In attempt to spur more charitable donations of automobiles, Reps. Todd Young (R-IN9) and Linda Sánchez (D-CA38)—along with 21 co-sponsors—introduced H.R. 4960, the Charitable Automobile Red-Tape Simplification (CARS) Act, on Wednesday.

Under current law that was established in 2005, taxpayers who donate a car worth less than $500 can immediately take a deduction for the fair market value of their donation up to $500.  For those with a car valued at over $5,000, they can immediately take a deduction for the value of the car if they have a certified appraisal.  For those donating cars worth more than $500 but less than $5,000, donors must wait until a sale is completed, at which point they can claim a deduction equal to the vehicle’s sale price.  Because of the delay between the time of donation and the ability to claim a deduction for the contribution, potential donors don’t have enough information at the time of transaction to make a fully informed decision.  As a result, the volume of donated cars dropped by 67% in the first year following the law; through 2011 (the most recent year for which IRS documentation is available), car donations have dropped by 80%.

The CARS Act would still allow a deduction for the fair market value of cars worth up to $500, and still allows those with a certified appraisal to immediately deduct any amount over $5,000.  Donors who wish to claim an amount between those thresholds would be able to do so provided 1) they obtain a valuation from an authorized online valuation service (such as Kelley Blue Book), and 2) the receiving charity verifies the physical condition of the vehicle.

“Across the country, more than 5,000 charities depend on the donation of cars as a prime fundraising tool,” said Young. “This is especially true of smaller organizations such as food banks and churches that can’t afford a full-time professional fundraising staff.  This simple change to the tax code would help spur such donations after years of decline.  I’m grateful to Congresswoman Sánchez for helping me introduce the CARS Act.”

"With fewer resources and staff to carry out their missions, charities and organizations today are facing an uphill battle,” said Sánchez. “By making a simple change to the charitable automobile donation process, the CARS Act will make it easier for people to donate their cars to charities that provide valuable services to our communities. I am proud to have worked with Congressman Young to help bring this legislation to fruition and stand committed to ensuring it is enacted."