What to do? Feeling Christmas-like and sympathetic toward those with less-manly machines, you decide to donate your hunky wheels to a needy cause. And in the meantime, you can use that donation for a tax write-off that's probably a lot heftier than Hummers are fetching down at Cactus Corner Autos Sales.
So you get on the horn to your favorite charity, and they happily cover the dirty work, from towing to auction. In return, all those proceeds from your rolling hulk will go toward a worthy cause.
Well, maybe not. Annually, battalions of cars are donated to big-time charities, from the Juvenile Diabetes Research Foundation and the Lupus Foundation of America to the USO, an organization Bob Hope made famous while entertaining troops overseas.
But what most of these organizations don't advertise is that up to a third of your vehicle's value goes to for-profit processing middlemen like Car Program LLC. Assuming your used slightly used Hummer garners $30,000, up to $10,000 of that goes to the Car Program.
But it's not only the big national groups that are taking a bite out of your donated vehicle. Even local vehicular-donation granddaddy Junque for Jesus taps up to 32 percent of your giving for administrative costs.
Nationally, it's a huge industry. Estimates are that up to 1.2 million cars are donated annually in the United States. The Web is thick with donation sites, touting the tax write-off advantages of handing over your car, truck or boat.
But there's another looming catch: Congress recently closed deduction gaps between what donated vehicles are actually worth and the values their owners claim. According to a study last year by the U.S. General Accounting Office, donors often claimed up to 20 times the true value of their donated cars on tax forms, costing the U.S. Treasury millions of dollars. And according to the GAO, for their 2000 taxes, Americans claimed $654 million in deductions for donated vehicles, while charities actually only garnered about 5 percent of that value.
Cracking down, Congress passed a law--to go into effect Jan. 1--stipulating that deductions can't exceed the amount vehicles bring at charity auctions. In the past, people could simply claim resale values for a perfect machine as listed in guides such as the Kelley Blue Book. Now the value has to reflect an honest sale price. And if that value exceeds $5,000, a professional appraisal is required.
Many fear that charities will take a big hit from this change. Among them is Junque for Jesus President Bob Erler. "It's kind of a done deal," he says. "All of the donations are going to go bye-bye after the first of the year, and I think you're going to see most nonprofits go out of business. People aren't going to have any incentive to give."
Well, perhaps people could return to the dated notion of giving out of compassion, rather than for a beefy tax break. And maybe they'll only deduct true values, rather than outrageously inflated sums.
Regardless of how the new law affects nonprofits, it's an industry in which oversight is badly needed. That's according to Susan Grant, vice president for public policy at the National Consumers League. Not only do many charities fight disclosure of their finances, she says, but they also keep business ties to profitable middlemen--such as the 30 percent given to Car Program--under wraps. "While it may be perfectly legal, how many people know (about the 30 percent) when they're donating their cars?" she asks.
That's a good question. Certainly, most of the charities contacted by the Tucson Weekly didn't volunteer such information. For example, The Ronald McDonald House pays 30 percent to Car Program LLC, as does the Arizona's Children Association; but this information isn't revealed along with other donation information on either organization's Web site. And while the American Diabetes Association in Tucson only pays approximately 15 percent to Manheim's Greater Tucson Auto Auction for handling its cars, the association's Phoenix office dishes out 30 percent to Car Program. In other words, by donating your car to the Diabetes Association in Phoenix, you double the amount given to a for-profit.
Nor is Sacramento-based Car Program eager to discuss the money trail. While a customer service rep was forthcoming about the donation percentage his company receives, the rep was less clear about how such a high fee is justified. Asked what Car Program's 30 percent cut went for, he said "towing."
In other words, towing costs for your ill-fated Hummer could top $10,000, which suggests that Car Program either hauls with a fleet of turbo limousines--and a cadre of dancing girls--or that charitable donors are getting ripped off.
The arrangement at Junque for Jesus is a bit different--but no less confusing. According to Erler, the best donated cars are spruced up and given directly to needy folks, from recently released convicts to hard-luck families. Lesser vehicles are auctioned off by Cheep Auto Sales, which is owned by his wife. Those proceeds are then given to charities such as The Ronald McDonald House and the Tucson Police Officers Association, Erler says.
But this isn't as clear-cut as it sounds. Junque for Jesus is owned by International Rock Ministries, Inc., which Erler also heads. And just how much of your vehicle donation ends up with either entity isn't clear. Calling the Junque for Jesus number donor line, a reporter is told that "about 80 percent" of auction proceeds go directly to community charities. But when later asked directly, Erler claims that 68 percent goes back into the community, and the rest goes to Junque for Jesus and International Rock Ministries for operating expenses.
Beyond that, Erler won't discuss his finances. "You can talk to my attorney about that," he says.
Since its inception 21 years ago, Junque for Jesus touts having given nearly 1,000 vehicles directly to needy folks. But a visit to the organization's southside lot next to Cheep Auto Sales reveals nearly that number of cars awaiting processing, many of them later models in nice shape.
Still, amidst those sedans and vans and motor homes, the Weekly didn't spot your Hummer.