vehicle donation programs, and identify methods to 

monitor this area. 

I would now like to discuss these areas in more detail. 

The Vehicle Donation 

Process 

Individuals often first learn about vehicle donation programs through 

advertisements. Vehicle donation advertisements can be found on 

billboards, truck banners, and television, as well as in newsletters and even 

on small paper bags. Some of the most common mediums for vehicle 

donation advertisements include the radio, newspapers, and the Internet. 

Based on a sample of advertisements we reviewed,2 we found that 

advertisements for vehicle donations often identified that individuals could 

claim tax deductions for the donations, the donations served charitable 

purposes, and the donors’ vehicles would be towed free of charge. Figure 1 

identifies the most common claims made in the newspaper, radio, and 

Internet advertisements we reviewed. 

2

 We analyzed 147 advertisements for vehicle donations, including 69 newsprint 

advertisements from a sample of 50 newspapers nationwide, 33 radio advertisements from 

19 radio stations in the top 10 U.S. markets, and 45 Internet advertisements. Our results 

cannot be projected to all vehicle donation advertisements.
Page 4 GAO-03-608T 

Figure 1: Most Common Claims in Newspaper, Radio, and Internet Advertisements Reviewed

Note: GAO analysis of 147 vehicle donation advertisements. Claims classified as “other” included 

promises that vehicles would be picked up in 24 hours, title transfer would be handled, or contributions 

would be used locally.

IRS has expressed concern about some vehicle donation advertisements.3 

According to an official from IRS’s Tax Exempt Division, tax deduction 

claims are potentially deceptive when they do not specify that taxpayers 

must itemize their deductions to claim a vehicle donation, since many 

taxpayers do not itemize. Of the 147 advertisements we reviewed, 117 

0

10

20

30

40

50

60

70

80

90

100

Newspaper

Radio

Internet

Ads with 

no claims

Tax deduction Serves 

charitable 

purpose

Free 

towing/

pick up

Vehicles 

accepted 

running 

or not

Avoid 

hassles

Some 

restrictions

Percent 

going to 

charity

Other 

Percentage

Source: GAO. 

3

 Responsibility for oversight of advertisements is diffused. The Federal Communications 

Commission defers regulatory authority regarding false advertising on radio or television to 

the Federal Trade Commission (FTC). FTC is charged with taking action against unfair or 

deceptive acts that affect commerce. FTC does not have specific jurisdiction over charities, 

but may become involved in cases of fraud. State officials are primarily responsible for false 

advertising by charitable organizations. Officials we interviewed from two states said that 

limited resources prevent them from providing broad oversight over advertisements, and 

that they generally review advertisements in response to consumer complaints, or when 

they discover that charities or fundraisers are soliciting in their state without being 

registered. 
Page 5 GAO-03-608T 

identified that taxpayers could claim a tax deduction, but only 7 

advertisements specified that donors must itemize in order to claim a 

deduction. 

IRS also expressed concern when advertisements claim donors can value 

their vehicles at full, or maximum, market value when claiming a tax 

deduction. IRS does not define full or maximum value, but believes these 

claims may be misleading since vehicles are required to be valued at fair 

market value. IRS stated that these advertisements may be particularly 

misleading when they also claim that vehicles will be accepted whether 

they are running or not. Fair market value equals what a vehicle would sell 

for on the market, and takes into account a vehicle’s condition and mileage, 

among other factors. Of the 117 advertisements we reviewed that mention 

tax deductions, 38 specified that donors could claim fair market value on 

their tax returns when donating their vehicles; while 8 identified that a 

donor could claim full or maximum market value. Other advertisements 

referred potential donors to the IRS Web site, an accountant, used car 

guides such as the Kelley Blue Book,4

 or other sources for guidance on 

claiming a tax deduction.

After deciding to donate a vehicle to charity, a donor will generally 

encounter one of two types of vehicle donation programs: those operated 

by charities (in-house) and those operated by a for-profit or not-for profit 

fund-raiser (fund-raiser). Donors may not know whether they are donating 

vehicles directly to charities or through fund-raisers.5

 Figure 2 identifies 

the vehicle donation process for both in-house and fund-raiser vehicle 

donation programs.

4

 The Kelley Blue Book is one of several guides listing values for various models of used 

vehicles based on their condition and mileage. 

5

 This may not be a factor for donors if their primary motivation is disposing of their vehicle.
Page 6 GAO-03-608T 

Figure 2: Vehicle Donation Process 

For in-house programs, charities, typically larger ones, advertise for vehicle 

donations, and respond to donor’s initial call inquiring about a donation. 

After the charity determines that it will accept the vehicle,6

 it arranges to 

have the vehicle picked up, often towed, and delivered to wherever it will 

be stored until it is liquidated. The charity provides the donor with a receipt 

when the vehicle is picked up, or at a later time to document the donation 

for tax purposes. At the time the vehicle is picked up, the charity obtains 

the title of the vehicle from the donor, and some charities may provide 

donors with state-required forms (e.g., release of liability) or references for 

establishing the tax deductible value of their donated vehicles (e.g., Kelley 

Blue Book or IRS guidance). Charities we spoke with stated that it is up to 

the donor to establish the vehicle’s value. Once the donated vehicles are 

collected, they are generally sold at auto auctions or salvaged for parts, but 

may also be sold to auto dealers or to the general public. Charities with inhouse programs keep 100 percent of the net proceeds after deducting costs 

associated with processing the vehicles. 

Advertisement

solicits donors

$ Revenue $

$ Revenue $

Auto auction /

dealers

Parts 

Reclaimer

Vehicles

are

donated

$ Net $

Proceeds

 

 

Charity or fundraiser

arranges

vehicle pickup

Autos

sold

Source: GAO.

6

 When a charity or commercial fund-raiser receives the initial call from a potential donor, 

the donor is asked questions about the vehicle, including the vehicle’s make, year, and 

condition, and whether the donor has the title. Some programs will only accept vehicles 

expected to produce a profit after towing and other expenses. Charities sometimes will 

accept vehicles regardless of condition, because, as one charity stated, they view accepting 

vehicles with little value as generating goodwill for future donations. 
Page 7 GAO-03-608T 

For fund-raiser programs, 7 fund-raisers generally perform some or all of 

the tasks associated with advertising, vehicle pick up, and vehicle disposal. 

After deducting expenses, fund-raisers keep a portion of the net proceeds 

from the vehicle sale or salvage, providing the remainder of the proceeds to 

the specified charity. A charity working with a fund-raiser may have no 

oversight of the process, leaving the operation of the program, and 

distribution of proceeds, up to the fund-raiser. 

The relationship between charities and fund-raisers varies, depending on 

the agreements they have established. Some commercial fund-raisers may 

handle vehicle donation programs for many charities. For example, one 

national fund-raiser has contracts with about 140 charities, and another 

works with about 200 charities. Charities may also contract with multiple 

fund-raisers. Fund-raisers often support smaller charities that would not 

otherwise be able to participate in vehicle donation programs. For 

example, at one California charity, a staff person spent half her time 

working with two vehicle donation fund-raisers, which together generated 

about $110,000 for the first six months of the current year (approximately 

8 - 10 percent of its annual budget).

In addition to the in-house and fund-raiser programs described above, we 

identified some variations in how vehicle donation programs operate. For 

example, see the following: 

• Some charities refurbish donated vehicles for their own program 

services or clients, rather than for sale or salvage.

• One state consortium of 14 charities jointly runs a vehicle donation 

program in conjunction with a wrecking yard. The charities share in 

oversight of the operations, such as inspecting donated vehicles and 

monitoring vehicle donation reports. Donors can select one charity to 

receive the proceeds, or proceeds are split among members of the 

consortium equally if no charity is designated. 

• One large charity runs a national vehicle donation program and serves 

regional offices as a fund-raiser would, charging its regions vehicle 

processing costs. Some of the charity’s affiliates choose other fundraisers and do not participate in the national program.

7

 Some charities perform vehicle donation fund-raising for other charities, but most of the 

vehicle donation fund-raisers we identified were for-profit businesses. 
Page 8 GAO-03-608T 

• Another large charity runs a national program and serves charity 

affiliates but also has a nonprofit vehicle donation program for other 

smaller charities.

Vehicle Donation 

Proceeds 

The total proceeds a charity receives from a vehicle donation may be less 

than what a donor expects. We identified two factors that contribute to 

this difference. First, charities and fund-raisers often sell vehicles at auto 

auctions for wholesale or liquidation prices or to salvage yards for parts, 

rather than obtaining the amount they would receive if vehicles were sold 

to private parties. Second, vehicle processing and fund-raising costs are 

subtracted from vehicle revenue, further lowering proceeds.

According to a 2001 survey of charitable donors commissioned by the Wise 

Giving Alliance, donors expect at least 70 to 80 percent of a charity’s funds 

to be used for charitable purposes rather than fund-raising or 

administrative costs. Actual charity receipts reported to state officials for 

charity fund-raising are less. For example, in New York telemarketing 

fund-raisers (not specifically vehicle donations) returned 32 percent of 

funds raised for charities in 2000. Although donors are often motivated by 

serving a charitable cause when donating their vehicle, the results of donor 

surveys identified that individuals are also motivated by the ability to claim 

a tax deduction and to dispose of an unwanted vehicle. 8 

Figure 3 provides an example of the amount a charity received from an 

actual vehicle donation. In this case, a 1983 truck was donated in 2001 to a 

charity whose vehicle donation program is operated through a fund-raiser. 

The gross sale price for the truck (sold at an auction) was $375. After 

deducting fund-raiser and advertising expenses, net proceeds totaled 

$63.00. This amount was divided evenly between the fund-raiser and 

charity, leaving the charity with $31.50 from the vehicle donation. The 

donor claimed a deduction of $2,400 on his or her tax return, based on the 

fair market value of the vehicle as identified in a used car guidebook. 

8

 Two charities shared voluntary feedback provided by vehicle donors. Over 3,000 donors 

responded in one survey and about 400 responded in the other. We did not review the 

methodology for the surveys and consider the results to be illustrative. 
Page 9 GAO-03-608T 

Figure 3: Example of Vehicle Donation

Note: GAO analysis of an actual vehicle donation.

Charities operating in-house vehicle donation programs incur costs 

associated with processing vehicles for sale or salvage, but do not incur 

additional fees generally associated with fund-raiser programs. Processing 

costs cannot be compared among in-house programs because charities may 

record their costs differently. One of the few in-house charities we spoke 

with reported that it earned a net average of 42 to 44 percent of the sales 

price of donated vehicles. Another charity operating a national program 

for local affiliates reported a range of 13 to 32 percent net proceeds for 

programs operating for over 2 years, and a deficit to slightly in excess of 

breakeven for newer programs. 

Proceeds received by charities participating in vehicle donation programs 

run by fund-raisers also varied, in part due to the different processing costs 

deducted by fund-raisers, as well as different agreements between charities 

and fund-raisers for splitting net proceeds. Some charities receive a 

percentage of the net proceeds, after the fund-raisers costs are deducted. 

Other charities receive the net proceeds remaining after the fund-raiser 

deducts a flat fee for expenses.

Source: GAO.

Vehicle

donation

1983 Truck

Gross sale

price

(wholesale)

Truck sold at auction

for $375.00

Proceeds

after

expenses

After deducting

$312.00 in

fundraising and

advertising costs,

the net proceeds of

$63.00 are split

with charity

For tax

deduction

Donors claimed

$2400 on tax

return

Net

proceeds

to charity

Charity receives

$31.50, half of

the net proceeds

from donation
Page 10 GAO-03-608T 

California is the only state that systematically captures information on the 

percentage of proceeds received by charities through vehicle donation 

programs.9

 However, California only captures information related to 

programs run by fund-raisers, and cannot separately identify the number of 

charities that operate in-house programs. According to a report from the 

California State Attorney General’s Office, less than 1 percent of registered 

charities in California have vehicle donation programs that are managed by 

commercial fund-raisers. In 2000, these fund-raisers generated 

approximately $36.8 million in sales revenue, with about $11.3 million 

(31 percent on average) being returned to the charities. As shown in figure 

4, California charities received proceeds from fund-raiser programs ranging 

from less than 20 percent to over 80 percent of the net proceeds from 

vehicles, but most were in the 40 – 59 percent range. 

Figure 4: Vehicle Donation Proceeds to California Charities Using Fund-raisers

9

 National data on the proceeds charities receive from vehicle donation fund-raising do not 

exist. Although IRS’s Form 990 collects information from charities on fund-raising costs, it 

does not identify the portion, if any, related to vehicle donations. 

6

15

94

41

31

0

10

20

30

40

50

60

70

80

90

100

Less

than 20

20-39 40-59 60-79 80 

or more

Percent of proceeds received by charity

Number of charities

Source: California Attorney General’s Office. 
Page 11 GAO-03-608T 

Issues relating to charity proceeds from fund-raising reached the Supreme 

Court on March 3, 2003, in arguments related to “Ryan v. Telemarketing 

Associates”. The Attorney General of Illinois is appealing a decision of the 

Illinois Supreme Court10 to dismiss fraud charges against Telemarketing 

Associates. At issue were solicitations implying that cash donations would 

go to a charity to buy food baskets and blankets for needy veterans, while 

only 15 percent of the funds raised actually went to the charity. As part of 

the case, donor affidavits were reviewed stating that some individuals 

would not have donated if they knew the percentage of proceeds the 

charity would actually receive. The Supreme Court has ruled in three 

previous cases that percentage-based limitations on charitable solicitations 

were unconstitutional. The Supreme Court decision in this case is not 

expected until July 2003.

We plan to conduct a national survey of charities to further review vehicle 

donation proceeds received by charities and fund-raisers. We will identify 

any concerns regarding the amount of net proceeds fund-raisers keep from 

vehicle donations and the significance of vehicle donation programs to 

charity operations. Charities may consider proceeds from vehicle 

donations to be a welcomed, if not crucial, source of revenue to support 

their operations. For example, one charity stated that vehicle donations 

are “just keeping their heads above water.” 

Donor Tax Deductions The results of donor surveys we reviewed indicated that the ability to claim 

a tax deduction is one of the most important reasons individuals donate 

vehicles to charity. However, we found that a small percentage of 

Americans claim tax deductions for vehicle donations. Specifically, we 

reviewed a representative sample of taxpayer returns that claimed noncash 

contributions for the tax year 2000. Of the 129 million returns filed that 

year, a projected 0.6 percent, or an estimated 733,000 returns11, had tax 

deductions for vehicle donations.

10 The Illinois Supreme Court held that the fund-raiser's conduct was protected under the 

First Amendment and the Attorney General's complaint was not legally sufficient because it 

was an attempt to impose a constitutionally impermissible percentage-based limitation on 

the fund-raiser's ability to engage in a protected activity.

11 Ninety-five percent confidence intervals:0.6 percent +/- 0.2 percent, and 733,000 returns +/- 

520,000 returns.
Page 12 GAO-03-608T 

We also found that deductions for vehicle donations accounted for a small 

fraction of forgone tax revenue. Based on the sample we reviewed, vehicle 

donation deductions totaled an estimated $2.5 billion12 of the $47 billion in 

noncash contributions claimed.13 Stocks and thrift store donations 

accounted for most of the tax dollars deducted for noncash charitable 

contributions. We estimate that in 2000, vehicle donations deductions 

lowered taxpayers’ income tax liability by an estimated $654 million14 of the 

$1 trillion tax liability reported on returns.

IRS guidance limits the amount of an allowable deduction to the vehicle’s 

fair market value, or the amount a willing, knowledgeable buyer would pay 

for the vehicle. We reviewed each deduction for vehicle donations in our 

sample to determine the average value claimed for donated vehicles in 

2000, and whether these values fell within the ranges identified in a 

nationally recognized blue book. We estimated that the average value 

claimed for donated vehicles in 2000 was $3,370,15 and that the amounts 

claimed for almost all of these vehicles fell within the blue book. However, 

since we did not have additional information regarding the vehicles’ 

condition and mileage, we could not determine whether reported values 

accurately reflected fair market value. 

For a donor to claim a vehicle tax deduction, the contribution must be 

made to a qualified organization. Churches and most nonprofit charitable, 

educational, and medical organizations are qualified.16 We submitted the 

names of charities from our sample that taxpayers reported on their 

returns to IRS to verify whether the recipient organization was qualified to 

receive tax deductible donations. Of the 22 charities IRS reviewed, it was 

able to verify that 10 of the charities were qualified to receive taxdeductible donations. IRS could not determine whether the remaining 12 

12 Ninety-five percent confidence interval: $2.5 billion +/- $2.0 billion.

13 Our estimates are based on taxpayers who were required to file Form 8283, “Noncash 

Charitable Contributions,” for noncash contributions exceeding $500. Some of these 

taxpayers may have claimed tax deductions for vehicle donations, but they were not 

required to list these transactions on their returns. 

14 Ninety-five percent confidence interval: $654 million +/- $480 million.

15Ninety-five percent confidence interval: $3,370 +/- $790. 

16 Other types of organizations that qualify for donations include war veteran organizations, 

domestic fraternal societies, certain nonprofit cemetery companies or corporations, and the 

United States and any state or local government.
Page 13 GAO-03-608T 

charities were qualified organizations because it needed more information 

than taxpayers reported on their tax returns, such as the organizations’ full 

names and addresses and employer identification numbers. 

IRS has a compliance program to review noncash donations, including 

vehicle donations generating revenue over $5,000, which compares the 

amounts received by a charity upon the sale of a donated item with the 

amount claimed by the taxpayer as the fair market value of the item. 17 

Although differences exist between fair market values and the proceeds 

from items sold at wholesale prices, this program gives IRS an indication of 

whether a particular donation should be further scrutinized. However, IRS 

has no data identifying whether cases referred for further review by this 

program are ever pursued. 

IRS is also in the process of implementing a National Research Program, 

which may provide data on compliance issues dealing with vehicle 

donations and other noncash contributions. Under the program, officials 

will randomly select about 49,000 tax year 2001 returns to determine 

whether taxpayers complied with statutory income, expense, and tax 

reporting requirements. Returns with noncash contributions, including 

donated vehicles, could be subject to audit to verify donation claims. Once 

this project is completed, IRS plans to assess individuals’ compliance 

related to deductions for noncash contributions, and determine whether 

more enforcement is needed to help ensure proper reporting in this area. 

Taxpayer Guidance 

and Cautions

IRS and other organizations, including the National Association of State 

Charity Officials and the Better Business Bureau, have issued guidance on 

steps potential donors should take before donating their vehicles to charity 

and claiming associated tax deductions. These steps include the following:

• Verify that the recipient organization is a tax-exempt charity. Potential 

donors can search IRS’s Publication 78, which is an annual cumulative 

list of most organizations that are qualified to receive deductible 

contributions. 

17 Charities file Form 8282 when donated property valued at over $5,000 is disposed of 

within 2 years of receiving it. 
Page 14 GAO-03-608T 

• Determine whether the charity is properly registered with the state 

government agency that regulates charities. The state regulatory agency 

is generally the state attorney general’s office or the secretary of state.

• Ask questions about how the donated vehicle will be used to determine 

whether it will be used as intended. Such questions include the 

following: Will the vehicle be fixed up and given to the needy? Will it be 

resold, and if so, what share of the proceeds will the charity receive?

• Itemize deductions in order to receive a tax benefit from the donation. 

The decision to itemize is determined by whether total itemized 

deductions are greater than the standard deduction. 

• Deduct only the fair market value of the vehicle. The fair market value 

takes into account many factors, including the vehicle’s condition, and 

can be substantially different from the blue book value. IRS Publication 

526, “Charitable Deductions,” and IRS Publication 561, “Determining the 

Value of Donated Property,” provide instructions on how to calculate the 

fair market value of donated property.

• Document the charitable contribution deduction. IRS Publication 526 

identifies requirements for the types of receipts taxpayers must obtain 

and the forms they must file.

• Follow state law regarding the car title and license plates. Generally, the 

donor should ensure that the title of the vehicle is transferred to the 

charity’s name, by contacting the state department of motor vehicles, 

and keep a copy of the title transfer. Donors are also advised to remove 

the license plates, if allowed by the state. 

The IRS and the states have identified few significant occurrences of abuse 

by charities and fund-raisers operating vehicle donation programs. 

However, the guidance above may help potential donors avoid donating 

vehicles to organizations that have not complied with laws or regulations 

related to vehicle donation activities, and prevent problems sometimes 

encountered with vehicle title transfers. For example, see the following: 

• IRS revoked the charity status for one Florida organization that solicited 

boat donations after finding that its charitable activities were 

insubstantial, and that proceeds were kept for personal gain. 
Page 15 GAO-03-608T 

• California charity officials prosecuted and jailed the owner of a used car 

lot soliciting vehicles for charity. The organization raised an estimated 

$1 million, none of which benefited charity. 

• In Massachusetts, a for-profit company solicited cars through 

newspaper ads, and led potential donors to believe that the organization 

was a charity and that all, or a substantial portion of, proceeds would go 

to a charitable purpose. In May 2002, Massachusetts brought an 

enforcement action in which the company’s president agreed to cease 

all further activity related to the car donation operation and dissolve.

• According to state agency officials, they often receive complaints from 

donors when charities do not transfer vehicle titles as promised. 

Donors found themselves responsible for parking violations, penalties, 

and in some cases damages when donated vehicles were subsequently 

involved in accidents. 

In addition to noncash contributions guidance found in various IRS 

publications and news releases, the IRS has publicized guidance regarding 

vehicle donations, and developed a training video for state and IRS 

compliance regulators. In 2001 IRS also created a cross-functional 

Donated Property Task Force to study issues surrounding donated 

property and identify methods to monitor this area. The task force, in 

cooperation with the National Association of State Charity Officials, is also 

surveying state charity officials to identify information that states collect 

on charity fund-raising, and on vehicle donations in particular. As of March 

2003, only California reported having data available on vehicle donation 

handled by fund-raisers. 

Mr. Chairman, this completes my prepared statement. I would be happy to 

respond to any question you or other Members of the Committee may have 

at this time.

Contacts and 

Acknowledgments

For further information regarding this testimony, please contact 

Cathleen A. Berrick, Acting Director, Homeland Security and Justice, at 

(202) 512-8777. Individuals making key contributions to this testimony 

include Ralph Block, Leo Barbour, Keira Dembowski, Michelle Fejfar, Tre 

Forlano, Lemuel Jackson, Monica Kelly, Brittni Milam, Amy Rosewarne, 

Sam Scrutchins, Kathleen Seymour, Addie Spahr, and Wendy Turenne.

(440167)