Many congregations sell donated vehicles in fund raising activities. The
Internal Revenue Services has issued guidelines for churches and donors to
follow in order to qualify these donations as tax deductible.
If a congregation or mission center receives a car donation with a value of
more than $500 or which generates proceeds of more than $500, the deduction is
determined in one of two ways.
- If the car is sold without any "significant intervening use" or "material
improvement" by the charity, the deduction is limited to the amount the
congregation receives from the sale.
- If the charity intends to make "significant intervening use" of or
"materially improve" the car, the donor generally can deduct its fair market
value.
[For example: many donated cars are repaired or restored by high school
automobile repair programs. The value enhanced vehicle is then sold at
charity auction.]
“Significant intervening use” means the congregation must actually use the
car for some period of time to substantially further its regularly conducted
activities, and the use must be considerable. There is no significant
intervening use if the charity's use is incidental or not intended at the time
of the contribution.
“Material improvement” means major repairs or improvements that result in a
significant increase in the car's value. Cleaning, minor repairs, and routine
maintenance are not material improvements.
The charity must provide the donor with a written acknowledgement of the
donation no later than 30 days after the date it sells the car, or 30 days from
the date of the contribution if the charity intends to make significant
intervening use of or materially improve the car. The charity also must provide
the IRS with the same information it included in the acknowledgement. Without an
acknowledgement, the donor cannot deduct the contribution.
The acknowledgement must include:
- the individual's name and taxpayer identification number,
- the vehicle identification number, and
- a statement certifying that the car was sold in an arm's length
transaction between unrelated parties, the gross proceeds received from the
sale, and a statement that the donor may not deduct more than the gross
proceeds from the sale, or
- if the charity intends a significant intervening use, a statement
certifying the intended significant intervening use, the duration of that use,
and that the charity will not sell the car before completion of that use, or
- if the charity intends to make a material improvement to the car, a
statement certifying the intended material improvement and that the charity
will not sell the car before completion of the improvement.
For specific questions about car donations, please contact Legal Services at
800-825-2806, extension 2220 or E-mail:
legalservices@CofChrist.org
