Car Insurance

A new tax law giving less favorable deductions to good Samaritans who donate cars and trucks to charities has caused a significant drop in donations in 2005.

Salvation Army Auto Sales at Weber and Cimarron streets received 40 percent fewer vehicles last year than in 2004, said Dennis Broom, administrative assistant and vehicle representative.

“It is due to the tax-law change, and while it’s not a big blow, it’s disappointing,” he said.

Brisk sales at a new Salvation Army thrift shop at Platte Avenue and Circle Drive have helped offset some of the loss of revenue, Broom said.

Under tighter Internal Revenue Service rules, taxpayers are allowed to claim as a donation the amount the donated vehicle sells for. If it’s less than $500, the taxpayer may claim up to $500. Before 2005, donors could claim whatever amount they thought reflected the fairmarket value of the car, up to $5,000.

“In some cases, the new restrictions made it a better deal to trade in a car rather than donate it,” said Sandra Miniutti, spokeswoman for Charity Navigator, a national nonprofit evaluator based in New Jersey.

Cars Helping Charities, a Morrison-based company that sells cars donated from around the state to benefit more than 500 nonprofits, will close because of the drop in donations.

“I went from 2,400 cars a year to 1,500 cars a year,” said Steve Morrow, who founded the company in 2002.

Goodwill Industries of Colorado Springs accepted 930 donated vehicles last year, 45 percent fewer than 2004’s donations of 1,711 vehicles, said spokeswoman Laura Marth. That led to a $100,000 decrease in program revenue, a 30 percent decline from 2004.

Last year’s loss is less than it could have been, though, because in December 2004 the organization received 464 vehicle donations from people getting in under the IRS deadline. That was the highest number of donated cars since the program started in 1998, Marth said.

The rush to make vehicle donations in the last month of 2004 before the new tax law went into effect is, in part, what led to the market downturn, Miniutti said.

“Apparently, donors who were aware of the changes coming decided to quickly make those gifts before the new rules took effect,” she said.

Although the number of vehicles donated to nonprofits has taken a nose dive, other aspects of automotive-donation programs have not.

The average sales price per car remained the same at the Salvation Army and Goodwill Industries, for example. The Salvation Army, licensed as a used-car dealer, averages a sales price of $950 to $970 per vehicle, Broom said. That’s higher than what other nonprofits report because the Salvation Army sells cars directly off its used-car lot and does not send donated vehicles to auction — the route many charities take to sell the vehicles.

Goodwill Industries’ average sales price was $478 last year, Marth said, which has remained consistent for several years. Goodwill sells the vehicles through a local auctioneer.

Despite the seeming setback, nonprofits say donating unwanted cars, trucks, vans and RVs remains a worthy avenue for supporting local charities and provides hassle-free disposal.

“It’s a real convenience — people just drop off their keys and title with us, and we take care of the rest,” Marth said. “And revenue generated is put back into our programs and services that help people in our community.”