December 30, 2009
December 30, 2009
By William S. Manne, William C. Fisher
Miller Nash LLP,
Oregon and Washington Law Firm
Charitable organizations’ vehicle donation programs have come under recent scrutiny by the Oregon DMV (the “DMV”). Oregon motor vehicle law requires vehicle sellers to be registered dealers unless the vehicle was used for personal or household purposes. If a charity accepts vehicle donations and then sells those vehicles as a source of revenue, it violates these laws unless it is a registered dealer. Some states have enacted statutory exemptions from these requirements, but Oregon has no such exemption.
One approach to resolving this problem is to sell the donated vehicles through consignment with a registered dealer. But Oregon’s vehicle consignment rules provide a prickly path for charities that attempt to navigate it. If those rules are not strictly followed, the DMV may force the charity to cease its vehicle donation program altogether.
Likewise, IRS regulations relating to automobile donations are complicated and must be fully understood to correctly implement the proper arrangements. For example, if a donor consigns a donated vehicle directly to a dealer, and instructs the dealer to submit the net proceeds from the sale to the charity (after fees and expenses), the donor’s charitable income tax deduction will likely be limited to the actual net proceeds (not the gross sales price). A charity may be subject to IRS penalties, including substantial fines, if it misleads donors about the value of their charitable income tax deductions. To provide the donor with a full value income tax deduction, careful steps must be taken to ensure that the donation arrangements comply with IRS requirements.
Through use of proper agreements, a charity’s vehicle donation program can meet both the DMV and IRS requirements. Miller Nash attorneys Bill Manne and William Fisher have developed such agreements for several Oregon organizations and can advise you about your organization’s situation. Please contact Bill or William with any questions at 503.224.5858 or via email communication at [email protected] or [email protected]
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