Without promulgated guidance from the Treasury, revenue to charities from vehicle donations will decline 90% or more. This is based on the fact that the most valuable 20% of vehicles donated yield 92% to 96% of revenue to charities. These vehicles will no longer be donated because the tax incentive will no longer be greater than trade-in values. This 90% decline will be a far cry from the 36% decrease in deductions intended by stopping tax cheaters. In fact, this will result in many vehicle donations programs that directly further charitable purposes being discontinued because they will not be able cover the necessary and reasonable expenses of running their programs.

Further, if Treasury does not provide the called for guidance for the “direct furtherance” exception, deductions by taxpayers will decrease at least 76%, and probably 94% (based on the retail value of the actual mix of donated vehicles and the projected decline in donations of higher value vehicles.) Based on the unadjusted GAO annual savings of $654 million in 2000, this decline will generate between $4.97 and $6.14 billion in tax revenue over 10 years, well in excess of the $2.379 billion projected by, and intended by, Congress.

Congress clearly intended and estimated that vehicle donations would continue; hence the low estimated reduction in tax benefits and corresponding revenue generation. The Conference Agreement calls for the specific continuance, under the old valuation rules, of sales that are in “direct furtherance” of an organization’s charitable purpose to allow continuation of viable, responsible, efficient vehicle donations programs.

Failure to maintain a viable vehicle donation system will result in serious economic dislocation for the automotive industry and negatively impacted the environment as detailed below:

Economic Damage Vehicle donations that are valued at fair market value act as a floor on used car trade-in values. Removing this floor will result in lower values for all used vehicles at trade-in, broadly reducing the pool of money available for new car purchasers who trade-in vehicles on a regular basis resulting in a direct reduction in new car sales. In addition, at least 733,000 and probably more than 1.8 million vehicles (when growth and non itemized donations are included) are donated each year. There are approximately 40 million used car sales each year. Elimination of vehicle donation programs will result in up to 4.5 percent of total used car sales moving from dealers to private parties and will significantly reduce prices.

Environmental Damage The environment will suffer because older vehicles that are near the end of their life are efficiently routed into junkyards by vehicle donation programs. Up to 60 percent of donated vehicles are donated by people who do not itemize simply to get rid of an unwanted vehicle. Charities make little or no money on these vehicles but take them as a service to their supporters and the environment. Without a robust vehicle donation program between 200,000 and 400,000 vehicles per year will remain on America's streets unless their owners take extraordinary efforts to dispose of them. The likely alternative is that owners will simply selling them at very low prices to people who will run them in their polluting state and ultimately abandoned them. Abandon vehicles are already a serious problem in our cities and this will make it much worse..