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Treasury
Seeks New Rules on Car Donation Tax Breaks
FOXNEWS.COM,
Associated Press
Tuesday,
January 13, 2004
WASHINGTON
— The Treasury Department (search), responding to evidence
that taxpayers who donate cars to charities tend to
overstate their value, asked Congress to impose new
restrictions on deductions for donated automobiles.
Treasury
wants Congress to give taxpayers a choice between obtaining
an independent appraisal of a car's value or estimating
its fair market value using a department formula. Congress
would have to give the department the authority to develop
a formula.
Assistant
Treasury Secretary Pamela Olson said the department
wants deductions to reflect more accurately the value
of the donated cars. The restrictions, if enacted, would
reduce taxpayer deductions by roughly $1 billion over
a decade. She said the department did not want to stop
car donations.
Individuals
and companies who donate patents and other intellectual
property also would have to get independent appraisals,
and the proposed rules would limit the amount that could
be deducted.
The
closer look at deductions for donated cars grew out
of an investigation last year by General Accounting
Office (search) auditors.
The
report examined 54 specific vehicle donations and found
that the charities received pennies on the dollar value
that donors claimed as deductions on their tax returns.
Charities
(search) often reap little of a car's estimated worth
if the vehicles are sold at wholesale auctions. The
proceeds are split between the charity and the company
that organizes vehicle donations, which uses some proceeds
for advertising, towing and auctions.
As
a result of the study, the Internal Revenue Service
urged taxpayers to ask charities how much they benefit
from a donation. The IRS also reminded taxpayers to
estimate a donated vehicle's fair market value, or the
amount it would sell for on the market, considering
its condition and mileage.
The
Senate Finance Committee has been studying proposals
to curtail deductions that far exceed the worth of donated
property. Committee leaders plan to use money the government
saves under the stricter rules to offset the cost of
a new tax deduction for cash donations to charities.
"On
patent donations, we know there's massive abuse,"
said committee Chairman Charles Grassley, R-Iowa. "I'm
also pleased that the administration has responded to
the Finance Committee review of car donations and suggested
reforms."
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