Car Donations

Charitable Contributions of Vehicles, Boats, and Aircraft

This notice provides interim guidance regarding section 884 of the American Jobs Creation Act of 2004, Pub. L. No. 108-357, 118 Stat. 1418 (2004), which adds §§ 170(f)(12) and 6720 to the Internal Revenue Code. Section 170(f)(12) contains rules for determining the amount that a donor may deduct for a charitable contribution of a qualified vehicle the claimed value of which is more than $500, and related substantiation and information reporting requirements. Section 6720 imposes penalties on a donee organization that receives a contribution of a qualified vehicle subject to § 170(f)(12) and knowingly furnishes a false or fraudulent acknowledgment of the contribution to the donor, or knowingly fails to furnish the acknowledgment. Sections 170(f)(12) and 6720 apply to contributions made after December 31, 2004. This notice also invites comments from the public regarding this notice and suggestions for future guidance under §§ 170(f)(12) and 6720. The rules provided in this notice apply until regulations are effective.

Section 170(a) allows as a deduction, subject to certain limitations, any charitable contribution (as defined in § 170(c)), payment of which is made within the taxable year. Section 1.170A-1(c)(1) of the Income Tax Regulations provides that if a charitable contribution is made in property other than money, the amount of the contribution is the fair market value of the property at the time of the contribution, reduced as provided in § 170(e) and §§ 1.170A-4 and 1.170A-4A.

In general, § 1.170A-1(h) provides that if a taxpayer transfers to a charitable organization cash or property that is partly a charitable contribution and partly in consideration for goods or services, the taxpayer is allowed a charitable contribution deduction for the excess, if any, of the cash or fair market value of the property transferred over the fair market value of the goods or services the organization provides in return. See also United States v. American Bar Endowment, 477 U.S. 105, 117-118 (1986); Rev. Rul. 67-246, 1967-2 C.B. 104.

Section 170(f)(12)(A)(i) provides that no deduction is allowed under § 170(a) for a contribution of a qualified vehicle the claimed value of which is more than $500 unless the donor substantiates the contribution by a contemporaneous written acknowledgment that meets the requirements of § 170(f)(12)(B). Section 170(f)(12)(A)(i) also provides that the substantiation rules of § 170(f)(8) do not apply to a contribution of a qualified vehicle the claimed value of which is more than $500.

In general, to meet the requirements of § 170(f)(12)(B), the acknowledgment must include: the name and taxpayer identification number of the donor; the vehicle identification number; and certain certifications, depending on the use or disposition of the vehicle by the donee organization. See section 3.03 of this notice for all of the requirements applicable to acknowledgments. To be considered contemporaneous, the acknowledgment must be obtained within 30 days of the contribution or the disposition of the vehicle by the donee organization, as applicable. See § 170(f)(12)(C) and section 3.03 of this notice. A copy of the acknowledgment must be included with the donor’s tax return on which the deduction is claimed. Section 170(f)(12)(E) defines a qualified vehicle as any (i) motor vehicle manufactured primarily for use on public streets, roads, and highways, (ii) boat, or (iii) airplane, but the term does not include any property described in § 1221(a)(1) (e.g., property held primarily for sale to customers).

If a donee organization sells a qualified vehicle without any significant intervening use or material improvement by the donee organization, the deduction allowed under § 170(a) may not exceed the gross proceeds received from the sale, which must be reported on the acknowledgment. See § 170(f)(12)(A)(ii). Section 170(f)(12)(F) provides that the Secretary may prescribe regulations or other guidance that exempts from the gross proceeds limitation and certain certification requirements sales by the donee organization that are in direct furtherance of the organization’s charitable purpose. Section 170(f)(12)(F) also provides that the Secretary shall prescribe such regulations or other guidance as may be necessary to carry out the purposes of § 170(f)(12).