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Greed, not charity, often drives used-car donors

Published Sep. 13, 2005

For a group that always has appealed to people's gentler nature, the latest fund-raising appeal among charities seems as subtle as a used-car salesman's sports coat.

"Pay less tax! Donate a car . . ."

"The Blue Book says it's worth $2,000. That's not even close!"

"Donate your car _ highest deduction plus."

Charities are finding greed a better motivator than human kindness as they team with towing services and car wholesalers to squeeze money from society's clunkers. So far, it has proven to be a winning strategy.

Whether the cars are sold at auction or scrapped for parts, groups as large as the Salvation Army and as small as local synagogues have found ways to raise their bottom line through car write-off programs.

The charities earn badly needed revenue, and the donors pencil in a sizable tax deduction _ an amount they, not the charities, generally determine.

But appealing to greed brings its own problems.

Donors are typically less interested in the cause than they are in getting their tax receipts as quickly as possible. That has opened the door for bogus or obscure charities, and for-profit middlemen who return as little as 10 percent of the donation's value to the charity.

The largest car fund-raiser may be the National Kidney Foundation's Kidney Cars program. Last year, it received 44,500 donated cars, raising a total of $9.1-million, 15 percent of its budget. The foundation works through a third party, the Auto Placement Center of Providence, R.I., and keeps 72 cents of every dollar raised.

"It is our most popular program, and it is growing," said Karen Rogers, marketing coordinator for the Florida program. "It is definitely a win-win situation for everyone."

The average age of donated cars is 10 years old, Rogers said. Nationwide, there are an estimated 45-million cars that age still in circulation, providing an enormous potential market.

Still, while the greatest selling point for charities is the large tax deduction, that is also its greatest source of controversy.

The Internal Revenue Service specifies that donors may deduct the "fair market value" of their gift. That varies widely.

Diana and Ronald Drost of Fort Lauderdale recently donated their 1985 Lincoln Continental to the Aleph Institute in Miami, a group founded by a Lubavitch rabbi to provide religious and material support to people in institutional settings like prison.

Depending on the Kelly Blue Book value selected, the Drosts' car could garner anywhere from $550 as a trade-in to $2,500 if it's in excellent condition and sold at its best retail price.

Diana Drost said she doesn't know which value to claim; she's just glad to have the old car out of the driveway.

"It was better for us to donate the car, because then we got a tax write-off, which was to our advantage," Drost said. "They gave us paperwork for the IRS, so there won't be any last-minute looking around."

State government officials from California to Michigan are investigating the practice, with an eye toward tightening the deduction loophole. The logical way to determine a car's fair-market value is for the donor to check back with the charity and find out how much the gift brought in.

But almost no one does that, charities say.

"When they come to me to sign a form saying "I have received the above described item,' I have been known to raise my eyebrows," said Isaac Jaroslawicz, executive director of the Aleph Institute. "I tell them not to be pigs."

The National Kidney Foundation has solved that problem by returning tax forms with a note stating what the car sold for, said Michelle Davis, national director of the program. California legislators have proposed requiring such disclosure.

Tax advisers say donating a car can make financial sense in the right circumstances, but not always.

First, you should be someone who would itemize your deductions anyway, said Jay Shein, chairman of the South Florida Society of Financial Planners. And there are other considerations.

"Let's say you're in the 28 percent tax bracket," he said. "On a $1,000 donation, you get $280 off your taxes. If you sold it yourself, you might get $700, so I don't know that you're better off."

And you should make sure your charity qualifies for tax-deductible status. Davis said the Kidney Foundation's own surveys have shown that donors act almost exclusively out of self-interest, making them less careful about choosing a cause.

"It's less about the charity than we would hope," she said. "It's more about whether "Getting my receipt for my tax deduction was quick and easy.' "

That has provided an opening for obscure or unregistered groups.

In South Florida, a group called the Jewish Children's Fund advertises daily in newspaper classified ads.

It turns out that the "Jewish Children's Fund" serves a very specific group of children in Connecticut at the New Haven Hebrew Day School.

"We raise money for scholarships," a telephone operator said. The group's director, Rabbi Sholom Ber Katz, did not return several phone calls.

"You have to get all the documentation and make sure you're dealing with a real charity," said Daniel Langan, spokesman for the National Charities Information Bureau in New York.

That means asking for proof of 501(c)3 tax-exempt status, unless it's a religious group.

"There are a lot of . . . liars and thieves in this business, making believe they are charities," said Jaroslawicz at the Aleph Institute. "We're trying to do it the right way and trying to do the right thing."