Even as she learns more information about how the recent changes in tax law governing vehicle donations to nonprofits might affect programs in Mississippi, Gail Sweat of the National Kidney Foundation of Mississippi wants to make sure people are aware that such donations are still allowed.
It’s how they can be deducted for tax purposes which will change in January, she explained.
Last year, the National Kidney Foundation in Mississippi (NKF-MS) received more than 350 cars through its “Kidney Car” program — approximately 100 were donated in December, according to Sweat. The program, which accepts cars in any condition and sells them at auction to raise funds, has been a mainstay of NKF-MS budgets for several years.
“About a third of our income every year comes from Kidney Cars,” she said.
Nationwide, approximately 75 different organizations have similar programs.
The rule change came about as a result of an amendment to HR 5520 sponsored by U.S. Sen. Charles Grassley (R-Iowa) once it reached the Senate. The bill, omnibus legislation that was touted as a reorganization of corporate tax law, was passed and signed into law on October 11.
Grassley’s amendment had already attracted the attention of the National Kidney Foundation, which lobbied to have the amendment removed in negotiations.
“The Kidney Foundation nationally has known for quite some time that this was a possibility,” Sweat said.
The rule changes affect both how donors can deduct contributions from their federal income taxes, and how the charity has to document the contribution in communication with the donor. It only affects taxpayers who itemize deductions and take tax advantages for charitable contributions. Until January 1, 2005, donors could deduct the fair market value of the vehicle (usually as documented in the Kelly Blue Book) with a letter from the charity stating they had made the donation in question.
After January 1, however, the charity has to send the donor a notification of how much the car actually sold for — if the donor wants to claim $500 or more for the donation. In other words, the car might have a Blue Book value of $1,500, but if the charity sells it for $650, that’s all money the donor can deduct.
Notifying the donor of the amount of the sale is an administrative cost that the charity will have to bear.
“That’s what we’re not looking forward to,” said Sweat.
Sweat said her organization usually has no trouble actually selling the cars donated to them, using Mid-South Auctions in Jackson to move the inventory. The company holds an auction every Tuesday for dealers and wholesalers and usually has at least one car per week they sell for the organization.
Not many other organizations in Mississippi handle vehicle donations, which has made the program all the more useful to the Kidney Foundation. “We’ve been lucky because in Mississippi, we haven’t had that much competition,” Sweat noted.
Take for example the Mississippi chapter of the American Lung Association (ALA).
The organization does accept vehicle donations, but differs from the Kidney Foundation in how it administers the program. Where they once would come get the car, running or not, they now ask that donors bring the cars to them in operable condition, said Dianna Gunter, administrator for the program at ALA.
“We couldn’t compete with Kidney Cars,” she said.
Other ALA chapters invest more effort into their vehicle donations efforts, but the rule changes aren’t expected to affect the Mississippi state offices very much. Last fiscal year, the vehicular donation program only raised $8,700 of the chapter’s $876,000 budget, and the notification and documentation aspects of the program are handled through the national office. Programs like ALA’s charity walk raise a great deal more money in Mississippi than does the vehicular donation program, according to Gunter.
Mark McCrary, director of the Mississippi Center for Nonprofits, was aware of the rule change, but was unsure on how many programs it would affect in Mississippi’s nonprofit community. He did say, however, that he wouldn’t think that the number of donations to Mississippi organizations offering the program would decrease because so few people itemize deductions or make donations solely for tax advantages.
“I imagine it won’t stop people from donating cars if they want to still do it,” McCrary said.
Sweat hopes that donations will continue in 2005, even under the new rules. With Mississippi listed as number one in the nation for incidence of kidney disease per capita, the need for the organization’s screening and research programs isn’t expected to decrease anytime soon.
“Over the past 12 years, we’ve brought in over $1 million into the state through the Kidney Car program,” Sweat said.
Contact MBJ contributing writer at Julie Whitehead at email@example.com.
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