Tax Exempt and Government Entities
EXEMPT ORGANIZATIONS

                                  A Charity’s

                                  Guide to

                                   Vehicle  

                                  Donation,

                                  T Y P E S  O F  V E H I C L E  D O N A T I O N   
                                  P R O G R AM S   AN D   T H E I R   I M P A C T   
                                  ON   TA X - E X E MP T  S TA T U S ,   
                                  TA X A B L E   I N C OME ,   A ND   
                                  D E DU C T I B L E   C O N TRI B U T I O N S

 A Charity’s

Guide to

   Vehicle  

 Donation                               ,

harities described in section 501(c)(3) of the Internal Revenue 

  Code need funds to operate their charitable, educational,  

or other tax-exempt programs. These charities may choose 
 C
from a number of fundraising activities for financial support. A popular 

fundraising program is the sale of donated vehicles. 

Through this Publication 4302, the Internal Revenue Service (IRS) and 

state charity officials provide general guidelines for charities operating 

vehicle donation programs. 

The information in this publication applies to the most common types 

of section 501(c)(3) organizations, commonly referred to as “charities.” 

A companion brochure, Publication 4303, A Donor’s Guide to Vehicle Donations,  
provides guidelines for individuals who donate vehicles.

                           1

Vehicle Donation Programs  

and Tax-Exempt Status,

A charity must be organized and operated exclusively for one or more exempt purposes  
described in section 501(c)(3). If a charity operates a vehicle donation program in a manner that 
confers improper benefits on private parties, the charity’s exemption may be adversely affected.  
If the charity loses its exemption, its income is subject to tax, and it must file the appropriate  
federal income tax return (generally, Form 1120 for corporations or Form 1041 for trusts). 

Vehicle donation programs generally fit one of the  
following descriptions:
                                                               * A charity must operate exclusively to 
Charity Operates Vehicle Donation Program*                        
                                                                  further the charity’s exempt purposes.  
Generally, there should not be an adverse impact on a  
                                                                  A charity must not operate a vehicle 
charity’s tax-exempt status if it does any of the following  
                                                                  donation program in a manner that 
with donated vehicles: 
                                                                  improperly benefits private parties.  
■ sells the donated vehicles and uses the proceeds  
 exclusively to fund its charitable programs,                     For example, a charity should not sell 
■ regularly uses the vehicles for a significant period of         vehicles on favorable terms to individ-
 time to conduct activities that substantially further its        uals who are not part of a charitable 
 charitable programs,                                             class, such as board members. Fees 
■ sells the vehicles after it makes a material improvement        the charity pays an agent to operate the 
 to the vehicles and then uses the proceeds to exclusively  
                                                                  program must not exceed a reasonable 
 further its charitable programs, or,
                                                                  amount. Activities such as these may 
■ distributes the vehicles at a price significantly below fair 
 market value to needy individuals in direct furtherance          have adverse tax consequences for  
 of its charitable purpose of relieving the poor and              both the charity and related parties. 
 distressed or the underprivileged who are in need of  
 a means of transportation. 

Charity Hires Agent to Operate Vehicle Donation Program*,

If the charity hires a private, for-profit entity as an agent to operate its vehicle donation program, 
the charity and the for-profit entity must establish an agency relationship that is valid under the 
applicable state law. Generally, an agency relationship will be established where the parties agree 
that the for-profit entity will act on the charity’s behalf and that the for-profit entity’s activities 
covered by the agreement are subject to the charity’s oversight. Accordingly, the charity should 
actively monitor program operations and have the right to review all contracts, establish rules of 
conduct, choose or change program operators, approve of or change all advertising, and examine  
the program’s books and records. If the charity follows these guidelines, the program should not 
jeopardize the charity’s tax-exempt status. 

                                            2

For-Profit Entity Receives and Sells Vehicles Using Charity’s Name,

In this program, the charity grants a for-profit entity the right to use the charity’s name for the  
purpose of soliciting donations of used vehicles. The charity receives either a flat fee or a  
percentage of the proceeds from the sale of the vehicles to support its charitable programs.  
The charity has no control over the for-profit entity’s activities.  

Unlike the preceding program, the charity has not established an agency relationship with the 
for-profit entity that is valid under applicable state law; therefore, this program is not the charity’s 
program. Because the for-profit entity is not an agent of the charity, the donors’ contributions 
(transfers) are made to the for-profit entity, not the charity. A charity cannot license its right 
to receive tax-deductible contributions. The for-profit entity and the charity must not mislead 
the public by stating that contributions may be deductible (for example, by providing a written 
acknowledgment that the “contribution” is deductible). Misleading the public in this regard may 
expose the for-profit entity and the charity to adverse tax consequences.

Written Acknowledgment of Donation,

Donors contribute vehicles in order to support charity and benefit from the federal income tax 
deduction. A donor cannot deduct any single charitable contribution valued at $250 or more 
unless the charity provides the donor with a contemporaneous written acknowledgment of the 
contribution. The information the charity must provide in the written acknowledgment depends 
upon what it does with the vehicle and on the claimed value of the vehicle. 

Written Acknowledgment for Vehicle Contribution Deduction of More Than $500,

If a donor contributes a vehicle and claims the value of the vehicle is more than $500, the charity 
is required to provide a contemporaneous written acknowledgment to the donor, such as Form 
1098-C, Contributions of Motor Vehicles, Boats, and Airplanes. All acknowledgments must include 
the following information, plus information on what the charity did or intends to do with the vehicle:
■ the donor’s name and taxpayer identification number,
■ the vehicle identification number, 
■ the date of the contribution, and one of the following:
 ● a statement that no goods or services were provided by the charity in return for the               
  donation, if that was the case,
 ● a description and good faith estimate of the value of goods or services, if any, that the  
  charity provided in return for the donation, or ,
 ● a statement that goods or services provided by the charity consisted entirely of  
  intangible religious benefits, if that was the case.

                                     3

Charity Sells the Vehicle —If the charity sells the            CAUTION  ,
vehicle for more than $500, in addition to the information 
required for all acknowledgments, the contemporaneous          A donor cannot claim a deduction for 
written acknowledgment must include:                           more than $500 if the acknowledgment 
■ a statement certifying that the vehicle was sold in an       provided by the charity does not con-
  arm’s length transaction between unrelated parties,          tain the donor’s taxpayer identification 
■ the date the vehicle was sold,                               number. If a donor fails to provide his 
■ the gross proceeds received from the sale, and    ,          or her taxpayer identification number 
■ a statement that the donor’s deduction may not exceed        to the charity, follow the rules under 
  the gross proceeds from the sale.                            Written Acknowledgment for Vehicle 
However, if the gross proceeds from the sale are $500          Contribution Deduction of $500 or 
or less, the charity should not provide a written acknowl-     Less, page 7. 
edgment based on these rules. Instead see Written 
Acknowledgment for Vehicle Contribution Deduction  
of $500 or Less on page 7.

Charity Intends a Significant Intervening Use of the Vehicle — If the charity intends to make a  
significant intervening use (defined below) of the vehicle, in addition to the information required 
for all acknowledgments, the contemporaneous written acknowledgment must include: 
■ a statement certifying that the charity intends to make a significant intervening use of the  
  donated vehicle, 
■ a detailed statement of the intended use, 
■ a detailed statement of the duration of that use, and  ,
■ a certification that the vehicle will not be sold before completion of the use. 

Significant Intervening Use – To qualify as significant intervening use, the charity must actually 
use the vehicle to substantially further its regularly conducted activities, and the use must be con-
siderable. There is no significant intervening use if the charity’s use is incidental or not intended 
at the time of the contribution. In addition, significant intervening use does not include use of the 
vehicle to provide training in general business skills, such as marketing and sales. Whether a use 
qualifies as significant intervening use depends on its nature, extent, frequency, and duration. 

EXAMPLE 1:    An individual donates a used van to a charity that delivers meals to needy  
individuals. The charity only uses the vehicle a few times to deliver meals and then sells  
the vehicle. Because the charity’s use was infrequent and incidental, it does not qualify as  
significant intervening use. 

EXAMPLE 2:    The facts are the same as in Example 1, except that the charity uses the van to  
deliver meals every day for one year. This use qualifies because it is significant and substantially  
furthers the charity’s regularly conducted activity of delivering meals to needy individuals. 

                                               4

EXAMPLE 3:    The facts are the same as in Example 1, except that the charity drives the van  
a total of 10,000 miles over a 1-year period to deliver meals to needy individuals. This use qualifies 
because it is significant and substantially furthers the charity’s regularly conducted activity of  
delivering meals to needy individuals. 

Charity Intends to Make a Material Improvement to the Vehicle —     If the charity intends to make a 
material improvement (defined below) to the vehicle, in addition to the information required for all 
acknowledgments, the contemporaneous written acknowledgment must include: 
■ a statement that the charity intends to make a material improvement to the donated vehicle, 
■ a detailed description of the intended material improvement, and  ,
■ a certification that the vehicle will not be sold before completion of the improvement. 

Material Improvement – A material improvement includes a major repair or improvement that 
results in a significant increase in the vehicle’s value. Cleaning, minor repairs, and routine  
maintenance are not material improvements. In addition, a material improvement to the vehicle 
will not qualify if the improvement was funded by an additional payment from the donor. 
Material improvements do not include: 
■ application of paint or other types of finishes (such as rustproofing or wax), 
■ removal of dents and scratches, 
■ cleaning or repair of upholstery, and ,
■ installation of theft deterrent devices. 

Charity Intends to Give or Sell the Vehicle to a Needy Individual — If a charity, whose purpose  
is relieving the poor and distressed or the underprivileged who are in need of a means of  
transportation intends to give or sell the vehicle to a needy individual at a price significantly  
below fair market value, in addition to the information required for all acknowledgments, the 
acknowledgment must certify: 
■ that the charity intends to give or sell the vehicle to a needy individual at a price significantly 
  below fair market value, and ,
■ that the gift or sale is in direct furtherance of the charity’s charitable purpose of relieving the 
  poor and distressed or the underprivileged who are in need of a means of transportation. 

However, if the charity merely applies the proceeds from the sale of the vehicle to a needy indi-
vidual for any charitable purpose, the sale is not in direct furtherance of the charity’s charitable 
purpose. In addition, the sale of a donated vehicle at auction does not qualify as a sale to a needy 
individual at a price significantly below fair market value; instead the rules above under Charity 
Sells the Vehicle, page 4, apply. 

                                           5

Time and Manner of Providing Acknowledgment to the Donor — The charity must provide the 
written acknowledgment to the donor within 30 days from the date of the vehicle’s sale. This 
does not mean the charity must sell the vehicle in the year it receives it. For example, if a charity 
receives a donated vehicle on December 31, Year 1, and sells the vehicle on January 15, Year 2,  
the acknowledgment is due by February 14, Year 2. If the charity intends to make a significant  
intervening use of or material improvement to the vehicle, or if it intends to sell or give the vehicle 
to a needy individual at a price significantly below fair market value, the acknowledgment is due 
within 30 days from the date of the contribution. The charity may use Form 1098-C, Contributions 
of Motor Vehicles, Boats, and Airplanes, as acknowledgment or provide its own statement  
containing the information described above. 

Time and Manner of Providing Acknowledgment to the IRS — A charity must report the infor-
mation contained in the contemporaneous written acknowledgment to the IRS on Form 1098-C. 
Form 1098-C is due by February 28 (March 31 if filing electronically) of the year following the year 
in which the charity provides the acknowledgment to the donor. 

Penalties — For a written acknowledgment of a vehicle contribution deduction of more than $500, 
a penalty applies if a charity knowingly furnishes the donor with a false or fraudulent acknowledg-
ment, or knowingly fails to furnish an acknowledgment with the required information. In the case 
of an acknowledgment related to the sale of a vehicle, the penalty is either the gross proceeds 
from the sale or the product of the highest tax rate (currently 35 percent) and the sales price stat-
ed on the acknowledgment, whichever amount is greater. In the case of an acknowledgment that 
is not based on gross proceeds, the penalty is either $5,000 or the product of the highest tax rate 
(currently 35 percent) and the claimed value of the vehicle, whichever amount is greater.

EXAMPLE 1:   A charity that delivers food and other needed goods to the rural poor in remote  
locations receives a donation of a subcompact car that has been driven more than 100,000 miles.  
The charity needs three large vehicles suitable for delivering heavy loads across rugged terrain.  
The subcompact is not suitable for the charity’s use. The charity provides an acknowledgment  
to the donor falsely certifying that it intends to make significant intervening use of the car.  
Based on this acknowledgment, the donor claims a deduction of $2,300, the fair market value  
of the car. The charity is subject to a penalty for knowingly furnishing a false or fraudulent  
acknowledgment to the donor. The amount of the penalty is $5,000, because that amount is  
greater than $805, the product of the claimed value ($2,300) and 35 percent. 

EXAMPLE 2:  The charity receives a donation of a qualified vehicle and sells it without any  
significant intervening use or material improvement. The gross proceeds from the sale are $300,  
but the charity provides the donor with an acknowledgment that states that the gross proceeds  
were $1,000. The charity is subject to a penalty for knowingly furnishing a false or fraudulent  
acknowledgment to the donor. The amount of the penalty is $350, the product of the sales price  
stated in the acknowledgment ($1,000) and 35 percent, because that amount is greater than the  
gross proceeds from the sale of the vehicle ($300). 

                                       6

Written Acknowledgment for Vehicle Contribution Deduction of $500 or Less

If a donor is claiming a charitable contribution deduction of at least $250 but not more than  
$500 for the vehicle, the acknowledgment must include the name of the charity, a description  
(but not value) of the vehicle, and one of the following: 
■ a statement that no goods or services were provided by the charity in return for the donation,  
 if that was the case, 
■ a description and good faith estimate of the value of goods or services, if any, that the charity 
 provided in return for the donation, or ,
■ a statement that goods or services provided by the charity consisted entirely of intangible  
 religious benefits, if that was the case. 

Time and Manner of Providing Acknowledgment to the Donor — For the written acknowledgment 
to be considered contemporaneous, a donor must receive the acknowledgment by the earlier  
of: the date on which the donor files his or her individual federal income tax return for the year 
of the contribution; or the due date (including extensions) of the return. A charity may use Form 
1098-C as the acknowledgment or provide its own statement that includes the information described  
above. If the charity uses Form 1098-C, only provide Copy C to the donor and be sure to check 
the box that states that the donor may not claim a deduction of more than $500. The charity 
should not file Copy A with the IRS. A charity can provide either a paper copy of the acknowledg-
ment to the donor, or an electronic acknowledgment, such as an email addressed to the donor. 

Filing and Disclosure Requirements,

Form 990 Series (Annual Information Return)  
and the e-Postcard (Annual Electronic Notice),

Most charities must file an annual information return in the Form 990 series (990, 990-EZ, or  
990-PF, with required schedules), disclosing information about the charity’s revenue, expenses, 
activities, and financial position. Most small charities that are not required to file Form 990 or  
990-EZ, must file an annual electronic notice known as the e-Postcard or Form 990N. See IRS 
Publication 557, Tax Exempt Status for Your Organization, the instructions to the annual informa-
tion returns and the Charities and Non-Profits page of IRS.gov for further information. 

Form 1098-C,

The charity must file Copy A of Form 1098-C with the IRS to report the information contained in  
a contemporaneous written acknowledgment for a vehicle contribution with a claimed value of 
more than $500. Form 1098-C is due by February 28 (March 31 if filing electronically) of the year 
following the year in which the charity provides the acknowledgment to the donor. 

                                           7

Filing Form 1098-C does not relieve the charity of its obligation to report information about the 
disposition of a donated vehicle on Form 8282, Donee Information Return. For more information, 
see Forms 8282 and 8283 below. 

If the charity uses Form 1098-C as the acknowledgment for a vehicle contribution deduction  
of $500 or less, only provide Copy C to the donor and be sure to check the box that states that 
the donor may not claim a deduction of more than $500. The charity should not file Copy A  
with the IRS. 

Forms 8282 and 8283,

A donor must file Form 8283, Noncash Charitable Contributions, to report information about  
noncash charitable contributions if deductions for all noncash gifts during the year exceed $500. 

If the contribution deduction is over $5,000, the donor must complete Section B of Form 8283, 
and an authorized official of the charity must complete a portion of the form and sign it. The 
donor must give the charity a copy of Section B. A charity required to sign Form 8283 for receipt 
of a vehicle must file Form 8282, Donee Information Return, if it sells or otherwise disposes of the 
vehicle within three years after the date it received the vehicle. This form must be filed within 125 
days after the charity disposes of the vehicle. This form requires the charity to identify the donor, 
the charity, and the amount the charity received upon disposition of the vehicle. The charity must 
give the donor a copy of the completed Form 8282. 

Written Statements Disclosing Quid Pro Quo Contributions,

If a charity provides goods or services in exchange for property valued at over $75, it must  
provide the donor a written statement. See Publication 1771, Charitable Contributions –  
Substantiation and Disclosure Requirements, for more information about written statements  
disclosing quid pro quo contributions. 

State Law Requirements – Vehicle Title,

Charities and their fundraisers are subject to state law requirements relating to titling of vehicles 
and transfers of title. Generally, state charity officials recommend that the donor take responsibil-
ity for transfer of title to ensure termination of liability for the vehicle. In most states, this involves 
filing a form with the state motor vehicle department, which states that the vehicle has been 
donated. Before donating the vehicle, the donor should remove the license plates, unless state 
law requires otherwise. This will help avoid any liability problems after the vehicle is transferred. 

                                       8

  Assistance Through State  

  Officials and Through the IRS,

  State Charity Official Assistance,
  Before starting a vehicle donation program, check out your state requirements. Charities that 
  solicit contributions are often required to register with state officials, such as the state attorney 
  general or the secretary of state. Some state charity officials provide information about paid  
  fundraisers on their Web site. Contact your state charity official if you have a concern or complaint 
  that a charity is not complying with state laws. 
  A listing of state charity offices is available through the National Association of State Charity 
  Officials at www.nasconet.org. A listing of state attorneys general is available through the National 
  Association of Attorneys General at www.naag.org. 

  IRS Assistance,
  The IRS offers help that is accessible online, via mail, by telephone, and at IRS walk-in offices in 
  many areas of the country. IRS forms and publications can be downloaded from the Internet and 
  ordered by telephone. 

,,
  Specialized Assistance for Tax-Exempt Organizations,

  www.irs.gov/Charities-&-Non-Profits,                                                 EO Customer Service,
  Subscribe to the EO Update  , an electronic newsletter                               (877) 829-5500 (toll-free) ,
  with information for tax-exempt organizations and tax                                Internal Revenue Service,
  practitioners who represent them.                                                    TE/GE ,
  www.stayexempt.irs.gov,                                                              P.O. Box 2508,
  Web based training ,                                                                 Cincinnati, OH 45201,

  IRS tax forms and publications related to donations include:                         General IRS Assistance on the  
  Form 1098-C, Contributions of Motor Vehicles, Boats,                                 latest tax laws, forms and publi- 
  and Airplanes, ,                                                                     cations, and filing information:

  Form 8282    , Donee Information Return   , ,                                        www.irs.gov,
  Form 8283, Noncash Charitable Contributions   , ,
                                                                                       Federal tax questions ,(800) 829-1040  ,
  Publication 526,   Charitable Contributions  ,,
                                                                                       Small business  
  Publication 561,   Determining the Value of Donated Property                       , federal tax questions  , (800) 829-4933,
  Publication 1771, Charitable Contributions – Substantiation  
                                                                                       IRS tax forms and  
  and Disclosure Requirements  ,,                                                      publications ,           (800) 829-3676,
  Publication 4303, A Donor’s Guide to Vehicle Donations,

  Publication 4302 (Rev. 1-2015)  Catalog Number 38161E  Department of the Treasury  Internal Revenue Service  www.irs.gov