United States Government Accountability Office

GAO Report to the Chairman, Subcommittee 

on Select Revenue Measures, 

Committee on Ways and Means, House 

of Representatives 

VEHICLE 

DONATIONS 

Selected Charities 

Reported Mixed 

Experiences after 

Changes in Vehicle 

Donation Rules 

February 2008 

 

GAO-08-367 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

February 2008

VEHICLE DONATIONS

Selected Charities Reported Mixed Experiences after 

Changes in Vehicle Donation Rules 

Highlights of GAO-08-367, a report to the 

Chairman, Subcommittee on Select 

Revenue Measures, Committee on Ways 

and Means, House of Representatives 

In 2003, GAO found that many 

taxpayers’ estimates of the value of

their vehicles, claimed as tax 

deductions, were in excess of the

charities’ subsequent sales of the 

vehicles. Subsequently, effective 

January 1, 2005, the rules related to

the amount taxpayers can claim as

a deduction on their tax returns for 

vehicles donated to charities 

changed. Under the new rules, in

many cases the amount taxpayers 

are allowed to claim as a deduction 

is less than they could have 

claimed before the changes. Some

charities that used vehicle 

donations as a revenue source said

that the changes could lead to

fewer donated vehicles and 

reduced revenues. GAO was asked

to determine how charities have 

been affected by the 2005 changes. 

GAO discussed the rule changes 

with Internal Revenue Service 

(IRS) officials and the impact of the

changes with representatives of

several charities. GAO 

judgmentally selected 10 charities 

from among the 65 contacted in the

course of the 2003 GAO study. The 

experiences of these charities 

cannot be generalized to all 

charities because the selected 

charities were not drawn from a 

statistical sample of all charities 

with vehicle donation programs. 

What GAO Recommends

GAO is not making any 

recommendations in this report. 

The Acting Commissioner of 

Internal Revenue was provided a 

draft of this report for her review

and comment. IRS provided

technical comments which were

incorporated as appropriate. 

The selected charities GAO contacted reported mixed experiences after the 

rules for claiming a tax deduction for donating a vehicle were changed. Prior 

to the law change, taxpayers could claim estimated fair market value for any 

donated vehicle. However, beginning January 1, 2005, taxpayers are generally 

limited to deducting only the sales price of the vehicle when a donated vehicle 

is sold by the charity. The 10 charities GAO contacted reported varied 

experiences in the number of, quality of, and revenue from donated vehicles; 

some changes in their business operations; and mixed experiences with 

administering the changes in the rules. Of these 10 charities, when comparing 

2003 to 2006, 6 reported decreases in the number of vehicles donated and 

some of these decreases were substantial. Also, 3 charities reported an 

increase, and 1 did not provide data. Three reported an increase in quality, 3 a

decrease, and 4 no change. Six reported a decrease in vehicle donation 

revenue from 2003 to 2006, 3 an increase, and 1 did not provide data. GAO did 

not find a consistent pattern when comparing the number of donated vehicles 

with the revenue from the vehicle donation program or a charity’s overall 

revenue. In response to the rule changes, some charities changed their fundraising activities and some decreased services, such as reducing the hours for 

providing services. Examples of business operations changes include using 

minimum bids at auctions, selling vehicles online, and selling vehicles directly

to the public instead of through wholesalers. Finally, all 10 reported increased 

administrative burden due to increased reporting requirements, but they were 

able to accommodate the increase in paperwork. 

Changes in Amount Donors Can Deduct for a Charitable Contribution of a Vehicle 

Before changes in 

rules (any vehicle) 

After changes in rules (vehicles donated January 1, 2005, or later) 

Claimed value of

vehicle is $500 or less

Fair market value Claimed value of vehicle exceeds $500 

Lesser of fair market 

value or $500 

Fair market value if the 

charity intends to 

(a) make significant 

intervening use of

vehicle, (b) make

material improvement to 

vehicle, or (c) give or sell 

the vehicle to a needy 

individual in direct 

furtherance of the 

charity’s charitable

purpose 

Gross proceeds of the

sale if charity does not 

intend to do (a), (b), or 

(c) 

Source: GAO.

To view the full product, including the scope 

and methodology, click on GAO-08-367. 

For more information, contact Michael 

Brostek at (202) 512-9110 or 

brostekm@gao.gov. 
Contents 

Letter 1

Results in Brief 3 

Background 4

Charities Have Had Mixed Experiences with Their Vehicle 

Donation Programs since the 2005 Changes 8 

Agency Comments 14 

Appendix I Steps IRS Took to Implement Changes 15 

Appendix II IRS’s Plans to Ensure Charity and Donor Compliance 18 

Appendix III Objectives, Scope, and Methodology 21 

Appendix IV Information Charity Must Include in Written 

Acknowledgment 23 

Appendix V Charity and Donor Filing Requirements 25 

Appendix VI Detailed Descriptions of Charities 27 

Tables 

Table 1: Changes in Amount Donors Can Deduct for a Charitable 

Contribution of a Vehicle 5 

Table 2: Number of Vehicles Donated by Year 10 

Table 3: Information That Charity Must Include in Written 

Acknowledgment Sent to Donor 23 

Table 4: Donor’s Recordkeeping and Filing Requirements for 

Vehicles Donated to Charities 26 

Table 5: Charity A 27 

Table 6: Charity B 29 

Table 7: Charity C 31 

Page i GAO-08-367 Vehicle Donations
Table 8: Charity D 33 

Table 9: Charity E 35 

Table 10: Charity F 37 

Table 11: Charity G 39 

Table 12: Charity H 41 

Table 13: Charity I 43 

Table 14: Charity J 45 

Figure 

Figure 1: Vehicle Donation Process 6 

This is a work of the U.S. government and is not subject to copyright protection in the 

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Page ii GAO-08-367 Vehicle Donations
United States Government Accountability Office

Washington, DC 20548 

 

February 15, 2008 

The Honorable Richard E. Neal 

Chairman 

Subcommittee on Select Revenue Measures 

Committee on Ways and Means 

House of Representatives 

Dear Mr. Chairman: 

Vehicle donation programs are important sources of income for some 

charities, with many of these charities selling the donated vehicles and 

using the proceeds for their charitable purposes. In 2003, we found that 

many taxpayers’ estimates of the value of their vehicles, claimed as tax 

deductions, were far in excess of the proceeds of charities’ subsequent 

sales of the vehicles.1

 Subsequently, Congress changed the rules so that 

beginning in 2005, deductions for vehicles donated and then sold by the 

charities were to be limited to the gross sales price of the vehicle with 

some exceptions.2

 Some charities were concerned that this would lead to 

fewer vehicle donations and less revenue for the charities to use in pursuit 

of their missions. 

Because of your interest in the effect of the vehicle donation rule changes,

you asked us to determine how charities have been affected by the 2005

changes to the amounts donors can claim on their tax returns for donated 

vehicles. In addition, as you requested, appendixes I and II include 

information about the steps the Internal Revenue Service (IRS) took to 

implement these changes and to ensure charity and donor compliance. 

To determine how charities have been affected by the 2005 changes, we 

reviewed the new vehicle donation rules that became effective January 1, 

2005, and compared them to the previous vehicle donation rules. In 

addition, we attempted to contact the 65 charities we interviewed for our 

November 2003 report about the vehicle donation process. We reached 58 

of these charities and determined which of them still operated vehicle

donation programs as of August 2007, if they used contractors to operate 

 1

GAO, Vehicle Donations: Benefits to Charities and Donors, but Limited Program 

Oversight, GAO-04-73 (Washington, D.C.: Nov. 14, 2003). 

2

Prior to this, the taxpayer could claim the fair market value of the donated vehicle. 

Page 1 GAO-08-367 Vehicle Donations
the programs, and approximately how many donated vehicles they 

received in 2006 or 2007.

3

 We selected 10 of these charities that still 

operated programs and 1 that no longer operated a program and 

conducted in-depth interviews with charity officials to obtain their views 

about how they were affected by the changes in the amounts donors could 

claim on their tax returns. To ensure that we obtained the views of 

officials who operated a wide variety of vehicle donation programs, we 

selected, based on the results of our initial screening contacts, charities 

that did and did not use the exceptions to the gross proceeds of sale rule4

and charities that used or did not use contractors to operate their vehicle

donation programs. Also, our screening contacts indicated that some 

charities had vehicle donation programs that increased, stayed about the 

same, or decreased in terms of the number of donated vehicles in 2006 or 

2007 in comparison to 2002, and we selected a similar mix of charities for 

our in-depth interviews. The information provided by charity officials is 

anecdotal and cannot be generalized to other charities that operate vehicle 

donation programs. We did not independently verify the information 

provided by the charity officials. 

We also reviewed and analyzed documents related to the rule changes, 

including IRS publications, forms and instructions, and notices, and 

Treasury Inspector General for Tax Administration (TIGTA) reports and 

our reports related to charitable contributions of vehicles or other 

noncash contributions. In addition, we interviewed TIGTA officials as well 

as IRS officials from the Tax Exempt and Government Entities, Wage and 

Investment, Small Business/Self Employed, and Large and Mid-Sized 

Business Divisions and analyzed related documents to determine IRS’s 

plans for ensuring that charities and donors comply with the requirements 

related to vehicle donations or other noncash contributions. We 

performed our work from June 2007 through January 2008 in accordance 

 3

We could not contact a representative sample of charities that operate vehicle donation

programs because IRS officials and the President of the National Association of State

Charity Officials said they did not know of any organization that maintained a list of 

charities that operate vehicle donation programs. 

4

Many donors are limited to deducting the gross proceeds of the sales of their donated

vehicles on their tax returns. However, there are three exceptions to this rule. The three

exceptions are that the charity intends to make a significant intervening use of the vehicle, 

the charity makes a material improvement to the vehicle, or the charity sells the vehicle in

direct furtherance of its charitable purposes. If a vehicle donation meets one of the 

exceptions, the donor can deduct the fair market value of the donated vehicle on his/her 

tax return. 

Page 2 GAO-08-367 Vehicle Donations
with generally accepted government auditing standards. Our scope and 

methodology are described in greater detail in appendix III.

Selected charities reported mixed experiences after the rules related to the 

amount taxpayers could claim as a deduction for donating a vehicle to a 

charity changed.5

 We interviewed officials from 10 of the 65 charities we 

previously interviewed in 2003 who still operate a vehicle donation 

program. They reported varied experiences in the number of, quality of,

and revenue from donated vehicles; some changes in their business 

operations; and mixed experiences with administering the changes in the 

rules. Some charities experienced a substantial decline in the number of 

vehicles donated from 2003 to 2006. For those same years, of the 10 

charities covered in our in-depth interviews, 6 reported decreases in the 

number of vehicles donated, 3 reported increases, and 1 did not provide 

data. However, when comparing years 2005 to 2006, 4 of the 5 charities 

that reported using one of the exceptions to the gross proceeds of sale rule 

also reported an increase in the number of vehicles donated. Charity 

experiences with the quality of donated vehicles varied. Three of the 10 

charities reported an increase in quality, 3 reported a decrease, and 4 

reported no change. 

Results in Brief 

In terms of vehicle donation revenue, officials from 6 of the 10 charities 

reported a decrease from 2003 to 2006, 3 reported an increase, and 1 did 

not provide data but reported that the rule changes had no effect on the 

number of vehicle donations or revenue. We did not find a consistent 

pattern when comparing the number of vehicles donated with the revenue

from the vehicle donation program or the charity’s overall revenue. To 

deal with the decrease, some charities changed their fund-raising activities

and some decreased services, such as reducing the number of hours 

services would be provided. Examples of changing business operations 

include using minimum bids at auctions, selling vehicles online, and selling 

vehicles directly to the public rather than to wholesalers. Finally, all 10 of 

the charities reported that they had experienced an increase in 

administrative burden because of the increase in reporting requirements, 

but the charities were able to accommodate the increase in paperwork. 

 5

The experiences of these charities cannot be generalized to all charities because these 

selected charities were not drawn from a statistical sample of all charities with vehicle 

donation programs. 

Page 3 GAO-08-367 Vehicle Donations
The Acting Commissioner of Internal Revenue was provided a draft of this

report for her review and comment. IRS provided technical comments, 

and we incorporated them as appropriate. 

Section 884 of the American Jobs Creation Act of 20046

 changed the rules 

for the amount taxpayers could claim as a deduction on their tax returns 

for donating a qualified vehicle7

 to a charity.8 The new rules were effective 

for all vehicle donations made after December 31, 2004. Prior to this 

change, eligible taxpayers could claim up to the fair market value of the 

donated vehicle as a deduction on their tax returns. For any vehicles 

donated to a charity on January 1, 2005, or later with a claimed value that 

exceeds $500, taxpayers can only claim the lesser of the vehicle’s fair 

market value or gross proceeds of the sale as a deduction on their tax 

returns unless the charity’s intended use of the donated vehicle meets one 

of the three exceptions9

 to the gross proceeds of the sale rule. If one of the 

exceptions is met, the taxpayer may be eligible to claim the fair market 

value of the vehicle as a deduction.10 The three exceptions are 

Background 

• the charity intends to make a significant intervening use of the vehicle;11

• the charity intends to make a material improvement to the vehicle;12 or 

 6

Pub. L. No. 108-357 § 884 (Oct. 22, 2004). 

7

A qualified vehicle is any motor vehicle manufactured primarily for use on public streets, 

roads, and highways; a boat; or an airplane. However, a vehicle held by the donor primarily 

for sale to customers, such as inventory of a vehicle dealer, is not a qualified vehicle. 

8

Taxpayers can deduct contributions of vehicles if they itemize their deductions on 

Schedule A (Itemized Deductions) of Form 1040 (U.S. Individual Income Tax Return). 

9

Publication 4303 (A Donor’s Guide to Vehicle Donations; revised February 2006), provides

an explanation of the exceptions and other guidance related to vehicle donations. 

10To be eligible, the taxpayer must itemize deductions on his/her Schedule A (Itemized 

Deductions) of Form 1040 (U.S. Individual Income Tax Return). The taxpayer must also file 

other required documentation. See app. V, table 4 for details. 

11To qualify as a significant intervening use, the charity must actually use the vehicle to 

substantially further its regularly conducted activities and the use must be considerable. 

For example, a charity that delivers meals to needy individuals and uses a donated vehicle 

to deliver meals every day for a year is making a significant intervening use of the donated 

vehicle.

12A material improvement includes a major repair or improvement that results in a 

significant increase in the vehicle’s value. Cleaning, minor repairs, and routine maintenance

are not material improvements. 

Page 4 GAO-08-367 Vehicle Donations
• the charity intends to give or sell the vehicle to a needy individual at a 

price significantly below fair market value in direct furtherance of the

charity’s charitable purpose. 

If the charity sells the vehicle for $500 or less and the exceptions do not 

apply, the taxpayer can deduct the lesser of $500 or the vehicle’s fair 

market value on the date of the contribution. Table 1 summarizes the 

amount donors could deduct for charitable contributions of vehicles 

before and after the changes in the rules for such deductions.

Table 1: Changes in Amount Donors Can Deduct for a Charitable Contribution of a

Vehicle 

Before changes in

rules (any vehicle)

After changes in rules (vehicles donated January 1, 2005, or 

later) 

Claimed value of 

vehicle is $500 or 

less Claimed value of vehicle exceeds $500 

Fair market value Lesser of fair market 

value or $500 

Fair market value if 

the charity intends to 

(a) make significant 

intervening use of 

vehicle, (b) make 

material 

improvement to 

vehicle, or (c) give or 

sell the vehicle to a 

needy individual in 

direct furtherance of 

the charity’s 

charitable purpose 

Gross proceeds of 

the sale if charity 

does not intend to do 

(a), (b), or (c) 

Source: GAO.

The vehicle donation process generally consists of six steps: 

(1) solicitation/donor contact, (2) vehicle pickup, (3) vehicle sale, 

(4) distribution of proceeds, (5) charity provides donor with written 

acknowledgment, and (6) charity and donor file required forms with IRS.13

The vehicle donation process is depicted in figure 1. 

Vehicle Donation Process 

 13This six-step process is the usual course of handling vehicle donations according to the 

charities included in GAO-04-73 and the charities we contacted as part of this review. 

Page 5 GAO-08-367 Vehicle Donations
Figure 1: Vehicle Donation Process 

Vehicle pickup

Third-party

agent

Individual vehicle donor replies to 

charity or third-party advertisement

One from the 

charity and two 

from the donor

Third-party 

agent

Vehicle 

sold

Charity Proceeds distributed

Source: GAO depiction of information obtained from charities and third-party agents. 

Step 1

Solicitation / 

donor contact

Step 2

Vehicle pickup

Step 3

Vehicle sold

Step 4

Proceeds

distributed

Step 5

 Charity sends

donor written 

acknowledgment

Step 6

 Charity and donor 

file forms with IRS

Charity

Step 1 – Solicitation/donor contact. The vehicle donation process 

generally begins with solicitations for donated vehicles through 

advertisements. Vehicle donations may be solicited directly by charities, 

third-party agents, or both, depending on the agreement between the 

charities and third-party agents. Vehicle donations are solicited through 

advertisements on the radio, in newspapers, on the Internet, on truck 

banners, on television, and on billboards. Also during this step, donors 

initiate contact with the charity and or third-party agent to donate their 

vehicles. Either a charity or third-party agent may take the initial call from 

a potential donor, asking the donor questions that may be used to screen 

vehicles, such as the vehicle’s make, year, and condition and if the donor 

has the title to the vehicle. 

Step 2 – Vehicle pickup. After the donor makes the initial call to donate a 

vehicle, arrangements are made to pick up the vehicle and deliver it to 

wherever it will be stored until it is sold. Once vehicles are picked up, the 

charity or third-party agent also obtains the title of the vehicle from the 

donor. 

Page 6 GAO-08-367 Vehicle Donations
Step 3 – Vehicle sale. Once collected, donated vehicles are most often 

sold. Charities or third-party agents typically sell donated vehicles through 

auctions to auto dealers,14 to the public, or to vehicle salvagers. 

Step 4 – Distribution of proceeds. After vehicles have been liquidated, the 

proceeds are distributed. Charities with in-house vehicle donation 

programs keep proceeds that remain after deducting costs associated with

processing the vehicles. When charities use third-party agents, the 

financial agreement between the charity and the third-party agent dictates 

the proceeds that the charity and fund-raiser will receive from the sale. 

Step 5 – Charity provides donor with written acknowledgment. Charities 

are required to provide a contemporaneous written acknowledgment to 

the taxpayer for any contribution of a vehicle with a claimed value that 

exceeds $500. The charity can either create its own acknowledgment, or it 

can use Copy B of Form 1098-C (Contributions of Motor Vehicles, Boats, 

and Airplanes) as the contemporaneous written acknowledgment. For 

details about the information that must be included in the written 

acknowledgment, including contributions with a claimed value of $500 or 

less, see appendix IV. 

Step 6 – Charity and donor filing requirements. The charity must file a 

Form 1098-C if a donor contributes a qualified vehicle to a charity with a 

claimed value of more than $500. Charities are not to file Form 1098-C for 

contributions of qualified vehicles with a claimed value of $500 or less. 

Donors must attach Copy B of Form 1098-C, or a copy of the 

acknowledgment if the charity does not use Copy B for this purpose, to 

their returns if they are claiming a deduction of more than $500. A donor 

must also file Form 8283 (Noncash Charitable Contributions) if the 

deduction he/she is claiming for a donated vehicle is greater than $500 and 

attach it to the Form 1040 (U.S. Individual Income Tax Return). For more

information on the filing requirements for charities and donors, see 

appendix V.

 14These auctions are sometimes referred to as wholesale auctions. 

Page 7 GAO-08-367 Vehicle Donations
We contacted 58 charities during August 2007 and found that almost all of 

them still operated their vehicle donation programs. We conducted indepth interviews with officials from 10 of these charities15 and learned that

changes in the number of donated vehicles did not appear to correspond 

with changes in the quality of vehicles donated or with changes in overall 

fund-raising. Also, some charities have developed innovative ideas to 

increase revenue from vehicle donations. 

Charities Have Had 

Mixed Experiences 

with Their Vehicle 

Donation Programs 

since the 2005 

Changes 

Charities Continue to 

Operate Vehicle Donation 

Programs 

Almost all of the charities contacted still operated their vehicle donation 

programs as of August 2007. In 2003, we interviewed officials from 65 

charities when collecting data for our previous report.16 We attempted to 

contact all of these charities and successfully reached 58 of them.17

Through these contacts, we learned that all but 5 of the 58 charities still 

operated vehicle donation programs. During these contacts, we asked 

about changes in the numbers of vehicles being donated before and after 

the rule changes. Not all of the charities in our screening interviews 

provided information about the number of donated vehicles; 30 charities 

gave us this information and 21 of them said that they had seen a decrease,

and the rest said that they saw increases or no change. Some of these 

changes were large, while others were fairly small. 

We conducted an in-depth interview with an official from one of the five 

charities that no longer operates a vehicle donation program. According to

the official, charity managers decided to discontinue the vehicle donation

program before the rules were changed, choosing instead to focus their 

fund-raising activities on a large fund-raising campaign that lasted for a 

few years. The official said that by reallocating the resources that had 

been devoted to the vehicle program, the charity could raise more money 

by focusing on obtaining large donations from selected donors for its fundraising campaign. At the remaining four charities that no longer had 

vehicle donation programs, officials told us either that the employees who 

used to operate the vehicle donation program no longer worked for the 

 15See app. VI for details about each of the 10 charities.

16GAO-04-73. 

17For the remaining seven charities we either could not identify a current telephone number

or we attempted to contact the charity and the charity did not respond. 

Page 8 GAO-08-367 Vehicle Donations
charity and no other program officials could speak about the decision to 

discontinue the program or that the charity has not received any vehicles

for the past 2 to 3 years. 

Some Selected Charities 

Reported Substantial 

Declines in Number of 

Vehicles Donated and Had 

Varied Experiences with 

the Quality of Vehicles 

Donated 

For the 10 charities covered in our in-depth interviews, 6 reported 

decreases from 2003 to 2006 in the number of vehicles donated, 3 reported 

increases and 1 did not provide data, as shown in table 2; however, the

latter reported that the number of donated vehicles is about the same 

since the rule change.18 One charity’s donations declined by over 37,000 

vehicles, while others realized much smaller decreases ranging from about 

350 to 600 vehicles when comparing 2003 and 2006 data. However, when 

comparing years 2005 to 2006, 4 of the 5 charities that reported using one 

of the exceptions to the gross proceeds of sale rule reported an increase in 

the number of vehicles donated. It is important to note that not all of the 

vehicles donated to a charity that can use one of the exceptions to the 

gross proceeds of sale rule are eligible for the exception. For example, a

charity that gives donated vehicles to needy individuals in direct 

furtherance of its charitable purpose may sell some of the donated 

vehicles it receives. The vehicles given to needy individuals are eligible for 

the exception, but the vehicles that are sold to non-needy individuals are 

not. 

 18The 10 charities we selected for in-depth interviews experienced a similar proportion of 

increases and decreases in numbers of donated vehicles as the 30 that provided those data 

in our screening contacts. 

Page 9 GAO-08-367 Vehicle Donations
Table 2: Number of Vehicles Donated by Year

 Year 

 Charity 2003 2004 2005a 2006

Ab519 304 204 114

Bc - - - -

C 9,134 9,529 11,564 15,963

D 16,154 18,801 11,025 10,914

E 13 30 28 26

F 246 267 134 296

G 631 478 384 288

H 76,765 81,470 70,738 39,501

I 1,719 1,267 1,204 1,229

J 2,362 1,985 1,425 1,754

Source: Data reported by charity officials. 

Notes: Some charities use a calendar year and some use a fiscal year for reporting purposes and the 

latter did not all use the same fiscal year. In this report, when we cite a year, we are using data based

on the 12-month period used by each charity. Further, we did not independently verify the number of 

vehicles donated for each charity. Finally, the experiences of these charities cannot be generalized to

all charities because these selected charities were not drawn from a statistical sample of all charities 

with vehicle donation programs. See app. III for more information. 

a

The rule changes became effective in 2005. b

The charity reorganized the vehicle donation program after the rule changes to make one office 

responsible for the entire state. For purposes of consistency, these data represent only the portion of 

the state the office was responsible for prior to the change. c

This charity was not able to provide the number of vehicles donated each year. 

All of the six officials who reported a decrease in the number of vehicles 

donated to their charities attributed this decrease, at least in part, to the 

change in the rules. Some charity officials noted other factors that also 

may have affected the number of vehicles donated. For example, officials 

at two charities noted that there is more competition in the marketplace 

for donated vehicles. An official at another charity noted that vehicle 

donations often follow the trends in new vehicle sales, and if people are 

not buying as many new vehicles, they are less likely to donate vehicles.19

An official at a different charity said that she could not attribute reduced

donations fully to the rule changes because the charity had decreased its 

advertising of the vehicle donation program over the past few years. 

 19According to the National Automotive Dealers Association, new vehicle sales increased 

from about 16.6 million in 2003 to 16.9 million in 2005 (a 1.87 percent increase) and then 

decreased in 2006 to about 16.5 million (a 2.6 percent decrease).

Page 10 GAO-08-367 Vehicle Donations
Charity experiences with the quality of donated vehicles also varied. Three 

of the 10 charities reported an increase in quality, 3 charities reported a 

decrease in quality, and 4 charities reported no change in the quality of 

vehicles donated. One of the charities that uses one of the exceptions to 

the gross proceeds of sale rule reported that the quality of donated 

vehicles generally increased and more of these vehicles could be 

refurbished and given to needy individuals. The official said that in 2002 

the charity was only able to refurbish about 75 vehicles to give to clients 

while the charity gave away about 200 vehicles to clients in 2006. An 

official at another charity noted that the quality of the vehicles may be 

related to the demographics of the areas where the charity operates. In 

one area of the state, the charity tends to receive higher-quality vehicles 

because many of the area residents are retirees who are financially 

comfortable and able to donate their old vehicles, which are still in good 

condition, while donors in less-affluent parts of the state tend to donate 

vehicles that need to go straight to salvage yards. 

Officials from eight charities said that they will take any vehicle in any 

shape, although some charities stipulate that the cost to tow the vehicle 

cannot be more than the value of the vehicle. Some of those charities sell 

the vehicles to salvage yards for the price of the metal or to salvage yards 

that pay a flat fee to the charity for the vehicles. 

Some Selected Charities 

Reported Decreases in 

Vehicle Donation Revenue 

Officials we interviewed from 6 of the 10 charities reported a decrease in 

vehicle donation revenue from 2003 to 2006, 3 reported an increase, and 1 

did not provide data but reported that the rule changes had no effect on

vehicle donations or revenue. We did not find a consistent pattern when 

comparing the number of vehicles donated with the revenue from the 

vehicle donation program or the charity’s overall revenue. For example, 3 

of the 6 charities that reported decreases in revenue from vehicle donation

programs from 2003 to 2006 also reported a decrease in total revenue 

while the other 3 reported increases in total revenue. For 1 of these 

charities, the number of vehicles donated increased, while the revenue

from those vehicles and total revenue decreased. In another case, a charity 

reported a decrease in the number of vehicles donated but increases in 

both the revenue from the vehicle donation program and total revenue. 

Some of the charity officials we interviewed said that their organizations 

changed their fund-raising activities to offset the loss in revenue from their 

vehicle donation programs. For example, one charity started to increase 

the number of special events, such as tennis and golf tournaments and 

fund-raising dinners. In 2006, this charity held over 35 special events, 

Page 11 GAO-08-367 Vehicle Donations
which raised $1.2 million dollars. Another charity reported an increase in 

grant revenue to offset the loss in vehicle donation revenue but added that 

grant revenue is often earmarked for specific programs and activities 

unlike vehicle donation revenue, which can be used for general program 

administration. 

Five of the 10 charities we interviewed reduced services or made other 

changes in their programs because of the loss in revenue from their 

vehicle donation programs. For example, 1 charity curtailed some 

services, such as decreasing hours of operations at some homeless 

shelters. Previously, this charity operated a 24-hour facility targeted at 

single men and women, but now the charity only operates the facility in 

the evenings. This same charity instituted a hiring freeze and has 

postponed or canceled staff merit pay increases because of the loss in 

revenue. Another charity reported closing some local offices and reducing 

its staff. However, 2 charities noted that the total revenue from their 

vehicle donation programs was a small percentage of their overall budgets. 

As such, 1 of these charities said that the decline in vehicle donation 

revenue did not have much of an impact on its ability to provide services. 

Some of the Selected 

Charities Changed Their 

Vehicle Donation Business 

Operations in Order to 

Adapt to the New 

Environment 

In order to offset decreased revenue from the vehicle donation programs, 

some charities have changed their vehicle donation business operations. 

Examples of changes include using minimum bids, selling vehicles online, 

and selling vehicles directly to the public. 

One charity started placing a minimum bid amount on the vehicles sold at 

auction to help secure a higher selling price. The charity takes the chance 

that the vehicles will not sell and it will have to reclaim them at the end of

the auction. This practice helps ensure that the charity will receive the 

minimum sale amount for each vehicle at some point. The charity also 

sends a representative to the auction to oversee the vehicle sales. The 

charity official said that his organization found that it got better prices 

when it directly oversaw the auction than when it left the whole process to 

the auction house. 

One charity that provides services to needy persons has sold high-end 

vehicles on online auction sites such as eBay rather than giving them to 

needy individuals. Since high-end vehicles tend to have higher upkeep 

prices, the charity was concerned that the needy families would not be 

able to fix the vehicles if they broke down. Instead, the charity sells these 

vehicles at an online auction and uses the money in its program. This 

allows the charity to obtain more revenue than at a wholesale auction, 

Page 12 GAO-08-367 Vehicle Donations
since the general public is bidding on the vehicle, not just wholesale 

buyers. 

One of the charities we interviewed said that in response to the rule 

changes, it began operating a used car lot at the end of 2005. As a result, its 

revenue from vehicle donations doubled in 2006 over that of 2005, 

according to the charity official. 

Selected Charities 

Reported Mixed 

Experiences with 

Administering the Changes 

in Vehicle Donation Rules 

All of the charities said that administrative burdens have increased; 

however, some charity officials noted that they were able to accommodate 

the increase. The charity officials said that they had additional reporting 

requirements to contend with and that completing and filing the Form 

1098-C was time consuming. For example, an official at one charity stated, 

“it takes time to fill out the Forms 1098-C and to prepare the 

acknowledgment that is sent to the donors. We have to keep track of each 

sale in order to provide the sale information to the donor. The donor 

cannot claim a deduction until the vehicle is sold.” The official also noted 

that although it was a burden, the charity has been able to handle the 

increase in paperwork. An official at another charity noted that the money 

spent on donor mailings has increased because the charity sends out a 

donor package with explanations of how the vehicle will be used and the 

acknowledgment for the donation and then must also send the Form 1098-

C to the donor. According to the official, the paperwork has quadrupled 

but the charity can handle it. An official at a different charity stated that 

although it now has to file the Form 1098-C, the charity has also become 

more efficient at using technology and can therefore handle the increase in

paperwork. 

Six of the charities we interviewed reported difficulties with obtaining 

Social Security numbers from donors, while some of the others

experienced few or no problems. Two charities noted that if donors do not 

want to provide their Social Security numbers, then box 7a on the Form 

1098-C is checked and the donors cannot claim more than $500 for the 

vehicle donation. Two charities said that they explain why they need the 

donors’ Social Security numbers in the letters sent to donors. Four 

charities found that donors were nervous about providing their Social 

Security numbers, possibly for fear of identity theft. 

Six of the charities we interviewed noted that IRS’s guidance, forms, and 

publications are generally clear and user-friendly. In a few cases, charity 

officials were confused about some guidance. For example, one charity 

did not know the correct timing for sending the acknowledgments to the 

Page 13 GAO-08-367 Vehicle Donations
donors, questioning if it was 30 days from receipt of the vehicle or 30 days

from when they evaluated the vehicle. 

Five charities noted that donors were asking more questions about the 

vehicle donation rule changes. One official noted that for about the first 6 

months, some donors did not know that the rules changed but now most 

donors understand the new rules. Officials at the remaining 5 charities said

that the number of questions from donors remained the same or 

decreased. One official noted that most of the donors were doing their 

own research before deciding to donate a vehicle. 

The Acting Commissioner of Internal Revenue was provided a draft of this

report for her review and comment. IRS provided technical comments, 

and we incorporated them as appropriate. 

Agency Comments 

As agreed with your office, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days after its 

date. At that time, we will send copies of this report to the Secretary of the 

Treasury, the Commissioner of Internal Revenue, and other interested 

parties. This report will also be available at no charge on GAO’s Web site 

at http://www.gao.gov. 

If you or your staff have any questions, please contact me at (202) 512-9110

or brostekm@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

Key contributors to this report were David Lewis, Assistant Director; 

Charlesetta Bailey; Amy Bowser; Laurie Ellington; Michele Fejfar; Robyn 

Howard; and Shellee Soliday. 

Sincerely yours, 

Michael Brostek 

Director, Tax Issues 

Strategic Issues Team 

Page 14 GAO-08-367 Vehicle Donations
Appendix I: Steps IRS Took to Implement Appendix I: Steps IRS T Changes ook to Implement 

Changes 

The Internal Revenue Service (IRS) took several steps to implement the 

new rules for claiming charitable deductions for vehicles, including 

providing guidance to both charities and donors. After the enactment of 

the new rules in October 2004, and before the new rules became effective

on January 1, 2005, IRS issued a news release in November 2004 that 

explained the new rules.1 This news release explained that the charity 

must provide donors acknowledgment of their donations, and that if the 

claimed value of the donated vehicle exceeds $500 and the vehicle is sold 

by the charity, donors are limited to claiming the gross proceeds of the 

sale except in certain situations. During 2005 and 2006, IRS issued 

additional news releases, notices, and publications related to charitable 

contributions of vehicles including the following:

• Issued a notice in June 2005 that described the new rules, including that 

the deduction is limited to the gross proceeds of the sale with some 

exceptions; what the exceptions are and that when an exception applies, 

the donor may claim the fair market value of the vehicle; what information 

must be included in the acknowledgment charities send to donors; and 

what charities must report to IRS.2

• Issued a news release in December 2005 reminding taxpayers that they 

must obtain a charity’s written acknowledgment of their vehicle donation

and that if the deduction is for more than $500, they must attach the 

acknowledgment to their tax return.3

• Issued a notice in January 2006 that describes the information reporting 

requirements for charities.4

• Issued a revised publication for donors in February 2006 that describes 

how much they can deduct, how their deduction is generally limited to the 

gross proceeds of the sale unless an exception applies, what the 

exceptions are, how to determine fair market value if they are entitled to

claim fair market value, when an appraisal is required, and what 

documents must be attached to their returns.5

 1

Internal Revenue Service, “IRS Officials Urge Care for Those Making a Car Donation; New 

Law Changes Rules at End of Year,” news release IR-2004-142, November 30, 2004. 

2

Internal Revenue Service, “Charitable Contributions of Certain Motor Vehicles, Boats, and 

Airplanes,” Notice 2005-44/Internal Revenue Bulletin 2005-25, June 20, 2005. 

3

Internal Revenue Service, “IRS Reminds Taxpayers About Requirement of Written 

Acknowledgment for Donated Cars,” news release IR-2005-149, December 22, 2005. 

4

Internal Revenue Service, “Information Reporting by Organizations That Receive 

Charitable Contributions of Certain Motor Vehicles, Boats, and Airplanes,” Notice 2006-

1/Internal Revenue Bulletin 2006-4, January 23, 2006. 

5

Internal Revenue Service, A Donor’s Guide to Vehicle Donations, Publication 4303

(revised February 2006). 

Page 15 GAO-08-367 Vehicle Donations
Appendix I: Steps IRS Took to Implement 

Changes 

Page 16 GAO-08-367 Vehicle Donations 

• Issued a revised publication for charities in May 2006 that describes 

charities’ responsibilities in relation to vehicle donations, including what 

must be included in an acknowledgment and when it must be sent to the 

donor, guidance about using the exceptions to the gross proceeds of the 

sale rule, and what information must be reported to IRS and when it must 

be provided.6

• Issued a notice in November 2006 that provided guidance related to the 

requirement for appraisals of noncash charitable contributions. An 

appraisal is required if the taxpayer is claiming more than $5,000 for a 

donated vehicle.7

Besides issuing these documents that specifically relate to charitable 

contributions of vehicles, IRS also included information about vehicle 

donations in other publications.8

In addition to news releases, notices, and publications, IRS also created 

Form 1098-C (Contributions of Motor Vehicles, Boats, and Airplanes) to be 

used by charities to report each contribution of a qualified vehicle with a 

claimed value of more than $500.9

 Charities must send a written 

acknowledgment of vehicle donations to donors, and they can use Form 

1098-C for this purpose. The form includes all the information required by 

law to be included in the written acknowledgment. Form 1098-C has four 

copies—Copy A, which the charity files with IRS; Copy B, which the 

charity sends to the donor and the donor attaches to his or her return; 

Copy C, which the charity sends to the donor and the donor keeps for his 

or her records, and Copy D, which the charity keeps for its records. 

The Treasury Inspector General for Tax Administration (TIGTA) agreed in 

its September 2007 report that IRS took several steps to implement the 

new rules and that IRS properly updated tax forms and publications, 

provided training and information to employees to facilitate the 

implementation of the requirement, and added a link on the Large and MidSized Business Division’s Web site to guidance related to vehicle 

 

6

Internal Revenue Service, A Charity’s Guide to Vehicle Donations, Publication 4302 

(revised May 2006). 

7

Internal Revenue Service, “Guidance Regarding Appraisal Requirements for Noncash 

Charitable Contributions,” Notice 2006-96/Internal Revenue Bulletin 2006-46, November 13, 

2006. 

8

Internal Revenue Service, Charitable Contribution, Publication 526 (2006), and 

Determining the Value of Donated Property, Publication 561 (2007). 

9

A qualified vehicle is any motor vehicle manufactured primarily for use on public streets, 

roads, and highways; a boat; or an airplane. 
Appendix I: Steps IRS Took to Implement 

Changes 

Page 17 GAO-08-367 Vehicle Donations 

donations.10 However, TIGTA also found that in 80 percent of the sample 

cases reviewed, taxpayers, preparers, or both did not prepare/file the 

required forms for claiming the deduction. TIGTA recommended that IRS 

develop a comprehensive outreach plan for taxpayers and preparers on 

the reporting requirements for vehicle donations. IRS management 

disagreed with this recommendation because they believe the actions IRS 

was taking in response to a similar recommendation in an earlier TIGTA 

report, related to noncash contributions that did not cover vehicle 

donations, would address the new reporting requirement for vehicle 

donations.11 TIGTA disagreed with IRS management’s response because 

the deficient returns included in TIGTA’s sample were filed after IRS 

provided outreach to the public. TIGTA agreed that taking additional 

actions to publicize reporting requirements for noncash contributions may 

address the new reporting requirements for vehicle deductions but added 

that the outreach efforts must specifically emphasize that the 

documentation requirements for donated vehicles are different than those 

for other noncash contributions. Currently, IRS’s proposed outreach plan 

does not emphasize vehicle donations; however, according to a Wage and 

Investment Policy Analyst, IRS intends to include information in this 

outreach effort that will address vehicle donations.

 

10Treasury Inspector General for Tax Administration, Improved Procedures Are Needed to 

Identify Noncompliance With the Reporting Requirements for Contributions of Motor 

Vehicles, Reference Number 2007-30-171 (Washington, D.C.: Sept. 17, 2007). 

11Treasury Inspector General for Tax Administration, The Internal Revenue Service Needs 

to Improve Procedures to Identify Noncompliance With the Reporting Requirements for 

Noncash Charitable Contributions, Reference Number 2007-30-049 (Washington, D.C.: 

Mar. 5, 2007). 
Appendix II: IRS’s Plans to Ensure Charity Appendix II: IRS’ and Dos Plans to Ensure Charity nor Compliance 

and Donor Compliance 

Internal Revenue Services’ Tax Exempt and Government Entities Division 

(TE/GE) is responsible for determining if charities are complying with the 

vehicle donation tax rules and the Wage and Investment Division (W&I) 

and the Small Business/Self Employed Division (SB/SE) are responsible 

for determining if donors are complying with the vehicle donation tax 

rules. Officials in these divisions said that they currently are not 

concentrating on charity or donor compliance with the vehicle donation 

rules in part because of competing priorities for compliance resources. 

However, if a charity or donor is selected for an examination, one of the 

items that could be reviewed is compliance with the vehicle donation 

rules. 

The Exempt Organizations Examinations Office staff in TE/GE, which 

determines if charities are complying with tax rules, used input from its 

Strategic Planning Work Group, which brainstorms ideas to determine if 

issues should be addressed, and information obtained from Congress, IRS 

staff, TIGTA reports, and the media to prioritize its work. Using this 

information and because of limited compliance resources, officials of that 

office said that they determined that issues other than vehicle donations 

had a higher priority. In addition, in July 2007, the TE/GE Commissioner 

testified that IRS is focusing on noncash contributions, but the problems 

are greatest for noncash contributions for which there is no ready market.1

Based on our interviews with officials from 10 charities that operate 

vehicle donation programs, there is a ready market for donated vehicles. 

W&I officials said that they decided not to focus compliance resources on 

donated vehicles after conducting correspondence examinations in 2005 

of a sample of 204 tax returns that included deductions for donated 

vehicles and closing 88 percent of the examinations with no changes.2

 The 

average tax change made to the remaining returns was $382. They 

concluded that the high rate of no change cases and the low audit results 

in terms of dollars indicated that vehicle donations were not conducive for 

correspondence examinations. In addition, according to the W&I 

 1

Testimony of Steven T. Miller, Commissioner, Tax Exempt and Government Entities 

Division, Internal Revenue Service, before the Subcommittee on Oversight, House 

Committee on Ways and Means on the Oversight of Tax-Exempt Organizations, July 24, 

2007. 

2

The sample returns were for tax year 2004—before the new vehicle donation rules took

effect. 

Page 18 GAO-08-367 Vehicle Donations
Appendix II: IRS’s Plans to Ensure Charity

and Donor Compliance 

Automated Under Reporter (AUR) Program Chief,3 IRS has not done any 

studies to determine if there would be a high return on investment from 

instituting automated document matching related to vehicle donations. 

An SB/SE Division Program official said that when identifying special 

compliance initiatives, for example in vehicle donations, IRS considers the 

amount of possible increased tax revenue that could be realized from an 

examination in comparison to the resources spent on the examination. 

Currently, IRS is not developing a special compliance initiative for vehicle 

donations. However, in response to a TIGTA recommendation, IRS is 

adding an audit indicator to returns claiming charitable deductions for 

donated vehicles over a specific dollar threshold that did not have Form 

8283 (Noncash Charitable Contributions) attached. Thus, according to the 

SB/SE official, if a tax return is selected for an examination for other 

reasons, the audit indicator will let examination staff know that they 

should also look at the vehicle donation. 

Besides recommending that IRS add an audit indicator to certain returns 

with vehicle donations, TIGTA also recommended in its September 20074

report on charitable donations of vehicles that IRS 

• lower the dollar threshold for reviewing returns with unsubstantiated 

deductions for donated vehicles and 

• correspond with taxpayers to obtain missing documentation. 

IRS management responded that they consider vehicles a small subset of 

the overall population of noncash charitable contributions, they will not 

lower the threshold, and they will continue to correspond with taxpayers 

who do not provide documentation if their noncash contribution is over a 

specific dollar threshold. They also said that they are exploring alternative

ways to address lower-dollar vehicle donation compliance issues. 

According to an SB/SE senior program analyst involved with exam policy,

IRS is revising Form 8453 (U.S. Individual Income Tax Declaration for an 

IRS e-file Return). This form will be used to transmit supporting paper 

documents that are required to be submitted to IRS by taxpayers who are 

 3

The AUR program examines tax returns where the income reported on the tax returns is

less than what is reported by third parties such as banks and employers.

4

Treasury Inspector General for Tax Administration, Improved Procedures Are Needed to 

Identify Noncompliance With the Reporting Requirements for Contribution of Motor 

Vehicles. 

Page 19 GAO-08-367 Vehicle Donations
Appendix II: IRS’s Plans to Ensure Charity

and Donor Compliance 

filing electronically. The Form 8453 will include a list of paper forms that

can be submitted with Form 8453. These will include Form 1098-C and

Form 8283. This should remind filers that they must file these forms with 

IRS. TIGTA disagreed with IRS’s policy of treating vehicles as a small 

subset of the overall population of noncash contributions. In TIGTA’s 

opinion, since Congress specifically provided substantiation levels for 

vehicles that were different than the requirements for other noncash 

contributions, to ignore this when administering the tax law is not in 

keeping with Congress’s intent. 

Page 20 GAO-08-367 Vehicle Donations
Appendix III: Objectives, Scope, and Appendix III: Objectives, Scope, and Methodology 

Methodology 

Our objective was to determine how charities have been affected by the 

2005 changes to the amounts donors can claim on their tax returns for 

donated vehicles. To address this objective, we reviewed the new vehicle 

donation rules that became effective January 1, 2005, and compared them 

to the previous vehicle donation rules. In addition, we contacted 58 of the 

65 charities1

 we interviewed for our November 2003 report about the 

vehicle donation process,2

 and determined which of these charities still 

operated a vehicle donation program as of August 2007 and if they used a

contractor to operate the program. In our screening contacts, we also 

asked about changes in the number of donated vehicles in 2006 or 2007 in 

comparison to 2002. About half of the charities—30 out of the 58—

provided a response to this question, and 21 of them said they had seen 

decreases and the rest said they had seen increases or no change in

numbers of donated vehicles. We selected 10 of the 58 charities that still 

operated programs and 1 that no longer operated a program and 

interviewed officials to obtain their views about how the changes affected 

the number and quality of donated vehicles, vehicle donation revenues, 

their vehicle donation programs, and administrative burden. To ensure 

that we obtained the views of officials who operated a wide variety of 

vehicle donation programs, we selected charities that did and did not use 

the exceptions to the gross proceeds of sale rule3

 and charities that used or

did not use a contractor to operate their vehicle donation programs. The 

charities we selected also reflected changes in the numbers of donated 

vehicles from 2002 to 2006 or 2007 in similar proportion to what we found 

in our screening contacts. The information provided by charity officials is

anecdotal and cannot be generalized to other charities that operate vehicle 

donation programs. We did not independently verify the information 

provided by the charity officials. 

In addition, to provide information on the steps IRS took to implement 

these changes and to ensure charity and donor compliance, we analyzed

 1

For the remaining seven charities, we could not identify a current telephone number or we

contacted the charity but the charity did not return our calls. 

2

GAO-04-73. 

3

Many donors are limited to deducting the gross proceeds of the sale of their donated

vehicles on their tax returns. However, there are three exceptions to this rule. The three 

exceptions are the charity intends to make a significant intervening use of the vehicle, the

charity makes a material improvement to the vehicle, or the charity sells the vehicle in 

direct furtherance of its charitable purposes. If a vehicle donation meets one of the

exceptions, the donor can deduct the fair market value of the donated vehicle on his/her 

tax return. 

Page 21 GAO-08-367 Vehicle Donations
Appendix III: Objectives, Scope, and

Methodology 

documents and interviewed officials. To provide information about 

implementation, we reviewed the guidance IRS issued to implement the 

changes, including news releases, notices, publications, and forms and 

instructions and TIGTA’s evaluation of IRS’s implementation of the 

changes in the rules.4

 To provide information about IRS’s efforts to ensure 

compliance, we analyzed TE/GE, W&I, SB/SE, and LMSB documents 

related to charitable contributions of vehicles and other noncash 

contributions, including TE/GE’s implementing guidelines for its annual 

work plans for fiscal years 2005 through 2007, a W&I analysis of a sample 

of taxpayers who claimed a deduction for a vehicle donation to determine 

if it should conduct correspondence examinations of vehicle donations, 

SB/SE’s analysis to determine if it should lower the threshold for 

examining returns that claim deductions for donated vehicles, and LMSB’s 

proposed outreach plan for providing information about noncash 

contributions. We also interviewed officials from those divisions about 

compliance issues, and interviewed TIGTA officials and reviewed the 

results of TIGTA’s evaluation of IRS’s controls over the processing of 

deductions for donated vehicles reported on individual tax returns.5

We performed our work from June 2007 through January 2008 in 

accordance with generally accepted government auditing standards. 

 4

Treasury Inspector General for Tax Administration, Improved Procedures Are Needed to 

Identify Noncompliance With the Reporting Requirements for Contribution of Motor 

Vehicles.

5

Treasury Inspector General for Tax Administration, Improved Procedures Are Needed to 

Identify Noncompliance With the Reporting Requirements for Contribution of Motor 

Vehicles. 

Page 22 GAO-08-367 Vehicle Donations
Appendix IV: Information Charity Must Appendix IV Include in Written Acknowledgment : Information Charity Must 

Include in Written Acknowledgment 

As shown in table 3, the information charities must include in the written 

acknowledgment they send to donors varies depending on the value of the 

donated vehicle. 

Table 3: Information That Charity Must Include in Written Acknowledgment Sent to Donor

Information charity must include

in the written acknowledgment 

sent to donor

If the donor claims the value

of the vehicle is more than

$500 and the charity’s 

intended use of the vehicle

meets one of the exceptions

to the gross proceeds of sale 

rule 

If the charity sells the 

vehicle for more than $500 

If the gross proceeds from

the sale are $500 or less or

the donor is claiming a

charitable deduction of at

least $250 but no more than 

$500 

Information on what the charity did or 

intends to do with the vehicle—see 

below for further information required 

about a charity’s use of a donated 

vehicle

X X

Donor’s name and taxpayer 

identification number 

X X

Vehicle identification number X X 

Date of the contribution X X 

One of the following: (a) statement 

that no goods or services were

provided by the charity in return for 

the donation, if that was the case; 

(b) description and good faith 

estimate of the value of goods or 

services, if any, that the charity 

provided in return for the donation; or 

(c) statement that goods or services 

provided by the charity consisted 

entirely of intangible religious 

benefits, if that was the case 

X X X

Statement certifying that the vehicle

was sold in an arm’s length 

transaction between unrelated

parties 

X

Date the vehicle was sold X 

Gross proceeds from the sale X 

Statement that the donor’s deduction

may not exceed the gross proceeds 

from the sale 

X

Description but not the value of the 

vehicle

X

Source: IRS Publication 4302, A Charity’s Guide to Vehicle Donations. 

Page 23 GAO-08-367 Vehicle Donations
Appendix IV: Information Charity Must 

Include in Written Acknowledgment 

If a charity intends to (1) make a significant intervening use of the vehicle, 

(2) make a material improvement to the vehicle, or (3) give or sell the 

vehicle to a needy individual, the charity must include additional 

information in the acknowledgment in addition to the information 

included in table 3. For a significant intervening use, the letter must 

include 

• a statement certifying that the charity intends to make a significant 

intervening use of the donated vehicle, 

• a detailed statement of the intended use, 

• a detailed statement of the duration of that use, and 

• a certification that the vehicle will not be sold before completion of the 

use. 

For a material improvement, the letter must include 

• a statement that the charity intends to make a material improvement to the 

donated vehicle, 

• a detailed description of the intended material improvement, and 

• a certification that the vehicle will not be sold before completion of the 

improvement. 

For giving or selling a vehicle to a needy individual, the letter must include 

a certification that 

• the charity intends to give or sell the vehicle to a needy individual at a 

price significantly below fair market value and 

• the gift or sale is in direct furtherance of the charity’s charitable purpose 

of relieving the poor and distressed or the underprivileged who are in need 

of a means of transportation. 

Page 24 GAO-08-367 Vehicle Donations
Appendix V: Charity and Donor Filing Appendix V Requirements : Charity and Donor Filing 

Requirements 

If a donor contributes a qualified vehicle to a charity with a claimed value

of more than $500, the charity must file a Form 1098-C (Contributions of 

Motor Vehicles, Boats, and Airplanes) for that vehicle. This form has four 

parts: 

• Copy A which the charity files with IRS; 

• Copy B which the charity sends to the donor and the donor is to attach it

to his/her tax return; 

• Copy C which the charity sends to the donor for his/her records; and 

• Copy D which the charity retains for its records. 

Charities can use Copy B as the contemporaneous written 

acknowledgment that charities must send to donors. Charities are not to 

file Form 1098-C for contributions of qualified vehicles with a claimed 

value of not more than $500; however, they may provide the donor with 

Copy C as the acknowledgment. Donors must attach Copy B, or a copy of

the acknowledgment if the charity does not use Copy B for this purpose, 

to their returns if they are claiming a deduction of more than $500. 

In addition, if a charity receives a donated vehicle that has a claimed value

greater than $5,000 and sells or otherwise disposes of the vehicle within 3

years after the donation, the charity must file Form 8282 (Donee 

Information Return) within 125 days of the disposition. The charity must 

also provide a copy of the filed Form 8282 to the original donor. 

Besides filing the acknowledgment, donors must also complete Section A1

of Form 8283 (Noncash Charitable Contributions) if the deduction they are 

claiming for a donated vehicle is greater than $500, but not more than 

$5,000, and attach it to Form 1040 (U.S. Individual Income Tax Return). If 

the deduction the donor is claiming is greater than $5,000, he/she must 

complete Section B2

 of the Form 8283, which must include the signature of

an authorized official of the charity, and attach it to the return. In addition, 

if the deduction is over $5,000 and the deduction is not limited to the gross 

proceeds from the sale of the vehicle, the donor must get a written 

appraisal of the vehicle. Table 4 lists the donor’s recordkeeping and filing 

requirements. 

 1

Donated Property of $5,000 or Less and Certain Publicly Traded Securities. 

2

Donated Property Over $5,000 (Except Certain Publicly Traded Securities). 

Page 25 GAO-08-367 Vehicle Donations
Appendix V: Charity and Donor Filing

Requirements 

Table 4: Donor’s Recordkeeping and Filing Requirements for Vehicles Donated to Charities 

Requirement 

Deductions of less 

than $250 

Deductions of $250 

or more, but not 

more than $500 

Deductions greater

than $500, but not

more than $5,000 

Deductions greater

than $5,000 

Recordkeeping requirements

Name/address of charity X X X X

Date of donation X X X X 

Place where you donated vehicle X X X X 

Description of vehicle X X X X

Contemporaneous written 

acknowledgment from charity 

X X X

Filing requirements

Written acknowledgment X X 

Form 8283, Section A (Donated Property 

of $5,000 or Less and Certain Publicly 

Traded Securities) 

X

Form 8283, Section B (Donated Property 

Over $5,000 Except Certain Publicly 

Traded Securities) 

X

Written appraisal—if deduction is not 

limited to gross proceeds 

X

Source: IRS Publication 4303, A Donor’s Guide to Vehicle Donations. 

Page 26 GAO-08-367 Vehicle Donations
Appendix VI: Detailed Descriptions of Appendix VI: Detailed Descriptions of Charities 

Charities 

We profiled 10 charities that operated a vehicle donation program as of 

August 2007. Tables 5 through 14 highlight information provided to us in 

interviews with charity officials about their vehicle donation programs. 

Table 5: Charity A 

Main purpose or mission To fight lung disease and promote lung health 

Charity is independent or affiliated with a national charity Affiliated 

Operate vehicle donation program independently or as part of a 

program operated by the national charity 

Independent 

Operate vehicle donation program in-house or use a third party In-house 

Types of vehicles accepted Passenger cars, trucks, motorcycles, recreational 

vehicles/campers, boats 

Condition of vehicles accepted Any condition 

What is done with vehicles All vehicles are sold at auction or to salvage yards 

Charity is able to use an exception to the gross proceeds of sale 

rule 

No 

Recent vehicle donation statisticsa

Fiscal year 

(July 1 – June 30) Number of vehicles donated 

Net revenue for donated 

vehicles 

Total charity revenue

(vehicle and nonvehicle) 

2002 380 $133,148 $3,031,121

2003 519 202,305 1,837,832

2004 304 145,290 1,063,888

2005 204 120,268 1,121,058

2006 114 50,800 1,126,184

2007 (through 8/31/07) 57 42,201 1,686,280

Sources: The charity’s area executive director and the vehicle donation program director. 

a

The charity reorganized the vehicle donation program after the rule change to make one office 

responsible for the entire state. For purposes of consistency, these data represent only the portion of 

the state the office was responsible for prior to the change. 

Effects of rule changes reported by charity: 

• Number and quality of vehicles donated 

• The total number of donated vehicles has decreased since the rules 

changed. 

• The quality of vehicles has stayed about the same since before the rules 

changed. The quality of the vehicles may be related to the 

demographics of the state. In one area of the state where this charity 

operates, the charity tends to receive higher-quality vehicles because 

many of the residents are retirees who are financially comfortable and 

able to donate their old vehicles, which are still in good condition, 

Page 27 GAO-08-367 Vehicle Donations
Appendix VI: Detailed Descriptions of 

Charities 

while donors in less-affluent parts of the state tend to donate vehicles 

that need to go straight to salvage yards. 

• Revenue 

• The net revenue from the donated vehicles decreased since the rules 

changed. 

• To increase other revenue-producing activities to offset decreases in 

revenue from the vehicle donation program, the charity started to 

increase the number of special events, such as tennis and golf

tournaments and fund-raising dinners. In 2006, the charity held over 35 

special events, which raised $1.2 million. 

• Business operations 

• The charity decreased the number of staff working for the vehicle 

donation program and streamlined the business operations by 

consolidating all locations that ran the vehicle donation program in the 

state into one office. 

• The charity uses a scrap recovery company for the vehicles that need

to go to the salvage yard.

• Administration of rule changes 

• Administrative burden increased because of more time-consuming 

paperwork. 

• The IRS guidance and documents have improved since the vehicle 

donation rules originally changed and they are now clearer and simpler 

to use. 

• Donors are asking about the same number of questions as before the 

rules changed. 

• Other 

• Many vehicle auctions that include vehicles donated to charities are 

only open to dealers, not the public. Consequently, the cars are not 

selling for what they would in a retail market. 

Page 28 GAO-08-367 Vehicle Donations
Appendix VI: Detailed Descriptions of 

Charities 

Table 6: Charity B 

Main purpose or mission To provide people and organizations access to jobs, transportation, housing, and 

training to realize their potential as contributing members of the community

Charity is independent or affiliated with a 

national charity

Independent 

Operate vehicle donation program 

independently or as part of a program 

operated by the national charity 

Independent 

Operate vehicle donation program inhouse or use a third party In-house 

Types of vehicles accepted Passenger cars, trucks, motorcycles, recreational vehicles/campers 

Condition of vehicles accepted Any condition as long as the donor can get it to the location of the charity 

What is done with vehicles 75 percent are sold 

25 percent are sent to scrap metal yards 

Charity is able to use an exception to the 

gross proceeds of the sale rule 

No 

Recent vehicle donation statistics 

Fiscal year 

(July 1 – June 30) Number of vehicles donated 

Net revenue for donated 

vehicles 

Total charity revenue

(vehicle and nonvehicle) 

2002 a a a

2003 a a a

2004 a a a

2005 a a a

2006 a a a

2007 (through 8/31/07) a a a

Source: The charity’s office manager who is responsible for answering questions about vehicle donations and sales. 

a

Charity official did not provide this information. 

Effects of rule changes reported by charity: 

• Number and quality of vehicles donated 

• The charity did not experience any change in the number or quality of 

vehicles donated even though there are now more programs with 

vehicle donations in its geographical area. 

• The rules changes have not affected donors’ decisions about whether 

to donate a vehicle based on what they can claim on their tax returns. 

• Revenue 

• The net revenues from the vehicle donation program have not

decreased. 

• Business operations 

Page 29 GAO-08-367 Vehicle Donations
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Charities 

• The charity repairs most of the donated vehicles at an auto-repair shop 

that it uses to train people in automotive repair. It then sells the 

vehicles to the public for $800 to $2,500. The charity operated in the 

same manner prior to the rule change. 

• Administration of rule changes 

• Administrative burden increased slightly, but officials are able to 

handle the increase. 

• Some donors do not want to provide their Social Security numbers. 

The charity informs the donors that if they do not provide their Social 

Security numbers, then they cannot claim more than $500 on their tax 

returns. It is a burden on the charities to obtain the donors’ Social 

Security numbers. 

• The guidance on the rule changes is better than it was in the past 

because it is more user-friendly. 

• The charity has not noticed any increase in the number of questions 

donors ask. Donors do not ask many questions. 

Page 30 GAO-08-367 Vehicle Donations
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Charities 

Table 7: Charity C 

Main purpose or mission To provide free vehicles to disadvantaged people throughout the nation 

Charity is independent or affiliated with a 

national charity

Independent 

Operate vehicle donation program 

independently or as part of a program 

operated by the national charity 

Independent 

Operate vehicle donation program inhouse or use a third party In-house 

Types of vehicles accepted Passenger cars, trucks, motorcycles, recreational vehicles/campers, boats 

Condition of vehicles accepted Any condition unless the cost to tow the vehicle is more than the value of the vehicle 

What is done with vehicles Approximately

65 percent are sold at auction

30 percent are sold to salvage yards 

5 percent are given to clients 

Charity is able to use an exception to the 

gross proceeds of sale rule 

Yes, for the 5 percent that are given to clients

Recent vehicle donation statistics 

Fiscal year 

(Sept. 1- Aug. 31) Number of vehicles donated 

Net revenue for donated 

vehicles 

Total charity revenue

(vehicle and nonvehicle) 

2002a a a a

2003 9,134 $2,624,177 $3,700,691

2004 9,529 3,288,449 4,928,696

2005 11,564 4,461,297 6,733,802

2006 15,963 5,883,225 8,684,333

2007 13,698 5,200,549 8,704,895

Sources: The charity’s president and chief executive officer.

a

Charity official did not provide this information. 

Effects of rule changes reported by charity: 

• Number and quality of vehicles donated 

• The total number of vehicles donated has decreased from 2006 to 2007. 

• Some of the decrease in the number of donated vehicles may be

because of the slowing of the economy, which results in fewer people 

buying new vehicles. Vehicle donations often follow the trend in new 

vehicle sales.

• The charity official said that the quality of those vehicles has increased. 

• Revenue 

• The increase in net revenue from the vehicle donation program is in 

part because of the charity’s ability to use one of the exceptions to the 

gross proceeds of sale rule. 

Page 31 GAO-08-367 Vehicle Donations
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Charities 

• Business operations 

• This charity is a licensed motor vehicle dealer in its state. The charity 

operated in the same manner prior to the rule changes. 

• Administration of rule changes 

• The charity spends a lot of money on donor mailings and has 

experienced an increase in administrative burden because the charity 

sends out a donor package with explanations of how the vehicle will be 

used and the acknowledgment for the donation and then must also 

send the Form 1098-C to the donor. The paperwork has quadrupled but 

the charity can handle it, according to the official. 

• Donors are reluctant to provide their Social Security numbers. To help 

deal with this, the charity explains in a letter the need for the donor’s 

number in order to claim a deduction for a donated vehicle. 

• Donors are asking more questions since the change in the rules than 

they did before. 

• Other 

• The charity official was concerned about the lack of oversight of thirdparty contractors. 

Page 32 GAO-08-367 Vehicle Donations
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Charities 

Table 8: Charity D 

Main purpose or mission To provide integrated services to assist the homeless in breaking the cycle of homelessness 

Charity is independent or affiliated 

with a national charity 

Independent 

Operate vehicle donation program 

independently or as part of a 

program operated by the national 

charity 

Independent 

Operate vehicle donation program 

in-house or use a third party 

In-house 

Types of vehicles accepted Passenger cars, trucks, motorcycles, recreational vehicles/campers, boats, airplanes 

Condition of vehicles accepted Any condition as long as it is cost effective to tow the vehicle to the charity’s facility 

What is done with vehicles Almost all vehicles are sold 

Charity is able to use an exception 

to the gross proceeds of sale rule 

Yes for about 5 to10 vehicles per month 

Recent vehicle donation statistics 

Calendar year

Number of vehicles 

donated 

Net revenue for donated 

vehicles 

Total charity revenue (vehicle 

and nonvehicle) 

2002 16,704 $9,464,337 $44,346,344

2003 16,154 9,057,427 46,123,563

2004 18,801 10,920,907 48,412,355

2005 11,025 7,567,668 38,320,252a 

2006 10,914 7,575,371 47,949,478

2007 (through 8/31/07) 6,321 5,155,548 25,609,783

Sources: The charity’s vice president, vice president of retail, director of vehicle donation program, and chief financial officer. 

a

The decrease was in part because of a decrease in bequests. 

Effects of rule changes reported by charity: 

• Number and quality of vehicles donated 

• The number of vehicles donated decreased. 

• The quality of the vehicles donated has not been an issue since the rule 

changes. 

• Revenue 

• The net revenue from donated vehicles has decreased. Revenue from 

vehicles decreased more than $3,000,000 in both 2005 and 2006 in 

comparison to 2004. 

• The decline in total charity revenue in 2005 was greater than the 

decline in net vehicle donation revenue. This was in part because of a 

decrease in bequests. 

• To offset the decrease in revenue from vehicle donations, the charity 

decreased some services, such as the hours of operation for a homeless 

Page 33 GAO-08-367 Vehicle Donations
Appendix VI: Detailed Descriptions of 

Charities 

shelter from 24 hours per day to the evening hours only. The charity 

also was unable to expand existing services or start new services. In 

addition, the charity reduced staff, instituted a hiring freeze, and has 

not given or has postponed merit pay raises. 

• An increase in grants and bequests has offset some of the loss from

vehicle donations; however this revenue is often earmarked for certain 

activities or programs and may not be used for general program 

administration. 

• Business operations 

• The charity operates its own auctions, which it also did prior to the rule 

changes. 

• Administration of rule changes 

• The number of forms the charity must complete has increased, but the 

charity has also become more efficient in using technology to handle 

the increase.

• Donors are nervous about providing their Social Security numbers for 

fear of identity theft. The charity informs the donors that if they do not 

provide their Social Security numbers, then they cannot claim more 

than $500 on their returns. 

• The officials did not identify anything in the IRS publications that was 

unclear. 

• The donors do not ask too many questions, mostly doing their own 

research before donating a vehicle. 

• Other 

• The charity operates its vehicle donation program in-house and does 

not share the revenue from the program with a for-profit entity. Thus, 

all the revenue from the vehicle donation program is used to further the 

charitable purpose. In the officials’ opinion, the donors of vehicles to 

charities that operate programs in-house and retain at least 80 percent 

of the net proceeds from the sales should be able to claim the fair 

market value of their vehicles on their tax returns. IRS could revise its 

guidance for the interpretation of the furtherance of charitable

purposes exception to incorporate this concept. The officials have 

developed a legislative proposal that incorporates this concept and 

presented it to their state’s congressional delegation. 

Page 34 GAO-08-367 Vehicle Donations
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Charities 

Table 9: Charity E 

Main purpose or mission Raise and invest funds for two community colleges 

Charity is independent or affiliated with

a national charity 

Independent 

Operate vehicle donation program 

independently or as part of a program 

operated by the national charity 

Independent 

Operate vehicle donation program inhouse or use a third party Contractor manages pickup, repairs, selling, and paperwork for vehicles. 

In-house management handles advertising and donor calls. 

Types of vehicles accepted Passenger cars, trucks, motorcycles, recreational vehicles/campers, boats 

Condition of vehicles accepted Vehicles must be in running or close to running condition. Charity does not accept scrap 

metal vehicles 

What is done with vehicles Some vehicles are repaired but all vehicles are sold 

Charity is able to use an exception to 

the gross proceeds of sale rule

No 

Recent vehicle donation statistics 

Fiscal year 

(July 1 – June 30) 

Number of vehicles 

donated 

Net revenue for donated 

vehicles 

Total charity revenue

(vehicle and nonvehicle) 

2002 7 $7,275 a 

2003 13 14,637 a

2004 30 26,142 a

2005 28 21,259 $2,482,000

2006 26 21,832 4,185,000

2007 (through 8/31/07) 2 1,026 5,253,000

Source: The charity’s assistant director. 

a

Charity official did not provide this information. 

Effects of rule changes reported by charity: 

• Number and quality of vehicles donated 

• Although the changes may have had some effects on the number of 

vehicles donated, the charity has decreased its efforts to advertise this 

program in the past couple of years. 

• The quality of the vehicles has decreased, and the charity has received 

more calls from donors of vehicles that need to go to the salvage yard. 

• Revenue 

• Because the charity raises most of its revenues through other means, 

the lost revenue from the vehicle donation program did not have a large

impact. 

• Business operations 

• No changes have been made to the business operations; however, the 

charity used to advertise in newspapers and had banners around town. 

It no longer uses those methods to advertise. 

Page 35 GAO-08-367 Vehicle Donations
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Charities 

• Administration of rule changes 

• Recordkeeping and reporting requirements have increased. 

• IRS publications and guidance were not disseminated in a timely 

manner. 

• Donors are asking more clarifying questions about claiming a 

deduction for a donated vehicle, but overall donors are asking about 

the same amount of questions since the rules changed as they did 

before they changed. 

Page 36 GAO-08-367 Vehicle Donations
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Charities 

Table 10: Charity F 

Main purpose or mission To provide donated vehicles to low income families and individuals at a significantly 

reduced price 

Charity is independent or affiliated with a 

national charity

Independent 

Operate vehicle donation program 

independently or as part of a program 

operated by the national charity 

Independent 

Operate vehicle donation program in-house 

or use a third party 

In-house 

Types of vehicles accepted Passenger cars, trucks, motorcycles, recreational vehicles/campers, boats 

Condition of vehicles accepted Vehicle must be in good condition and could be used by clients 

What is done with vehicles 30 percent are sold 

70 percent are repaired and given to clients 

Charity is able to use an exception to the 

gross proceeds of sale rule 

Yes, for the 70 percent of vehicles given to clients 

Recent vehicle donation statistics 

Fiscal year 

(July 1 – June 30) 

Number of vehicles 

donated 

Net revenue for donated 

vehicles 

Total charity revenue

(vehicle and nonvehicle) 

2002 174 a

$250,000 

2003 246 $44,880 361,000

2004 267 101,392 314,000

2005 134 78,923 388,000

2006 296 39,974 341,000

2007 (through 8/31/07) 186 38,894 671,000

Source: The charity’s executive director. 

a

Charity official did not provide this information. 

Effects of rule changes reported by charity: 

• Number and quality of vehicles donated 

• Initially, the number of vehicles decreased; however, the charity 

expects to receive about 330 vehicles in 2007. 

• The quality of the vehicles has increased since the rules changed. For 

example, in 2002 the charity was only able to use about 75 vehicles to 

give to low-income families or individuals, but in 2006 it was able to 

give about 200 vehicles to low-income families or individuals. Thus, 

although the number of donated vehicles increased in 2006, it sold 

fewer vehicles, resulting in a decrease in net revenue from donated 

vehicles. 

• Revenue 

• The charity did not need to change its revenue-producing activities 

because of the program it operates in conjunction with the state. 

• Business operations 

Page 37 GAO-08-367 Vehicle Donations
Appendix VI: Detailed Descriptions of 

Charities 

• The charity inspects and repairs donated vehicles which are given to 

low-income families and individuals. A department in the state that 

trains and finds jobs for low-income people pays the charity a flat fee 

per vehicle; the department's staff refers selected families or 

individuals to receive a vehicle from the charity for $1 after the vehicle

has been repaired. The charity operated in the same manner prior to 

the rule change. 

• The charity sells high-end vehicles on online auction sites because lowincome families or individuals may not be able to maintain these 

vehicles. Since high-end vehicles tend to have higher upkeep prices, the 

charity was concerned that the needy families would not be able to fix 

the vehicles if they broke down. This allows the charity to obtain more 

revenue than at a wholesale auction, since the general public is bidding 

on the vehicle and not just wholesale buyers. The charity uses the 

revenue to finance its program. 

• Administration of rule changes 

• The amount of paperwork has increased, but the charity has been able

to handle the increase. 

• The charity has not experienced any reluctance from donors when 

requesting Social Security numbers. The charity explains the need for 

the numbers in the letter sent to the donors. 

• Although IRS publications and notices have been generally clear, the 

officials were confused about the correct timing for sending the 

acknowledgments to the donors, questioning if it was 30 days from 

receipt of the vehicle or 30 days from when the charity evaluated the 

vehicle. 

• Donors are asking more questions; however, the charity is now 

receiving fewer calls from donors who want to donate vehicles that 

need to go to the salvage yard. 

Page 38 GAO-08-367 Vehicle Donations
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Charities 

Table 11: Charity G 

Main purpose or mission To provide job training and employment services to people with disadvantages and 

disabilities 

Charity is independent or affiliated with a 

national charity

Affiliated 

Operate vehicle donation program 

independently or as part of a program 

operated by the national charity 

Independent 

Operate vehicle donation program in-house

or use a third party 

Contractor 

Types of vehicles accepted Passenger cars, trucks, motorcycles, recreational vehicles/campers, boats, 

lawnmowers, all-terrain vehicles 

Condition of vehicles accepted Any condition 

What is done with vehicles Virtually all vehicles are sold 

Charity is able to use an exception to the 

gross proceeds of sale rule 

No 

Recent vehicle donation statistics 

Calendar year

Number of vehicles 

donated 

Net revenue for donated 

vehicles 

Total charity revenue

(vehicle and nonvehicle) 

2002 a a a

2003 631 $300,839 $20,000,000

2004 478 301,901 21,000,000

2005 384 198,114 25,000,000

2006 288 153,632 28,000,000

2007 (through 9/31/07) 357 180,000 26,000,000

Source: The charity’s senior vice president for marketing and communications. 

a

Charity official did not provide this information. 

Effects of rule changes reported by charity: 

• Number and quality of vehicles donated 

• The quantity and quality of vehicles have decreased. The number 

decreased because donors are not able to receive fair market value for 

their donations. 

• Even though the number of vehicles donated in 2007 increased

compared to 2006, more of the vehicles need to be sent to salvage

yards. 

• Revenue 

• Net revenue from vehicle donations decreased. 

• The vehicle donation program contributes only a small part to the 

charity’s overall revenue. 

• Business operations 

Page 39 GAO-08-367 Vehicle Donations
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Charities 

• The charity recently changed its business operations from operating 

the program in-house to contracting with a third party. Officials 

decided to use a third-party contractor because it was not costeffective to operate in-house because of the decrease in donated 

vehicles. 

• Administration of rule changes 

• Administrative burden has increased because it takes time to complete 

the Form 1098-C and to prepare the acknowledgments that are sent to 

the donors. Furthermore, the charity has to keep track of each sale in 

order to provide donors with the required information about the sale of 

the vehicle. However, the charity official noted it was able to handle 

the increase in paperwork. 

• Donors were asking more questions about the rule changes in the first 

6 months after the change. Now, most people understand the rule 

changes. 

Page 40 GAO-08-367 Vehicle Donations
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Charities 

Table 12: Charity H 

Main purpose or mission To prevent kidney and urinary tract diseases, improve the health and well-being of 

individuals and families affected by these diseases, and increase the availability of all 

organs for transplantation 

Charity is independent or affiliated with a 

national charity

National office of charity 

Operate vehicle donation program 

independently or as part of a program 

operated by the national charity 

National office of charity 

Operate vehicle donation program in-house 

or use a third party 

Third-party contractors manage donor calls, pick-ups, and selling of vehicles; about 

55 percent of the charity’s affiliates use these contractors while the other 45 percent 

do not use the contractors or only use some of the services provided by the 

contractors (in these cases, the affiliates determine whether to operate the program 

in-house or use contractors) 

Types of vehicles accepted Passenger cars, trucks, motorcycles, recreational vehicles/campers, boats 

Condition of vehicles accepted Any condition 

What is done with vehicles All vehicles are sold 

Charity is able to use an exception to the 

gross proceeds of sale rule 

No 

Recent vehicle donation statisticsa

Fiscal year 

(July 1 – June 30) Number of vehicles donated 

Gross revenue for donated 

vehiclesb 

Total charity revenue

(vehicle and nonvehicle) 

2002 c c c

2003 76,765 $17,692,561 $52,318,965

2004 81,470 18,975,596 55,518,850

2005 70,738 18,160,346 55,972,463

2006 39,501 10,608,827 57,283,499

2007 (through 8/31/07) c c c

Source: The director of the charity’s vehicle program. 

a

The statistics represent local and state affiliates that use the national vehicle donation program. Not 

all local and state affiliates choose to use the national program. 

b

The dollar amounts for this charity are gross revenues. 

c

Charity official did not provide this information. 

Effects of rule changes reported by charity: 

• Number and quality of vehicles donated 

• The number of vehicles donated decreased. 

• The quality of donated vehicles has remained constant. However, in 

2007, the charity was receiving about $130 more per vehicle because of 

an increase in the value of steel and a decrease in fees associated with 

the auctioning of vehicles. 

Page 41 GAO-08-367 Vehicle Donations
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Charities 

• Revenue 

• Revenue from donated vehicles as a percentage of gross income has 

decreased from almost 34 percent in 2003 to less than 19 percent in 

2006. Total charity revenues increased because of changes in other 

fund-raising activities. 

• The charity increased other revenue-producing activities, such as 

charity walks, golf tournaments, and other special events, to help offset 

the revenue losses from decreased vehicle donations. 

• The reduced revenue from vehicle donations has affected some local 

affiliates and led to reductions in staff and some office closures. 

• Business operations 

• The charity changed its marketing for vehicle donations and shifted the

focus more to the Internet. More donations are occurring from online 

donors. 

• There is more competition from other charities; therefore more money 

is now being spent on marketing the program. 

• Because of the increase in the price of steel, the charity now sells a 

higher percentage of vehicles at auction instead of sending some to 

scrap yards. 

• Administrative burden 

• Administrative burden has increased, specifically with regard to donors 

not wanting to provide Social Security numbers over the telephone. 

• Based on a survey the charity conducted, donors prefer to provide their 

Social Security numbers in writing rather than over the telephone. This 

results in more work for staff. 

• Generally the IRS publications and notices have been clear. Some 

affiliates thought the instructions for electronic filing could be made 

clearer. 

• Generally, donors are asking fewer questions about the donation 

process than they were right after the rule changes took affect. 

• Other 

• More vehicles are sent to auction because the price of steel has 

increased, which helps ensure that the charity receives more revenue

per vehicle than if the vehicle was sent to the scrap yard. However, 

there are also increased fees associated with auctioning vehicles versus 

sending them to scrap yards, so this decreases the profit ratio.

Page 42 GAO-08-367 Vehicle Donations
Appendix VI: Detailed Descriptions of 

Charities 

Table 13: Charity I 

Main purpose or mission To provide services for at-risk children and families 

Charity is independent or affiliated with a 

national charity

Independent 

Operate vehicle donation program 

independently or as part of a program 

operated by the national charity 

Independent 

Operate vehicle donation program in-house 

or use a third party 

Third-party contractor manages some donor calls, some vehicle pick-ups, and the 

selling of vehicles 

Types of vehicles accepted Passenger cars, trucks, motorcycles, recreational vehicles/campers, boats, forklifts, 

tractors 

Condition of vehicles accepted Any condition unless the cost to tow the vehicle is more than the scrap value of the 

metal 

What is done with vehicles Vehicles are sold, repaired and sold, or sold for the value of their metal 

Charity is able to use an exception to the 

gross proceeds of sale rule 

Yes, for the vehicles that are repaired and sold 

Recent vehicle donation statistics 

Calendar year

Number of vehicles 

donated 

Gross revenue for 

donated vehiclesa 

Total charity revenue

(vehicle and nonvehicle) 

2002 1,712 b c

2003 1,719 b c

2004 1,267 b c

2005 1,204 b c

2006 1,229 $231,895 c

2007 (through 8/31/07) 618 177,768 $852,745

Source: The charity’s business development director. 

a

The dollar amounts for this charity are gross revenues. 

b

Gross revenues are estimated at from $300,000 to $350,000. 

c

Charity official did not provide this information. 

Effects of rule changes reported by charity: 

• Number and quality of vehicles donated 

• The charity received fewer donated vehicles. This may be in part 

because of the rule changes and in part because of an increase in 

competition for the donated vehicles. 

• The quality of the vehicles has decreased. For example, in 2006 the 

charity spent about $156,000 on parts in order to repair donated 

vehicles, which is more than it spent in previous years. This may be 

because of potential donors selling or trading higher-value vehicles 

instead of donating them because they can get more money for the 

vehicles. 

Page 43 GAO-08-367 Vehicle Donations
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Charities 

• Revenue 

• The revenue from donated vehicles has decreased since the rules 

changed. 

• Business operations 

• The charity is licensed as a used car dealer and was also licensed as a 

used car dealer prior to the rule changes. The charity sells about 45 

percent of donated vehicles at retail prices. 

• Most of the vehicle donation revenues are from the vehicles sold at a 

used car lot. The charity makes repairs to some of these vehicles 

before selling them. As a result, some vehicles are eligible for the 

material improvement exception, and the donors can claim fair market 

value. The other vehicles are sold to a wholesaler or to salvage yards 

for the value of the metal. 

• Administration of rule changes 

• Administrative burden has increased because of the notification and 

filing requirements. 

• Some donors have not wanted to provide their Social Security 

numbers. 

• The IRS publications and guidance are clear. 

• The charity received a lot of questions about the changes to the rules in 

2005, but now donors are not asking as many questions. 

• Other 

• The charity does not have any plans to eliminate the vehicle donation 

program. Even though it now receives fewer vehicles and lower-quality 

vehicles, it believes that the program is still worth operating. This is in 

part because of the flexibility in how the charity can use the revenues 

from the vehicle donation program. It uses the revenues from the 

vehicle donation program to pay for services that are not covered by 

federal grants. 

Page 44 GAO-08-367 Vehicle Donations
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Charities 

Table 14: Charity J 

Main purpose or mission To repair and sell cars to low-income people 

Charity is independent or affiliated with a 

national charity

Independent 

Operate vehicle donation program 

independently or as part of a program 

operated by the national charity 

Independent 

Operate vehicle donation program inhouse or use a third party In-house operations but occasionally use outside garages to repair some of the 

vehicles 

Types of vehicles accepted Passenger cars, trucks, motorcycles, boats, vans 

Condition of vehicles accepted Any condition 

What is done with vehicles 75 percent are sold 

25 percent are sold to low-income families 

Charity is able to use an exception to the 

gross proceeds of sale rule 

Yes, for the 25 percent of cars sold to low-income families and for the 5 percent of 

vehicles to which the charity makes material improvements 

Recent vehicle donation statistics 

Calendar year

Number of vehicles 

donated 

Net revenue for donated 

vehicles 

Total charity revenue

(vehicle and nonvehicle) 

2002 2,235 $566,579 $832,121

2003 2,362 805,493 1,268,297

2004 1,985 883,265 1,444,937

2005 1,425 860,553 1,245,364

2006 1,754 1,775,613 2,088,309

2007 (through 8/31/07) 1,229 1,290,503 1,640,548

Source: The charity’s president. 

Effects of rule changes reported by charity: 

• Number and quality of vehicles donated 

• The number of vehicles donated decreased; however, the quality of the 

individual vehicles has increased. The number of vehicles donated that 

could be sold to low-income individuals or families has about doubled 

since the changes in the rules. 

• Revenue 

• The charity has doubled revenues from the vehicle donation program 

since it started operating a used car lot at the end of 2005. 

• Business operations 

• The charity sells vehicles to low-income families for low amounts 

generally in the range of $900 to $1,100. Recipients of the vehicles must 

be sponsored by a social service agency and live in certain geographic 

areas. The charity operated in the same manner prior to the rule 

change. 

• The charity receives a higher dollar figure per vehicle than many of the

other large charities receive because it sets a minimum value on all of 

Page 45 GAO-08-367 Vehicle Donations
Appendix VI: Detailed Descriptions of 

Charities 

the vehicles sent to wholesale auction. At auction, if a vehicle does not 

receive a bid equal to or greater than the minimum, it is not sold and 

the charity will try to sell it again at another auction. This ensures that 

the sale of the vehicle will bring in more revenue. 

• The charity began operating a used car lot at the end of 2005.

• Administration of rule changes 

• Administrative burden has increased because of the reporting

requirements. 

• About 1 in 20 donors do not want to provide their Social Security 

numbers. 

• IRS guidance is fairly clear; however the charity was disappointed by 

the lack of publicity for the use of the exceptions to the gross proceeds 

of sale rule. Because of this, the charity had to advertise the exceptions 

and explain that donors may be able to claim greater deductions if they 

donate their vehicles to it rather than to another charity. After this, the 

number of donated vehicles began to increase. 

• The charity receives more questions from donors, mostly relating to 

how much can be claimed on donors’ tax returns. 

(450604) Page 46 GAO-08-367 Vehicle Donations
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Washington, DC 20548 

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800 

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548 

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Mail or Phone 

To Report Fraud,

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

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