January 29, 2018
Thinking about starting a vehicle donation program for your not-for-profit organization, but don’t know where to begin? Or wondering if it’s still worth it? The American Jobs Creation Act, which passed in 2004, makes vehicle donation programs more difficult for not-for profit organizations to operate.
Charities with vehicle donation programs expect the number of cars they receive to drop dramatically. Under the current rules (described in the right-hand box), many taxpayers are likely to sell old cars themselves. But there still may be cases when it makes sense for organizations to operate vehicle donation programs.
If you decide to go this route, the first thing you need to do is contact the local Department of Motor Vehicles to establish your charity as a wholesaler car dealer. There are likely to be a lot of forms asking for documentation as a charitable organization, what you plan to do with the cars, and other questions. You also have to supply the names of officers in the organization because the police generally perform criminal background checks.
After a not-for-profit is approved, it can begin operating as a wholesale dealer, which means selling to other wholesalers or salvage companies, but not to the public.
The easiest way to sell to other wholesalers is generally to locate an auction house. It’s also important to hook up with a towing company so your organization won’t have to invest in its own tow truck and driver.
After that, your not-for-profit gets a phone call and the appropriate staff person calls the towing company and tells it to haul the vehicle to auction or to salvage.
Of course, there are some costs involved. The towing company usually charges a set amount for each local vehicle (more if a great distance is involved). Auction houses also generally charge charities a flat fee.
The amount of money a car brings at auction can vary wildly – for instance, a brand new car in mint condition won’t bring its true value because it’s sold to wholesalers. Many vehicles only sell for a few hundred dollars, which might translate into just over $100 for an organization’s programs after expenses.
It’s important to hire a knowledgeable vehicle director that you have complete faith in. The director will generally make decisions based only on donor’s phone calls and should be adept at determining whether cars are best sent to salvage or to auction.
More Tips to Help Get a Program Off the Ground:
Arrange with the towing company to have cars picked up quickly — within an hour or two if possible. It may cost a bit more, but will be worth it. As one vehicle donation director put it, “Once people have made up their minds to donate, they want the vehicles out of their garages or off their driveways immediately.” And if your organization can’t pick them up promptly, someone else probably can.
Keep proper records, including the make and model of the car and the name and address of the donor. Under tax law, you must also provide certain information to donors. (Tax law concerning vehicle donations has recently changed. Read right-hand box above to see how.)
Be very careful when it comes to the vehicle’s title. For instance, if someone’s mother gave him a car, but the title is still in mom’s name, the potential donor must go to the DMV to get the title in his name before you can accept the car.
Setting up a vehicle donation program takes some work. Although it is much more difficult under current tax law, in some cases, a program might have the potential to make a contribution to your organization’s bottom line.