Car Donation Programs Rev up
December 1, 2009 Tom Pope
The Arc of the United States (ARC) is defying the trend of slacking activity in car donation programs. The 60-year-old civil rights organization just started a car program about a year ago while other programs face 30-percent declines from the economy.
“We’re beginning to see some growth with 90 chapters that are bringing in 30 cars a month totally,” said Trudy Jacobson, chief development and marketing officer for The Arc.
Not all chapters have that much success, and only 10 are fully active. “The Twin Cites had 22 cars in 15 days and that shows us the potential,” she said.
ARC represents people with intellectual and development disabilities through 730 local grassroots chapters.
Jacobson said the economy was partly responsible for donors in general slowing down their car contributions. “If you follow all the IRS guidelines, you have to have a donor in a certain tax bracket with a car at a certain level to gain a deduction,” she said.
ARC is “winning no matter what,” she said. It works with another nonprofit that manages the operation and handles the IRS paperwork.
The nonprofit manager has the staff for a plug and play program with an 800 number so anyone across the county can call and immediately be placed in a call center that feeds the information to the local level.
The Internal Revenue Service (IRS) became an obstacle to donors in 2004 when the American Jobs Creation Act changed the rules for contributions of vehicles. Before January 1, 2005, donors could claim a deduction equal to the fair market value. With the law, donors can only deduct the amount of the sold vehicle. Car donations got on the government’s hit list because it found examples of large discrepancies between a market value and actual sales price. According to the IRS, amounts donors claimed for these gifts dropped by more than 80 percent between 2004 and 2005. According to the IRS’s Statistics of Income Bulletin of Summer 2009 and the Spring 2008 car donations were 297,000 in 2006, down from 900,891 in 2005.
“We know we’re following the cleanest way to deal with the IRS,” Jacobson said.
ARC uses the Melwood Training Center, in Upper Marlboro, Md., to operate the functions. Melwood, a job training nonprofit, operates a donation program in the Washington, D.C. area.
“Melwood makes sure the donor gets the IRS paper work Schedule 1040 and the Form 8283, which has to be attached,” she said. “We’d prefer to make less money as long as we make sure all the forms are correct.”
Other vendors might not provide the paperwork. “Many programs might not be aware of the IRS paperwork,” she said. “When a bill of sale goes through, the manager sends back the paperwork so donors know exactly what is needed to be sent.”
ARC has set rates through Melwood of a flat fee of $75 per car to pick up and manage the operation. This differs from most vending contracts that allow outside vendors to manage the operation. “We get approached from other vendors and those costs are so much higher that the chapters couldn’t afford it,” she said. “Anything in a percentage basis wouldn’t be in the donor’s interest.”
The current law allows donors to continue with a deduction of the fair market value if the charity uses the vehicle before selling it, fixes it before the sale, or gives it to a needy individual.
Such restrictions resulted in a 38-percent drop in cars for 2005 for Volunteers of America (VoA), based in Alexandria, Va. The program that handled about 80,000 cars in 2004 now gets 25,000 cars a year.
“We haven’t had a rebound from that time,” said Jim Hartman, vice president of Enterprise Programs for VoA. “From ‘07 we’re down about 12 percent.”
The federal Cash for Clunkers Program took approximately 677,000 cars off the road, according to The IRS. “Those were our typical donations,” he said. “We think there will be a six- to 12-month impact because those people who would have bought a new car were the ideal donors.”
Car donation programs depend on a high quality car that makes up for those fit only for the scrap heap. Those cars were donated because of the tax deduction.
“Now sometimes the quality isn’t there so that the towing and the cost of selling the vehicle becomes an obstacle,” he said. Add to that the problem that the price for salvage has plummeted for the past three years. “We were getting $600 for salvage and salvage guys were coming to the auction bidding against each other,” he said. “Now that has softened a bit and the same cars are bringing in only $100 to $200.”
VoA runs auctions and other times goes through auction houses. Those places are suffering too, according to Hartman. The shortage of cars going to the auction because of the clunker program means that 677,000 used car trades will not filter down to the auctions.
“We continue to advertise aggressively,” he said. “We want to counter balance the bad economy, although it’s a complicated balance between spending and keeping the program running.”
The Society of St. Vincent de Paul in New York City is evolving into a national program. “We’re trying to advertise more instead of being an independent program,” said Munaa Shariff, transportation program manager for the Atlanta Council. “Next year we hope to have more television ads because the small independent organizations can’t afford to do much.”
The Atlanta Council handles about 120 cars a year, down about 40 percent from when the changes went into effect.
“We don’t have an online program,” she said. “With the national effort, we will have more online ability and third party help.”
Presently, the outreach happens through small newspapers. Targeting the demographic to find the higher quality car doesn’t work well. “We have tried to use demographics to get better cars with our database,” she said. “We do not see any pattern outside of people in the suburbs.”
While many programs are shuffling to survive, Kars-4-Kids in Lakewood, N.J., has seen a sharp increase in donation during the past four years.
“That could be because we have grown now to 49 states,” said Clifford Meth, vice president of communications for the nonprofit. “We’re stronger in states with more affluent areas.”
Places with a higher unemployment usually means that people are holding on to their cars.
Kars anticipated a negative impact from Cash for Clunkers. “We didn’t see a drop off,” he said. “There has been almost a zero impact although it could hit in some months.”
The guarantee of a $500 deduction for donors means something to many people, according to Meth. “This comes down to a donor who has a vehicle in the driveway who is thinking about giving it away or has a rust bucket taking up space,” he said. “Instead, they could have a vacation voucher and feel good by donating.”
Kars’ increase has been steady during the past 10 years with more than a 10 percent rise a year for the past four years.
“Car donation is still a viable way for a charity,” he said. “We’re giving people the opportunity to be part of the giving of America — that old car that is a pain in the neck could help a charity.”