IRS
Form 1098-C, used by tax-exempt
organizations to report contributions of qualified
vehicles, is now available.
The IRS and Treasury Department have issued
guidance on charitable deductions for donated
vehicles. Notice 2005-44 explains new rules adopted
in the American Jobs Creation Act of 2004, which (1)
generally limits the deduction to the actual sales
prices of the vehicle when sold by the donee
charity, and (2) requires donors to get a timely
acknowledgment from the charity to claim the
deduction.
Donors may claim a deduction of the
vehicle's fair market value under the following
circumstances:
The charity makes a significant intervening
use of the vehicle, such as using it to
deliver meals on wheels.
The charity makes a material improvement to
the vehicle, i.e., major repairs that
significantly increase its value and not
mere painting or cleaning.
The charity donates or sells the vehicle to
a needy individual at a significantly
below-market price, if the transfer furthers
the charitable purpose of helping a poor
person in need of a means of transportation.
The notice says the Service will be issuing new
Form 1098-C, which may be used to provide the
acknowledgment. Finally, it provides guidance on the
new penalties imposed on donee organizations that
provide a false or fraudulent acknowledgment of a
vehicle donation, or fail to furnish the
acknowledgment properly.
The IRS and Treasury request public comments on
the guidance. Comments must be submitted by
September 1, 2005, in writing or electronically, as
explained in section 9 of Notice 2005-44.
